Hero Image

Buying Property in New Zealand

"New foreign buyer laws – what do they really mean?"

By the end of October, foreign buyers will face new restrictions on buying property in New Zealand. The changes will not affect new or existing agreements entered into prior to that date. Changes will also not affect existing ownership by overseas people.

 

About the current law

Let’s look at the current legislation governing investment by overseas buyers in New Zealand: The Overseas Investment Act 2005.

Until the new law comes into force – foreigners must obtain consent from the Overseas Investment Office (the OIO), before they buy, or take an interest in, “sensitive land”.

The most common form of sensitive land is non-urban land over five hectares, or land that adjoins a foreshore, lake bed, a reserve or Department of Conservation land.

Leases of, or other interests in, sensitive land lasting three or more years also require OIO approval (this has now been extended to five years under the new Bill).

Overseas buyers must further satisfy the OIO that they:

  • Are ordinarily resident in New Zealand, or intend to live here indefinitely (known as the Commitment Test); or
  • That the investment would result in a benefit to New Zealand (the Benefit Test) – and, in some cases, that benefit needs to be substantial and identifiable.

If the land isn’t deemed to be sensitive, OIO consent isn’t needed and a person from overseas can buy the property, as normal.

 

Be aware of...

What’s important to note first is that the new rules will not apply to contracts entered into before the new law comes into force. Nor will it stop those “ordinarily resident in New Zealand” from buying residential property, provided that they can show they call New Zealand home, which means the person:

  • Holds a resident class visa
  • Has resided in New Zealand for the last 12 months
  • Has been physically present in New Zealand for 183 days of that 12-month period
  • Is a tax resident of New Zealand

Australians and Singaporeans will be exempt due to free-trade agreements, but will still face screening by the OIO. The new rules that will apply to Australians and Singaporeans have not yet been released.

Companies registered outside of New Zealand, and any that are at least 25 percent foreign owned, will still be treated as "overseas persons" and need OIO approval to buy residential land, if an individual would.

The biggest change to be aware of under the incoming rules is that the definition of “sensitive land” is extended to include “residential land”. This means that virtually all residential property purchases by non-resident buyers will require some form of OIO consent (and this is not a fast or low-cost process).

In order to obtain that consent, an overseas person will need to satisfy one of the following tests (which are less onerous than the Benefit Test under the current Act):

  • Increased housing test: If the overseas buyer would be developing land and adding to New Zealand’s housing supply.
  • Non-residential use test: If the overseas buyer intends to use the land for non-residential purposes.
  • Incidental residential use test: If the overseas buyer intends to use the land for a residential purpose in the course of business (for example, retirement village, rest home, student hostel or similar – but not a hospital, hotel, motel, campground, etc).
  • Commitment test: If the overseas buyer holds an appropriate visa and can show they have committed to reside in New Zealand.
"New foreign buyer laws – what do they really mean?"

 

Land Information New Zealand has started to release the new consent forms for the OIO changes coming into force on 22 October.

 

The new forms and further information on applying for consent are available on the LINZ website- https://www.linz.govt.nz/overseas-investment.

LINZ has prepared the attached simple information sheet on who will be required to obtain consent under the new rules.

 

Contact

Why list with us?

For more information about us, click here!

Property Search

  • to
  • to