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Government's proposed ban on foreign buyers of residential dwellings

By Steven Lee - 14 Dec 2017

The government is to introduce a ban on foreign buyers from buying existing dwellings. What could this mean for developers?

Phil Twyford, the Housing and Urban Development Minister, has said that the government will help control house prices and make it easier for first home buyers. The government's new Bill is expected to become law early next year.

The government intends to make changes to the Overseas Investment Act (OIA) which is the Act that establishes the consenting regime.

Currently, the OIA requires an overseas person to obtain consent from the Overseas Investment Office in three key types of transactions. These transactions include direct or indirect investment in:

  1. Sensitive land or an interest in sensitive land (for example farm land over a particular size, small islands and historic places);
  2. Significant business assets (over NZ$100 million); or
  3. Fishing quota or an interest in fishing quota.

The proposed changes are to bring residential land within the category of sensitive land in the OIA.

The proposal is that overseas buyers will not be able to buy existing residential property unless they are either increasing the number of residences and then selling them or converting the land to another use. Australian citizens will be exempt from the ban. Whether Singaporean citizens will also be exempt is yet to be determined because of an existing trade deal.

The process for obtaining OIA consent is costly. The common reason is that the process can be difficult and time consuming. The OIA applications fees can cost up to $49,000 for sensitive land related applications and $32,000 for applications for relating to significant business assets.

For property developers that rely on foreign investment, this means that costs relating to the acquisition of a new project are likely to increase but sales demand is also likely to also improve as overseas people will be redirected from existing dwellings to new developments. This could be good news for overseas based property development businesses focusing on large New Zealand residential property projects.

We assist owners of property with development potential and property developers funded by overseas investors by navigating them through the OIO consenting regime, all property development related legal issues and maximising the value of their projects.

If you require any advice or further information on the matters dealt with in this publication please contact a lawyer in our OIO team at Martelli McKegg or Steven Lee.


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