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The ‘Foreign Buyer Ban’ – The Changes Which Apply to Residential Land

The Overseas Investment Amendment Act 2018, which is set to bring significant changes to the Overseas Investment Act 2005, will come into force on 22 October 2018. This means that any agreement for sale and purchase of real estate signed on or after this date will be subject to the Act’s new restrictions and requirements.

The overarching purpose of the Act remains the same – that is, to acknowledge that it is a privilege for overseas persons to own or control sensitive land in New Zealand, and to require overseas persons wishing to do so to meet certain criteria for consent. However, a number of changes have been made to these criteria, including changes to what constitutes “sensitive land”, and what defines an “overseas person”.  These changes are significant because any “overseas person” who wants to purchase “sensitive land” in New Zealand must obtain consent from the Overseas Investment Office before their purchase can proceed.

The changes come in response to a period of rapidly rising house prices and aims to increase restrictions on foreign speculators looking to purchase property in New Zealand.  The Government hopes that this will create a housing market with prices shaped by, and affordable for, New Zealand buyers.

Until now, overseas persons have not needed to apply for consent to purchase residential land in New Zealand as residential land has not fallen within the definition of “sensitive land” (provided that land is not sensitive for some other reason, for example, if it has historic heritage status, or adjoins a reserve). However, the definition of “sensitive land” has now been extended to capture all residential land. Residential land includes any land classified as residential or lifestyle in the relevant rating valuation roll.

The definition of “overseas persons” (in relation to natural persons) has also been amended to clarify that overseas persons are all people who are neither a New Zealand citizen, nor ordinarily resident in New Zealand.

To be “ordinarily resident” (as the test applies to residential land), a person must:

  • hold a New Zealand residence class visa; and
  • be a New Zealand tax resident; and
  • have been residing in New Zealand for at least 12 months; and
  • have been in New Zealand for a total of at least 183 days in the immediately preceding 12 months.

The amendments to the Act do not, however, change the definition of “overseas persons” in relation to entities. The position here remains that if 25% or more of a company, trust, or other entity is owned or controlled by overseas persons, that entity will be deemed to be an overseas person.

Importantly, if a person is not an overseas person, that person does not need to apply for consent. This includes all New Zealand citizens (regardless of where that person is, or has been living), and all others who satisfy the “ordinarily resident” test.

However, an exemption has also been made for citizens of Australia and Singapore and permanent residents of those countries who are living in New Zealand. This is in keeping with the Government’s obligations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, signed earlier this year, and means that any person who is an Australian or Singaporean citizen (regardless of where that person is, or has been living), or any person who is a permanent resident of either of these countries who is ordinarily resident in New Zealand, also does not need to apply for consent.

Overseas persons will still be able to buy residential land in certain situations where they do not intend to live in the property. This will include, for example, opportunities to build and on-sell new residential housing, build and operate long-term accommodation facilities, or acquire an interest in residential land to be used for non-residential purposes such as motels, hotels or offices, or which is otherwise incidental to a core business purpose. However, the Overseas Investment Office will still need to be satisfied that the investment will be for the benefit of New Zealand.

Applying for consent from the Overseas Investment Office is a time consuming and costly process, where application fees can be in the tens of thousands of dollars, take months to be considered and where approval is far from guaranteed. Accordingly, any agreement for sale and purchase of real estate where a purchaser is or is likely to nominate an “overseas person” to complete the purchase should always be conditional upon the purchaser obtaining the required consent. Even where a purchaser is not an overseas person, all purchasers will, from 22 October 2018, be required to sign a statement with their lawyer confirming that they are not an overseas person or, if they are, that they have obtained the required consent, or are exempt from doing so.

The Amendment Act will also bring with it a number of other changes to the provisions of the Overseas Investment Act, including changes to the rules which apply to overseas investment in rural land and forestry, for example, which are not addressed in this article.


This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.

For further information

Greg Thomas - Harkness Henry Associate

Greg Thomas

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