Overseas Buyers Shut Out of Housing Market

Changes to the Overseas Investment Regime

As at 22 October 2018 the Government’s policy to exclude overseas buyers from buying houses in New Zealand came into effect.

Overseas buyers were already banned from buying “sensitive” New Zealand land such as farms, land which borders the foreshore of the ocean or a lake and land of cultural or historic significance under the Overseas Investment Act. However residential land, houses, did not fall into the category of sensitive land and as such there were only very limited restrictions on overseas people buying residential land.

Now, with effect from 22 October, the Overseas Investment Act has been changed to make residential land sensitive. The effect of this is that overseas buyers are now effectively banned from buying houses in New Zealand except in limited circumstances.

Houses, and the land on which they sit, are considered residential land if the land is categorised as residential or lifestyle for the purposes of the District Valuation Role, meaning for rates purposes.

From 22 October every person or entity (a trust or a company) buying residential land must complete a Residential Land Statement setting out that they do not require consent from the Overseas Investment Office to purchase residential land.

Everyone will require consent unless they are either a New Zealand Citizen or “ordinarily resident in New Zealand”. There are ordinarily four criteria to decide whether a person is ordinarily resident in New Zealand, these are:

• Hold a residence class visa; and

• Have been living in New Zealand for at least 12 months; and

• Have been present in New Zealand for 183 days in the previous 12 months; and

• Be a New Zealand Tax resident.

Lawyers and Conveyancers who handle all sales and purchases of land in New Zealand are required to hold a Residential Land Statement from their client for every purchase of residential land from 22 October and are unable to complete the purchase without a Statement. Real Estate Agents must also complete the Statement prior to buyers signing an agreement.

An overseas person cannot have a New Zealander buy land on their behalf in order to avoid the new rules. There are significant penalties for people and lawyers who do not comply with the new rules or attempt to get around the new rules.

Some people who would ordinarily be considered overseas persons can still buy houses in New Zealand. Citizens and permanent residents of Australia and Singapore do not require consent due to existing economic relationships New Zealand has with each country. Also overseas persons who are spouses or partners of New Zealand citizens or residents do not need consent to buy jointly with their New Zealand spouse or partner if it is to be their family home.

This exclusion of overseas persons from buy houses in New Zealand is a significant change in New Zealand legislation. How much of an effect it has on the market remains to be seen.      


Issue 94 December 2018