Encounter the Difference

NZ CA is an association of independent Chartered Accounting firms, proactively working together for the benefit of our clients.

Overseas Investment Amendment Act – property development update

Published: 11th March 2019

Author: Duncan Cotterill

On Wednesday (22 August 2018), the Overseas Investment Amendment Act 2018 (Amendment Act) became law. The new laws will come into force on or before 22 October 2018.  The Amendment Act brings “residential land” within the existing Overseas Investment Act, such that any overseas person who wishes to buy or lease residential or lifestyle land (of any size) will, in almost all cases, need to apply to the Overseas Investment Office (OIO) consent.  

A general overview of the new residential land provisions is contained in our separate update: New OIO laws bring changes for residential land, forestry and horticulture.  This update contains more detail on how the changes will impact on the property development sector.

Property development
The key impacts of the Amendment Act on the property development sector are twofold:

1  All developers with a degree of overseas ownership (generally 25%+) will need to apply
for consent to buy residential land for the purposes of new development; and 

2  The new rules will also impact on the potential purchaser pool for new residential property developments by imposing restrictions on overseas persons buying into these developments.

An overseas person investing in an entity that already holds residential land in New Zealand
for development purposes may also require consent, particularly if they are acquiring a 25%
or more ownership interest in that entity.

The “increased housing” test
Property developers that are “overseas persons” can apply for OIO consent to purchase residential land on that basis that they will be developing the land and adding to New Zealand’s housing supply.
Consents granted under the increased housing test come with specific conditions,
including:
• the overseas person must dispose of all interests in the residential land within a specified period (to be set by the OIO in each case); and
• while the overseas person holds an interest in the land, they must not occupy any part of it (or allow related parties to occupy any part of it).

Purchasers who are overseas persons may also be able to rely on the “increased housing” test, where pre-sales of the new residential dwellings are an essential aspect of the development funding, although they will be subject to the on-sale and non-occupation conditions. Otherwise, individual purchasers
must generally:
• apply for OIO consent on the basis that they have an appropriate visa status (to be defined through regulations) and intend to reside in the property being purchased; or
• purchase pursuant to an “exemption certificate” held by an apartment developer (see below).

Large-scale developments – rules, allowances and exemptions
There are some more relaxed rules for large scale developments, although they do still require OIO applications to be made:

• developers can be permitted to retain long term interests in new residential dwellings
(e.g. as landlords or through shared-equity or lease-to-buy arrangements) if the development involves 20 or more new residential dwellings;
• developers of retirement villages are permitted to retain ownership of and operate a new (or expanded) retirement village; and 
• developers of large apartment blocks (20+ apartments per building) can apply for an “exemption certificate”, allowing them to sell a certain percentage of the apartments “off the plans” to overseas buyers without those buyers requiring OIO consent. The overseas buyers will not be permitted to occupy the apartments.  The percentage of dwellings that can be sold under an exemption certificate will be set by regulation, and is expected to initially be 60%.

There are also some new exemptions for hotel lease-back arrangements and for network utility companies that need to acquire residential land to provide essential services.

Minority interests
Where an overseas person is applying for consent to acquire an ownership interest in an entity that already holds residential land in New Zealand, the Ministers may exercise a discretion not to impose to on-sale condition if the overseas person is acquiring (a) less than a 50% ownership interest or (b) an indirect ownership interest (i.e. through another entity).

Existing developments
An overseas person buying an existing development (i.e. where the new dwellings have already been constructed) will generally have to satisfy the “benefit to New Zealand” test, and also satisfy a residential land outcome” (such as on-sale, and/or no-occupation).

Standing consents
The new “standing consent” regime is available for developers wishing to acquire land under the
“increased housing” test. This allows them to remain competitive in the market when making new land acquisitions, as once they hold a standing consent their offers will not need to be conditional on obtaining OIO consent.

Transitional provisions – apartment developments
If sales of apartments in a new apartment development (of 20+ new apartments per building) have already commenced before the Amendment Act comes into force, the developer can apply for a special exemption certificate that will allow them to potentially sell all of the new apartments to overseas buyers. The right to make applications for these exemption certificates is effective 2 weeks after royal assent (22 August) but expires 6 months after the date of royal assent.

 

Related Articles

  • Auckland
  • Bay of Plenty
  • Canterbury
  • East Coast
  • Hawke's Bay
  • Manawatu/Wanganui
  • Nelson/Marlborough
  • Northland
  • Otago
  • Southland
  • Taranaki
  • Waikato
  • Wairarapa
  • Wellington
  • West Coast

McDonald Vague Limited

Our experience in business turnaround, restructuring and insolvency has helped many New Zealand companies through periods of growth and change, as well as difficult times.

We advise underperforming businesses how to protect their financial future and find stability through a range of turnaround services including independent accounting reviews, raising finance and divestment.

Region: Auckland

Phone: 0800 30 30 34

Young Read Woudberg

Trust YRW for highly professional accountancy support – as well as for expertise in business development, new business establishment and information technology.  We have a firm emphasis on regional business needs and are particularly close to local dynamics in the property, commercial and horticultural sectors. YRW are well resourced to provide experienced, informed, independent advice while we remain small enough to form long lasting personal relationships.

Region: Bay of Plenty

Phone: 07 578 0069

Brophy Knight Limited

Brophy Knight Ltd is a Chartered Accounting firm located in Ashburton, the capital of Mid Canterbury.

We are a member firm of NZCA, a New Zealand wide group of independent Chartered accounting firms focused on providing clients with a quality service.

We act for a diverse range of clients in Mid Canterbury and throughout New Zealand.

We are committed to forming close partnerships with our clients. This way we can understand your unique situation and customise the assistance we provide to suit your needs. Our commitment to excellence is evident in the hardworking nature of our staff, and the exceptional service we offer.

Region: Canterbury

Phone: 03 307 9051

No firms in East Coast

BM Accounting Ltd

BM recognise that different people need different things from their accountants depending on where they are in the business life cycle. Whether you are just starting out, are established in business or ready to retire we have the knowledge and expertise to support you. Similarly our dealings with a wide variety of industries and professionals help us to understand that everyone's requirements are unique.

Region: Hawke's Bay

Phone: 06 876 7159

Naylor Lawrence

Region: Manawatu/Wanganui

Phone: 06 357 0640

Wallace Diack Chartered Accountants Ltd

Region: Nelson/Marlborough

Phone: (03) 578 7389

Sudburys Limited

Sudburys look after business owners providing solutions in all areas related to accounting, finance and wealth management. They work alongside their clients, from supporting them with their daily accounting needs, to providing them with valued business advice.

Region: Northland

Phone: (09) 430 4888

G S McLauchlan & Co

GSM is a Dunedin based Business Advisory and Chartered Accountancy practice founded in 1957. 

GSM pride themselves on our specialist knowledge, our ability to keep fresh in today's ever changing environment

Region: Otago

Phone: 03 477 8192

McIntyre Dick & Partners Limited

McIntyre Dick & Partners Ltd is one of the top chartered accountancy and business advisory firms in Invercargill and with a diverse portfolio of clients throughout the south including Invercargill, Te Anau, Gore, Queenstown, Dunedin & throughout Otago.

Region: Southland

Phone: 03 211 0801

Harris Taylor Limited

The Accountancy world is constantly changing and highly competitive. At Harris Taylor their challenge is to stay ahead of the competition by providing the best possible service, whilst ensuring that client satisfaction remains our primary motivation and ultimate goal.

Region: Taranaki

Phone: 06 278 5058

Strettons & Co Limited

Strettons Directors lead an energetic team of skilled professionals. Their team is motivated, multi-talented and works hard to achieve maximum results for clients. Their strengths and specialities align with the backbone of New Zealand industry - forestry, farming, geothermal energy, tourism, property small to medium business and human resources.

They recognise that one size does not fit all and their business reflects this, they employ the best people with a range of talents to service their clients.

Region: Waikato

Phone: (07) 376 1700

Southey Sayer

Offering a full range of accounting and business development services, tailored to meet the needs of each individual client. The wide range of expertise and experience within the firm is shared amongst the partners and their teams for their clients benefit. Services and products offered are fully flexible there will be no expectation to conform to a certain product or pricing structure.

Region: Wairarapa

Phone: (06) 370 0811

BW Miller Dean Ltd

BW Miller Dean Ltd was formed on 1 April 2016 with the merger of two long standing Wellington chartered accountancy practices: BW Chartered Accountants Ltd and Miller Dean Chartered Accountants Ltd. 

BW Miller Dean pride themselves on building relationships based on trust with clients through personal, individual attention, and always being available to help their clients with specialist Accounting or Finance functions when needed.

Region: Wellington

Phone: 04 910 3340

Marshall & Heaphy Limited

Central to the culture of the team that has been developed over their history, is the belief that successful and sustainable businesses are the backbone for the West Coast community. Great businesses create jobs, keeping people and family together on the Coast, building a sustainable community.

Region: West Coast

Phone: 03 768 7186