The Bill amends the Overseas Investment Act 2005 (‘Act’) so that residential land is classified as ‘sensitive land’, requiring the consent of the Overseas Investment Office (‘OIO’).
Residential land is defined as land that has a property category of ‘residential’ or ‘lifestyle’ for the purpose of the relevant district valuation roll. Further guidance on what constitutes ‘residential’ and ‘lifestyle’ land is found in the Rating Valuations Rules 2008 (LINZS30300), both of which are reasonably broad.
The ‘residential land’ category includes land which you would expect to see (such as apartments and dwelling houses), but it also includes bare or substantially unimproved land which is likely to be subdivided for housing.
‘Lifestyle land’ is also broadly defined and includes land improved to the extent that there is some residential accommodation sited on the land, bare or substantially unimproved land which is likely to be subdivided into smaller lifestyle lots and vacant or substantially unimproved land without immediate subdivision potential.
These broad definitions mean that land will be caught within the definition of ‘residential land’ even where housing is not present on the land.
Obtaining consent for investment in residential land
Overseas investors will be required to satisfy one of three tests to obtain consent of the OIO (in addition to satisfying the other requirements under the Act). These are:
Some concession is made to investors who intend to commit to New Zealand or to develop housing. The Bill provides that a ‘standing consent’ is available to these investors where they can satisfy either the commitment to New Zealand test or the increased housing on residential land test.
A ‘standing consent’ will require a limited application for consent (in that benefit to New Zealand is not required to be demonstrated) and may be obtained where the good investor test is met. There is still uncertainty regarding how extensive an application for ‘standing consent’ will be and what it will cost.
Any ‘standing consent’ will be subject to reporting conditions, but should alleviate some of the additional burdens imposed on housing developers under the Bill.
Changes to definition of ‘ordinarily resident’
The Bill has amended the definition of ‘ordinarily resident’, so that it is narrower in respect of residential land. To be ‘ordinarily resident in New Zealand’ an investor must:
Being domiciled in New Zealand is not a means in which a person can be considered ordinarily resident where the land is or includes residential land.
The changes proposed to the Act are far reaching and result in a complete change to the landscape for investing in residential land in New Zealand. They are likely to make smaller housing developments, which may not have previously required consent under the Act, more onerous. Conversely, the inclusion of increased housing supply in the three tests should assist developers of larger scale housing projects.
We recommend you seek early advice to assess the impact of these proposed changes to your business or investment assets.