Developers of multi-storey apartment blocks and hotels will be able to invite in foreign buyers again under changes to the Government's foreign buying ban law. Conveyancers also dodged a bullet and telcos got an exemption, but retirement village operators failed to win the exemption they hoped for. Nikki Mandow looks at the winners and losers in the select committee's changes to the Overseas Investment Amendment bill.
Amendments to the government’s foreign buyer ban, if introduced, would give overseas investors more leeway to put money into New Zealand housing developments.
The select committee looking at the Overseas Investment Amendment Bill has recommended some significant changes to the hastily-introduced legislation, after it came under fire in more than 200 submissions.
The select committee report released late on Monday introduced some major changes, including:
Allowing pre-selling 60 percent of units in big housing projects to foreigners, without them having to on-sell once construction is finished. The caveat is the investors mustn't live in the properties.
Waiving the requirement to on-sell immediately for investors in big developments intended to be rented out or sold under a rent-to-buy model.
Allowing all resident visa holders, not just those with permanent residents visas, to buy land without Overseas Investment Office consent.
Putting the burden of proof on purchasers, not lawyers, to make sure they meet the residency criteria.
Allowing foreigners to invest in major hotel developments as long as they lease the rooms they buy back to the hotel.
Opposition still opposes tweaked bill
National and ACT members of the select committee said the changes don’t alter the fact the bill is “a case study in bad law making”.
“Opposition members... oppose the bill on the basis that it will negatively affect the development of new housing in New Zealand at a time when we need to grow our housing stock, and will hamper the ability of New Zealand businesses to access foreign capital...
“In addition, the bill will impose significant cost and delay on parts of the housing sector... without clear benefit.”
Retirement village owners missed out
They MPs also criticised "the arbitary way exemptions and amendments have been introduced". For example, telecommunications, gas and electricity lines companies (which often have more than 25 percent foreign ownership) get an exemption, but retirement village developers don't.
And provisions stopping foreigners living in apartments they bought off the plans would be “unworkable or unenforceable”, they said
“Officials have confirmed these changes will still allow such units to be overseas owned and overseas occupied.”
Pre-selling apartments is often used by developers to finance large projects. However building industry players argued international investors would not put money into projects if they had to on-sell straight away, rather than being able to hold off until the market was strong.
Economist Shamubeel Eaqub believed the legislation was solving a problem that likely did not exist. He said there was no evidence foreign buyers are driving up housing costs and taking homes from New Zealanders. Instead the problem is around a severe shortage of supply.
But select committee chair Michael Wood points to recent Statistics NZ figures to back up the need to curb foreign ownership. The June figures showed more than 7.3 percent of property transactions in greater Auckland involved foreigners and in the central city the figure was almost 19 percent. Overall in New Zealand it was only 3 percent.
Given the bill wasn't going away, Eaqub welcomed the recommendation to allow foreign investment into rental development. Without overseas money, many big projects just couldn’t go ahead, he said.
A good supply of rental properties was almost more critical for low income families than increasing the houses available to buy, Eaqub said, because the government’s definition of “affordable” - $650,000 or less - is way beyond what people can afford.
“These changes give us an opening to try to market [rental, shared equity and rent-to-buy projects] around the world,” Eaqub said. “When one of my colleagues went to Australia recently, there was lot of interest.”
Meanwhile, lawyers will also be welcoming one significant change in the select committee report.
In the original wording, property lawyers and conveyancers could be fined $20,000 if they sold residential land to a foreigner. Now the onus is on the person buying the property to give the conveyancer a statement saying they meet the criteria.