Law to ban foreign home buyers to be introduced
The government will push through its Bill preventing foreign purchasers from buying existing New Zealand houses by early next year.
Housing Minister Phil Twyford and Land Information Minister Eugenie Sage announced the legislation would be introduced into Parliament today and first debated next week.
The Bill will go through a truncated select committee process and will come into force in the first quarter of next year.
The Bill means that New Zealand and Australian citizens can still buy residential land without screening, while New Zealand and Australian permanent residents would be able to buy without screening provided they have lived in New Zealand for the past year. Australian buyers are protected from the ban by the terms of the Closer Economic Relations Agreement.
The ban will also make buying an existing home difficult for skilled migrants who have moved to New Zealand, but who hold only residency visas rather than qualifying to buy existing homes as permanent residents.
Permanent residents from each country who have not lived in New Zealand for a year, along with “resident visa holders”, would have to pass Overseas Investment Office screening before being able to buy residential land, which is reclassified as ‘sensitive’ under the Overseas Investment Act.
The resident visa holders category encompasses those on resident work visas, people in the skilled migrant category, investors and entrepreneurs, as well as people on partnership, parent, dependent child, refugee, Samoan quota or Pacific access visas, but excludes temporary work and student visas.
“Foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use,” said Land Information Minister Eugenie Sage. “They will need to be able to show that this will have wider benefits to the country.”
Twyford said there were two ways for resident visa holders to pass OIO screening, which Sage said would not take as long as sensitive land applications. The first is the new build exemption, which means someone who is not a citizen nor a permanent resident can build a home, provided it is on-sold with the effect of increasing supply. The second exemption covers resident visa holders with an intention to live in New Zealand.
“You can buy a home to live in,” Twyford said. “You’ve got to pass that test, that’s yet to be determined, about the intention to reside. Then you would have to sell that home if you left the country or your visa expired.”
Overseas buyers would be able to buy new apartments off the plans, but would not be permitted to live in them. The ministers could not immediately answer how long a foreign buyer would be able to “sit on” property before selling although in other legislation, the government will shortly move to impose capital gains tax on property sold within five years of purchase.
Companies or trusts with overseas ownership of greater than 25 percent would also have to go through the OIO tests, Sage said. The Bill also permits someone to buy a house in order to knock it down and build several new homes, Twyford said.
This policy won’t just affect foreign buyers, but it’s likely to have an impact on the real estate market as a whole.
“We’ve see an increase in enquiries & listing numbers since the change of government,” Ray White Glen Eden real estate agent Savannah Boulger said.
“People are nervous that the new legislation will have a cooling effect on the market’