New People of the Land: Purchasing residential and rural property in New Zealand
New Zealand, known to the indigenous Maori as Aotearoa or ‘The Land of the Long White Cloud’, is often noted as one of the most beautiful countries on Earth. New Zealand has also been praised internationally – including by the World Bank and Forbes – for being a country that is great to do business in. It is, therefore, no surprise that in recent years, foreign interest in New Zealand’s property market has surged, with overseas buyers looking to acquire residential homes and farmland for investment.
This upsurge in buying interest has not surprisingly correlated with an increase in the median price of homes in New Zealand. Homes in New Zealand now have an average price tag of NZD550,000. In Auckland – the nation’s largest city – the median price is NZD835,000. New Zealand and international media have hyped stories of offshore billionaires buying up vast tracks of land in New Zealand’s South Island high country. All of this has caused much disquiet in New Zealand.
This increased international interest in New Zealand property has heightened scrutiny on overseas purchasers and has led to the New Zealand Government enacting more restrictive regulations concerning who can purchase residential and rural property in this country. In August 2018, legislation was passed that means only New Zealand residents can now purchase residential property in this country. Consequently, an overseas buyer looking to purchase a residential property in New Zealand needs to apply for New Zealand residency first. Those with residency, but who do not reside in New Zealand, need to apply for consent to purchase or build a residential home. There are limited exceptions: Australians and Singaporeans, thanks to existing free trade deals, are exempt from this law change and are still able to buy residential property in New Zealand. Foreign nationals who have already purchased residential property are not retrospectively affected.
There are also some options available to foreign nationals looking to purchase residential property in New Zealand for investment purposes. The majority of these options are focused on large-scale developments. An overseas buyer can buy an apartment off the plans from a developer, as long as the development has an exemption certificate. (An exemption certificate allows the developer to sell up to 60 per cent of the units to overseas buyers.) However, an overseas buyer is not allowed to live in the property – he or she can only hold the property (e.g. apartment) as an investment, or sell it.
Purchasing rural property in New Zealand as a foreign national is subject to scrutiny from the NZ Overseas Investment Office (OIO). The OIO assesses applications from overseas investors, including corporate purchasers – i.e. if an offshore entity is looking to purchase farmland, not as an individual but through a company, the OIO will regard a company as foreign if over 25 per cent of its owners are not New Zealanders.
Under the current Government, the OIO has increased its size, and the vetting process it undertakes before granting overseas investors a green light has become more rigorous. The OIO primarily looks at whether the overseas investment will bring additional benefits to New Zealand, that would not exist if a New Zealand entity purchased the same property. The onus is on the overseas purchaser to show these benefits. These benefits can be varied – e.g. economic, such as providing jobs to the local community, but they need to go beyond the purely economic, including actions such as pledging to commit to environmental protection of the land or maintaining public access to certain areas. The overseas investor must also pass an extensive ‘good character’ test, involving significant international due diligence on the proposed purchaser.
In summary, while the overseas purchase of rural land in New Zealand has been made more difficult, unlike residential property it has not been (effectively) banned, and with the right assistance purchasing farms and other lifestyle property in New Zealand from overseas is still very possible.
New Zealand Maori refer to themselves as Tangata Whenua, or ‘The People of the Land’. This concept is reflected in how seriously New Zealanders treat their commitment to safeguarding the nation’s land and environment. Those from overseas looking to purchase land are expected to demonstrate that same level of commitment. The current political climate in our country around foreign ownership of land makes it more important than ever to be supported by expert local advisers during the purchase process. Mark Copeland Lawyers has a wealth of experience in these regards, and we are always available to assist any overseas buyer who wishes to invest in the paradise which is New Zealand!