By David Hargreaves
The Government's proposed new law banning offshore-based people from buying New Zealand residential property was introduced into Parliament on Thursday and it contains provisions to force sale of properties, along with up to $20,000 fines in some circumstances.
While Housing and Urban Development Minister Phil Twyford and Land Information Minister Eugenie Sage spoke to introduction of the legislation earlier in the week, the Overseas Investment Amendment Bill as it is styled was introduced by Attorney-General, Trade, Economic Development and Environment Minister David Parker.
The preamble to the Bill states that it will ensure that overseas persons who are not resident in New Zealand "will generally not be able to buy existing houses or other pieces of residential land".
"This will lead to a housing market with prices shaped by New Zealand-based buyers.
"The Bill will therefore make homes more affordable for New Zealand buyers at some times in the property market cycle, including for first home buyers, while also supporting our efforts to build a more productive economy, by helping redirect capital to productive uses."
The Bill provides that overseas persons would be able to buy residential land in certain situations. These are:
• if they will be developing the land and adding to New Zealand’s housing supply; or
• if they will convert the land to another use and are able to demonstrate this would have wider benefits to the country; or
• if they hold an appropriate visa and can show they have committed to reside in New Zealand.
"The Bill requires that conditions be imposed if an overseas person purchases residential land utilising one of these exemptions, for example, if an overseas person purchases residential land to build houses on it, they will be required to sell the land when the houses are built," the Bill's preamble states.
In terms of the enforcement powers given to the Overseas Investment Office in relation to the new legislation, the Bill states that the 'regulator' may issue a property buyer with notice to dispose of the property if the regulator has reasonable grounds to believe that the buyer has:
(a) contravened this Act; or
(b) committed an offence under this Act; or
(c) failed to comply with a condition of a consent or of an exemption.
The Bill says the notice period for sale given by the OIO must "not be less than 90 days after the date on which the notice is given".
This would suggest therefore that a three-month notice period would probably be standard.
The Bill goes on to say that if the buyer does not dispose of the property within the time and in the manner specified in the notice, "the regulator may take any other enforcement action it thinks fit in relation to the contravention, offence, or failure".
Another very interesting section in the bill refers to the issuing of certificates showing that the buyers are entitled to buy a property.
The Bill states that the provider of conveyancing services must give the certificate.
"Before the transaction to acquire the interest is given effect, the provider must, in the prescribed manner (if any), certify that, to the best of the provider’s knowledge, A [the buyer] will not contravene or commit an offence under this Act by giving effect to the transaction."
It goes on to say that the "provider" must keep a copy of the certificate for a period of at least seven years after the date on which the transaction is given effect.
"Every person who, without reasonable excuse, fails to comply with this section commits an offence and is liable on conviction to a fine not exceeding $20,000," the Bill says.
The Bill will be sent to Select Committee so that public submissions can be heard, but the Government's hoping to have it passed into law early in the New Year.
90 Comments
Under National/previous Labour/All of them, existing houses could be bought and sold. Now, a new building must go up, increase supply, if a foreign national wants to invest in New Zealand. Note that once a foreign national has built a house, they can't then sell it to another foreign national. It 'exists' so joins the pool of property available exclusively to New Zealand nationals.
And as far as '" foreign capital will say bye-bye" goes? The asset has to be sold first to do that - who to? Answer: Only to a New Zealand national - and what price will/can they pay?
Wow so they can build houses but must sell once the houses are built.
In before the sound of “but they will work out ways to get around the law”. Yeah probably but forced sale/confiscation and a fine worth the risk? Every person who fails to comply (emphasis on every person) is liable on conviction to a fine not exceeding $20k. I guess that includes the real estate agent, conveyancer and could even drag in the vendor if they knew about it.
Sounds to me like the new government haven’t thought this out very well at all
This is draconian
My sympathies to existing home owners This will start the depression in values
NZer Chris Liddell [ ex GM CFO ] on Trumps Strategic Intiatives Committee just appeared at WH news conference with Trump
as he CUTS REDTAPE !
The new kiwi govt increases redtape
If they wish to put in place new legislation they should retire some of the old legislation on the books
NZ has too many regulations and nobody ever does anything to fix that impediment
Wow! A good start particularly with the force sell part. However I think adding a carrot and stick approach will supplement this bill further. That is should any lawyers, accountants, RE agent or bank staff found trying to cheat/bypass the intent of this bill will lose their license to practice their trade in nz forever!!! As well as a 20k incentive for the person who directly ratted out the scumbags within their trade.
I like that, they should also be encouraging a shop your boss for those scumbags who are exploiting immigrant labour - option a) you get found out and you're deported with a criminal record, or option b) you shop the owner get a $20k reward and a ticket back home with a clean slate. The owner goes to jail, and a commensurate fine, the minimum $50k they've allegedly been paying per employee per annum would suit.
So true!!! Never thought you can apply this same principle to employment too ;D. Who knows PTE centers as well? Rat your own dodgy school out, school pays heavy fine and lose license, a portion of money goes back to the snitch and other affected students without being blacklist by immigration.
Well no you’re always going to have people flout the law which is why you read about people getting done for fraud, murder etc. It’ll have an effect in the sense that people will ask “what if I get caught?” and I’m sure a good proportion of people will decide not to.
I’m sure agents and solicitors don’t want to risk getting stung either.
Good to see that they are taking some good tough measures on this, they'll need it if the Vancouver Tax dodging is anything to go by as to how systems can be gamed.
Better Dwelling article: Dodging Canadian Foreign Buyer Taxes: A Guide To Exploiting Loopholes For Fun and Profit
https://betterdwelling.com/dodging-canadian-foreign-buyer-taxes-guide-e…
My Goodness !! ...talk about complicated and tangled laws ... who is going to administer and police this, and How ???
And at what cost to the taxpayer ?? ... Forcing to sell ? Seriously? ....someone said today we have not reached Venezuela yet , well I am sure we are not too far away ....
and all this is for what? ... 3% of sales?? REINZ said it was 3.8% ( they think, as the data is not complete!!)
Almost all properties these foreigners buy are out of the dreams of FHBs anyway !! they buy the $1M+ , new 4-5 bdrm houses ...not old crappy 1960s bungalows !! or buy land and develop, and that is allowed in the new law, so where is the actual gain???
Another law based on "Intentions" ?? what a joke !!
I would only describe this as a dog's breakfast ... A bill with very little substance or merit .... nothing but another morphine shot to calm their envious mates and the brainwashed people who follow MSM media stories and who are completely confused between foreign residents and non residents.
But hey, Well done !!... we can all now sleep tight knowing that the residential properties will now become more affordable after shutting off those horrible overseas manipulators robbing our houses off with their cheap money ...!! How dare they ??
Keep an eye on prices folks ... you might miss out on an "affordable" if you blink ...!
haha, calling for help are we ?? ...
Wheeler is working hard on how to prove that Auckland prices lost $200K after REINZ figure yesterday !!
I agree with Penguin, this is headline and feel good stuff , they had to do it as it was an election promise ... but, in its current form, has no substance and will have no effect what so ever.
It is becoming apparent that only FHB's are watching the property market. Everyone else is looking to other investments that are more liquid and can be easily bought in small parcels over a period of time. Property is done for now. Too many government requirements needed such as insulation, smoke alarms, rising insurance risks, meth contamination testing... No thanks. Shares at least provide regular dividends and require no ongoing maintenance, insurance and rising rate increases. I am done with property investments for now!
We all know that National voters like yourself don't want to see the property ponzi scheme to go down but, you know you have to face the harsh realities of life Eco Bird. Think about it, if house prices had continued to skyrocket at the rate they were going; no legitimate business would be able to function in Auckland and your average citizen wouldn't be able to afford to live here because it has becoming simply far too expensive.
And do you know that each year about $1.35 billion from the proceeds of fraud and illegal drugs is laundered through everyday New Zealand businesses, a lot of that comes from abroad and is channeled in to Auckland property, that is then land banked to be flipped at a huge profit later (Music to your ears isn't Eco Birdy).
At least now we can move away from that false economy.
https://www.justice.govt.nz/justice-sector-policy/key-initiatives/aml-c…
This new government policy has already hit headlines across other western countries such as Canada, as they watch and wait to see if our new policy hits where it hurts the speculators the most. Australians have been calling for it for a couple of years and NZ gets in first. That must hurt!
Is it that simple? Now you have to effectively provide evidence that you’re entitled to purchase the property so I’d imagine people will be digging deeper into properties to be sold to companies or trusts. From the article:
Another very interesting section in the bill refers to the issuing of certificates showing that the buyers are entitled to buy a property.
The Bill states that the provider of conveyancing services must give the certificate.
So we need more foreign cash like another runway and casinos (and associated drugs and laundering), highrise brothels and crappy campers leaving turds everywhere? I think not.
Medium term we need to get this type of legislation down pat before hyper sonic passanger have us a couple of hours from China and the US.
Average
Wasn’t it a couple of bros in Wellington who are NZs biggest brothel owners ?
They owned a Auckland building that mysteriously burnt out
NZ doesn’t need foreigners to run criminal enterprises there’s a number of leading crime organizations
Don’t forget the Hells Angels NZ branch was the first overseas chapter outside the United States
NZ holds a special place in the Angels USA heart
You are referring to the Cho Brothers. TV3 have done a couple of documentaries on our lovely new imported brothers in arms. Yes they ran their main business in the vicinity of my town in K-Road and yes they were very successful at running all sorts of sidelined businesses in conjunction with their main interests. Do I need to spell it out for you?
This is looking more and more unlikely. With FATCA rules and AML/CFT reporting being imposed on lawyers in July 2018 that require lawyers to identify beneficial owners of entities, I struggle to reconcile how that, along with the certification required by this Bill, can allow someone from overseas to purchase without being found out.
Finally a government with some sense. While I benefited greatly from the National open door policy (not just in housing but the business I am in) the door had to be adjusted.
I would suggest house prices will continue downward (irrespective of what REINZ and other conflict of interest parties say) I am at the coal face of development and there has been a significant change in sentiment in the market.
You have to like the woolly make-believe language
"may be forced to sell the houses" - not will be - just maybe - who will make that decision - who will be the policeman
"provisions to force sale of properties, along with up to $20,000 fines in some circumstances" - don't you like that "in some circumstances" - that is code for "sometimes never"
"will generally not be able to buy existing houses or other pieces of residential land" - like the generally - no definite about it
Ex-long time National voter and I'm stoked.
This is the singular issue I voted for this time.
After 9 years of inaction and being told "its impossible" it has been done in a matter of weeks by the mob I least expected to get it done.
It may not be perfect or 100% watertight for those truly motivated to beat it (nothing is ) but it is a message - we are not your plaything anymore - go find an easier target to speculate with.
If you don’t know by now CJ
You’re all extremely naive if you believe this will help NZ
This is a complete over reaction
It’s the extreme opposite of the JK foreign speculators repatriation of capital gains paying no tax regime
You’re so miopic you have 0 global perspectives
No need to get abusive Northern. You don't even live here from what I recall from your previous comments, I presume that you are worried that you won't be able to buy whilst you're living else where in the world or that you might be forced to sell any existing property you own in NZ?
And are you saying that bringing down the cost of living is not going to help NZ? Have you not heard of a global economy, which is very competitive by the way?
Really NL, what planet are you on?
CJ
I think you need to tone down your rhetoric
I’m pointing out my opinion only
The fact is NZ does need foreign capital and it’s better it comes from foreigners investing in NZ than the government borrowing overseas funds to prop up the economy
Why do you think JK kept the doors wide open to new migrants ?
The point has always been there was not enough regulation
This proposed legislation is overkill
To those commenting “It like Australia’s “ they neglect the simple fact Australia is eminently more attractive for foreign investment and they can afford to be tougher with foreigners investing in their economy.
NZ is 1/5th the pop a couple of little islands at the end of the world
It can not afford to upset foreign investors
You’re welcome
Seriously Northern, I think you're the one being naive. That so called non resident investment, isn't really an 'investment' it's just money laundering, see things for how they really are.
That's the type of so called investment, is the type that we really do not need. So, no I do not see this new policy as over kill, in fact what we really need is this to support it: "Unexplained Wealth Order" to investigate suspected money launders, this bill was passed in the UK back in April this year and apparently both Australia and Ireland have it too.
Link: https://www.transparency.org/news/feature/unexplained_wealth_orders_how…
Funny that you should bring up JK, I'd love to know who was able to purchase his home sold recently for $20 million???
Since you don't seem to understand how money laundering works here's a nice info graphic for you, follow the money: https://www.ukunmaskthecorrupt.org/
Plus I remember when NZ had affordable housing in Auckland which wasn't that long ago, and they was no homeless people on the streets or families living in cars.
Besides all that, what do you care about NZ, you don't even live here!
New Zealand was never going to thrive in the "Global Market"! It is only now, that most people are realising that their low incomes can't compete with foreigners buying up all of our houses. New Zealand is closing it's borders down and looking after it's own for now. We are doing a bit of a "Trump" deal, if you like to see it that way. Just a temporary breather. It is what it is, and most New Zealanders are happy with the change.
bilbo, Chinese are not going to rush to buy NZ property through back doors or whatever - it's now a falling knife. If anything, as this weakness morphs into a rout, they will begin to panic. The authorities will be deemed to have failed to protect Chinese wealth. The irony of it all is the looming possibility it could all go into a freefall as result of a debt crisis in Homeland China!
A couple of years ago I asked a property loving neighbour (Chinese) "are you prepared in the event of this all crashing?" His reply I thought was priceless "A crash will never happen, the authorities won't let it happen"
Ahhhhh - such bliss.
That does reflect the mindset of a command and control type of economy. I'm sure many holders of import licences, many railways workers and many agricultural producers in Muldoon's days thought the same. Then came Lange/Douglas.
Where NZ land/property is concerned, someone in the future will say: then came Ardern/Robertson.
It can only be a good thing to get back to affordability.
You are spot on and I actually feel a little sorry for them. I had a lovely neighbour in Palm Heights who immigrated with his young daughter and he tried really hard to fit in with the Kiwi Lifestyle. He would often knock on my door and ask if my daughter could help with her homework around "New Zealand History and Facts", especially maori pronunciation. They were the best neighbours and always so quiet and polite. One day I came home and they were just gone. The house had a sold sign on it and I found out later that they just found it too hard to adapt to our culture. At that time, the GFC was still fresh and house prices had dropped. They bailed in a declining market. I do know many others that are so optimistic that our government will never let a housing bubble crash and I put this down to perhaps their naievity because they come from a country that is a closed off market and very much controlled by their government. So when they arrive in NZ, they are quite naieve to our Western style open markets where cycles are the norm for us and they only ever see the bull side of the equation.
Lots of hand wringing over at specuvestor central. Based on the tone they seem more concerned at the removal of the 3% money and loss of capital speculation than the Nats lead us to believe was relevant. But they are all doing specuvestment for a decent yield and the good of their tenants....
https://www.propertytalk.com/forum/showthread.php?42443-Foreign-investo…
So they are saying overseas people are not permitted to have a holiday home?
This potentially will stop companies buying up old homes and building tourist or other commercial properties?
"while also supporting our efforts to build a more productive economy, by helping redirect capital to productive uses." This is the same drivel that Nick Smith used to quote. What other country on earth (baring North Korea) would want their citizens to be poorly housed in order to make money available to build factories.
"while also supporting our efforts to build a more productive economy, by helping redirect capital to productive uses."
The simplistic way I see it is.
If I had $3 and rent/mortgage repayments are $1 then I can buy $2 worth of goods, this could be a whole raft of things.
If on the other hand I paid $2 towards rent/mortgage then I will only have $1 to spend.
This means that high property prices take away money from other businesses in NZ.
As for "citizens to be poorly housed".
How are they poorly housed when houses are more affordable if house prices drop. If house prices drop more people can buy property. Rent should become cheaper as yields are more easily met.
What other country on earth (baring North Korea) would want their citizens to be poorly housed in order to make money available to build factories.
I don't think that is the intent nor will it be the result.
New Zealand has a long history of under investing in productive industries that creates jobs and wealth, if this changes then all New Zealand could benefit.
Lets wait and see if this legislation goes through as is (doubtful) and once its through see what the effect is. I dont know if there will be much effect if foreign buyers are only 3% of buyers nationally. (if that is true). If prices do decrease markedly, this will bring in the investors again into the market (ie buying at a lower price ) because rents are going up providing an increased yield....and there will be an equilibrium reached (around 8% yield?). So we will see.
To give further support, what we really need is this bill of law to be passed here in NZ: Unexplained Wealth Orders: How to catch the corrupt and corrupt money.
On 27 April the UK parliament passed an important provision of the Criminal Finance Bill that introduces a powerful new weapon into the anti-corruption arsenal: Unexplained Wealth Orders. This follows action already taken in Australia and Ireland.
https://www.transparency.org/news/feature/unexplained_wealth_orders_how…
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