Change is on the horizon for overseas property investment regulations as the second and final stage of the review of the Overseas Investment Act 2005 gets underway.

Initial amendments, introduced last year, included major changes to the definition of ‘sensitive land’ and ultimately made it more difficult for most offshore buyers to purchase residential property in NZ.

The government’s proposed reforms focus on three areas that will affect how the Overseas Investment Office (OIO) screen candidates in the future.

The Act currently specifies the different assets or ‘interests’ in those assets that require consent from the OIO. This restricts the kinds of properties offshore investors can purchase, adds additional costs to purchasers and also slows down property transactions. The new proposals will look at streamlining this buying bottleneck.

Another proposed change relates to leases. Currently, a non-New Zealand resident requires OIO consent if they take on a residential lease for a period exceeding 3 years. This means they are required to go through the same process as an offshore person buying residential land. The reforms will look at extending the lease period to 10 years so that residential leases under ten years do not require OIO consent. This will make investment by foreigners in residential leases easier.

The OIO consent process is complex, lengthy and costly. Investors must meet certain character requirements and show that the investment will benefit NZ. The reforms will look at how this process can be simplified.

The Government’s proposals will hopefully improve the current regulations. While this second stage of changes isn’t intended to make it easier for an overseas person to buy land, the reforms are intended to clarify applicant criteria for purchasing property in New Zealand. 

It is anticipated that the proposed changes will also remove many complexities from the first round of amendments to the Act and streamline the screening process.

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Mike Toepfer is a Director of Aspiring Law.

Please remember, this information is designed as a general guide, and should not replace specific legal advice on a particular issue.