Overseas buyer ban full of loopholes

: The Minister in charge of the Bill, David Parker
 

The Government’s much vaunted overseas house buying ban legislation has emerged from a Select Committee with a whole heap of exemptions and loopholes.

Ironically the Committee originally proposed an exemption which has now been ruled out by the Speaker  for a company associated with a Queenstown businessman who has been behind some of the biggest and most expensive real estate developments aimed at overseas investors.

Singapore has been entirely exempted from the legislation.

There are also big exemptions for forestry.

But perhaps the most surprising thing about the Bill is that it now contains powers for the Government to exempt whole classes of proposed sales from the legislation.

So, for example, a Government could exempt all urban houses.

And it also contains a power for the Minister to exempt any “transaction, person, interest, right or assets from the requirement for consent or from the definition of overseas person or associate or associated land. “

The Bill does lay down some broad criteria the Minister must consider in granting an exemption.

And then there is a detailed set of criteria the Minister must take into account before an exemption can be granted. 

But one Queenstown developer told POLITIK that the likely consequence of this would be that it would provide a field day for lawyers seeking exemptions for their clients.

The site of the Te Arai beach development

The site of the Te Arai beach development

What had the potential to be even more controversial was a proposed clause which has now been ruled out on procedural grounds by the Speaker which would have given an exemption to a development involving an American billionaire, Queenstown developer and a northern hapu and iwi for an upmarket beachfront subdivision north of Auckland being marketed overseas.

The 106 sites beachfront subdivision at Te Arai which was the subject of the exemption was strongly criticised last year by the-then local MP, Winston Peters.

“Why do Kiwis, going about their lives as best they can, have to fight every step of the way to preserve what is their right against a billionaire developer from another country and a complicit government? “Peters said.

The Opposition in their minority report has made it clear they oppose the exemption being included in the Bill

But it’s inclusion was opposed by Parliament’s Clerk on procedural grounds in that a public act cannot apply to “a select group of people”.

Nevertheless, the Government used its majority on the Select Committee to disregard that advice and maintain the exemption in the Bill when it was returned to Parliament.

Speaker Trevor Mallard, however, stopped it there and removed the exemption from the Bill.

However at least one of the developers, the American billionaire, Rick Kayne, is believed to be a friend of former Prime Minister, John Key, and the former Finance Minister,Steven Joyce, did do the company some favours over an access road.

Now it couldbe implemented as a local bill or the exemption powers in the Bill might be able to be used.

The other big move which will come about as a consequence of the Bill is Parker’s intention to exempt Singaporean citizens and companies entirely from it.

It was clear when the Government announced its intention to legislate for a ban last year that there would be problems with Singapore who argued that it contravened the free trade agreement it has with New Zealand.

Relations between New Zealand and Singapore became frosty as a result.

That may have meant that it was prepared to hold up negotiations on an Enhanced Partnership with New Zealand.

So what is New Zealand getting for its decision to exempt Singapore?

“Well, nothing in effect, “said Parker.

“They weren’t just willing to budge on their existing provisions in the agreement, and we conceded on the point.

“They made the point that there are very small numbers of Singapore purchasers at the moment.

“And we’ve got a side letter that says if there is a material increase in that number then we will look at it again.”

Under the new regime, overseas investors will be able to invest in new housing, particularly apartments, new rentals, and homes available to purchase under rent-to-own or shared-equity arrangements.

“This will help first home buyers to get their foot on the property ladder, “David Parker said.

The Bill; has now had its original tough residence requirements relaxed so that all permanent residents and resident visa holders who spend the majority of their time in New Zealand will be able to purchase homes under the regime without obtaining consent.

Other recommended changes will simplify the process for buying residential land for commercial purposes, such as hotels, supermarkets and businesses that create jobs.

And “overseas persons“  will be allowed to take leases of up to five years over residential land,

Utility companies will also find it easier to acquire residential land to run pipes or power or telephone cables.

And forest cutting rights are to be subject to a light-handed regime to encourage foreign direct investment in forests.

Forest rights would mean essentially, the control of the forestry crops and land, but not ownership of the freehold estate in the land.

Approval would require the purchaser to demonstrate that their purchase would have a substantial and identifiable benefit to New Zealand. 

One of the original criticisms of the Bill was how it would be enforced.

Parker proposed that the responsibility to ensure compliance would lie with the conveyancer, usually a lawyer.

But the Committee has changed that and now the primary responsibility for compliance lies with the purchaser.

Someone acquiring an interest in residential land would be required to provide to a conveyancer a statement related to whether the transaction requires consent under the Act.

The Opposition minority report on the Bill was particularly critical of the proposal to allow overseas buyers to purchase apartments off the plans for investment purposes.

“The rules that seek to prevent those foreign buyers living in the units are likely to be unworkable or unenforceable, “their report said.

“Officials have confirmed that these changes will still allow such units to be overseas owned and overseas occupied.”

National's Finance spokesperson, Amy Adams, said the legislation was a “dog of a bill”. 

"To address housing affordability we need to build more houses, but banning all but a few foreign buyers will mean fewer housing developments proceeding at a time when we need to grow our housing stock, “she said. 

"It also appears that the Government now thinks it will be able to pick and choose who of New Zealand's trading partners will be able to invest in our housing market. First Australia, and now Singapore, have been carved out - and with trade negotiations looming with China, the EU, and the UK, who's to say they won't also demand an exemption? 

"Furthermore, changes to the Bill make clear that if foreign individuals not already exempt from the ban make their case right, Ministers may also give them an advance green light to purchase whatever properties they like here. Just what sort of 'case' they would need to make remains to be seen.” 

The Bill gives the Minister wide powers. How they will be used will be carefully watched.

You can download the full Select Committee Report here

Attachment

Download | Final-report-Overseas-Investment-Amendment-Bill-.pdf (749kb)

Finance and Expenditure Committee Overseas Investment Bill

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