New hurdles for rural and forest land sales to foreign buyers
By Pattrick Smellie
Nov. 29 (BusinessDesk) - Foreign buyers of rural land will face tougher requirements to provide additional benefits to the New Zealand economy under new government directives to the Overseas Investment Office which also slash the size of farms covered by OIO applications to any land purchase over five hectares, other than forestry.
The announcements today by Associate Finance Minister David Parker and Land Information Minister Eugenie Sage follow the decision to ban the sale of existing residential homes to foreign buyers, with the ministers indicating decisions on new rules covering the purchase of other asset classes by foreign buyers are yet to come.
The government would be introducing legislation to ban foreign buyers of New Zealand’s existing houses before Christmas "and other work to strengthen the Overseas Investment Act is underway.”
Today's announcements will apply from Dec. 15 and will catch any land sale applications already before the OIO that have not been approved by that date. They do not change the rules regarding acquisitions of significant business assets, Parker said in a statement.
Buyers claiming they intend to move to New Zealand will need to do so within 12 months of purchase rather than the current five years and buyers' donations to local causes to ease their applications will be treated as a less significant factor than in the past. Criteria for consent do not change although today's statement notes that can be achieved "by amending the (Overseas Investment) Act".
Forestry Minister Shane Jones would shortly make announcements to strengthen the requirement of foreign investors in forestry assets to "support New Zealand wood processing and manufacturing, which will also support regional communities".
Parker said the existing directive to the OIO was "too loose", applying only to "very large farms more than 10 times the average farm size".
“In practice this meant restrictions in sales generally applied to sheep and beef farms over 7,146 hectares or a dairy farm more than 1,987ha. This new directive tightens how we assess overseas investment in New Zealand to ensure authorised purchases provide genuine benefits.
“Too often we see investors buy a New Zealand farm, and then use existing systems, technology and management practices which don’t substantially add anything new, or create additional value to our economy.
“We want to make it clear that it is a privilege to own or control New Zealand’s sensitive assets, and this privilege must be earned. We campaigned on these changes and they won’t come as a surprise to potential investors,” said Parker.
All applications which are being assessed by the OIO at, and from, Dec. 15 will be subject to the new directive letter, with all applications not determined by that date being given a "fair opportunity to make additional submissions under the new approach".
The Overseas Investment Office continues to accept and process applications, and both Ministers and the OIO are making decisions on applications, they said, although the statement did not formally advise that the two ministers have been given the formal authority to approve OIO recommendations, where required.
At time of publication, the OIO website had not been updated from the most recent directive letter, issued by the previous government in 2010.