Free Press: ACT’s regular bulletin
Free Press ACT’s regular bulletin
The New Government’s Worst
Legislation So Far
Parliament’s Finance
and Expenditure Committee sat for most of last week,
including all day Fridayin Auckland. We’re not
complaining, but the reason is interesting. The Overseas
Investment Amendment Bill has received 220 submissions,
mostly very substantial and from the business community, who
are outraged at this bill.
What it
Does
Currently, any overseas person or
organization with more than 25 per cent overseas ownership
has to jump through the Overseas Investment Office’s hoops
to by more than five (sometimes only 0.4) hectares of land.
Six months is considered a good time for getting approval
from the OIO. The bill will apply this test to any
‘overseas person’ investing in ‘residential land.’
Treasury predicts the Overseas Investment office will go
from processing 150 applications per year to 4700.
Why They’re Doing It
The
Government believes they will reduce house prices by
reducing foreign investment in housing. That’s bollocks,
of course, the housing problem is one of supply, and the
Bill will actually make it harder for local and foreign
developers to source capital overseas. It is a monumental
own goal.
The Fundamental
Problem
There are so many possible ways of
structuring an organization to shield overseas interests
that any effective test must be draconian. Then again, any
test that allows people to get on with their lives will have
little effect on who has the ultimate interest in a piece of
land.
Who’s
Objecting
Almost everybody. We’d never
realized how many companies and industries have a) overseas
investment and b) an interest in owning residential land.
Below we list just a sample of the submissions made to the
Committee.
Electricity
Companies
Roughly every 1,000 homes require
a substation. There are a surprising number of these on
residential land. Developing electricity infrastructure
requires major investment with up to 20 year time horizons.
Adding uncertainty at the outset is fatal to building
anything. Electricity companies say they support the bill
but want to be exempt from it.
Telcos
Telcos face basically
the same problem as electricity companies. They need to have
a cell tower in every suburb at least, and then there are
data centres and future technology roll outs such as 5G.
They are not necessarily opposed to the bill but would like
an industry exemption.
The
Mega-Rich
Queenstown Mayor Jim Holt and
local man Sir Eion Edgar pointed out just how much wealthy
foreigners have contributed to conservation in the Otago
region. In at least one case investing $100m and putting the
land in trust for everybody to enjoy. They are not
necessarily opposed to the bill but would like an exemption
for properties over, say, $5m.
Retirement
Villages
Many of the big developers rely on
foreign capital. They are developing residential land by
definition, trying to meet the silver tsunami before it
drowns us all. They are not necessarily opposed to the bill
but would like an exemption for operators of registered
retirement villages.
Build-to-Rent
Companies
New Ground Capital, who specialize
in building homes to rent out, think the bill is a good idea
but would like to be given a Standing Consent for their type
of business.
Mining
Companies
Mining Companies are often
required to buy houses near their sites who might be
affected by noise and other pollution, in order to gain
resource consent. They may find themselves unable to
purchase in time to get consent. They would, of course, like
this activity to be exempt.
Apartment
Developers
Banks generally won’t lend to
apartment developments, who often depend on presales to as
wide a market of buyers as possible, including foreign ones.
Shrinking the retail market to domestic buyers only will
stop many developments. You guessed it, they’d like an
exception for overseas buyers who buy off the plan.
Bunnings Warehouse
How do you
build more houses without building supply stores in
residential areas? We don’t know, but the Aussie company
made perhaps the cheekiest submission for a customised
carve-out, suggesting ASX listed companies with more than
500 employees should be exempt.
Who
Polices the Bill?
Working out whether a
person is legitimate or not under the bill is a nightmare.
The big banks, the real estate institute, and the lawyers
all accept the objective of the bill. However, they would
prefer the buck didn’t stop with them for checking whether
a person has properly declared their status as an overseas
person.
What’s
Missing
All of the requests for exemptions
should be taken seriously. All these submitters and more
have well-grounded fears that this bill will badly affect
their business. But hardly any of them are prepared to say
‘this bill is crap,’ it is wrong and needs to be
stopped.
The Government’s
Problem
They’re stuck between a rock and
two hard places. The Rock is the TPP, which forbids this
kind of nonsense and will be in force some time this year if
all signatories organize their domestic legislation in time.
The first hard place is Labour and New Zealand First’s
xenophobic campaigns against foreign investment. The second
hard place is the impossibility of designing a law that will
cut off some foreign investment without accidentally cutting
off the New Zealand economy.
National’s
Problem
The National Party started this ball
rolling when they introduced IRD number and domestic bank
account requirements for foreign buyers of residential
property in 2016. It took about six months for the industry
to come up with work arounds. This legislation is no
different in principle from what National did, it’s just
far more byzantine.
And
ACT?
We stand for a New Zealand that is not
afraid of the world but stands proudly as part of it.
Foreign investment is essential, and trying to cut us off
from it, as every other party has done in the past two
years, is offensive to our culture and fatal to our
prosperity. The bill should be stopped, and we will repeal
it.
ends