Before foreigners pass the buck, new investment law will require a quality check

The bill stopping foreigners from buying houses in NZ has emerged from select  committee study with   significant   amendments.  Associate  Finance  Minister  David Parker   says the  new law will ensure the  market  for homes  is a  “NZ  market  not  an international  one”.  He  contends  Kiwis  should not be outbid by  “wealthier  foreign buyers”.

But the same bill now includes a move to encourage  “foreign direct  investment”  in forestry.   Forestry Minister Shane Jones says the legislation –  by bringing forestry rights into the overseas investment regime – will help promote high-quality foreign investment  which puts more emphasis on genuine benefits for New Zealanders.

So – foreign money  for  NZ homes  is  dirty but  foreign money for  NZ  trees is clean?

Well, not  quite.  Jones  says  for forestry  the foreign money has to be  “high quality” investment.

To some NZers – probably most – a  dollar is a  dollar and the difference  between a  “high  quality”  dollar  and  an  ordinary dollar is hard to spot.  If a mate told them  the difference is obvious, he  would be in danger of  being accused  of  displaying undue  hubris.

But as the ministers see it, the proposed legislation, as it is now written, “rationalises”  forestry  investment.

In his press statement on it,   Jones says:

 “This Government wants to see a strong and flourishing forestry sector that will create and protect jobs across the country and contribute to our climate change targets.

 “Following the Select Committee’s review and intensive consultation with stakeholders, some key changes have been made to the Bill, including increasing investors’ flexibility in obtaining consent and removing unnecessary red tape. 

 “Investors can now choose from any of three different tests when seeking to acquire forestry land or rights.

 “The Bill also ensures  investors and landowners can make minor changes to their agreements without unnecessarily having to return to the Government to obtain consent. I’m pleased with the approach the Bill takes with regards to overseas investment into forestry and believe the sector as a whole has an exciting future ahead.”

In his press statement, Parker  noted all permanent residents and resident visa holders who spend the majority of their time in NZ will be able to purchase homes under the regime without obtaining consent.  Australian and Singapore citizens and residents will be treated the same as NZ citizens and permanent residents.

If the current number of Singaporean buyers materially increases, the two countries have agreed to meet to discuss the cause of the increase and how to address it, if required.

Other recommended changes aim to simplify the process for buying residential land for commercial purposes, such as hotels, supermarkets and businesses “that create jobs and support communities”.  An exemption is made for utility companies, reflecting the importance of these services to all Kiwis.

The select committee proposes allowing pre-selling up to 60% of units in big housing projects to foreigners, without them having to on-sell once construction is finished, provided the investors do not live in the properties.

In a minority report, National and ACT members of the select committee said the changes made by the select committee do not alter the fact the bill is “a case study in bad lawmaking”.

They oppose the bill on the basis that

… it will negatively affect the development of new housing in New Zealand at a time when we need to grow our housing stock, and will hamper the ability of New Zealand businesses to access foreign capital”, they said

“In addition, the bill will impose significant cost and delay on parts of the housing sector … without clear benefit.”

The opposition MPs also found fault with the arbitrary way exemptions and amendments have been introduced.  They cite the exemptions for telecommunications, gas and electricity lines companies – which often have more than 25% foreign ownership – but not for retirement village developers.

 

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