In this edition:
- Proposed changes to the Overseas Investment Act Amendment Bill – clarity or confusion?
- Work-life balance: the secret to life in New Zealand
- Great opportunities remain, despite winter downturn
- Migration inflows are expected to remain well above average due to steady growth
- Upcoming seminars
Proposed changes to the Overseas Investment Act Amendment Bill – clarity or confusion?
The Select Committee has completed its deliberations on the Overseas Investment Act Amendment Bill (Bill) with the publishing of its report on 18 June. The report proposes a number of changes to the draft legislation in an attempt to address issues with the Bill that were raised in public submissions received during the Select Committee hearing process. To recap on the first draft of the Bill refer to our article by clicking the button below.
Significant new restrictions overseas buyers residential property
The issues with the Bill raised by submitters were diverse and significant. These ranged from the Bill having the consequence of reducing the number of new homes available for purchase by New Zealanders as a result of offshore capital disappearing from our development market, the inability for overseas persons holding a residence class visa through one the investment visa programs to purchase a residential property, through to our largest infrastructure corporates requiring consent each time they acquired residential land necessary for delivering their essential services.
As the Government has acknowledged the Bill was prepared in haste, and it showed. The question is now whether the changes recommended by the Select Committee have resolved these issues and updated the law to provide clarity and certainty to overseas investors.
Whilst we consider that the amendments address some of the significant issues contained in the first draft of the Bill, there are other important issues that were raised during the Select Committee process that have been ignored. These have implications for some industries and regions. Therefore, the approach taken to incorporating amendments to the Bill appears to be somewhat ad hoc. An example being a one off exclusion offered to the Te Arai development north of Auckland. Perhaps realising that retaining this exclusion in the Bill would not be appropriate, we understand the Government has now withdrawn it.
Below is a summary of the key proposed changes recommended by the Select Committee on the residential ban aspects :
- The class of persons who will be considered a ordinarily resident in New Zealand, and therefore not require consent to purchase residential land, has been expanded from permanent resident visa holders to resident visa holders. There have been no material changes to the Commitment to Reside in New Zealand test, meaning that persons who hold a residence class visa, but who are not ordinarily resident in New Zealand, will still be required to commit to living in New Zealand for at least 183 days per year and become a tax resident in order to obtain consent to purchase residential land.
- The Bill previously required an overseas person who obtained consent to purchase residential land under the increased housing test to sell the land within a certain period of completing the development. Recognising that this condition would be a strong deterrent to offshore capital investing in new housing developments (thus affecting the financial viability of such developments), the Select Committee proposes the following amendments:
a. Overseas persons building or investing in large residential developments of at least 20 dwellings are not required to on-sell once construction is complete, if the dwellings are maintained as rental properties or a shared equity development; or sold under a rent-to-buy model; and
b. Developers of large multi-storey apartment buildings of 20 or more units can apply for an exemption to sell a percentage of the units to overseas buyers “off the plans”, without the need for consent or the requirement to on-sell once the unit is complete. However, buyers would not be allowed to occupy the units themselves. The Select Committee understands that the percentage will initially be set at 60, but this can be adjusted through the regulations to be set anywhere between 0 and 100 percent to respond to market conditions.
- Recognising that New Zealand has a shortage of hotel accommodation, a recommendation has been made to allow overseas persons to purchase and continue to own any number of units in hotels with 20 or more units, provided they enter into a lease-back arrangement with the hotel’s developer or operator on the conditions that the room must be used for the general purpose of operating the hotel, and that the overseas person may not reside in or reserve the unit for more than 30 days in a year.
- Allowing residential land to be acquired without consent for business purposes by electricity and gas distributors, telecommunication companies, and transmission network operators for the purposes of the relevant utility services.
- Allowing overseas persons to take leases of up to five years over residential land, compared to the existing three-year limit for sensitive land, without requiring consent and clarifying that periodic leases of residential land are not covered by the Overseas Investment Act.
- A streamlined approval path for businesses to purchase residential land for non-residential purposes, or for residential purposes to support a business is recommended. Such purchases would not be subject to a counterfactual analysis, but would be subject to conditions imposed by the relevant Minister to ensure that the land was being used for the purposes for which it was purchased.
- Allowing overseas persons to obtain a standing consent (pre approval) prior to entering into a transaction to purchase residential land under one of the qualifying consent tests, which in summary are the commitment to reside in New Zealand test, increased housing test, non-residential use test or incidental residential use test. A standing consent will be issued subject to conditions, including specifying a use-by date.
The Government has confirmed that both Australian and Singaporean citizens and permanent residents will be exempt from requiring consent to acquire sensitive residential land. They have also confirmed that the legislation will only apply to transactions entered into on or after the commencement of the new legislation, which is expected to become law at some point during the third quarter of 2018. The Bill also incorporates new easier consent pathways for overseas persons who wish to invest in forestry in New Zealand. We will review those changes in a separate article.
We consider the proposed amendments contain positive changes, particularly the ability for overseas persons to purchase a unit and rent it to a New Zealander rather than being required to sell, and for a developer to be able to obtain an exemption certificate allowing it to sell up to 60 percent of the units in a new development to overseas persons. However, the exemptions are reasonably limited in that they only apply to new residential developments where the overseas person is buying “off the plans”, the development comprises 20 units or more, and in the case of the exemption to sell a percentage of the units to overseas buyers the development must comprise one or more multi-storey buildings. This change therefore is, in reality, Auckland centric.
The threshold levels and building types contained in these rules appear to be somewhat arbitrary, and the financial viability of new smaller residential developments will likely be affected. If the purpose of the Bill is to make housing in New Zealand more affordable and accessible for New Zealanders, it would be logical for the exemptions described above to also extend to smaller residential developments throughout the country.
There are also areas where the Select Committee has not responded to submissions received, which in our view, will have an impact on certain markets and industries. For example, submissions from Queenstown regarding the importance and value to the local economy of the luxury home building industry, which is significantly funded by overseas buyers, for an offshore market. The Bill will likely result in this sector contracting, and therefore depreciation of high end property values may follow as there will likely be a reduced market for these properties.
The Select Committee has also not proposed any changes to exempt overseas persons who have obtained an investment visa, but who are not ordinarily resident in New Zealand. We consider that removing the ability for this class of visa holder to acquire residential property will have an impact on the numbers applying, particularly in the Investor Plus visa category which requires an investment of $10,000,000 and a requirement to spend 88 days in New Zealand over the three year investment period. Many of our current clients in this category have been snapping up property to live in during their conditional residency period to beat this new legislation. As noted in our previous article, it is often not possible for these visa holders to become ordinarily resident in New Zealand due to their offshore business/investment interests, and the structure of their tax affairs. Therefore, an inability to own a personal property to reside in when onshore will make the migrant investor categories less attractive in an environment where many countries around the world are actively competing to attract the same investors.
In summary, there are some positives to the Bill which are a pragmatic attempt by the Government to address some of the issues in the first poorly drafted version. However, as a consequence of the Bill starting life as a prohibition on the purchase of residential and lifestyle properties by overseas persons (other than cases which fell within a narrow range of clearly defined exemptions), it has now morphed into legislation that contains a wider number of exemptions, in each case with different conditions, to address the concerns of some of the sector groups who submitted to the Select Committee. As a consequence, it is not an easy piece of legislation to interpret, and overseas buyers/investors will need to ensure they are properly advised when considering whether they are able to make an investment in residential property in New Zealand.
Contact Lane Neave Overseas Investment Partner, Sam Nelson (sam.nelson@laneneave.co.nz or +64 21 228 3331), or Immigration Partner, Mark Williams (mark.williams@laneneave.co.nz or 021 2222 363) to find out more.
For further information or assistance with emigration please contact Lane Neave Lawyers on + 64 3 379 3720 or email liveinnewzealand@laneneave.co.nz.
Work-life balance: the secret to life in New Zealand
One of the most common reasons that newcomers give for their move to New Zealand is a desire to escape an exhausting, stressful, and unbalanced lifestyle back home. It seems a long way to go to make a change, but they’re onto something. Surveys of both new arrivals and longer-term migrants indicate that New Zealand has a desirable and rare balance between satisfying work, and relaxing leisure time.
HSBC’s 2017 Expat Explorer survey ranked New Zealand sixth in the world for work-life balance, and first for ‘Quality of Life’. Overall, they voted the country the third most popular place in the world for expats to live and work. (New Zealand Now) There are several reasons for this endorsement; physical space, less crowded cities, a lack of high-density housing, short commute times (outside of Auckland), excellent schools, and relaxed workplaces.
New Zealand has a sizeable proportion of small and medium-sized businesses, with less than 20 employees. In fact, these account for 40% of New Zealand’s economic output. Even the country’s ‘large’ organisations are often small by international standards. New Zealand businesses tend to have much flatter organisational structures, with employees being more involved in decision-making and having a greater understanding of how the business works. This can be an adjustment for those new migrants who come from highly hierarchical cultures where they are used to having very little say and have a narrowly defined role within the workplace. Kiwis are often generalists – a result of working in a sparsely-populated country and small organisations. This does require newcomers to be more flexible in their approach to work than they may be accustomed to being back home.
Newcomers often cite less stressful work environments as a big attraction to New Zealand. Despite averaging 40 hours a week in the workplace, the country’s work culture is undoubtedly more relaxed than many others. There is a strong emphasis on teamwork in Kiwi workplaces, and while great work is recognised and rewarded there can be an aversion to bragging about your achievements. Newcomers from cultures where accomplishments are loudly and proudly celebrated may find this aspect of Kiwi work culture a challenge at first.
Work is important to Kiwis, but life outside of work is also hugely valued. Many New Zealanders travel outside of the cities on the weekends, particularly on the longer public holiday breaks. The destinations range from local beaches and lake districts, to road trips, and short flights around the country for a quick ‘city break’. Camping and tramping (trekking) are common summer pastimes, with nearly a third of New Zealand’s land area covered by national parks or other protected areas. Day trips to ski fields are another option for the winter months. Inexpensive, regular, and short flights to Australia also make this a popular destination on longer breaks from work.
Family time is encouraged by employers, and flexibility in the workplace is also considered important. In fact, considering a request for flexibility (particularly from an employee who is caring for others) is required by law in New Zealand. Increasingly, Kiwi employers recognise the link between flexible working and a positive, engaged attitude in the workplace. For most newcomers to the country, the balance is just about right.
Article provided by Lisa Burdes – SkillsConnect Canterbury Business Advisor at the Canterbury Employers’ Chamber of Commerce.
The Chamber offers migrant employment assistance, and support to employers of migrants in Canterbury. This service is fully funded by Immigration New Zealand (INZ). If you have questions about living and working in New Zealand, you can visit http://www.newzealandnow.govt.nz, email your query to newmigrantinfo@mbie.govt.nz or ring the INZ Contact Centre on +64 9 914 4100.
Great opportunities remain, despite winter downturn
The Winter solstice is now upon us here in New Zealand, along with this is the promise of spring being not far away and the regrowth associated with this season. Although for now it is winter in New Zealand, and as it generally is this season, the job market is quiet.
However, there is still good jobs opportunities throughout the country in some areas, such as the infra structure maintenance where there continues to be a need for renewal spend and is highly topical.
Unemployment rates remain very low and the shortage of skilled staff is still seen as the biggest constraint on New Zealand’s economic growth.
Looking ahead, the 36th America s’ Cup in 2021 will further stimulate the already buoyant Auckland market. It is estimated to provide between $0.6 – $1.0 billion in value add to New Zealand’s economy and an employment boost of between 4,700 and 8,300 new jobs. This range reflects different assumptions around the number of syndicates competing, visiting super yachts and international tourists. The cost of hosting such an event has on positive impact on services sectors, manufacturing (mainly boat building and super yacht refits) and tourism, including hospitality, retail and accommodation.
In addition, Enterprise Recruitment are especially interested in Information Technology professionals for the main centres, especially Auckland. We can also confirm that construction professionals at all levels are also in high demand throughout New Zealand.
Article provided by Steve Baker – Enterprise Recruitment and People.
Enterprise Recruitment and People has a national presence. We remain interested in providing obligation free advice to offshore candidate’s about their chances of securing employment in New Zealand. Steve can be contacted on steve.baker@enterprise.co.nz or 00 64 3 3530680.
Migration inflows are expected to remain well above average due to steady growth
Growth prospects for New Zealand’s economy continue to look good, even though some indicators such as business confidence have turned down in recent times. One measure of that confidence sits at a level of -27% which on the face of it would suggest recession fairly soon.
However, in New Zealand there is a well known tendency for business confidence to be strong when the National Party are in power, and weak when Labour hold the reins, as is the case now. This is best seen in the following numbers. Labour ruled from 1999 – 2008. On average businesses were a net 18% pessimistic. But the economy averaged growth of 3.5% per annum with employment up on average 2.5% a year.
Then when National were in power from 2008 – 2017 confidence averaged +23% but the economy grew on average by 2.5% with employment up 1.6% a year on average. So don’t get too concerned if you read headlines of businesses feeling down in the dumps.
Most businesses in fact are going to face strong growth in demand for what they do or produce. In construction activity is likely to remain at high levels for many years. There is a shortage of houses in Auckland and Wellington and this is accompanied by a worsening shortage of all types of tradespeople.
In tourism the growth in inward visitor numbers has been very strong for five years and continued firm growth seems likely. This is because the Kiwi dollar sits at comfortable levels, world growth prospects look okay, and the structural rise in outward travel by Chinese people looks like continuing.
The tourism boom is interesting because it is also feeding part of the construction surge. The country is short of accommodation and that means plans are being executed to build a lot more motels and hotels around the country.
Growth prospects remain strong in the primary sector with good prices for practically everything exported by New Zealand. There is a risk of disturbance from the deepening trade war being initiated by the United States. But hopefully things do not become too bad. An outbreak of cow disease mycoplasma bovis is leading to over 150,000 animals being slaughtered. But the ongoing cost to the dairy sector is likely to be less than $200mn per annum which compares with export receipts over $15bn.
The NZ healthcare sector continues to grow strongly. But that just means the shortages of nurses and other professionals already endemic offshore are increasingly becoming evident here as well.
The technology sector continues to forge ahead, though with so many firms being relatively new it is often only when they are bought out by large foreign corporates that we learn of their existence!
On top of that there remains good support for economic and employment growth over the next few years from continued low interest rates generated by ongoing low inflation (currently 1.1%), plus net migration inflows which although easing are expected to remain well above average for perhaps another four years.
The new government is also boosting spending and public sector wage rates so that means some slight extra stimulus to growth as well.
On the face of it things look good. But like every other country we are watching closely the deepening trade war being initiated by the United States and trying to determine whether it will spread and whether key NZ exports might be affected. The conclusion to date is that we should escape any major impact – unless the dispute causes sufficient concern and financial market disturbance to precipitate a major slowing of world growth. We shall see.
Barring that, in New Zealand itself conditions remain good, the labour market is very strong, in Auckland house prices have flattened out, and across the rest of the country the pace of house price inflation is expected to slow.
Article provided by Tony Alexander – Chief Economist, Strategy & Business Performance, BNZ.
Seminars
A pathway to residence
– A seminar is for Chinese visa holders who are working and/or studying in New Zealand
Auckland
Date: Wednesday 4 July 2018
Time: 4.30pm-6.30pm
Location: AUT, Room WA220, Gate 3, 55 Wellesley Street East
Register: email lingbo.yu@laneneave.co.nz
Employer Accreditation – What you need to know
Auckland
Date: Thursday 5 July 2018
Time: 8.00am-9.30am
Location: Spark Lab, Level 4, Seafarers Building, 52 Tyler St, Britomart
Christchurch
Date: Monday 9 July 2018
Time: 8.00am-9.30am
Location: Lane Neave, Level 5, 141 Cambridge Tce, Central City
Register: email maddie.gibbons@laneneave.co.nz
