A change to the Overseas Investment Act, allowing high-net worth investors to buy or build a house valued at least $5 million, is causing major housing concerns for Labour and the Greens. But Housing Minister Chris Bishop says he’s “not worried in the slightest”.
On Friday, reforms to the Overseas Investment Act came into force. As part of this, people with an Active Investor Plus visa can now buy or build a house valued at $5 million or more.
Labour housing spokesperson Kieran McAnulty said even though it was ring fenced to the most expensive houses, “we do believe that there’s a flow-on effect”.
“We’re strongly opposed to any idea that overseas investors can buy residential property,” McAnulty said. “We’re still seeing people unable to get into homes.”
McAnulty said “data … from Statistics NZ shows building activity is considerably lower than what it has been previously”.
Housing volumes in the social housing pipeline were lower than two years ago, he said, “and now we’re letting overseas buyers take up our residential property. It’s not good stuff”.
Asked whether Labour had a position on whether it would reverse this if they got back into government, McAnulty said: “Well, our position is to oppose that.”
Labour would be announcing its overseas investment policy in due course, he said.
Greens housing spokesperson Tamatha Paul told interest.co.nz that many young, working age New Zealanders were leaving the country for many reasons.
“One of the big reasons is that they can’t afford a home and now we’re opening up our housing markets to offshore investors who will push house prices up."
“So it’s not a good thing for the future of New Zealand or for the young people living in New Zealand now or anyone really,” Paul said.
“New Zealand should not be open to the highest bidder.”
“We should be focusing on what our people need, which is clearly lower house prices, which is why so many New Zealanders are leaving the country every day,” she said.
“So in opening up the country to offshore investment where their only bottom line is profit, that’s going to have a consequence for everyday New Zealanders whose wages can’t keep up with rent or the ability to save … or service a mortgage.”
‘Not worried in the slightest’
But Housing Minister Chris Bishop isn’t concerned.
“Obviously it will have an impact in the sense that it was banned and now it’s not banned, but it’s at a threshold that is going to have an immaterial impact on broader housing demand,” he said.
“It’s all about supply anyway and the Government’s got a comprehensive programme of reform underway around supply so I’m not worried about it in the slightest.”
‘Encourage deeper connection to New Zealand’
This change has been in the works for a while. In September, the Coalition Government agreed that "overseas-based investors" with a special investor residence visa would be exempt from the foreign buyer ban.
This ban was passed into law by the Labour–NZ First Government in 2018. Amendments to the Overseas Investment Act that year reclassified most residential land as sensitive, effectively banning foreign buyers from purchasing existing homes.
Many high-net worth investors have previously been put off by not being able to buy a home until they have lived in New Zealand for the majority of an entire year. The luxury rental market is growing but remains small, as most high-net worth people prefer to buy.
The National and Act parties had been wanting to relax the ban for a while, but have been blocked by NZ First, which opposed foreign speculation in the housing market.
But after months of discussion and negotiations, NZ First agreed to support this limited relaxation, with party leader Winston Peters saying last July: “If you're investing millions of dollars, then we’ll seriously look at if you have the right to back that up with the buying of a house in New Zealand at a certain cost - and that cost is not $2 million.”
In September, Prime Minister Christopher Luxon announced that this ban would remain in place, but further amendments to the Act would allow migrants on an Active Investor Plus residency visa to immediately buy a home.
Described as the ‘golden visa’, it has two categories: Growth and balanced.
For the growth category, people are required to invest $5 million over a three-year-investment term. In the balanced category, a minimum of $10 million is needed over a five-year investment term.
The growth category is focused on higher-risk investments, which includes managed funds and direct investments in the country's businesses. The balanced category looks at mixed investments, which means people can choose investments that are lower risk.
People who successfully apply for the Active Investor Plus visa can live, work and study in New Zealand indefinitely.
Applications for the Active Investor Plus visa can include a person's partner and children. People in the growth category can apply for permanent residence after three years of keeping funds in New Zealand and those in the balanced category can apply after five years.
As of February 26, there have been 573 applications for 1833 applicants, for the Active Investor Plus visa - 105 in the balanced category and 468 in the growth category.
The highest number of applications by nationality has been received from the United States. This was followed by China and Hong Kong. Other applications by nationality include Germany, Netherlands, Japan and Great Britain.
In the lead up to the housing rule change, the Government said investor visa holders being able to buy or build a home would “encourage deeper connection to New Zealand”.
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