By David Hargreaves
The Government's proposed new law banning offshore-based people from buying New Zealand residential property may yet see fairly substantial changes, with a huge number of submissions having been received.
One interesting possibility is whether the Government will decide to exempt "luxury houses" owned offshore from the ban. Apparently the Select Committee considering the bill actually asked one of the submitters to offer up a new clause for the bill that exempted "luxury houses" from the new rules. The submitter has now done this and presumably this will now be considered.
Submissions for the bill, which is before Select Committee, had to be in by April 10. Over 300 have been received.
A report from the Finance and Expenditure Committee is due by May 31.
A number of potential issues were raised with the bill in its original form, including complications for companies such as power companies and telecom companies with substantial offshore ownerships that might routinely buy land, or with holders of forestry rights.
These issues will need tackling and appear likely to have been done so by the next reading of the bill in Parliament. A Supplementary Order Paper dealing with the forestry issue and some other related issues has already been produced.
But there may well be other changes made too - given the pressure the Government's coming under.
The Queenstown Lakes District Council has submitted vigorously that the current legislation "does not recognise the important distinction between the role of overseas buyers in the regular housing market and those in the luxury home market".
The Queenstown area has some very highly valued properties and attracts substantial offshore interest from wealthy buyers.
QLDC said in an earlier submission this year that according to Land Information New Zealand data, the Queenstown area currently welcomes the second highest number of international buyers in the country.
"When considered in the context that we are the 32nd in the country when ranked by population size with a population base of just 32,410 people, it is clear that the relative negative impact of this Bill will be disproportionately shouldered by our community."
The council says in its latest submission that the legislation cuts off the significant benefits, investments and philanthropic donations currently received from overseas buyers in the luxury home market. It also detrimentally affects a thriving industry of tradespeople, businesses and artists that support the luxury home market.
"This industry would arguably struggle to exist without the high end investment in craftsmanship that these buyers generally aspire to."
In their submission the Queenstown Mayor Jim Boult and chief executive Mike Theelen say that when the council had appeared before the Select Committee earlier this year "we were asked to recommend wording for the development of an exemption clause for overseas investors in luxury homes".
This they have now done, with the suggestion that houses above $2.5 million be excluded.
QLDC therefore seeks the following addition to the definition of “residential land” in clause 4 of the Bill to achieve this exemption:
"(c) does not include land on which there is or will be a single residential dwelling together of a value in excess of $2,500,000 (or such higher amount as is specified in regulations) on the district valuation roll for a territorial authority that is specified in regulations; and different values may be specified for different territorial authorities."
The Queenstown council submission says if the exemptions are not made "the shock to the luxury housing market will be considerable".
"Without the above changes, the Bill will cut off the significant benefits, investments and philanthropic donations currently received from overseas investors, who also participate in the luxury home market.
"Purchasing property within the country is often the start of a far deeper relationship with high net worth individuals that benefits the country in terms of expertise, connections, investment, development and philanthropy."
The Queenstown Council has also recommended that, assuming exemptions are applied, every exempted overseas investor is required to make a compulsory contribution of 2.5% of the value of their purchase, to an affordable housing scheme in their district.
"For example, a purchase of a $2.5M property in the Queenstown Lakes District, would require a compulsory contribution of $62,500 to the Queenstown Lakes Community Housing Trust (or other nominated scheme)."