Government tweaking Overseas Investment Act rules to allow migrants on special investor visas to purchase residential property worth more than $5 million

Opposition leader Chris Hipkins says New Zealand First ought to change its name after allowing certain foreign investors to purchase residential property worth over $5 million. 

Prime Minister Christopher Luxon announced the policy change, alongside Immigration Minister Erica Stanford and Act Party leader David Seymour, in Auckland on Monday. 

He said the coalition parties had agreed that “overseas-based investors” with a special investor residence visa will be exempt from the foreign buyer ban, which was passed into law by the Labour–NZ First Government in 2018. 

Amendments to the Overseas Investment Act that year which reclassified most residential land as sensitive, effectively banning foreign buyers from purchasing existing homes.

Luxon said 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. 

These special visas are offered to migrants who invest at least $5 million in NZ growth assets or $10 million in balanced assets. More than 300 overseas-based investors have applied for this type of residency, and could bring over $1.8 billion of investment into the economy. 

However, many high-net worth investors have 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.

“Because Active Investor Plus residency visa-holders do not have to be in New Zealand for six months of a year, the foreign buyer ban means some do not meet the threshold for buying a house under the Overseas Investment Act,” Luxon said. 

The National and Act parties have been wanting to relax the ban but have been blocked by Winston Peters and NZ First, who oppose foreign speculation in the housing market. 

After months of discussion and negotiations, the party has agreed to support this limited relaxation of the ban. Overseas investors on special visas will be able to purchase a single home, worth at least $5 million, in addition to their $5 million to $10 million investment.

“This change navigates a path between those who do not want foreign ownership opened up, and the desire to attract high net worth investors by deepening their connection to our country to help grow the economy,” Luxon said. 

But Labour leader Chris Hipkins argued Peters and NZ First had betrayed their voters by allowing Luxon to pump up house prices with foreign money. 

“He’s rolling out the red carpet for wealthy foreigners wanting to buy New Zealand while Kiwis struggle to get on the housing ladder … Winston Peters should change the name of his political party, he’s no longer putting New Zealanders first,” he told reporters. 

Hipkins said the advice Labour had received while in government was that you couldn’t disconnect luxury house prices from the rest of the market. Price pressure at the high end would cascade down through to cheaper homes. 

Treasury officials did argue, in a 2018 memo, that demand from overseas buyers was encouraging developers to use scarce land to build high-end properties instead of affordable housing.

“Nor is the market for existing high end and low end homes completely segmented. Demand from overseas buyers for high end homes will push New Zealand-based buyers into the lower end part of the market to some extent, pushing up prices for affordable housing,” it said. 

Green Party housing spokesperson Tamatha Paul said real estate agents would now have an incentive to boost prices to $5 million to sell to this new wealthy market wherever possible.

“Last week Christopher Luxon said he wanted to see house prices increase, and now he's working to make that happen despite many crying out for the ability to access home ownership and all of the benefits that come with it,” she said in a press release. 

The Prime Minister said opening the door “just a little” would help to attract significant investors who wanted to contribute to the communities and the country.

A draft amendment to the Overseas Investment Act has already been prepared for select committee scrutiny and is expected to be passed before Christmas.