NZ’s im­age as bolt­hole un­der siege

Govt sends sig­nal to wealthy for­eign­ers

Weekend Herald - - Fran O’sullivan - Fran O’Sul­li­van

New Zealand’s rep­u­ta­tion of be­ing a “Switzer­land of the South Pa­cific” — a beau­ti­ful and wealthy bolt­hole for high net- worthers — is un­der siege.

For­mer Prime Min­is­ter John Key po­si­tioned New Zealand as a magnet for high net- worth con­sumers want­ing to es­cape from an un­sta­ble world.

There were articles aplenty in pub­li­ca­tions rang­ing from The Tele­graph to the New York Times and The Guardian which ex­tolled New Zealand’s rep­u­ta­tion as a bil­lion­aire’s bolt­hole — an “es­capee’s par­adise” — at­tract­ing the mega- rich, in­clud­ing US in­vestor Peter Thiel.

But the Labour Gov­ern­ment has sent a clear sig­nal that it will take a lot more than per­sonal wealth to buy a stake in New Zealand, par­tic­u­larly when it comes to prime farm­land and ( as ex­pected in the fu­ture) how for­eign­ers build a path­way to per­ma­nent res­i­dency.

The at­ti­tu­di­nal shift was made clear by Cabi­net Min­is­ter David Parker when he spoke to jour­nal­ists on Wed­nes­day af­ter un­veil­ing a min­is­te­rial di­rec­tive set­ting tough new con­di­tions for for­eign­ers seek­ing to buy farm­land in ex­cess of five hectares.

Parker — who holds both the Eco­nomic Devel­op­ment and Trade port­fo­lios — staked out a po­si­tion be­fore the Septem­ber 23 elec­tion where he ex­panded on Labour’s pol­icy to clamp down on farm sales to for­eign­ers. His con­tention was that by re­mov­ing the off­shore buy­ing pres­sure the mar­ket would be con­strained to New Zealan­ders who would not find them­selves priced out of the con­test.

In other words, the for­eign buyer pre­mium would be re­moved.

But there were two new el­e­ments that sur­prised.

First, in com­ments to jour­nal­ists, Parker said: “Peo­ple who com­mit them­selves to New Zealand, pay tax in New Zealand, they’re the ones who should have first bite at buy­ing our land as­sets.

“We think that im­ped­i­ments to share milk­ers grad­u­at­ing to be farm own­ers are wrong, and they shouldn’t be ef­fec­tively pre­vented or blocked in their progress in life from a one per cen­ter from over­seas bring­ing their wealth from a low- tax ju­ris­dic­tion or from coun­tries that have got far higher rates of in­equal­ity than we have.”

For­eign­ers who do get ap­proval will have just one year to re­lo­cate here where re­lo­ca­tion forms part of the ap­proval process.

Sec­ond, the Gov­ern­ment has re­fused to grand­fa­ther ex­ist­ing ap­pli­ca­tions from for­eign in­ter­ests to buy New Zealand farms un­der the rules that were pre­vi­ously in place at the Over­seas In­vest­ment Of­fice.

It is well known that the OIO has been sit­ting on a raft of ap­pli­ca­tions to buy not just farm­land but busi­nesses that sit on sen­si­tive land. Those ap­pli­cants now have to re­work their ap­pli­ca­tions and build in a much higher ben­e­fit to New Zealand or walk away.

There is a na­tion­al­is­tic streak to Parker’s phi­los­o­phy.

It is one which sur­prises some from the rul­ing coali­tion who be­lieve he may in fact be stronger in his pro- New Zealand lean­ings that New Zealand First leader Win­ston Peters.

But Parker could use­fully con­strain his rhetoric and pos­si­ble con­tempt for the oneper cen­ters so that the Gov­ern­ment does not ac­quire a rep­u­ta­tion as be­ing against for­eign in­vest­ment.

The Gov­ern­ment’s de­ter­mi­na­tion to con­fine off­shore in­vest­ment in res­i­den­tial hous­ing — to new hous­ing which adds to the over­all stock — was un­der­lined by Fi­nance Min­is­ter Grant Robert­son at an ad­dress to a busi­ness break­fast at ANZ yes­ter­day.

Some of the sting from Parker’s rhetoric was re­moved by Robert­son’s mes­sage that New Zealand would con­tinue to wel­come over­seas in­vest­ment.

New Zealand will also con­tinue to wel­come im­mi­grants. But the con­di­tions will be tougher. For in­stance, when it comes to those com­ing here to study — it must be for a qual­ity ed­u­ca­tion. Not a “rort” or back­door path to a work visa.

Some Cabi­net Min­is­ters, such as New Zealand First’s Shane Jones, who suc­ceeded in ring- fenc­ing forestry land from the full am­bit of the min­is­te­rial di­rec­tive, have a dif­fer­ent ap­pre­ci­a­tion of the role for­eign cap­i­tal can play.

Key was frankly un­apolo­getic about the mas­sive in­crease in Auck­land res­i­den­tial prop­erty val­ues dur­ing his pe­riod as Prime Min­is­ter. It re­sulted in many es­tab­lished Auck­lan­ders be­com­ing rel­a­tively rich, but younger peo­ple be­ing locked out of the mar­ket.

Right now the Labour- NZ First coali­tion ( sup­ported by the Greens) sees do­mes­tic

There is a na­tion­al­is­tic streak to Parker’s phi­los­o­phy.

political cap­i­tal by keep­ing more New Zealand as­sets in New Zealand hands.

The prob­lem is that those who own ex­ist­ing farm­land or hous­ing as­sets — which in­cludes for­eign­ers as well as New Zealan­ders — are set to take a hair cut.

En­sur­ing the coun­try buys the ar­gu­ment that the Gov­ern­ment is sim­ply out to in­tro­duce fair­ness will not be easy, af­ter New Zealand has en­joyed be­ing part of the global mar­ket for nigh on three decades.

Pic­ture / Janna Dixon

Min­is­ter for Eco­nomic Devel­op­ment and Min­is­ter of Trade David Parker is mak­ing it tougher for for­eign buy­ers.

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