Foreign investors might leave NZ
New Zealand’s largest telecommunication company Spark may need to obtain Overseas Investment Office consent whenever it builds new cell towers on residential land.
It would be one unintended consequence of planned changes to overseas investment rules, according to Daniel Milmine, an analyst with Whillans Realty.
Spark would be caught because it was mainly owned by offshore shareholders, Milmine said.
Adding residential and lifestyle land to a new classification meant OIO applications would skyrocket from around 100 a year to potentially thousands, with Treasury estimating 4700 a year.
‘‘This will significantly raise transaction costs and delay the settlement period for residential land purchased by overseas interests,’’ Milmine said.
‘‘But will foreign investors even bother with the new rules? Will they invest in other countries with more straightforward legislation?
‘‘Will it create an uneven playing field for companies run and headquartered in New Zealand but with overseas shareholders?’’
A company was defined as having offshore ownership if their shares were held by overseas custodians or nominees, even if 75 per cent of them were held by New Zealand citizens, he said.
Milmine also looked at the requirement for non-resident foreigners buying residential land for their main home and living in New Zealand for a required 183 days a year or selling within 12 months, as proposed.
‘‘Ric Kayne (from the US), the owner of the Tara Iti Golf Club, has invested millions of dollars into the New Zealand economy. He is an
‘‘Construction companies are concerned that the new requirement ... will reduce the demand from wealthy offshore individuals for highvalue homes.’’ Daniel Milmine
international entrepreneur and estimates he will only be in New Zealand for 100 days a year.
‘‘If the Overseas Investment Amendment Bill comes into force, he has threatened to stop investing in New Zealand.’’
Overseas visa class residents will also be affected.
‘‘Construction companies are concerned that the new requirement for OIO consent on residential homes will reduce the demand from wealthy offshore individuals for high-value homes.’’
Overseas buyers will be allowed to buy residential land if they can show it could be developed to the benefit of New Zealand by either increasing the supply of housing, or selling after a specified period, or developing a hotel, supermarket, or shopping centre.
Because of the requirement to sell new dwellings within 12 months, developers are concerned about forced to sell houses in a declining market.
Developments also needed presales commitments to obtain achieve bank funding and if they did not get them, the projects may not go ahead, Milmine said.
This would have the unintended consequence of reducing the pool of rental properties and raising rents. Auckland’s apartment market would be severely affected, he said.
‘‘If it weren’t for offshore investors, thousands of apartments in Auckland would never have been built.’’
Milmine said the Australian model allowed foreigners to buy new homes and keep them indefinitely, provided they either lived in them or rented them out, increasing the pool of housing.
Developers of hotels, supermarkets and shopping complexes typically purchased land that was sometimes classed as residential, and they would have to show their commitment toward developing.
A Parliamentary select committee is reviewing public submissions, and a report and suggestions for changes is due by May 31.