A new approach to overseas investment approval
On 28 November 2017 Finance Minister Grant Robertson issued a new ministerial directive letter to the Overseas Investment Office (“OIO”). This directive letter increases the relative importance of factors the OIO is to consider when reviewing an application by an overseas person to purchase rural land in New Zealand.
An overseas person requires OIO consent to purchase “sensitive land” in New Zealand (which includes over 5 hectares of non-urban land). To obtain such consent, the OIO must be satisfied that the purchase will, or is likely to, benefit New Zealand by reference to a stated list of approximately twenty two “benefit factors”.
What has changed?
The new directive letter provides the following “benefit factors” are now to be given higher relative importance by the OIO when it considers an overseas person’s application to purchase any non-urban land (other than land used primarily for forestry):
- The creation of new jobs or retention of existing jobs in New Zealand that would otherwise be lost;
- The introduction of new technology or business skills to New Zealand;
- Increased exports for New Zealand exporters;
- Increased processing in New Zealand of New Zealand’s primary products; and
- The extent to which New Zealanders will be able to participate in the overseas investment.
Previously the OIO was only directed to give the above factors higher relative importance when an overseas person wanted to purchase “large” areas of farm land (being farms that were ten times the average farm size for that type of farm).
For overseas investments in forestry, the following factors will now be given higher relative importance:
- Increased processing in New Zealand of New Zealand primary products; and
- Whether the investment will advance a significant Government policy or strategy.
In addition, the OIO is now directed to place a low relative importance to the “consequential benefit to New Zealand” factor if the claimed benefit relates to the overseas person sponsoring community projects or making community donations.
What does this mean?
It may now be harder for an overseas person to satisfy the “higher” importance benefit factors when applying for OIO consent to buy smaller farms and rural land in New Zealand. We anticipate this will especially be the case for overseas purchasers looking to acquire smaller “lifestyle” type farms.
We do not consider the new directive letter will result in any significant change to the OIO’s approach when assessing an application by an overseas person to purchase a “large” farm in New Zealand (as the OIO already had to give high relative importance to the above factors).
The new directive letter comes into force on 15 December 2017 and will apply to OIO applications currently being processed.
Further changes to come – houses
The Government is also planning to introduce restrictions on overseas investment in New Zealand residential housing. We will provide an update when these changes are announced.
Want to know more?
If you have any questions about overseas investment, please contact our specialist property team.
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