Twyford extends olive branch to Singapore in house-buying ban

The government will push through its bill preventing foreign purchasers from buying existing New Zealand houses by early next year, though questions remain over the status of Singaporean buyers.

The ban breaches New Zealand's free trade agreement with Singapore and Housing and Urban Development Minister Phil Twyford said Singaporean buyers may be exempt from the ban in the same way as Australians will be if the FTA cannot be successfully renegotiated.

Twyford and Land Information Minister Eugenie Sage announced the legislation would be introduced into Parliament tomorrow and first debated next week. The bill will go through a truncated select committee process and will come into force in the first quarter of next year.

The bill means that New Zealand and Australian citizens can still buy residential land without screening, while New Zealand and Australian permanent residents would be able to buy without screening provided they have lived in New Zealand for the past year. Australian buyers are protected from the ban by the terms of the Closer Economic Relations Agreement.

The ban will also make buying an existing home difficult for skilled migrants who have moved to New Zealand, but who hold only residency visas rather than qualifying to buy existing homes as permanent residents.

Permanent residents from each country who have not lived in New Zealand for a year, along with "resident visa holders", would have to pass Overseas Investment Office screening before being able to buy residential land, which is reclassified as 'sensitive' under the Overseas Investment Act. The resident visa holders category encompasses those on resident work visas, people in the skilled migrant category, investors and entrepreneurs, as well as people on partnership, parent, dependent child, refugee, Samoan quota or Pacific access visas, but excludes temporary work and student visas.

"Foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use," said Land Information Minister Eugenie Sage. "They will need to be able to show that this will have wider benefits to the country."

Twyford said there were two ways for resident visa holders to pass OIO screening, which Sage said would not take as long as sensitive land applications. The first is the new build exemption, which means someone who is not a citizen nor a permanent resident can build a home, provided it is on-sold with the effect of increasing supply. The second exemption covers resident visa holders with an intention to live in New Zealand.

"You can buy a home to live in," Twyford said. "You've got to pass that test, that's yet to be determined, about the intention to reside. Then you would have to sell that home if you left the country or your visa expired."

Overseas buyers would be able to buy new apartments off the plans, but would not be permitted to live in them. The ministers could not immediately answer how long a foreign buyer would be able to "sit on" property before selling although in other legislation, the government will shortly move to impose capital gains tax on property sold within five years of purchase.

Companies or trusts with overseas ownership of greater than 25 percent would also have to go through the OIO tests, Sage said. The bill also permits someone to buy a house in order to knock it down and build several new homes, Twyford said.

EARLIER: The Coalition will tomorrow introduce legislation to ban overseas buyers from buying New Zealand houses and the bill will receive its first reading next week.

The plan was close to the top of the government’s list of policies in its ambitious 100-day plan and was first discussed in late October by Prime Minister Jacinda Ardern.

The bill aims to amend the Overseas Investment Act (OIA) to classify residential housing as sensitive and will mean non-residents or non-citizens cannot buy existing residential dwellings.

The legislation would allow a resident visa holder to buy residential land under new OIA screening rules.

Australian citizens will be exempt from the rules.

Land Information Minister Eugenie Sage says the law will mean foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling them or converting the land to another use.

“They will need to be able to show this will have wider benefits to the country.”

Housing Minister Phil Twyford says he expects the law to be passed “early next year.”

Although he says the housing market is in a “temporary cooling” period, “when the cycle inevitably turns, we’re much less likely to see the unchecked demand lead to extreme house price inflation we have seen in recent years.”

Mr Twyford says there will be an exception in the bill that allows someone who is neither a citizen nor a permanent resident to build a home that is then onsold with the effect of increasing supply.

“We don’t want to deter people who have the genuine intent to make New Zealand their home and contribute to the country.”

He says foreigners can buy a home to live in if they hold a residence class visa (excluding temporary work or student visas). They would have to sell that home if they leave the country, Mr Twyford says.

In this case, the OIA would assess if there is a “benefit to New Zealand” if that person were to permanently reside in New Zealand.

But that test has not yet been finalised – Ms Sage says she is waiting for public submissions before it is ready.

Back in October, Ms Ardern said the ban would not breach any trade agreements, except the Singapore Closer Economic Partnership.

She said that was being “worked through.”

Mr Twyford says those discussions were still under way but he does not know when the issue will be finalised.

“Ultimately, if we were unable to reach an agreement with Singapore on that, Singapore could be exempted through the regulations in the same way as Australia will be.”

Mr Twyford says he has not heard of any concerns from other countries about the ban.