Major reforms are coming! Will New Zealand open up to overseas investors? Visa and legal changes are on the way — your guide to the policy direction

As capital moves increasingly frequently around the world, overseas investment is crucial to New Zealand’s economic development. Yet for many potential investors, New Zealand’s current Overseas Investment Act appears to present a formidable barrier, restricting the inflow of overseas funds and discouraging many from investing in the country.

Imagine you are an overseas investor planning to invest in a beautiful piece of New Zealand land or acquire a promising business asset, only to find yourself confused by complex approval processes and uncertain rules, perhaps without knowing where to start. This is no isolated experience, but a common feature of the current overseas investment system.

But there is good news: several signs suggest that a favourable time for overseas investors to invest in New Zealand is approaching! The government plans to make changes to visas, the Overseas Investment Act and other areas to create a simpler, more open and welcoming investment environment for overseas investors. Today, we look at the possible direction of these key policies.

The current position for overseas home buyers in New Zealand

Currently, only New Zealand citizens and residents who meet the “ordinarily resident” requirements can buy property in New Zealand without restriction. Only qualifying citizens or permanent residents of Singapore and Australia can purchase residential or lifestyle properties. Apart from those from these two countries, most overseas people cannot buy property in New Zealand.

Who can buy property without restrictions?

New Zealand citizens, whether or not they live in New Zealand.
Residents who meet the “ordinarily resident” requirements.
Australian or Singaporean citizens buying residential land.
Partners or spouses of any of the above.

Who needs consent?

If you do not yet meet the “ordinarily resident” requirements, but:

Hold a New Zealand residence visa; or
Are a permanent resident of Australia or Singapore; or
Are an Australian or Singaporean citizen wishing to buy other sensitive land.

Who cannot buy property in New Zealand?

New Zealand work visa holders
New Zealand student visa holders
New Zealand Work to Residence visa holders
New Zealand working holiday visa holders
New Zealand visitor visa holders
Any other overseas people

Overseas people who cannot buy property in New Zealand still have two options:

Large multi-storey apartment developments: Developers can apply for an exemption certificate allowing up to 60% of the units to be sold to overseas buyers.
Hotel units: Hotel developers do not need an exemption certificate, but overseas buyers must enter into a leaseback agreement with the hotel operator and may use the hotel unit for no more than 30 days each year.

Clearly, most buyers holding Chinese passports who do not have New Zealand permanent residence have very limited options. However, this situation may well change next year.

Investor visa reforms

New Zealand once offered many favourable policies for overseas investors, including the Active Investor Plus Visa. This visa attracted large numbers of high-net-worth individuals, bringing around NZ$1,000,000,000 in investment into New Zealand each year. However, the programme has performed poorly since the rules changed in 2022. According to Immigration New Zealand, only 35 applications received full approval over the past two years, with total investment funds of NZ$352,000,000.

In an interview in Wellington on 12 December, Finance Minister Nicola Willis said: “We recognise that the previous government changed the relevant policies, leading to a sharp decline in investor numbers. Over the coming weeks, you will see announcements from us on this.”

Under the current policy, visa applicants must commit at least NZ$5,000,000 in direct investment or NZ$15,000,000 in passive investment, such as listed shares. By comparison, the previous policy’s investment threshold was just NZ$3,000,000. In addition, previously popular investment options, including bonds and property, are no longer eligible.

At the time of publication, the government had not announced the details of its investor visa reforms. However, we have reason to believe that investors will face fewer restrictions and that the visa threshold is likely to be lowered.

Overseas investment rules are very likely to be relaxed next year

Before the 2023 general election, the National Party proposed relaxing the home-buying ban to allow foreigners to purchase homes worth NZ$2,000,000 or more. However, New Zealand First blocked the policy during coalition negotiations, leaving it stalled for a time. Then, in April this year, New Zealand First leader Winston Peters signalled an opening for the first time, saying he would consider easing the ban if foreigners also invested in New Zealand when buying a home.

Since then, the coalition government has continued to advance reforms to overseas investment policy. In month 6 of this year, Associate Finance Minister David Seymour issued a ministerial directive to the Overseas Investment Office (OIO) to speed up consent decisions and minimise investors’ compliance burden.

The other parties also agreed on this, with New Zealand First leader Winston Peters saying that “foreign investment will strengthen New Zealand’s economy”. Prime Minister Christopher Luxon also supported increased foreign investment, proposing a new investment model to help overseas entities invest.

Then, on 12 October, David Seymour announced that the government had agreed on the principles for changes to foreign investment laws, which would make it easier for foreign investors to buy companies and property in New Zealand.

Despite speculation that the government would announce the details of its reforms before the end of 2024, no clear details had emerged by the publication date. In December, Nicola Willis said: “As we progress reforms to the Overseas Investment Act and investor immigration policy, we will have a series of discussions and ultimately reach agreement.” She also confirmed that the government had advanced reforms to speed up overseas investment applications and would amend the legislation next year.

How will the Overseas Investment Act change?

The government’s current signals suggest that simplifying the Overseas Investment Act is inevitable, but what form will this take? Will the much-anticipated opening of properties worth more than NZ$2,000,000 to overseas buyers happen?

David Seymour’s public statements offer clues to the reforms. In October, he said: “The central principle of these reforms is to reverse the assumption that investing in New Zealand is a privilege and that investors must justify their investment to the government.”

That wording is rather convoluted, but put simply, the government previously regarded “investing in New Zealand as a privilege”, imposing various restrictions and requiring investors to actively demonstrate that they posed no risk to New Zealand. The approach is now very likely to shift towards “investment is approved unless a risk is identified”. In other words, investors would be presumed to pose no risk to New Zealand, with intervention only when risks are identified.

This would bring more than a change in attitude: it would also substantially simplify the process. Industry sources say the government has already asked LINZ to streamline the existing application process, and applications are being processed more quickly.

As for the specifics, we do not yet know whether properties worth more than NZ$2,000,000 will be opened to overseas buyers. However, given that this was part of the government’s election promises and all three parties have agreed to ease overseas investment restrictions, we may perhaps expect a similar policy to emerge next year.

The current property market

What can be anticipated is that once overseas investment rules are relaxed, another wave of home buying will inevitably emerge, taking a market that is already recovering to new heights.

Barfoot & Thompson managing director Peter Thompson said New Zealand’s property market currently had ample supply, with listings at their highest level in 15 years and new homes continuing to come on stream. Although prices had fallen from their 2021 peak and were now close to levels seen at the same time in 2020, they were stable and posed no significant obstacle to sales.

He said sales volumes were strong, with home sales from August to October this year up 12% year on year and 59% above 2022, the second-highest level in nearly eight years. Falling interest rates, a wide range of choices and ample supply were supporting steady market activity, with a positive summer and autumn trading period expected ahead.

“By historical standards, prices are low and relatively stable. Interest rates have fallen significantly, and the most likely direction remains further declines. There is also an exceptionally wide range of choice on the market, with plentiful supply helping to restrain potential price rises.”

“Given the dramatic fluctuations the market has experienced over the past decade, the concerns of politicians, regulators and commentators about its direction, and the continual adjustments to how it operates, the market’s current stability is a welcome change.”

Whether you are based overseas or locally, if you are planning to buy a home, we recommend contacting an experienced Barfoot & Thompson salesperson early. They can provide professional advice that best reflects current market conditions.