Overseas Buyers

Australia

RESIDENTIAL INVESTMENT

Residential real estate means all Australian urban land other than commercial properties (that is offices, factories, warehouses, restaurants, shops). Acquisitions of 'hobby farms' and 'rural residential' blocks by foreign interests are included in the residential real estate category.
Foreign purchasers intending to acquire real estate in Australia must seek prior approval from the Government through the Foreign Investment Review Board unless specifically exempted by the Foreign Acquisitions and Takeovers Regulations.

Entering Into A Contract

All contracts by foreign persons to acquire interests in Australian real estate must be made conditional upon foreign investment approval, unless approval was obtained prior to entering into the contract.
For properties to be purchased at auction, prior foreign investment approval must still be obtained and advice provided whether the parties were successful or not, and if so, a copy of the signed contract forwarded to the Foreign Investment Review Board (FIRB) after the auction.

Who is Exempt?

Exemptions include:

acquisitions by Australian citizens resident abroad;
acquisitions of property zoned residential by foreign nationals who hold permanent resident visas or hold, or who are eligible to hold, a 'special category visa' (eg a New Zealand citizen); and
foreign persons purchasing, as joint tenants, with their Australian citizen spouse property that is zoned residential.

Under the Act, a foreign person is:

a natural person not ordinarily resident in Australia;
a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

A substantial foreign interest (ie, a controlling interest) occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

The Government seeks to ensure that foreign investment in residential real estate increases the housing stock. The Government, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments - house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

The policy on developed residential real estate is negative. The effect is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent, therefore maintaining greater stability of house prices and the affordability of housing for Australians.
For further information, click here to view the Foreign Investment Review Board web site.

New Zealand

Overview

The purchase of New Zealand real estate by foreigners is regulated by the Overseas Investment Act 2005('the Act') and the Overseas Investment Regulations2005 ('the Regulations').

The Overseas Investment Office ('OIO') administers the policies created by the Act and the Regulations .Information on the OIO and its functions can be found at www.oio.linz.govt.nz

The policy of the Government is to encourage foreign investment. However, some types of land are deemed by the Act to be 'sensitive land', and a purchase by an overseas buyer of such land requires OIO consent to be obtained pursuant to the Regulations.

Consent applications are usually successful, and the refusal rate over recent years has been less than 4 percent. However, the consent requirements are becoming increasingly stringent, and it is important that legal advice is obtained when considering a consent application.

The initial questions to ask when buying land in New Zealand are:
Is OIO consent required?* This involves asking:

Is the land of a type that requires consent? AND
Am I deemed to be an overseas person under the Act? If consent is required:
What criteria need to be fulfilled?
How long will it take?
What will it cost?

What type of land requires consent?

Consent is required for an overseas person to purchase land, either directly or through the purchase of shares in a land owning company, where the land in question:

exceeds 5 ha and is not in an urban area; or
is situated on particular islands; or
includes the foreshore or seabed, or is greater than 0.2 ha and adjoins the foreshore; or
exceeds 0.4 ha (4,000m2)and includes • any lake, the bed of which exceeds 8 hectares; or
any land which is held for conservation purposes, is provided as a reserve, a public park, for recreation purposes or as a private open space, is subject to a heritage order or is an historic place; or
exceeds 0.4 ha and adjoins similar types of land as above.

Note: The above categories are not exhaustive.
Legal advice should always be obtained as to whether a particular property requires consent.

Who is an overseas person?

If the land is of a type that requires consent, the next question is whether the buyer is deemed to be an overseas person for the purposes of the Act.
Individuals who are New Zealand citizens are not overseas persons. In addition, an individual is not an overseas person if that individual:

a) holds a residence permit or is exempt from the requirement to hold a residence permit (Australian citizens are so exempt); and
b) is domiciled in New Zealand; or
c) is residing in New Zealand with the intention of residing there permanently, and has done for the last 12 months (a person still qualifies despite temporary absences).

If the buyer is a trust or a company, then the general rule is that if 25% of the ownership or control of that company is ultimately held by an overseas person or entity, the Act will apply. The Act has extensive "look through" provisions, which prevent an overseas person from using complicated ownership structures or trusts to overcome the requirements.

Criteria for consent

If consent is required, the following initial criteria must be satisfied:

the overseas person must have business experience and acumen relevant to the investment in the property;
a financial commitment to the investment must be demonstrated; and
the overseas person must be of good character.

Once those criteria are established, it is necessary to look at whether the overseas buyer is ordinarily resident in New Zealand, or is intending to reside indefinitely in New Zealand. If that is the case, then the consent process is easier. It will, however, need to be shown that there are clear plans to move to New Zealand, and any consent will be conditional on that move being made. If there is not an intention to move to New Zealand, then it must be shown that the overseas investment will, or is likely to be, of benefit to New Zealand. The various factors which must be taken into account when deciding if there is such a benefit to New Zealand include the following:

Whether the investment will or is likely to result in:
the creation or retention of jobs in New Zealand; or
the introduction of new technology or business skills; or
increased export receipts for New Zealand exporters; or
added market competition, greater efficiency or productivity, or enhanced domestic services; or
the introduction of additional investment for development purposes; or
increased processing in New Zealand of New Zealand’s primary products;
Whether there will be adequate mechanisms in place for protecting or enhancing indigenous flora and fauna, habitats of trout, salmon and protected wildlife, historic heritage and walking access (to the extent that those matters may be applicable to the land being bought);
If the land includes the foreshore, seabed, or rivers or lakes (of a certain size) then those parts of the land must be offered for sale to the Crown;The Overseas Investment Act
Whether the investment is likely to result in other consequential benefits to New Zealand, such as additional investments or sponsorship of community projects;
Whether the overseas person has previously undertaken investments that have been of benefit to New Zealand.

These factors are not exhaustive, and it is not necessary for all of the above factors to be satisfied in order to obtain consent. Applications must be accompanied by a detailed investment plan which sets out and quantifies how the relevant factors will be achieved, and in what time frames. It is then necessary to comply with such investment plan as a condition of the consent.

Farm Land advertising requirement

In order to obtain consent for the purchase of farm land, it must be shown that such land has first been offered for sale on the open market in New Zealand. Advertising must follow a prescribed format, and the land must be available on the open market for at least 20 working days after an advertisement has first been placed. If the property is required to be advertised then that process will need to be completed before a consent application is submitted. The advertising requirement does not impose an obligation on the seller of the property to accept any offers received from members of the New Zealand public.

Who considers the application?

The Overseas Investment Office deals with consent applications where the land being acquired is larger than 5 ha, and is not 'sensitive' for any other reason. Where the land has other characteristics which make it sensitive land (e.g. being next to the foreshore), then the consent application is decided by the Minister
of Land Information and the Minster of Finance. How long will an application take? The time taken for an application to be processed differs from month to month, depending upon the workload of the OIO and the availability of the Ministers (if their determination is required). There can be significant delays, although they can be reduced by ensuring that the consent application contains all relevant information. Buyers should allow around 2 months time for an application to be processed. The actual processing time may be shorter if the application is straightforward.

For further information, click here