David Seymour says more overseas capital is vital for growth, while Labour says the law change will allow a ‘fire sale’ of assets, writes Catherine McGregor in today’s extract from The Bulletin.
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Starting at ‘yes’
David Seymour has been talking about it for almost as long as he’s been in government, and now his plans to liberalise the foreign investment rules are a reality. On Sunday the associate finance minister announced a reform of the Overseas Investment Act that will fast-track the government’s process for investment applications “with the starting assumption that investment can proceed”.
The requirement that potential foreign investments must satisfy a number of tests proving they will benefit New Zealand are to be scrapped, except in the case of farmland, fishing and residential property. “We’re going to say that if you have a willing buyer and a willing seller, and there’s no threat to public national security or public order, then we will triage you through and you have a decision in 15 days,” Seymour tells the Sunday Star-Times’ Luke Malpass.
Addressing the productivity gap
Opening New Zealand to more foreign investment is vital to improving our economic growth, Seymour argues. New Zealand’s productivity is among the worst in the developed world, and the OECD has singled out our restrictive foreign investment rules as a major barrier to improving the situation.
A key beneficiary of the law change could be infrastructure, which faces an estimated $200 billion funding shortfall. More foreign capital is desperately needed, either direct or in the form of public-private partnerships, says Infrastructure NZ’s Nick Leggett. “Infrastructure can be an extremely attractive asset for international institutional investors such as pension funds and sovereign wealth funds,” he says.
‘Everything must go’
The opposition has attacked the government’s plans, arguing they will “[throw] the doors wide open” to investors with no regard for the country’s best interests. “Investing in New Zealand is a privilege, not an open invitation for profit-chasing investors to exploit our resources and siphon off the returns overseas,” says Labour’s finance spokesperson Barbara Edmonds. “It seems the Government’s new slogan ‘Everyone Must Go’ has been interpreted by David Seymour as ‘Everything Must Go,’ including New Zealand’s essential assets.”
Peters changes his tune on foreign home buyers
NZ First insisted on the carve-outs for farmland, fishing and residential property as a condition of supporting the legislation, reports Malpass. While Peters has long been an enthusiastic supporter of the foreign buyer ban on residential property, in recent months he has appeared to soften his position. “The right person, with the right investment will get the right place, yes,” he told Newstalk ZB when asked about the issue in October. Announcing changes to the foreign investor visa earlier this month, finance minister Nicola Willis said the ban made New Zealand less attractive to some overseas investors. “They don’t love [renting], but they’re still here.”
Buy-to-rent investment law comes into effect
While the coalition continues to debate foreign purchases of individual homes, corporate landlords from overseas will find it easier to invest in New Zealand. The Overseas Investment (Build-to-Rent and Similar Rental Developments) Amendment Bill passed its third reading on Thursday and will come into force this week. The legislation simplifies foreign investment in build-to-rent (BTR) housing, large-scale residential developments designed for long-term rental.
The Overseas Investment Act’s stringent criteria posed an issue for both overseas buyers of existing BTR developments and their original developers “who knew their on-sale market was limited to New Zealand investors, of which the pool is small”, explains law firm Simpson Grierson. The new amendment removes the previous barriers, allowing foreign investors to more easily purchase BTR properties of at least 20 dwellings.
