23 January To whom it may concern,

Transcription

1 23 January 2018 Committee Secretariat Finance and Expenditure Select Committee Parliament Buildings Wellington To whom it may concern, SUBMISSION: OVERSEAS INVESTMENT AMENDMENT BILL 1. Recommendations 1.1. Property Council New Zealand ( Property Council ) generally supports the proposed amendments incorporated in the Overseas Investment Amendment Bill (the Bill). We have also made some suggestions for consideration, including: a. All sensitive land that could be used for housing be exempt. This would ensure that farm land that is likely to be re-zoned for residential purposes will be included and would better achieve the Government s objectives. Consideration could also be given to local authorities administrating some of the processes to lessen the regulatory burden. b. An increase in the number of houses should be measured by the number of dwellings rather than individual titles. This recognises that more than just housing is required for successful residential developments We welcome the proposed new standing consent that streamlines the process for effectiveness and efficiency. However, consideration could be given to, either: a. widening the new standing consents to include non-residential land that will be used for residential developments, with further exemptions to use residential land for supporting services; or for the use of residential land for other purposes; b. that the standing consent clarifies the number of residential dwellings is counted by the total land used not just individual titles; and/or c. expanding the new standing consent to enable an application for investment in any sensitive land be provided, where the commitment to New Zealand test has been met. d. recognising residential developments require more than just housing to be successful We support the proposed specified period test to curb potential land-banking but that consideration be given to either: a. extensions for residential developments of scale or unusual complexity; b. case by case determinations where a true commitment to the residential development has been made; and/or c. an exemption where an investment has been shown for the residential development to progress.

2 d. Residential developments can take many years, particularly those of scale, and do not necessarily develop to a specified time line for various reasons Adequate resourcing for the Overseas Investment Office (OIO). We recognise that the significant increase in workload is likely to cause disruption and we suggest that some alternatives be considered such as prioritisation and mandatory time limits for applications of scale, or other organisations undertaking some of the new regulatory duties Another exemption for overseas persons that purchase property, meet the commitment to New Zealand test, although intend that the property to be used as a rental. The same policy intention is met by ensuring that the housing stock is increased as rental stock We support the proposed district valuation roll to define the residential and lifestyle land as it allows more public transparency. 2. Introduction 2.1. Property Council is a member-led, not-for-profit organisation offering a collective voice for the commercial property industry. The property industry is currently the largest industry in New Zealand with a direct contribution to GDP of $29.8 billion or 13%. In a sense the property sector is a foundation of New Zealand s economy and caters for growth by developing, building and owning the buildings that house businesses and developing the homes to house people and communities Our membership is wide ranging and includes some of the largest companies and property holders in New Zealand. Our members undertake a range of large-scale residential and commercial development projects, including large commercial buildings, industrial parks, and retail precincts. Many of our members will be delivering the Government s ambitious housing objectives of Kiwibuild and building more houses We recognise that the intent of the Bill is to give effect to the Government s commitment to ban overseas speculators from buying existing houses. Property Council supports the Government on this issue. However, the Bill has gone further by restricting the sale of all residential land, not just the sale of existing houses, to all overseas persons, not just overseas speculators. This risks adverse and unintended consequences which could hinder the Government s wider objective of enabling more houses to be built Property Council s submission focusses on ensuring a balance between protecting New Zealand s interests and permitting desirable foreign investment to help more houses to be built quickly and at scale. 3. Slowing or preventing large-scale residential developments 3.1. Large-scale residential developments require capital including foreign investment. By its nature the property sector is extremely capital intensive, with developments and buildings worth tens and hundreds of millions of dollars. Overseas investment is an crucial source of capital given the limitations of New Zealand s small capital market There are very few New Zealand domiciled companies of scale that have the capability to undertake large-scale residential developments and these companies require sufficient investment including foreign capital. A significant proportion of these companies are deemed

3 overseas persons because of minority foreign shareholders even when they are New Zealand controlled Our members experience shows that preparing and submitting applications for consent or an exemption for overseas persons requires a significant amount of time, effort and money, and decisions are often not issued quickly. All of which creates a level of uncertainty around the process and the outcome. This can be often off-putting to foreign investors which are integral for potential large-scale residential developments to progress. Any restriction that inhibits the ability to raise capital could have adverse, unintended consequences for the Government to meet its targets of building new houses To achieve the objective of the Bill whist at the same time maximising development potential, Property Council recommends consideration be given to: a. Widening the standing consent requirements under the net benefit tests for nonresidential land, particularly any non-residential land that supports a residential development. Residential developments need more than just residential land to ensure a development is successful. b. A new definition of a company overseas persons. This would help ensure that housing and associated business developments were not inadvertently captured. We note that the current proposal has an individual focus which is concerning when regarding companies. We believe that due to the concentration on individuals, the Bill has inadvertently caught companies that will be building the houses and meeting the Government s Kiwibuild targets Property Council suggests that a potential change to the 25% threshold might assist, as currently many insubstantial very small foreign shareholders are caught that effectively hold no control over a New Zealand controlled company. We believe this to be a problematic definition of an overseas person. We suggest capping at a 5% of the total shares be introduced and not contribute to the 25% threshold. We believe this could be a more effective and efficient definition of an overseas person. 4. Increased housing on residential land test 4.1. Property Council notes that the increased housing test only relates to residential land. However, we believe all land that is likely to be used for residential purposes should be included, such as farm land that is to be re-zoned as residential by local authorities. This ensures that all land that could potentially be used for housing will be included Similarly, large scale housing developments often need land for other purposes such as community facilities, parks, and retail hubs. Such facilities are sold to property owners for long term hold or vested back to local authorities for parks and community facilities. These initiatives are part of building not just homes, but communities In some instances, of these other activities are likely to occur on residential land and the proposed new net benefit test is likely to be too onerous for this supporting land. It is important that the increased housing on residential land test is applied in a way that recognises that some land will be used for other purposes rather than just increasing the housing stock. We recommend that some flexibility be included to ensure that the entire development is seen as a whole not just its individual titles.

4 4.4. Property Council recommends consideration be given to, either: 5. Exemptions a. an exemption to use residential land for other purposes such as business/commercial development if it shows to be supporting residential development, ie town centre, supermarkets etc. or provides essential social infrastructure (eg healthcare or aged care) or community services; b. measuring the standing consent, ie an increase in the number of residential dwellings, by reference to the total land acquired for a residential development, not each individual title or parcel of land; c. Widening the standing consent for use of residential land for supporting services; and/or d. Including other land into the increased housing on residential land test that would be used for residential developments, such as farm land that is to be re-zoned as residential by the relevant local authority Property Council notes that exemptions to purchase sensitive land for the purposes of increasing the housing stock, are likely to assist companies determined as overseas persons. However, our members experience shows that the timing and uncertainty surrounding an application is again often off-putting to foreign investors. This uncertainty will be exacerbated if exemptions are not processed quickly and efficiently by the OIO Currently, the OIO deals with approximately 150 applications a year and the Treasury is estimating a likely increase to approximately 4,700. Even optimistically it is unlikely the OIO will be able to meet the new demand quickly. This could potentially put large-scale residential developments at risk of not progressing or for them to grind to a halt while awaiting approval. This again could potentially have an unintended consequence of the Government unable to meet its targets of building new houses. We deal with the OIOs resourcing issues in detail below. 6. New advance standing consents 6.1. Property Council supports this approach and understands the need to streamline processes for effectiveness and efficiency. However, we note that some sensitive land would not be included under the standing consent provisions. This could jeopardise some companies of scale from applying for these standing consents Property Council recommends that consideration be given to expanding the new standing consent to enable an application for investment in any sensitive land be provided, where the commitment to New Zealand test has been met We also have further concerns regarding this proposal and its administration. We understand that the OIOs workload is expected to increase significantly and believe this could lead to a drawn-out exemption application process which again we deal with in detail below. 7. Specified period for the residential satisfaction test 7.1. Property Council supports the proposal of the new specified period test noting its intention to prevent long-term land banking of residential land without building starting. However, we believe that some flexibility needs to be incorporated in this provision. The larger-scale

5 developments often do not progress to a specified timeline, with various external factors contributing to this, including market conditions. These developments can take 10 years or more to progress These large-scale residential developments are also not simple and can include the need for significant consultation particularly with iwi which takes time Flexibility is needed to ensure no perverse unintended consequences occur because a development has not met a specific time line. Again, this could potentially undermine the Government s ability to meet its targets of building new houses Property Council recommends that consideration be given to either: a. Extensions for residential developments of scale; b. Case by case basis determinations to the specified period where a true commitment to the residential development has been made; and/or c. An exemption where an investment has been shown for the residential development to progress. 8. Overseas Investment Office resourcing 8.1. The exemption/consenting regime only works well if applications are processed in a quick and efficient manner. As mentioned above, our members are met with timing and resourcing concerns when making applications. The new proposals are likely to increase these concerns, significantly Property Council recommends that further consideration be given to alternatives due to the OIOs expected significant increase in workload, including: a. Substantially more resourcing. There is likely to be a bedding period where all activities undertaken by the OIO will slow down. This could have flow on effects for our members unable to obtain an exemption or consent in a timely manner, which in turn could potentially hinder their ability to raise capital to undertake their residential developments. An unintended consequence of this could potentially mean that the Government will struggle to meet its Kiwibuild targets; b. Prioritisation for applications of scale. For example, if an application is for a large-scale residential development prioritisation would be given to those applications; c. Mandated time limits to process applications, particularly for applications for residential developments of scale; and/or d. Other organisations undertake some of the proposed regulatory functions, such as local authorities or central government agencies. Local authorities will be undertaking building inspections and therefore could advise the OIO of the development s progress. 9. Increased housing stock generally 9.1. Property Council supports the need to manage the implications of housing speculation. However, we believe that although an overseas investor might purchase an off the plans property and not move in, they should not be penalised if they intend to still meet the benefit to New Zealand test. For example, they intend to keep the property for a period but only as a rental.

6 9.2. We believe that the policy outcome of increasing the housing stock is still met. Some of the smaller residential development still require capital investment, including foreign investors although on a smaller scale, to ensure that the residential development is viable to progress. Flexibility is needed to ensure this can still be achieved Property Council recommends that consideration be given to: a. An exemption be introduced for overseas persons that purchase property and meet the commitment to New Zealand test, although intending to provide the property to the market as a rental. In practice, the property remains in the overseas persons name for a period whether they intend to live in it or not. The same policy objective is met by ensuring that the housing stock is increased, and New Zealanders have a place to live; and/or b. Expanding the standing consents to enable applications to invest generally in sensitive land providing they meet the benefit to New Zealand test of increasing the housing stock. This would meet the intention of the policy proposal by potentially increasing the rental stock. 10. District Valuation Roll Property Council supports the proposed district valuation roll to define residential and lifestyle land. We agree that this gives an ability for persons to object on those definitions and allows for more public transparency. 11. Conclusion Property Council generally supports the Government s proposal to revise the Act. We recognise the need to ban overseas speculators from buying existing houses We also recognise the need for further changes to the Act and are happy to provide any additional information that might assist with the consideration of our recommendations, including information about the likely impact any changes to the Act might have for our members Property Council again wishes to thank the Select Committee for the opportunity to submit on the Bill. We would also like to present our submission in person Any further queries do not hesitate to contact Jane Budge, Senior Advocacy Advisor, jane@propertynz.co.nz or cell (021) Yours sincerely, Connal Townsend Chief Executive