1. Reopening of New Zealand’s borders
New Zealand’s international border reopened to all visitors on 31 July 2022 and all COVID-19-related restrictions have now been removed.
This is a significant shift for New Zealand’s property sector, which saw a decline in foreign investment during the country’s response to the COVID-19 pandemic: due to both economic uncertainty, and practical impediments to due diligence and other “on the ground” requirements. We look forward to welcoming back international visitors and investors to New Zealand who played a significant role in the country’s economy prior to the global pandemic.
Foreign investors looking to invest in New Zealand will need to consider the application of the Overseas Investment Act 2005 (OIA) to their proposed investment. The OIA regulates the investment by overseas persons into various types of assets in New Zealand, including in “sensitive land”. Unless an exemption applies, acquisitions of “sensitive land” will require the consent of the Overseas Investment Office (OIO). Sensitive land includes residential and rural land, meaning the OIA regime will generally apply to residential purchases and developments and transactions involving the acquisition of farmland. Long term leasehold investments are also caught.
When evaluating an application for consent, the OIO will consider seven factors, including economic and environmental benefits. An overseas investor will also need to compare the current state of the land to the benefits of the investment to demonstrate that the investment will bring identifiable benefits to New Zealand. Breaches of the requirement for consent can carry heavy penalties, so it is important for foreign investors to seek specialist advice before signing any documentation.
Adjustments to wider immigration policy settings will, however, be needed to further incentivise foreign investment in the New Zealand property sector. In September 2022, Immigration New Zealand introduced a new Active Investor Plus residency visa. This new visa is designed to incentivise high-net worth overseas individuals to move to New Zealand and requires direct investment in New Zealand businesses through a weighted investment system. The minimum investment requirement is NZD15 million which must be invested within 48 months and the investments kept in New Zealand for at least 4 years after which time permanent residency can be applied for. The benefit of the visa can extent to partners and children and there is also a requirement for individuals to be present in New Zealand for minimum periods of time during the 4 years.
More widely, the Government has reset requirements for other resident visa pathways, including for skilled migrants, recognising that New Zealand, like many countries, is experiencing a labour shortage in many key sectors of the economy.
To read more, please visit our Investing in New Zealand 2022 Guide here.
2. Structural reform to facilitate growth
The New Zealand Government is advancing significant structural reform in national planning legislation, the ownership and delivery of water services throughout New Zealand and the structure and delivery of public health services. The breadth and extent of these reform programmes will provide significant opportunity for infrastructure investment and development over time.
The cornerstone environmental and planning legislation in New Zealand, the Resource Management Act 1991 (RMA), is currently in the process of being repealed and replaced with the new Natural and Built Environments Act, to be supported by two new Acts: a Spatial Planning Act and a Managed Retreat and Climate Change Adaptation Act. The new legislation is aimed at addressing the recommendations following a 2020 review of the RMA, including to make applications for land use and development consents easier and to change the regulatory assessment system from being effects-based to outcomes-focused. This is an exciting development and one that we hope will facilitate further growth and development.
The Government is also underway with a programme to improve the regulation and supply arrangements of drinking water, wastewater and stormwater in New Zealand. This will involve legislative reform and designing new, appropriate entities to manage the three water services (in the place of councils), with an impact on local government and the infrastructure sector. The core driver of the reform is to acknowledge and commercially address a material deficit in the quality of water infrastructure and quality and is expected to provide opportunities for private sector investment. .
We have also seen changes in the health sector to consolidate and centralised the structure and delivery of health services to New Zealanders. Under the Pae Ora (Healthy Futures) Act 2022 (Pae Ora Act):
- 20 District Health Boards were disestablished and consolidated into a single entity, Te Whatu Ora – Health New Zealand; and
- the Māori Health Authority, a separate entity focussed entirely on improving the health outcomes of New Zealand Māori, was established.
Part of the purpose of the Pae Ora Act is to achieve equity in health outcomes in New Zealand, including striving to eliminate health disparities for Māori. Both of these entities will follow the actions set out in the interim New Zealand Health Plan, due to be published shortly. Where previously those in the health services industry would need to engage with 20 separate District Health Boards, there is now a single, national body managing those health services functions. There is general consensus that reform of the prior structure was needed and it is hoped that these significant changes to the structure and delivery approach of the health sector will deliver significantly improved health outcomes for all New Zealanders.
3. Growing market interest in sustainability
New Zealand has committed to reducing net greenhouse gas emissions to zero by 2050. With buildings estimated as being responsible for up to 20% of New Zealand’s greenhouse gas emissions, the property sector will need to make significant changes to reduce its emissions and work towards a greener New Zealand. The Government is introducing further actions and measures to achieve this target, with recent examples being:
- New Zealand’s first Emissions Reductions Plan (released in May 2022).
- New Zealand’s first national adaptation plan: Urutau, ka taurikura: Kia tū pakari a Aotearoa i ngā huringa āhuarangi – Adapt and thrive: Building a climate-resilient New Zealand (finalised in August 2022).
- the Building for Climate Change programme, run by the Ministry for Business, Innovation and Employment (introduced in 2020, with ongoing initiatives).
New Zealand’s geographical environment also requires us to adapt. Like much of the world, New Zealand is already seeing the irreversible effects of climate change. Extreme weather events, sea level rise and flooding are areas of particular concern. In the market, we are seeing insurers and banks factoring climate affects into insurance and lending applications. Building climate-resilient properties in the right locations will become critical.
Overseas investors, suppliers and manufacturers of sustainable products and services should consider an expansion into New Zealand to assist with meeting the needs of a growing interest and demand for sustainable products and buildings. In the leasing space, we are seeing how reducing a building’s emissions can bring both an environmental and a cost benefit, with sustainability being a drawcard for some anchor tenants. Developers and building owners are considering the carbon cost of both building new and retrofitting existing builds, with a growing trend to retrofitting existing builds. We encourage building owners and investors to consider steps that can be taken to a reinvigorate existing buildings while making use of existing embodied carbon and reducing building waste.
If you are interested in reading more about climate change and sustainability in New Zealand, our Sustainable Impact publication provides insights from a range of different market sectors and perspectives – read the latest issue here.
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