Investors keen on market receive warning
Environment Minister David Parker has slammed ACT New Zealand’s (ACT) calls to exempt build-to-rent (BTS) accommodation from the foreign buyer ban, describing the suggestion as unnecessary and could open the door to speculators.
Currently, the New Zealand law allows foreign investment in non-sensitive residential land if the investor intends to increase the number of dwellings on the land. Additionally, the investor can hold on to the dwellings if they build 20 or more. If they build fewer than 20 dwellings, they have to on-sell. Foreign investment in a “long-term accommodation facility” is also allowed, including retirement villages, rest homes, and student accommodation.
However, ACT is urging the government to tweak the Overseas Investment Act, adding BTR accommodation to the list – which means foreign investors would not need to add 20 new dwellings to own homes, as they could own the “long-term accommodation facility if they add only one new dwelling to it.”
In response to the suggestion, Parker accused ACT of being “interested in opening the door to overseas speculators.”
However, ACT argued that the current law limits investment, as investors building long-term rental accommodation struggle to sell their property to other overseas investors.
“We should aspire for New Zealand to be a place where people want, and are able, to send their money, to provide for more development opportunities and choice of housing,” said ACT housing spokesperson Brooke van Velden, as reported by Interest.co.nz.
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Meanwhile, the Property Council of New Zealand has warned that property investors keen on the BTR market might be disappointed if the government would not carve this niche out as another asset class.
In a letter to government ministers ahead of the government’s decision on the proposed changes to tax deductibility rules, the Property Council of New Zealand claimed that the proposals would be a significant barrier to BTR developments occurring at scale and pace.
The council further explained that the changes could push domestic developers to see emerging asset classes like BTR as unviable.
“While exempting new builds is encouraging, the government has an array of levers it can pull to incentivise more housing to be built that don’t pull the rug out from under the feet of developments,” said Property Council New Zealand chief executive Leonie Freeman.
“We have specifically requested the government exempt build-to-rent developments from the interest deductibility proposal to encourage this dynamic new asset class. The feedback we have had is compelling – these rule changes will make it much more difficult for build-to-rent’s potential to be unlocked.”
