But some market positivity is returning as the Overseas Investment Office (OIO) has started to release decisions under new ministerial directives, she told Rural News.
“There has been a big delay under the OIO in getting decisions under the new directive,” Lefever says. “There was a period of about six months when no decisions were issued.”
The OIO decisions bring complex issues to be worked through, but farmers with potential overseas buyers should not be put off, she says. They will need to allow more time for a more comprehensive OIO process.
Lefever says new tests were introduced by a ministerial directive letter issued by the Government in December.
“That increased the threshold for determining whether there would be a substantial identifiable benefit under the Overseas Investment Act (OIA) if an overseas investor was looking to buy rural land in New Zealand over the 5ha area threshold,” she says.
“We were getting indications from various sources that with a lot of those applications the OIO was contacting the applicants and saying ‘we don’t think this will be sufficient to meet the new tests’. And those applicants were therefore withdrawing their applications.
“But now there have been some positive consent decisions coming out of the OIO on rural land, which is great to see and already increasing positivity in the market. It confirms the door has not been closed on rural land investment by the new directive letter.”
Lefever says threshold tests have definitely increased but, as more decisions go through the OIO, legal advisers and overseas investors will get more clarity as to where those tests now sit. They can adjust their investment strategy accordingly.
“The directive has put the focus of applications onto five specific factors that the ministers identified in their directive letter. They have said that certain factors are now of higher importance when considering an application for consents.
“They are increased export receipts, increased jobs, increased processing of primary products, introduction of new technology and business skills and the degree of New Zealand oversight or participation in the investment through some degree of NZ ownership or NZers on the board of directors.”
An application showing a substantial increase in at least one of those areas still has a good chance of getting across the line.
“But the test of what is a substantial increase has also increased. What was enough 18 months ago may no longer be sufficient,” says Lefever.
“An overseas investor has to show their investment will bring benefit to NZ. That benefit has to be over and above what would be likely to happen if they didn’t buy the property. What is likely to happen? Is the current owner likely to retain it and if so what are they likely to do? Or is it more likely that it would be sold on to a New Zealander and what would they be more likely to do?
“So if an alternative purchaser is likely to carry out development or increased production to the same level as an overseas person, they can’t rely on demonstrating a benefit; it has to be over and above.”
That can involve a counterfactual test based on a hypothetical purchaser.
It currently takes at least six months to go through OIO processes. This can be an issue with seasonal businesses which want a settlement date at a particular point in the season.
“Some vendors might need to engage with potential overseas purchasers in more detail about what their OIA strategy is before they get on contract with them.” They may need an independent assessment.
Some professionals in property were concerned that the new directives will impact prices, particularly when there were no decisions coming out of the OIO.
“As more decisions are released we can get greater clarity on exactly what will be enough to meet the new test.”
