‍

Are you an Indonesian investor looking for new investment opportunities in foreign real estate markets? New Zealand is becoming an increasingly popular destination for both tourists and investors due to its stunning landscapes, high-quality infrastructure, and stable economy.

As an Indonesian investor, there are certain types of real estate opportunities available to you in New Zealand. However, it's important to understand the legal and regulatory requirements that allow you to purchase real estate without facing serious penalties.

NZ Legal has extensive experience advising Indonesian investors buying real estate in New Zealand and offer expert guidance to our clients throughout this process.

In this article, we discuss the key restrictions that apply to Indonesian investors and provide an overview of the essential things Indonesian investors need to consider before buying real estate in New Zealand.

‍

The New Zealand Real Estate Market

While the Indonesian and New Zealand real estate markets share many similarities, there are a number of reasons why Indonesian investors may choose to purchase real estate in New Zealand. For example:

1. By investing in real estate in New Zealand, Indonesian investors can reduce their exposure to any potential risks or downturns in the Indonesian real estate market, and potentially benefit from the growth of the New Zealand market.
2. New Zealand has a stable and prosperous economy, with a strong and transparent legal system and low corruption. The country is politically stable and offers a high standard of living for its residents.
3. Areas of New Zealand have low vacancy rates and high demand for rental real estate, leading to potential for strong rental returns.
4. New Zealand also has a thriving tourism industry, which offers opportunities for those looking to invest in the hospitality and leisure sectors.

These factors make New Zealand an attractive location for both residential and commercial real estate investments.

‍

‍Real Estate that Indonesians Can Buy Without Consent (The Exception)

If you're an Indonesian investor looking to purchase real estate in New Zealand, you may be wondering what your options are. 

While the Overseas Investment Act of 2005 typically requires foreign buyers to obtain consent from the Overseas Investment Office (OIO) before they buy real estate in New Zealand, there are some key exceptions. 

‍

Residential Real Estate

There are two residential real estate opportunities available to Indonesian investors without consent.

The first type is large multi-storey apartment developments. Developers building large apartment blocks can apply for an exemption certificate, which allows them to sell up to 60% of their units to overseas buyers. To qualify for this exemption, the apartment building must have multiple storeys and at least 20 units.

This provides an opportunity for Indonesian investors to invest in the growing apartment market in New Zealand, particularly in cities like Auckland and Wellington. 

The second type is hotel units. Again, these also need to be multi-storey, built on residential real estate, and have at least 20 units. The only difference here is that a hotel developer does not need an exemption certificate to sell to overseas buyers. 

However, if you're buying a hotel unit, you need to enter into a leaseback arrangement with a hotel operator and cannot use your unit for more than 30 days a year. This ensures that overseas buyers purchasing a hotel unit cannot live in it for a large part of the year.

‍

Commercial Real Estate

For those interested in commercial real estate, there are several opportunities available to Indonesian investors without consent, such as:

1. commercial offices, either a complete building or a single floor within a building used for commercial purposes;

2. light industrial real estate, which covers warehouses, showrooms, and light industrial units larger than 3,000 square meters;

3. heavy industrial real estate, which refers to factories or other industrial facilities that involve heavy machinery or manufacturing; and

4. retail real estate, which encompasses everything from individual shops to complete shopping malls.

However, it is essential for all real estate investors to seek expert legal advice before entering into any property purchase agreements. Our experts at NZ Legal can assist you with due diligence on and ensure all relevant regulations are complied with. ‍

‍

Real Estate that Indonesians Can Buy With Consent (The Rule)

The general rule is that the Overseas Investment Act of 2005 requires foreign buyers to obtain consent from the OIO before buying residential real estate or ‘sensitive land’ in New Zealand. 

Residential real estate means real estate that has a real estate category of residential or lifestyle. While “Sensitive Land” can be farm land, land adjoining marine and coastal areas, significant Māori land, real estate on specific islands, and includes both freehold or leasehold interests in real estate.

The full list of sensitivities can be found in Schedule 1 of the Overseas Investment Act 2005 and a general guide to when consent is required can be found here. 

As discussed here, it is important that Indonesian investors obtain consent from the OIO before entering into a property purchase agreement. 

So what does the OIO consent process look like?

‍

Consent Process for Buying Real Estate in New Zealand

The consent process starts with an application being submitted to the OIO for residential or sensitive land consent. 

The application fees for consent range depending on the complexity of the application, but more complex applications can include fees in excess of $100,000 NZD.

The OIO will then assess the application within the prescribed time frame and determine whether the transaction meets the benefit to New Zealand test and the investor test. 

The benefit to New Zealand test is largely discretionary and involves an assessment of whether the purchase will bring a net benefit to New Zealand. Some factors the OIO may consider as part of the test include: 

1. will there be an economic benefit to New Zealand;

2. will historical sites be protected and accessible; 

3. will there be a benefit to New Zealand’s natural environment; and 

4. will the investment assist government policy. 

While the investor test sets out the types of behaviours the OIO considers likely to pose a risk to New Zealand and questions the character and capabilities of the buyer. A common condition of consent is that the buyer continues to meet the investor test.

‍

Standing Consent from the Overseas Investment Office

Obtaining standing consent from the OIO can also provide a range of benefits to investors who meet the criteria. 

Standing consents allow investors to make investments under the umbrella of a consent that is already in place, which can streamline the process and reduce uncertainty when approaching an acquisition.

Standing consents are issued with specific conditions that the investor must follow, such as limitations on the scope of the consent and an expiry date. The conditions may include a maximum number of transactions that can be completed and the area or type of real estate that can be acquired. 

By obtaining standing consent, investors can have greater confidence in their ability to acquire and manage real estate in New Zealand.

‍

Non-Compliance with the Overseas Investment Office

We highly recommend seeking expert legal advice before you enter into a property purchase agreement. 

There are many areas where hopeful buyers get stung because they have failed to comply with OIO rules. 

For example, if you sign an unconditional property purchase agreement in New Zealand without consent, you can be fined up to $ 300,000 NZD and your purchase may also be declined. 

‍

Having a Real Estate Attorney or Lawyer Assess the Estate Before the Purchase

Before purchasing any real estate in New Zealand, it is important to have a real estate attorney or lawyer carry out due diligence on the estate.  

This is especially true when purchasing sensitive land, as there may be cultural or ecological considerations that need to be taken into account. 

Our team at NZ Legal routinely assess real estate for Indonesian investors and provide assistance in navigating the legal and regulatory landscape of buying real estate in New Zealand.

‍

Key Takeaways

Indonesian investors who are considering purchasing real estate in New Zealand need to be aware of the legal and regulatory requirements that apply to before entering into a property purchase agreement. 

We highly recommend that all Indonesian investors seek expert legal advice on OIO compliance to avoid the harsh penalties and fines.

At NZ Legal, we can assist you with navigating the process of purchasing real estate in New Zealand, manage any required consent applications on your behalf, and complete all legal requirements that are necessary.

‍

Fill out the form below, and we will book in a time for a free no obligations 30 minute phone call with one of our experts.