A welcome change: Simplifying New Zealand's overseas investment regime

On 23 February, 2025 the New Zealand government announced the key changes agreed in principle by Cabinet to the overseas investment regime and reiterated the Government's strong desire to encourage more investment into New Zealand. This is one of the many announcements the Government has made, since first announcing its proposals to reform significantly the overseas investment regime in October last year, driven by concerns that the current regime is hindering economic growth.

Cabinet has approved a reform package which includes:

1. Acknowledging the benefits of investment: The reforms aim to acknowledge better the positive impact of foreign investment for New Zealand’s economy. As previously indicated, this will reverse, for most investments, the current presumption that investing in New Zealand is a privilege and the requirement that investors must justify their investment. Instead, investments will be able to proceed unless there is an identified risk to New Zealand. The reforms are a welcome step and are expected to clarify and streamline the existing complex and deterring regime.
2. Speeding up decision-making: One of the most significant changes is the commitment to make decisions within 15 days for most investments other than those involving residential land, farmland, and fishing quota. The Government had already directed Land Information New Zealand (LINZ) to take steps to streamline the current application process, which has resulted in an acceleration of the processing times for most applications for consent. Since that direction was made, LINZ has decided every application within the relevant statutory timeframe and 96% of those applications have been decided within half that timeframe. This expedited process will significantly reduce the uncertainty and delays that have at times been an obstacle for overseas investment.
3. Strengthening government intervention powers: While the reforms aim to facilitate investment, they will also include added provisions to intervene on the "rare" occasion that a transaction could be contrary to New Zealand's national interest.
4. Empowering LINZ: The announcement states that the reforms will give LINZ more authority to approve investments without ministerial involvement, to further streamline the process. LINZ already decides all applications other than those that require a national interest assessment without ministerial input. So, it is unclear what further changes are intended here.

The Government is concerned that New Zealand's currently restrictive overseas investment regime is holding back economic growth, which is out of step with other countries that encourage foreign investment. The Government believes that overseas investors are directing their investments to other countries with more welcoming overseas investment regimes. These reforms are aimed at reversing this impact.

The Government is not intending to change the current regime in respect of residential land, farmland and fishing quota. This decision in relation to farmland will deprive the particularly important agricultural sector of valuable and much needed foreign capital and the associated connections and opportunities in contrast to investments in the likes of existing forestry.

It is not entirely clear how far the reforms will go in removing or changing the current regime applicable to all other investment classes. The announcement refers to removing barriers to significant business assets, existing forestry and non-farmland investments. However, we do not think this means that the regime will cease to apply to these investments, rather we expect it will result in a much more streamlined approach with the presumption that the investment can proceed unless there is an identified risk to New Zealand.

The detail of the streamlined approach is not yet apparent. The legislation implementing the reforms is expected to be in place before the end of 2025. We will keep you updated once the details of the proposed changes have been announced.

These reforms are a welcome step, and we expect that the streamlined screening process will materially reduce the cost of most consent applications given the reduced screening required to be undertaken by LINZ. We are hopeful that the changes to the principles underpinning the regime will translate to a change in mindset within LINZ and other Government agencies, whereby encouraging and facilitating productive overseas investment is seen as equally important as screening of investments that may be contrary to New Zealand's interests. We also hope the opportunity is taken to simplify the legislation and remove areas of ambiguity or unnecessary complexity.