Why US billionaires want property in New Zealand

By March 2, 2018Latest Topics

The island nation of New Zealand has emerged as an unlikely real estate and investment hub for U.S. billionaires looking for palatial estates, and, according to some reports, a sense of security amid rising global tensions.

New Zealand’s gorgeous landscape, booming home prices and isolation have made it an attractive target to outside investors, to the point that government officials are pushing to ban the sale of houses to overseas buyers. However, the country presently offers a pathway for motivated foreign investors, offering residency and a pathway to citizenship, for those willing to invest millions in the country and spend a certain amount of each year there.

With nuclear tensions on the rise, New Zealand’s political stability, low population density, pristine country and distance from major powers provides a potential refuge to those for whom money is no object. That is particularly true among the tech elite of Silicon Valley, whose West Coast headquarters are a nonstop plane ride away.

“[New Zealand] makes investor visas relatively easy to obtain when compared to many other nations such as the United States, thus it is natural for those looking to invest money overseas to choose New Zealand,” Joshua Harris, a clinical assistant professor of real estate at New York University’s Schack Institute of Real Estate, said. “The country’s real estate markets are generally believed to be under supplied and have experienced rising prices in recent years. Further, daily nonstop flight options from the West Coast of the U.S. has made getting to New Zealand easier in the past few years as well.”

Silicon Valley tycoon Peter Thiel, legendary investor Julian Robertson and Hollywood director James Cameron are just a few of the notable figures tied to property deals in New Zealand, whose pristine hills served as the filming location of the “Lord of the Rings” film trilogy. Jack Ma, founder of Chinese e-commerce giant Alibaba, purportedly told the former New Zealand prime minister in April 2016 that he wished to buy a home in the country, the New Zealand Herald reported, adding that many of Ma’s colleagues had already retired there.

New Zealand offers two pathways for foreign applicants to obtain an investor visa. For a standard visa, applicants must invest NZ$3 million (more than $2 million in U.S. currency) for a four-year period and spend at least 146 days for three of the four years of an investment period. To speed up the process, foreign applicants can agree to invest NZ$10 million for three years and spend at least 44 days in the country for the last two years of the investment period. The country grants about 250 such visas annually, according to the Washington Post.

The notion that New Zealand is serving as a refuge for billionaires wary of a global crisis originated from a January 2017 story in the New Yorker entitled “Doomsday Prep for the Super-Rich.” Venture capitalist Sam Altman told the publication in 2016 that he planned to fly with Thiel to New Zealand in the event of a global pandemic.

For proponents of the theory, a New Zealand Herald report that Thiel recently added a panic room to his $4.8 million estate in Queensland served as a form of proof.

“I would venture to guess the biggest reason for U.S. billionaires investing in New Zealand real estate is political and economic instability, coupled with the ‘prepper’ mentality and vast amounts of disposable income,” said Max Coursey, a real estate investment expert and president of Tiger Prop in Boise, Idaho. “New Zealand is friendly with most of the world, so their chances of being hit would be minimal and fallout in the southern hemisphere would likely be substantially less than the northern. … If there was a major outbreak of disease, what better place to be than a sparsely-populated island?”

Years of overseas investment has driven up housing prices on the island. New Zealand’s national median average home price rose 5.8% to $405,000 in 2017, the BBC reported. Those rising prices are the primary driver behind the push by New Zealand’s Labour Party government to ban foreigners from buying homes in the country.

The emergence of high-profile American buyers has rankled some New Zealanders. The country’s Overseas Investment Office, which oversees attempts to buy property, told FOX Business last December that it review disgraced former NBC anchor Matt Lauer’s ownership of a $9 million ranch to determine if the allegations of sexual misconduct against him would violate the country’s “good character” clause for foreign investors.

“For an overseas person to receive consent under the Overseas Investment Act they need to be of good character,” Lisa Barrett, the agency’s deputy chief of executive policy and overseas Investment, said at the time. “There is a range of regulatory tools or actions we can take if we believe the Overseas Investment Rules have been broken. The OIO can seek orders, through the Courts, that require people to dispose of property.”

For critics, Thiel’s pathway to property ownership was seen as particularly problematic. New Zealand experienced a public uproar after it was revealed last month that the PayPal founder had gained permanent citizenship after just four visits to the country and did not attend his citizenship ceremony.

The country’s laws generally require that a would-be citizen spend 70% of their time in New Zealand for five years before gaining acceptance. Detractors argued that Thiel, who donated $800,000 to a local earthquake relief fund in 2011 and millions of dollars toward local startups, had effectively bought his citizenship.

“I am happy to say categorically that I have found no other country that aligns more with my view of the future than New Zealand,” Mr. Thiel wrote on his citizenship application.

Source: http://www.foxbusiness.com/features/why-us-billionaires-want-property-in-new-zealand