LaurentLore Business and Investor Edition
March 2018
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In This Issue
The Entrepreneur Visa is (Nearly) Dead
Ban on Non-Residents Buying Houses
Hotels - the Latest Sexy Investment?
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This specialty newsletter provides immigration insights which may be useful to potential business applicants under either the Investor or Entrepreneur programmes.

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The Entrepreneur Visa is (Nearly) Dead

Figures recently released by the Business Migration Team of Immigration New Zealand were a shock to the industry.  Month-on-month since October 2017, INZ has declined over 90% of all Entrepreneur Work Visa applications.  In our last e-News we said that a 70% decline rate was bad.

The moral of the story is simple: don't even consider an Entrepreneur visa unless:
  • You feel passionate about the business you want to build in its own right, and not just as a way to get a visa;
  • You have done your homework - financials, thorough research of the market and the competition, spending time staying in the proposed business location . . . ;
  • You are well cashed up to be able to fund both the business and your lifestyle in NZ for the next 3 years; and
  • You aren't afraid of failure.

Ever since this Policy started in 2014 we have tried to redirect people to other types of visa, rather than subject them to the difficulties of the Entrepreneur category.  Now, we will turn away everyone unless their case is truly compelling.

It's not clear whether INZ's hard line is an indirect way of shutting the policy down, or whether (as they say) they simply want applicants to "up their game".  If it's the latter, then it seems that they are setting the bar at an almost impossible level.  Instead, perhaps they hope to shift the focus on entrepreneurship toward the Global Impact Visa trial.

We are yet to see if the GIV is going to deliver any tangible benefits.  This is not surprising, as the scheme relies on the organic development of networks and initiatives, trial and error, which are the hallmark of real innovation and enterprise.
Coming Soon - Ban on Buying Houses by Non-Residents
For the last couple of years Land Information New Zealand has been gathering information about the visa status of property buyers who are not NZ Residents or Citizens.
The new Labour-led Government promised before the Election to clamp down on foreign ownership of New Zealand land.  As part of its "First 100 Days" programme, it introduced a Bill into Parliament in December aimed at stopping non-New Zealanders from buying houses.
The changes proposed are amendments to the Overseas Investment Act 2015.  "Residential land" will be added to the classes of land covered by the Act.  It will be treated as sensitive land so that foreigners will need Overseas Investment Office approval to buy it.  Approval can be granted if the land will be developed so as to add more houses to the market supply; or if the land will be changed to (say) commercial property which will deliver a positive return to New Zealand in the process.
The Government was keen to push through the legislative process as quickly as possible to beat a possible signing of the Trans-Pacific Partnership Agreement. However, the revised TPPA was signed in Chile on 9 March.  Originally, the Bill was to be reported back to Parliament in February, but this has been pushed out to 31 May as a result of a volley of protest from various sectors.

If the Bill makes it into law, it will dampen down the ability of non-Residents to buy any property zoned as "residential".  Migrants will have to apply for Overseas Investment Office approval to buy a house or apartment.  It should not impede Investor Resident applicants who aim to buy land in order to build a residential property development.  However, it could be a real problem for those who are planning to buy an existing apartment complex as an investment.
Hotels - the Latest Sexy Investment?
Our observation, along with most in the industry, is that migrant investors are averse to risk in their portfolio of NZ investments for the purposes of Residence.  This is totally understandable.  The investment is locked in to NZ-based assets or instruments for 3 years (Investor 1, $10 million) or 4 years (Investor 2, $3 million +).  It must hold its value for the whole of that time - or, at the very least, have the same value at the end.  Otherwise the Resident Visa is lost.

As a result, most successful applicants invest in safe, low-yield items such as Government bonds.  The Government has tried to spice up the landscape by providing policy incentives to put one's money in "growth" investments - that is, anything other than bonds or philanthropic investment in charities (which is now also permissible).  This could also include putting one's money forward as venture capital for a start-up, although I find it hard to imagine anyone doing that unless they were not absolutely wedded to the idea of having a NZ Resident Visa any time in the future.

However, commercial property may be a relatively safe bet.  Not only is it unlikely to disappear any time soon (barring the odd earthquake . . . ) but it also promises a better Return on Investment (ROI) than sticking the money in the bank.  Common advertised rates of return have been 5 - 10% for many years.  And it looks like most commercial sites are fully tenanted - occupancy rates are at their highest for some years.

One particularly interesting area for investigation may be hotels.  Reports from the NZ Herald and the National Business Review last week point to a scarcity of accommodation, so that room rates are fetching premium prices.  It is unlikely that this is going to change much year-on-year into the future.  New Zealand continues to be one of the world's most desirable destinations, because of its clean environment, low population and safety from threats such as terrorism.

This means that investment in a hotel as a going concern should reap good returns in the future.  It would also be worth considering as one of the few worthwhile projects for an Entrepreneur Visa as we mentioned above.  However, given that building a hotel is nowadays likely to tick into the tens of millions, you're better off to go direct for an Investor 1 Visa and save yourself the pain of the Entrepreneur route.
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