Golden Visas
Last Sunday, the Government rolled out plans for an update to our Active Investor Visa category, which has attracted a substantial amount of interest both from potential applicants but also the local press and other commentators. The changes are pretty significant, but in many ways are a bit of a “back to the future” moment.
The investor visa has always been an interesting category for the Government, Immigration New Zealand (INZ) and of course for applicants. It is, in my view, an absolutely necessary part of our visa ecosystem, but it does create a level of, sometimes heated, opinion amongst the local populace.
This week’s article is a bit of a walk back through the investor category and its history, what the recently announced changes will mean for future applicants and some of the things, potential investor applicants should consider if they are keen to move ahead with the process.
Investor Category
When I started in this industry the investor category was a far simpler process and the amount you need to bring to the table was far lower (around NZD$2 million). There were requirements for you to have business experience, and meet various health and character tests, but there was no mandated English criteria. Investments were held by the Government in a “fund” which generated a modest return and there were requirements to demonstrate that New Zealand was the place you wanted to live in. The formula was fairly simple - we wanted to bring people (and their money) here so that we could make use of their funds, but also their potential business expertise.
The Investor Pathway
The investor visa has had several makeovers in recent years, with recent changes bringing it almost full circle.
Over the years, this category has undergone a raft of changes, including a significant increase in the amount of investment required, the policy being split in to different “tiers” depending on the level of investment, the introduction of English tests and the varying role of business experience.
Successive Governments have fiddled with this policy to try and find a formula that balances our desire to bring capital in to the country, but making that capital work effectively. Parking some money here, in a term deposit or Government bonds hasn’t always yielded the best returns and in many ways, the more passive investment approach has created a bit of a “pay to stay” system.
There was one period in time (back in 2007 to 2009) where we tried our hand at directing the funds in to more active investments, but unfortunately the risk/reward calculation didn’t stack up for applicants and the policy was abandoned after only 18 odd months of operation.
Since that point and up until 2022, the policy focused more on the value of investment and less on where that money would flow. However there was as gradual push within some of the various iterations to focus on more growth focused investment activities. In 2022 however the former Labour Government rolled out the Active Investor Visa, which had a significant focus on directing funds in to far higher risk investments, with a sliding scale for investment amount against investment type. This was a post-covid roll out of a policy to attract the super wealthy.
The problem with the 2022 plan and the previous Governments approach is that it overestimated the risk appetite from this group of applicants, along with creating the visa policy equivalent of quantum physics. It was overly complex, and just didn’t stack up. As a result numbers fell off a cliff, and the policy was dubbed a lemon. Funny thing is that it wasn’t too different to the failed experiment in 2007.
The changes announced recently, which come in to effect on 01 April 2025, take us back to the pre-2022 policy to some degree, whilst still encouraging applicants to be a bit more active with their investments. We now have two separate tiers of investment (much like the previous category) with different investment timelines and requirements.
What is Changing?
Investor Visa Changes
From lemons to lemonade, the recently announced changes will hopefully make for a sweeter proposition.
The changes being rolled out to our investor category bring a welcome breath of simplicity, stripping back the very confusing process that the AIV consisted of.
Instead of a weighting system for different investment types, we are moving to a very clear and easy to understand, two-tier system.
Each tier will provide for different investment types and amounts and be tied to different commitments to time spent in NZ and the length your investment needs to be maintained. In short if you want to take a less risky approach and invest in “safer” things, you have to invest more for longer. If you are happy to take on some risk, then you can invest less, for a shorter duration. The time spent in NZ will vary under each category as well. The best way to summarise the changes is visually, hence the image below.
So while direct investments (the riskier investments in NZ firms) and managed funds still play a role in the process, they are carved out in to their own separate category at NZD$5 million.
For those looking to play it safe, they can invest NZD$10 million but chose things like bonds and listed equities, yielding lower returns but less likely to disappear during the term of the investment.
The number of days you need to be in NZ under either category is very small (almost not worth talking about) and as far as we know there is no need for applicants to demonstrate any form of business experience.
English language testing (or evidence) is also removed, which will come as a welcome result for specific markets. Arguably the English language piece is sensible because if you are investing this sort of money, then communication can be worked around (phones can now translate on the fly).
In short, this new policy (at least what we know of it) makes sense, its workable and its goes back to that very simple formula - bring people across and the investment will follow. In reality a lot of previous investors, brought in a lot more than that which was required for the visa, but that only happened once they were secure in the knowledge they had the right to live here.
However I do think that we could have done a few other things to take advantage of the skills and expertise these investors can bring as well as attracting people between the NZD$5 and NZD$10 million mark. For example, we offer a reduction in the time spent in NZ if you go above $10 million (its not listed above but is being proposed). Perhaps a better way to do this, would have been to apply an increase in the time spent as you go down from $10 million to $5 million. That way we would get that middle group of investors, and have them spend more time here (and potentially more money.
Equally we could have utilised business experience as a component of the above, to encourage more of these applicants to bring not only their funds, but also their entrepreneurial skills here. In doing so, and having applicants settle at least part of their lives here, we also have a greater chance of them bringing a higher level of investment over time. There will always be improvements to be made, so the announcements we have been delivered are still a vast improvement from the disaster that was the AIV policy originally.
Growth or Balanced?
For some investors, the decision over whether to go for the growth or balanced option will simply come down to affordability. If you don’t have NZD$10 million to play with, but can meet the NZD$5 million level, then it will come down to your appetite for risk. Obviously seeking good investment advice will be a big part of the overall process as well (something we have good contacts for).
The key to remember with the growth option is that these investments (managed funds and direct investments) will still be overseen by New Zealand Trade and Enterprise (NZTE). This will mean there is a vetting process for those funds to be deemed acceptable (although that doesn’t mean they are risk free).
For those that have the cash available to avail themselves of either option, it will simply be a calculation of risk versus reward. Investing the lower amount but in areas with increased risk to secure Residence in just three years or taking a more conservative approach but needing to invest for five years.
If you have the money, neither of those might pose as an issue. It will however be interesting to see how the demand is split against those two options and where people see the value sitting.
Balancing The Risk
The Government has created two pathway to residence via investment - Growth versus Balanced.
This category then affords those in the super wealthy bracket with options and those in the wealthy bracket with at least one pathway.
The use of the two-tier approach, which is something the pre-2022 version of this policy had is a good idea and I suspect the Government is banking on the fact that for many applicants (particularly in the US and the UK) exchanges rates are favourable and despite global economic turbulence, there is a lot of money looking for a new place to live. Ironically many countries in recent years have either closed their “Golden Visa” options or, like NZ did in 2022, made the process very challenging. There seems to be more appetite for more countries to open the door to these sorts of applicants and so we might have just entered the starting blocks for a very competitive environment.
Good for New Zealand?
Of course as soon as something like this is announced, not everyone is going to be pleased with it, and we have had our fair share of commentary as to how this is simply “buying your way in” to the country. The other arguments being made are that investors will see the housing market surge and there will be an influx of investors into our tourist hotspots.
On the housing issue, most of these applicants would be looking at properties well above the first home-buyer market. Currently our property rules, would prevent almost all of these investor applicants from buying property but even if changes are introduced (and they may need to be to act as a further incentive), the volume of applicants and types of properties they would focus on, wouldn’t have any significant impact on the majority of the market anyway.
Yes these investors will potentially want to seek out the most beautiful locations here to live in (after that is why most of them would chose NZ in the first place) but again, volumes wont be significant and their investment will potentially lead to an increase in housing stock anyway.
The simple fact is that any policy that delivers investment in to New Zealand, without completely opening the flood gates has the potential to do so much good for New Zealand. These applicants will bring a lot of longer-term investment as well, leading to an increase in jobs and opportunities across the board.
It is really the definition of a visa no-brainer.
Find Out More
Investor visa applications have often been seen as the “red carpet” version of our visa system, where applicants simply need to come up with the funds and then the immigration wheels will spin. However the reality is that while the applications are prioritised by INZ and considered a “premium product” there is no shortage of fine-print to cover.
Applications under this category are very closely screened, largely in response to anti-money laundering requirements and so hopeful candidates have to be able to show a very clear picture as to how they accumulated their wealth, how that wealth will makes it way to New Zealand and ensuring that the ownership piece remains intact throughout the process. Having the money is one part of the process, proving where it came from and making sure it gets here in the right way is an entirely different issue.
When we assist clients down this pathway, we focus on trying to ring-fence the process as much as possible, to avoid INZ catching the client out when the funds they intend to move here have inadvertently been mixed up with funds that INZ haven’t given the green light to. We also try and bring the discussion on what to invest in, to the front stage and give clients a head-start on that, with a panel of adviser we have come to know and trust. The sooner, applicants can understand their investment options the better, particularly given that the timeframe to make the investments under the new category have been reduced.
Knowing what to prepare for and what to do at each step of the process, particularly over the duration of the investment timeframe (when INZ applies specific conditions to your visa) is crucial - so we build long-term relationships with these clients, because getting the visa is one thing, keeping it is another.
Want to know more about how the investment visa pathway works or if it could work for you?…then get in touch with us today.
Until next week.
