Bayly AndrewANDREW BAYLY (National—Hunua): Madam Chair thank you. I thought I would start by talking about some of the rebuttal I've heard tonight before I want to actually deal with some of the issues of what's actually in this bill. The first thing I want to just refer to is that speech by Mr Mark Patterson who implied that National is not worried about these things hasn't done anything about—Hon Member: That's right.ANDREW BAYLY: That is not right. Mark Patterson: Yes it is.ANDREW BAYLY: That is not right Mr Patterson and I'd like to draw your attention to things that we actually did when we were in power which is that we implemented a thing to stop foreign buyers coming into the country and just wholesale buying up property by making sure that they were required to get an IRD number. We also introduced the two-year brightline test. We also introduced withholding tax on foreigners and we beefed up IRD to chase property people to make sure they're paying their taxes. So this assertion that we're not concerned about this issue is wrong.But the thing that we did which is different from this bill tonight is that we were measured calculated in the response that we wanted to do. I just found the response from the Minister in the chair talking about the ability for foreigners to come into this country and buy great swathes of forestry land because we need their investment to continue to promote forestry and also meet our billion-trees target—which I just find perverse because to me that strikes at the absolute contradiction of this bill. On one side we've got a Minister saying Let's allow an industry 72 percent owned by foreigners to buy more—to buy up to 100 percent." It allows them to come and buy a thousand hectares every year without any need to go and get approval and yet on the other side we're saying "We can't allow you guys to buy houses." even though we know only 3 percent a year are sold to foreigners. I can't understand that logic and that is the thing about this bill. I've got to say I've heard all the submissions—213—CHAIRPERSON (Poto Williams): I apologise to the member; the time has come for me to leave the Chair for the dinner break.Sitting suspended from 6 p.m. to 7.30 p.m.ANDREW BAYLY: Thank you Mr Assistant Chair. I was cut off in my prime I thought just before the dinner break. I had been talking about the illogicality of this bill about the issue of why we want to promote more foreign ownership in the forestry industry which is already 72 percent owned by foreigners and we think we should allow 100 percent. Yet on the other side in the housing sector we've only got three percent of houses being sold to foreigners but that is the issue. I can't understand that.But where I was just moving on to was we heard 213 submissions in the Finance and Expenditure Committee. I've got to say as a member of that committee I actually felt quite embarrassed. I did. I felt quite embarrassed because there was just this avalanche of submitters who came in and just hammered our committee. A lot of the members held their heads in shame. So what they did what happened—Rt Hon David Carter: So did the staff. So did the officials.ANDREW BAYLY: That's right. Unfortunately they had to Mr Carter. What happened was that we then saw a proliferation of minor changes as each of these submitters came in and worked the issue through and showed how illogical how wrong this piece of legislation was.So just to deal with a bit of fact the definition of an overseas person in the Act is defined as someone who's been living in New Zealand for 12 months or a person present for at least the last 183 days or a New Zealand tax resident and that all sounds very good. So if you're not one of those people and you're a foreigner in effect you need to apply for a consent to be involved in buying a house. You may avoid what's called the counterfactual process or test. A counterfactual is normally an Overseas Investment Office (OIO) requirement that if you are a foreigner and you're buying a piece of land or a business what you do must be more than the best New Zealander would do with that same asset. So to avoid that test which is actually quite a strong test you have to demonstrate that you've got a commitment to live in New Zealand that you're developing the land to create "increased housing"—is the term—provided you sell that development once you get to a completion or you use the land for non-residential purposes which may of course have a component where it has a house on it.So that's all very well but my first two observations around that carve-out are that the Government is happy for a foreigner to land bank for future houses in New Zealand. That's what this legislation means. It means they are prepared to allow foreigners to come in here and land bank good New Zealand land for the purpose of eventually building houses on it. Of course most people who are involved in the building industry know that's where you make your money and buying that land before it's rezoned and taking it through to a process where you can sell those sections.The second observation I'd make is that if you're a foreigner—Mark Patterson: Selling off those Pukekohe soils.ANDREW BAYLY: We've got huge problems in Pukekohe. If you're a foreigner and you buy an existing business the way to get around this is to make sure it's got a house on it. If you've got a house on it you will get approval and then you can then spend your $20 million doing the house up. That's the only way to get around this bill.But there are ways of getting around it. So if we were really trying to stop this—and these are wealthy people; these are the people that Mr Mark Patterson was slating off before earlier in the speech saying how we shouldn't have these wealthy people coming into New Zealand which I just find absurd—this is the way that they will get around it. So I'm not sure this carve-out actually works.So what did we do? What were the damage limitation rules that were introduced into the bill? Well the first change is that in order to promote foreigners building new properties or houses there's a dispensation for those who build 20 or more houses and you'd be able to get a consent to sell 60 percent of those houses to foreigners. Of course that was in recognition of the blindingly obvious: that in many cases New Zealanders need to be able to sell houses to a range of investors to be able to get the project off the line and that banks require presales. Of course suddenly there's a recognition by the Government that we should make a dispensation. But of course it means that you can sell 60 percent to overseas investors and these buyers will not be required to on sell but they will not be able to live in them and therefore be able to rent them. I'll come back to this. That's a buyer category. In terms of the developer itself who may be doing the apartment build or terrace house development there would be no requirement for them; so they could come in buy the land sit on it for five years build the terraced home or the apartments and then not sell provided there's a shared-equity basis or rent-to-buy or rental. See it all sounds very good. But this is the rub—this is the rub. If you're going to get around that rule what you will do is you will be that foreigner who comes in and land banks builds the houses and then you will rent it out. You will rent it out to your daughter or son or son-in-law on a term not less than five years but just under five years and you will be able to use that property. So actually the rules don't work. That's the issue I have with the rules. If you're going to try and carve something out make the rules work. These rules do not apply and will not apply. I think people'll find a hole in them unfortunately.Then of course there's the issue around hotels. There's a similar arrangement where you can take part of a hotel but of course you can retain that as long as you don't use it more than 30 days a year. But of course all this raises the issue around the OIO compliance. We heard from the committee officials that at the moment I think the OIO processes about 150 applications a year and under this arrangement they believe they will need to process about 4000—4000 of these. How are they going to ensure that the person who built the apartments who rented it to their daughter how will they go back in five years' time and check it or in seven years' time—and work its way through? So I think that's a really significant issue and I don't think that practicality of this whole thing—again it makes the Act unworkable. I think that's a crucial deficiency in this Act.I think the other thing was around the issue of residential housing providers. I want to return to this—hopefully I'll get another call at some point—because that is also part of a way of creating new housing stock in New Zealand. Residential housing providers like Ryman Healthcare Metlifecare—under the rules they are precluded because they've got more than 25 percent foreign ownership. I think those are issues again if you're trying to promote housing in New Zealand. We've actually carved them out of this arrangement. I can't understand how this bill works and what the intent of it is."