Navigating the Barriers: New Zealand’s New Active Investor Visa System
New Zealand’s investment visa programme, the Active Investor Plus Visa, comes with a complex set of requirements, specifically designed to attract a certain breed of overseas investors.
It is an intricate landscape to navigate, not just for the new-to-market investors, but also for those familiar with New Zealand’s investment climate.
The Government’s aim is to generate more active contributions to the Kiwi economy, but the question arises—does this new system also bring new barriers that could potentially deter active investors?
Background: a sea change in investor visas
The New Zealand Government overhauled its investor visa categories with a singular focus—to halt passive investments in low-yield assets like properties and bonds, and to bring in a new type of investor who would actively participate “in New Zealand’s investment ecosystem and make a significant contribution to New Zealand’s economy”.
While the old Investor 1 and 2 resident visa categories attracted nearly NZ$12 billion over the past decade, these investments were often passive in nature.
The Government’s new vision aims to leverage the expertise and active involvement of high-net-worth individuals to foster innovation and growth in local companies.
Yet, the new visa category has seen a slow take-up. In the six months since its launch, only 14 applications have been filed, and one granted as opposed to 492 applicants to the country’s old visa programme in 2021.
The Active Investor Plus Visa: a snapshot
The new visa programme has multi-layered investment criteria. At its core, it requires investors to:
– Invest between NZ$5 million and NZ$15 million, depending on a weighting system designed to incentivise ‘active’ investments.
– Maintain this investment across a span of three years, and hold it for an additional fourth year.
Direct investments in early-stage companies have the lowest financial barrier—just NZ$5 million—but these also come with the highest financial risks.
Such investments require in-depth analysis, ongoing management, and a thorough understanding of the specific business sector.
Balancing risk and reward
The new investor category creates a contest between the desirability of New Zealand as a destination and the instinct to preserve and protect wealth.
The system creates pricing mechanism. If you want residency at a lower cost—NZ$5 million in Direct Investments—you must be willing to shoulder a higher level of financial risk. Conversely, a more conservative asset portfolio will necessitate a higher investment, up to NZ$15 million, particularly if it involves stock investments.
The Direct Investment pathway, facilitated through the Live Deals platform of NZTE, demands exhaustive due diligence. This is a tall order for someone unfamiliar with New Zealand’s market.
While many investors might have professionals in their own countries to handle this, they are unlikely to want to conduct due diligence in an unfamiliar market.
Are we killing the golden goose?
The dilemma, then, is whether the ‘pricing mechanism’ sends the right signal to those seeking to invest in New Zealand.
New Zealand may be missing out on potential investors because the instinct for asset protection and lower risk is likely to prevail when seeking to enter a new (unfamiliar) market. This means that individuals who might have $5 million to invest could perceive Direct Investments as too risky and too challenging to engage with within the timeframes mandated by the Residence rules.
Investment decisions made under time pressure make people uncomfortable.
Those investors who have $5 million to invest but cannot meet the level of investment required for a more conservative investment option are likely to explore competing markets for opportunities if they perceive the risk associated with Direct Investments to be too high, or just practically too difficult.
The Government’s narrative—that it’s better to have fewer people investing more—seems to defeat its original objective of encouraging more Direct Investment. People who are investing more are not required to invest in Direct Investments and can move toward managed funds and equities which carry a lower risk and require a less active involvement by the investor.
Some thoughts for the Government review
The Active Investor Plus Visa was conceived as a pathway to attract dynamic overseas talent willing to invest in New Zealand’s future. However, its intricate requirements and high-risk investment options could be a double-edged sword, potentially discouraging the very investors it aims to attract.
As the government evaluates the programme’s effectiveness, the balancing act between risk and reward remains the pivot around which the success—or failure—of this ambitious initiative will turn. The signal needs to be right. Perhaps requiring a commitment to Direct Investments with higher levels of risk at the very beginning of the process is not the way to do it.
One solution would be to allow entry at the $5 million entry point with a capacity for more conservative investments initially, but incentivise moving investments over time into direct investments, in return for a reduction in the investment period, or a faster track to Permanent residency.
This will at least allow us to secure investment, allow investors time to understand the New Zealand investment market, encourage direct investment over time when they are here and can complete due diligence without being under pressure from the investment deadlines currently prescribed by the immigration system.
In re-evaluating the Active Investor Plus Visa, it’s crucial for New Zealand to adopt a more nuanced approach—one that not only secures immediate investment but also fosters long-term commitments, thereby ensuring that this ambitious initiative realises its full potential rather than becoming an inadvertent barrier.
Need expert guidance on navigating New Zealand’s new investor visa landscape? Contact us at NZIL for comprehensive support tailored to your needs.