New Zealand Property Investment

Why NZ ? Why New Zealand Property?

Why invest in New Zealand property? New Zealand is a stable, western democracy, a member of the British Commonwealth, a tiny country of 4 million people in the South Pacific. Property has always been New Zealander's favourite investment for some very logical reasons. New Zealand has some of the most investor-friendly property investment environment in the Western world.

New Zealand's Economy

New Zealand is still primarily an agricultural producer: dairy, meat, vegetables, fruit, wine, New Zealand makes huge quantities of it very efficiency.

New Zealand also has a vibrant tourism industry based around scenery made world famous by the Lord of the Rings movies, combined with skiing, water sports, and every kind of adrenaline pumping activity: New Zealand did invent bungy-jumping after all!

1900's Workers Cottages, Wellington Photo: james@nz
1900's Workers Cottages, Wellington Photo: james@nz

New Zealand is experiencing a bit of mini-resource boom with lots of off-shore oil and gas exploration but it would be fair to say that NZ is not a mining powerhouse like it's near neighbour Australia. Little of its domestic manufacturing industry has survived one the most open, free markets in the world.

The economy is currently booming with unemployment at historic lows. New Zealanders are a mobile bunch thanks to the right to live and work in Australia, but also with many having ancestry rights to live and work in the UK or Ireland. On the other side some Pacific Islanders have rights of abode in New Zealand, as do Australians. Immigration is one of the important drivers of the New Zealand property market.

NZ's Main Industry Photo: chris24w
NZ's Main Industry Photo: chris24w

What makes New Zealand a Good Place for Property Investment

Stable government. New Zealand has elections every 3 years and normally governments run their full-term. A change of government rarely leads to U-turns on economic policy with both main parties: Labour and National being centralist in their policies.

International surveys regularly rate New Zealand as one of the cheapest places to do business and least corrupt.

New Zealand has a stable, sophisticated banking system, which is familiar with lending to overseas investors. Due to the straightforward tax regime for property investment most investors use interest only loans either fixed rate or floating. A "flexi-loan" combines a floating rate mortgage with a current account.

There are few controls on foreigners buying property in New Zealand. Overseas investors only face controls if they wish to buy large tracts of agricultural land. There are no restrictions to buying normal residential, commercial or industrial property. Foreigners can either buy existing property or build on land they have purchased.

New Zealand has an economy sufficiently different from many other Western countries to make it a good place for overseas investors to diversify and spread their investment risk. For example after the September 11th attacks in the US, New Zealand property had a strong upward swing as many expatriates either returned to New Zealand or at least re-invested in New Zealand.

Mt Ngauruhoe, aka Mt Doom in LOTR And Yes it is active Photo:ultrahi
Mt Ngauruhoe, aka Mt Doom in LOTR And Yes it is active Photo:ultrahi

Risks of Investment in New Zealand Property

New Zealand has an economy smaller than many US States or even large cities! It is therefore vulnerable to external shocks - after the 1988 share market crash - New Zealand took the longest of all western countries to recover the losses made.

The predominantly agricultural economy is vulnerable to introduction of imported animal and plant diseases. New Zealand has some of the strictest quarantine regulations in the world as you will notice on arrival.

Related to this is New Zealand's interest rates tend to be higher than those in the Eurozone or US. Investing in New Zealand means that you are vulnerable to exchange rate changes between your home currency and the NZ$. The main way to mitigate this risk is to borrow for property within New Zealand rather than transferring capital from overseas. Interest rates and exchange rates are related, as the interest rate increases so does the NZ$ against major currencies - hedging your exchange rate risk.

New Zealand has a temperate country which does not suffer cyclones or tropical storms. It rarely snows outside of the the ski resorts. New Zealand does have active volcanoes but they won't affect any major population centres. The entire country is vulnerable earthquakes, particularly Wellington. So long as your have building insurance the government under-writes natural disaster losses, including earthquakes to full replacement value of the property.

1930's Bungalow Photo: mouse
1930's Bungalow Photo: mouse

New Zealand's Property Stock

Oddly, known around the world for its beautiful countryside, New Zealand is a very urban population. Greater Auckland has approximately 25% of the country's population at over 1 million. Wellington accounts for another 400,000, while Christchurch is the smaller of the 3 main centres.

British settlement of New Zealand started in earnest from the 1840's, and almost all of the current housing stock is less than 100 years old. New Zealand has a varied housing stock which has traditionally been made of wood. Wood initially was abundant and cheap. More importantly, once Wellington, initially built in brick, was destroyed twice in its first decade by earthquakes, the town was re-built in wood and the pattern was repeated across the country. Roofing is traditionally corrugated iron. Unfortunately the combination of wood/iron and a temperate climate means that New Zealand's houses are traditionally damp and cold.

Until the re-development of central cities in the last 15 odd years almost all of New Zealand houses were stand-alone. Terraces are rare and traditional semi-detached homes were considered "half a house" though the current generation appears to have moved past this particular

Buying any property built prior to 1930 means that you are buying a labour of love rather than an investment! From the late 1940's through to the 1960's the government built huge numbers of houses, known as State Houses. These houses have subsequently pasted into private ownership and the term State House is now recognised to mean a very well built and designed house.

Any house built before 1930 will have no insulation. Any property built in the last 20 years will have modern insulation. Houses built between 1930-1990 may or may not have insulation. Double or triple glazing is still very, very rare and expensive. Houses tend not to have central heating, mainly because of running costs. Heating is usually electric or gas.

New Zealand's Tax Regime for Property Investment.

New Zealand has no sales tax on property or mortgage transactions. The only direct property taxes are property rates which are levied by local Councils to provide Council services such as roads, water, rubbish collection and community services such as libraries. Rates are based on the value of the property and would vary between NZ$1500 and NZ$3000 per annum for a typical median value house.

New Zealand allows unlimited deductiblity of property losses against other New Zealand income, obviously including rental income. This includes depreciation of buildings and fittings. If there is no other New Zealand income to off-set the loss then losses are carried forward.

Other deductions typically made by New Zealand property investors are:

  • mortgage interest, not capital repayments

  • insurance of the property

  • property management fees repairs and maintenance; but not improvements, these have to be capitalised and depreciated.

  • accountancy fees

  • valuation fees

  • bank fees

  • property rates

  • lawyer fees associated with financing, not purchase of the property

  • relevant magazines, books at fees for Property Investment courses

  • reasonable travel and expenses for managing property portfolio - your next New Zealand holiday could become a tax deduction!

New Zealand has no capital gains tax for most property investors. So long as property is bought for long-term income rather than short-term purchase and re-sale the capital gain is not taxable, nor is any capital loss claimable. In practice so long as the investor is not in the business of buying and on-selling "flipping" properties, or buying, renovating and quickly re-selling the property you are unlikely to pay capital gains. This area of the law is complex, intention at time of purchase is the key and it is wise to consult a New Zealand accountant PRIOR to any purchase.

1880's Villa on the right, 1980's Townhouses to the left, Wellington Photo: jaredkelly
1880's Villa on the right, 1980's Townhouses to the left, Wellington Photo: jaredkelly

New Zealand's Tenants and Tenancy Laws

Approximately 70% of New Zealanders own their own home, most with a mortgage. The other 30% of New Zealanders represent your potential customer as a landlord. As in many countries most renters are younger and on lower incomes than homeowners.

Rents are quoted as weekly figures and are usually paid weekly or fortnightly in advance. A landlord can only charge a maximum of four weeks rent and bond in advance.

Bonds are lodged with an independent authority and both landlord and tenant have to agree to repayment at the end of the tenancy.

Traditionally tenancies have been periodic - with no fixed end date and with the tenant having to give 21 days notice of termination the landlord 42 days. However more recently and particularly with more expensive properties tenancies may be fixed for 6 or more often 12 months. During that period the rent cannot be increased and the tenant is liable for the rent even if they leave the property.

New Zealand has a generous welfare system which pays those who are ill, unemployed or raising children without a partner. All New Zealander's receive an non-means tested pension at age 65. If your tenant is a beneficiary the current levels of benefits means that your rent needs to be NZ$170 or less a week. Beneficiaries with a poor credit record can arrange to have their rent automatically paid before they receive their benefit - guaranteeing the payment.

Disclaimer

I am not an accountant, mortgage broker, real estate agent or lawyer. I am however a New Zealander who has invested in NZ property for over 5 years and currently own, along with my partner, in excess of NZ$2 million of residential property, over 8 houses. Are you considering property investment? Overseas, in New Zealand or elsewhere? I'd love to hear from you - please leave a comment below. What else would you like to know about the NZ property market - again leave me a note!

I suggest that prior to making an investment you seek out professional advice but a good place to start is the propertytalk forum for NZ property investors.

Comments 48 comments

Stacie Naczelnik profile image

Stacie Naczelnik 8 years ago from Seattle

One of my uncles has traveled to New Zealand a few times and loves it. His dream is to be able to retire there.


Rudy 8 years ago

Man, this is a fantastic page!


Sybille Yates profile image

Sybille Yates 8 years ago

I could imagine living there ;-) SY


stressrelief profile image

stressrelief 8 years ago from Nevada & Maryland

I'm with Rudy on this... wow! You could do a whole school report page right from your hub! (I'm way past school age LOL!) You also make me want to go, go, go to New Zealand. Love your reference to Lord of the Rings, I really can't get New Zealand out of my mind ever since I saw the movie. Course I'd love to really live in one of the hobbit houses :)

Definite thumbs UP!

Thanks for a great hub visit!


stephhicks68 profile image

stephhicks68 8 years ago from Bend, Oregon

Super Hub! I've always wanted to go there. Now I REALLY want to go!


Lissie profile image

Lissie 8 years ago from New Zealand Author

ROTFL - I have been meaning to do a NZ hub for ages - I specifically took a whole lot of photos at Christmas when we went home to do it! This was not what I was thinking about but I amused that by writing on todya's contest topic "investing" I have everyone talking like its a travel hub! Thanks for the comments everyone!


Mystic Biscuit profile image

Mystic Biscuit 8 years ago from Phoenix, AZ

Great hub, Lissie! I will defintely be passing this along to my friend in NZ. Congats on the daily win too!!


Caregiver-007 profile image

Caregiver-007 8 years ago from Florida

What a gorgeous country! The stability, agricultural base and cleanliness make it ideal for living during hard times internationally. So there are many attractions in addition to the obvious financial investment ones. You've outdone yourself again, with the most comprehensive information of key facts in one place, and in a form that the lay person can readily understand. Definitely makes me want to jump in!


Lissie profile image

Lissie 8 years ago from New Zealand Author

OK guys - I might just right a NZ hub or 2 that I have been planning to do!


Mary Tinkler profile image

Mary Tinkler 8 years ago from Gresham

I'd love to live in one of those State Houses! I'm so utterly left cold by the newer construction and styles. Well the new "craftsmen" are not bad on the outside, but the interiors are generally just a rehash of the status quo. Give me a gracious old lady of a bungalow any day of the week. Somewhere you can think about the families and fun and heartaches of the people who sheltered there before you and gave the home its character.

Fabulous article Lissie! You are a great asset to hubpages and I also congratulate you on your success with your real estate portfolio. As a broker I know you have to be a diligent and disciplined planner to oversee and juggle the assets, and the WORK!


Lissie profile image

Lissie 8 years ago from New Zealand Author

Yes our current (well we aren't living there now but its kinda home) house is an ex-state 1940's bungalow. Wood with an absetos roof - it had had at least 3 major renos before we started - it was originally tiny - bsically 3 rooms - now its about 200sqm. The delight of them is at one point we had practically every major interior wall out and we could still rebuild it with no unexpected problems - builders love working on them - you know what you are getting - the plumbing and electrics need replacing but are easy to get to once you pull all the wall linings off. The trick is to make sure you buy one with good sun aspect - though in the land of wooden houses its not uncommon to move a house either on a section or off a section entirely for re-use or re-sale!


Mike 8 years ago

NZ is a fantastic place to invest in property. Great hub!


Lissie profile image

Lissie 8 years ago from New Zealand Author

Thanks for visiting Mike! Yeah we have a bit giong for us over Australia for property investment - might do another hub on that too!


Linda 8 years ago

We had to leave a beautiful property which we had purchased on North Island but due to unforeseen circumstances, had to return to the US. Our property went into foreclosure and I don't know, even yet, our responsibility to the foreclosure issues. It was financed in NZ. Does anyone know the legal issues involved with this?


Lissie profile image

Lissie 8 years ago from New Zealand Author

Linda I am not a lawyer and you should get yourself a NZ lawyer to help with this. Basically if the amount owed to the finance company/bank including their costs is less than the property sells for then you will get the difference. Its not like the US the bank has to make a reasonable effort and get a fair price for the property. If you only borrowed 70% or so of the price you may well get money out of this = contact a NZ lawyer immediately!


Kate 7 years ago

Any ideas what the up coming effect on rentals will be in next few years? We are considering starting building and holding rentals as a way of securing a definate income but are reliant on being able to tenant them to cover mortgage repayments on interest only. Hoping to fix rates around 5%.

Whats your feeling on the rental property market?

Thanks


Lissie profile image

Lissie 7 years ago from New Zealand Author

I know that all our rentals are tenatned with minimal drama each year but I employ professional managers and don't acutally live in NZ at the moment so I am a little out of touch. I would say study the demoraphics of the area you are interested -understand your potential tenant market and then build to suit them at a price they can afford - build to the rental market not what you might like to have. Make sure you have a substantial buffer to deal with vacancies - I use the bank's figure of 6 weeks - easy enough to happen if you loose a tenant just before Xmas!


Edyharto 7 years ago

Wonderful information which is useful because I am thinking of investing in a property in NZ. I don't know which, how or what. As a foreigner, wanting to invest long term, can I buy a property with some mortgage loan? How? Thanks.


Lissie profile image

Lissie 7 years ago from New Zealand Author

Yes you can borrow in NZ for a NZ property - assuming that the property will be rented out that will count as local income to the bank. You will however need at least a 20% deposit. Contact any of the major banks or a NZ-based mortgage broker (they are free to you the borrower)


SweetPapa 7 years ago

I lived and worked there '96-'98 and if I could find a way back Iwoud move in a heartbeat.


Lissie profile image

Lissie 7 years ago from New Zealand Author

Nice country and people - but the weather is rubbish! Thats why I live in Australia now!


mr fudo 7 years ago

Hi Lissie. Nice overview. I may include a link to this page when I expand my www.fudosan.co.nz later this year, though my focus is commercial property investment in New Zealand. Good on you for mentioning PropertyTalk.com. I've made some real friends on and off that forum. Cheers.


London Flats 6 years ago

The weather can't be as bad as the UK lol, god I would love to visit NZ its just the flight which is the killer!!


Neil Ashworth profile image

Neil Ashworth 6 years ago from Ireland

Very good piece of writing.


RONNY 6 years ago

Iam not a resident of NZ, but i am interested in buying a few apartments in Auckland as investment.Am i allowed to buy these properties as a foreigner.Can i get mortgage.How much.How do i go about locating some nice apartments in Auckland


Lissie profile image

Lissie 6 years ago from New Zealand Author

Hi Ronny - non residents can buy practically any NZ property (unlike Austraila) exceptions are large tracts of rural land and beautiful islands. Auckland apartments are perfectly fine.

You will probably need at least a 20% deposit as a foreigner but otherwise you should be able to get a local mortgage based on the income from the property and obviously the value of that property.

I would suggest you do some due dilgience - get in contact with some Auckland agents and some mortgage brokers and maybe arrange a visit too.

BTW Auckland apartments are one of the most volatile parts of the market - I personally wouldn't buy one - many are very small and only really appealing to foreign students as tenants or purchasers


Cathy Cummins 6 years ago

I am in Australia, looking to invest. I have been told by a real estate agent that to purchase a property I need NZ representation. Duhhhhhhhhhhhhh

I have no idea where to start.

Could you help.

Not sure where I would bank (Loan) their or here.

Look forward to hearing from you.

I thought this webpage was very well written.

Cathy


Lissie profile image

Lissie 6 years ago from New Zealand Author

Hi Cathy - I have no idea what they mean by "NZ represnetation" - I would suggest that if you are serious that you do some homework and then get on a plane and come over to look at property.

You want a bank loan in NZ so you don't run the currency risk of having a loan in A$ against NZ$ property and income - also I don't know that an aussie bank will lend against NZ property. You will therefore need quite a large deposit because the only income the bank will be able to count on is the property's rental income.

Check out trademe.co.nz - most properties are listed there and agents will happily work with you via email and fax - but sort out the finances and your goals first before you get distracted by looking at houses!


kapilahuja 6 years ago

I am Kapil Ahuja from India, i am interested in buying Kiwi farms in Bay of Plenty. Who can guide me to buy farm in NZ, also is it possible to own kiwi farm and do farm business for a foreigner in NZ? Who can help me buying the Kiwi Farm? I recently selected one farm of 2.5 hecates of Zespri Kiwi through Link Consultants, they told me to get approval from foreighn investment board. what shud i do???


Lissie profile image

Lissie 6 years ago from New Zealand Author

kailahuja I am not a consultant or broker for foreigner's buying NZ property - the advice you have given sounds right - you do need permission to buy NZ farmland I believe.

I have never heard of "Link Consultants" BTW - make sure you are working with legit NZ based real estate agents who have the authority to sell the land. You will also need a local lawyer to help you and possibly a mortgage broker if you are raising a local mortgage.


GmaGoldie profile image

GmaGoldie 6 years ago from Madison, Wisconsin

We were just talking about retiring there. Will have to share this Hub!

I love all your works - so practical and plain English - thank you! You are a wonderful writer!


Tauranga Realty 6 years ago

In reply to GmaGoldie comment. New Zealand is a wonderful place to retire. Popular spots are the Bay of Plenty (Tauranga), Kapiti Coast and Hawkes Bay.


Lissie profile image

Lissie 6 years ago from New Zealand Author

GMAGoldie - just make sure you handle the cold - I'm not sure I can anymore and I doubt that I will retire here - well not for more than 6 months of the year anyways!

I'd agree with Tauranga Reality - who is obviously biased - but they missed out Nelson - which has quite a good climate - but an expensive air service out!


Anniegetcha 6 years ago

How could you talk about New Zealand without mentioning Waiheke Island? The weather is warmer and dryer than Auckland; much of the island never gets a frost. There are several beautiful beaches, 30+ vineyards, olive groves, plenty of space to walk or hike with no snakes huge spiders etc. Really, Australia just doesn't compare!


larry 6 years ago

Hi,

Am an African and my wife Chinese. We are currently live in china, but we are thinking of buying a house in NZ. My question is does buying a house allow us stay in NZ?


Lissie profile image

Lissie 6 years ago from New Zealand Author

Buying a house has nothing to do with immigration status - you would need to apply for a visa either tourist or long term


davelindahl profile image

davelindahl 5 years ago

Great overview of the info needed to invest in property over in the NZ. It is beautiful and would be a great place to own/rent/invest. I would be interested to see some more info in greater detail.


Jarek 5 years ago

Hiya,

a highly informative article indeed. I'm currently searching for some land to purchase in NZ (have previously lived and studied in Wellington for a few years so I have some knowledge of the country). Since I'm new to this sort of investment, I was wondering if you could give me some pointers and initial guidence as to what to think about in terms of (additional) costs and laws concerning land purchases by foreigners. I would like to have the land for a while and in the future (10-15 years) build a house on it. What are the costs of purcheses to concider except the obvious land price (taxes, applicable charges, agent fees, insurances etc.) to bare in mind? And all the formal documentation and permits etc to apply for as a foreigner?

Any info in this matter would be fantastic and highly appreciated.


jeremy 5 years ago

My biggest complaint is that kiwi banks lend no more than 70% of value for either foreign income or investment purposes. Just try and explain what a duplex or terraced home is or, if you want your work cut out for you...try and get permission from council & loans for any kind of infill development!


chamilj profile image

chamilj 5 years ago from Sri Lanka

Very informative Hub on New Zealand. Yes New Zealand is a Good place to live.


Ghani Syed 5 years ago

This is a very valuable information about NZ properties and about NZ. My immigration is under process so i am getting information about NZ. The quality of properties are not upto the mark this is serious problem. Owners are not invest on their properties.

How much the traveling time from rural to urban area especially in Auckland and others two main cities.

Pls let me know where is the best choice to land in NZ. My wife is pharmacist and I am market researcher and we have two kids age 7 and 5.

How much money must we have when we landed. I am searching jobs but little bit difficulty the salary range of middle management or odd jobs.

Pls advice me.

Regards

Ghani

ayazulghani@gmail.com


Loz Beth 5 years ago

Hi, I was wondering what deposit is generally required for a business loan for agricultural land (up to 1000 acres) and what controls do we need to consider as a foreign buyer?


Eric 4 years ago

Stumbled on your page today and found it most helpful Have been thinking of buying in Nelson for retirement but checks of nz herald website over past year lead me to believe NZ crime rate is way above what should be found in a country of just over 4 million. Even pensioners attacked and murdered. Also very high road toll - are roads unsafe or drivers bad? Things to consider before making a move.


Sun Song 4 years ago

Can I rent a house in NZ and live there for years though I'm a foreigner?


JOHN 4 years ago

Say me a foreigner buys a NZ vacation house, how long can I live in the house each year without being considered a resident for NZ income taxes ?


louromano profile image

louromano 4 years ago

Thanks and the great post..Nice


fernzfan 4 years ago

Hi there,

I too found this subject to be very interesting. I am looking at buying my mothers house in South Auckland as an investment property. I am currently living in Australia, have been here for the last 4 years. We are also paying off a mortgage on a house in the Thames Coromandel Region which my father lives in. Do you have any tips for me before going ahead with the purchase of my mother's house. Thanks,


rena 4 years ago

hi, I own a house in Auckland. our property is managed by a real estate management company since we moved overseas. there have been three tenants since and every tenant has left with arrears in rent. You have to spend more money to get your money back(if youo are lucky) The last tenants had signed up as a family but on my last visit to NZ, there were about 6 cars in the driveway and upto 25 people in the house. The house was in such a bad condition-it is indescribable! when i asked the property managers, their reply was that these were guests/visitors. i was there for one week and every day, i drove past and parked to notice and the same cars and people were there all the time! Now these tenants are moving on and have stopped paying my rent on top of destroying my property! When i asked the property managers for inspection reports at the time of handing over the property to these tenants, they say that the property was in this condition even then...... absolutely infuriating because I have paid for repairs, cleaning, painting jobs as and when required and organised by these managers! they are not giving me any inspection report or pictures to support my insurance claim at all and they have been charging money for property inspections every three months! how can i afford to have an investment property in NZ where all the laws are in favour of tenants?

I would not advice buying and investing in NZ unless you live there!

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