Wed, 21 Nov 07
Some know it as Middle Earth, Narnia or King Kong’s lost island but for others, New Zealand is a magical place to buy property...
Firstly, there’s the laid-back outdoor lifestyle, its friendly reputation and of course the spectacular scenery loved by movie makers.
Add to this sun, with most parts of the country having more than 2,000 sunshine hours a year, space 15 people per square kilometre compared with 243 in the UK and security as one of the safest countries in the world. Little wonder that 15,000 Brits got permanent residency and made it their new home last year.
Even if you choose not to relocate, New Zealand has a host of advantages for property investors. Foreign property investment is welcomed by the government and there are very few restrictions on what type of property non-residents can purchase.
Leveraging your purchase is also easier than most countries with 80% mortgages available and lending done on affordability. One of the greatest impediments to property investing abroad can be the high stamp duty taxes and legal costs. New Zealand though has no stamp duty and legal costs are lower than the UK. Moreover as long as you don’t buy for the express purpose of selling on in the short term there’s no capital gains tax.
Having a property system that’s transparent and familiar is highly desirable. We’ve all heard of the problems of buying Turkish property that didn’t actually belong to the ‘seller’, having Spanish property repossessed by the local government and investors buying over-priced Bulgarian apartments.
Thankfully such instances are rare but they can still happen. New Zealand is acknowledged as one of the most secure and least bureaucratic countries to purchase property. All transactions are done in English, the legal system is based on English law, trusts can be used and contracts are designed to eliminate gazumping and gazundering.
Let’s face it, even the most optimistic property investor is not expecting the UK to return to double digit growth in the near future. But New Zealand is still a boom market with nationwide double digit capital growth. All of the 12 regions in New Zealand saw their medium sale price increase in 2006, with growth in some of the regions being close to 40%.
Of course no-one can tell how long the boom will last but provided you do your research and seek advice from a local or a property finder who acts exclusively for you, such as NZ Property Finders, then you should see a healthy return on your investment.
One of the first things you’ll notice about New Zealand is the many different types of property on offer. The low population density means that people have more space and prefer to build out rather than up. Property is frequently detached, made of wood, often on one level and with generous sections.
Flats (or apartments as they’re known in NZ) on the other hand are not common, present only in the larger centres like Auckland and Wellington or tourist hubs like Queenstown. Despite the glossy brochures and the marketing to the British and US market, flats are rarely the best investment vehicle in New Zealand.
There are a number of ways to search for New Zealand property. Of course there’s the good old internet with www.realenz.co.nz being a good starting point. If you’re in the country then you’ll want to register with a number of estate agents. Although the New Zealand estate agents can be helpful and knowledgeable always remember that they act for the vendor and they have a bag of tricks new to UK buyers.
Open homes are just beginning to catch on in the UK but they are a popular way for buyers and nosy neighbours to check out properties. In the UK auctions are often a sign that the property is having difficulty selling; in New Zealand, they are common place, especially for more expensive properties.
Another option is to get a property finder to do all the legwork for you, to source, negotiate and find you letting agents and property managers. This is an economical way of doing it as you can get property professionals working for you for less than the cost of visiting the country. Just make sure they are working exclusively for you and don’t have any financial arrangement with an estate agency.
The process of buying a home or investment in New Zealand is refreshingly simple. As already mentioned regulation exists that discourages gazumping and helps more the process forward. Typically a formal offer is presented in writing that is conditional upon mortgage approval, valuations, searches and related sales.
If an offer is accepted a 10% deposit is required which is held until the conditions of sale are met. The next stage is signing the contract which specifies the settlement date and makes the sale unconditional, meaning there are financial penalties if the sale doesn’t proceed. From initial offer to completion takes on average 3-4 weeks. Mortgages are best arranged in New Zealand dollars and it’s advisable to also have a New Zealand solicitor.
Where to buy
The question of where to buy of course depends on each investor’s individual circumstances but there are some things to keep in mind. New Zealand has many scenic isolated spots but they don’t all make good investments. One of fastest growing areas is the Rodney District in northern Auckland.
In the last 5 years North Rodney’s median sale prices have increased 70% in the last three years from NZ$244,000 (£94,800) in January 2003 to NZ$415,000 (£161,000) in December 2005. Although other areas have done better it is more the potential of the area that makes it so exciting.
The area has undergone significant infrastructure improvement and a huge motorway development is slashing commuter times in to the centre of Auckland. Buying a slice of New Zealand has proved beneficial for many investors. After all hobbits, fawns and great apes know when they’re on to a good thing.
The first thing you’ll notice is the different styles of property in New Zealand. With a population density of just 15 people per km˛, compared to 243 people per km˛ for the UK, New Zealanders have more space and hence many properties are detached and built outwards rather than up. Apartments are a relatively new phenomenon and only exist in the larger centres.
Before you go jumping in though, some points to keep in mind. Areas with the most developments are not necessarily the best investments and some recent construction has been poor and unpopular with New Zealand buyers and renters.
The estate agents may be more helpful and friendlier than you’re used to but always remember their loyalties lie with the vendor and they’ve got a whole range of tricks you may have never come across. Unless you’ve got an intimate knowledge of the New Zealand property market and plenty of time to spend there, it’s a wise idea to seek the help of a property finder to act on your behalf.
Although some homes are made of brick, timber houses are widespread. Roofs are often made of steel and because the country has a warmer climate than the UK, double glazing and gas central heating are rare. The quality of most housing is good with new homes having a ‘Master Builder’ certification, which is a 5-10 year guarantee on the quality of workmanship. Whatever the age of the property an independent survey is strongly recommended.
To view properties you’ll probably want to register with a number of estate agents. Many Brits have commented on how helpful they can be compared to their UK counterparts. There’s probably some truth in that but never forget they’re working for the vendor (and themselves of course) not you. To have a property professional on your side seek advice from a property finder.
Another way of viewing properties is open homes, which is just beginning to catch on in the UK. It’s a popular pastime for serious buyers and nosy neighbours alike to come around at the open viewing time to check out the property.
Whereas house auctions in the UK are often a sign that the property is having difficulty selling they are common for properties in New Zealand, even for the most desirable houses. It takes nerves of steel but it can be an exciting way of purchasing your new home just do your research first!
David Boyd runs NZ Property Finders, set up to assist people relocate and invest in New Zealand property. http://www.nzpropertyfinders.com/
Back to: News Index