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Buying a Property in New Zealand

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Why New Zealand?

Despite being as far away from the UK as you can get, New Zealand does tend to remind many people of home. The sandy beaches of the North Island have been likened to Cornwall, while the rugged hills of the South Island are reminiscent of Scotland. English is the primary language, they drive on the left and you are just as likely to have a roast for your Sunday lunch as you would in Brighton. Of course, there are major differences too.

Although it's the same size as the UK, the population of New Zealand is only just over four million – resulting in a lot of extra space per capita. The weather is also better, with the North Island boasting hotter summers and milder winters, while the South has fresh summer days and plenty of snow during the winter. Unemployment is less than in Britain, workers receive more bank holidays and the outdoor lifestyle provides a far better quality of life.

Popular buying locations

Auckland, the country’s biggest city, has seen a lot of investment over recent years. This is mainly thanks to the 2003 America’s Cup yacht race which resulted in the city’s entire waterfront being regenerated. Bars, cafés and restaurants now line this thriving viaduct, while luxury apartments offer views to die for.

The capital city of Wellington maybe somewhat windy, but it does boast the impressive Beehive – the unusually shaped parliamentary complex that’s home to the offices of the Prime Minister. House prices in the world’s most southern capital have grown by 9.5 per cent during the past year, resulting in an average house price of $440,455 (£155,500).

The predominantly tourist destination of Queenstown, in the South Island, could be described as nothing better than an adrenaline junkies heaven. The original home of the bungee jump, Queenstown is proud to provide a diverse range of activities ranging from skiing in the winter to tramping (hiking to you and me) during the summer months.

The buying process

The process of purchasing a home in New Zealand is rather straightforward. When you have found a property you like you then put in an offer. This tends to be done in writing, and is subject to factors such as mortgage offers, searches and surveys. If this offer is accepted, you will be required to pay a ten per cent deposit which your solicitor will hold for you.

When all the terms of the sale have been met by both the buyer and the seller, a contract will be signed. This contract is legally binding, and therefore neither party can pull out of the transaction once it has been signed. It usually takes around three weeks from the time of signing until you can take possession of the property. In total, the whole process will take around a month – it is extremely unusual for it to take any longer.

Legal issues

If you have been granted permanent residency there are very few restrictions on the type, or the amount, of property that you are allowed to buy. If, however, you are coming in as an overseas investor then there is a certain amount of criteria that you must meet.

The main instances are when the property costs more than $10 million (£3.52 million), when the property consists of more than five hectares, or when your plot is made up of coastal land and is larger than 2,000 square metres in size. In these three instances you will need to apply to the Overseas Investment Commission for approval to purchase, and it is likely that permission will only be granted if you can prove that you will be adding economic value to the country.

Whatever type of property you decide to buy, you can rest assured that you won’t be gazumped, as accepting a written offer is legally binding.

Finance

It is relatively easy to get a mortgage in New Zealand, providing that you meet the usual criteria. Generally banks lend 90 per cent of the purchase price for up to 25 years. Interest rates fluctuate from bank to bank, but tend to vary between six and eight per cent depending on whether you opt for a fixed or variable rate. Banks do tend to be slightly more flexible in New Zealand, and are occasionally open to negotiations regarding rates. It may also be possible to split the loan into different parts, for example so that a certain amount of the mortgage is paid on a fixed term, and some of it on a variable.

Repayment mortgages are known as Table mortgages. Interest Only loans are also available, but so are Reducing mortgages. A Reducing mortgage means that your repayments change every month, with your actual repayment figure staying the same during the course of the loan, while the interest payments gradually reduce. So your payments start relatively high and reduce over time – hence the name.

Fees and taxes

The good news for potential property buyers is that there isn’t any stamp duty in New Zealand, or indeed any inheritance tax. Capital Gains tax is also non-existent – unless property trading is your profession.

Therefore, when buying a Kiwi home, you will need to budget for solicitor’s fees at around $1,000 (£352), a valuation fee of about $400 (£140), a building inspection report at $400, the Land Information Memorandum at $150 (£53) and a transfer fee of around $50 (£18). If you are buying with a mortgage, you will also be required to pay a registration fee which will cost about $50. All of the above figures include GST (goods and services tax) at 12.5 per cent.

When selling a property in New Zealand you will be liable for solicitor’s fees and estate agency charges – budget around three to four per cent of your asking price for the latter.

Visas, residency and work permits

If you are planning to buy a property in New Zealand solely as an investment then there are very few restrictions. However, if you are planning to emigrate then you will need to apply for permanent residence. This can be easier than you may think, as there are a few ways which you can gain entry.

The Work to Residence scheme enables you to emigrate to New Zealand provided that you have a job offer from an “in demand” field before you enter the country – the Skilled Migrant scheme operates in a similar way. A Family Visa can be gained if you are sponsored by a member of your family who is already a New Zealand citizen or resident, while a Business Visa encourages investment into the country by allowing you to set up a new venture.

Finally, you can gain permanent residence by investing with the New Zealand government. If you have $2 million (£705,000) that you would be happy to invest, for a total period of five years, the Investor Visa could be for you.

New-build versus resale

If you are after a new-build home you will find a good selection in the city centres, although the choice does tend to be solely between apartments and townhouses. If, however, you want to live in a more rural area then buying a new-build property is a more unusual process than in many other countries.

Outside of New Zealand’s urban areas there is no such thing as a purpose-built development. There are plenty of developers, but they only take responsibility for the actual building process. It is up to you to find and purchase a plot, or section as it is known, before you commission a developer to build your property.

Most developers have a huge range of property designs that you can choose from, but will also work with you to design your own home if you prefer. Show homes are generally available so that you can get an idea of the quality of finish. While this process may sound daunting to us Brits, Kiwi developers are professional and experienced, and will guide you through every stage of building – from deciding which property will best suit your plot to gaining planning permission on your behalf. Be aware, however, that this whole process can take up to two years.

Resale homes are easier to come by, however the majority are sold at auction, so make sure that you have done your research thoroughly, since any offer accepted at an auction is legally binding.

Investment potential

Capital growth in New Zealand has historically been good, with prices rocketing in the last five years. In fact, the July national house price median was over ten per cent higher than the median for the same period in 2005 – which was nine per cent higher than 2004’s figure. When you couple this with the favourable taxation system, then things for investors generally look pretty good. However, don’t buy in NZ purely because of the lack of capital gains tax – there are rumours that it could be introduced at any time.

There are plenty of property management firms available in the country – a necessity if you are planning on renting your property out from the UK. Landlords tend to offer unfurnished properties, and the occupancy rates are higher in the cities thanks to the high rates of migrants moving there.

However, due to the exchange rate, you may want to think twice before investing in New Zealand if you are planning on bringing your profit back to the UK. Financially, buying a kiwi home is far more lucrative if you are planning on staying in the country for the long term.

Health and education

Healthcare is of a good standard in New Zealand, and is generally funded through a public taxation system. Some treatments however, and even prescription medication, are only subsidised by the government. In fact, even a trip to your GP is likely to set you back $50 (£18), but on that basis you will usually get a same-day appointment. Ambulance services and visits to physiotherapists, chiropractors and osteopaths will also require you to provide a financial contribution. Private healthcare is available, and if you are not a permanent resident it is essential that you have health insurance.

If you are planning on taking your children to New Zealand, there is the usual choice of state-run and private schools. The education system has a good reputation, and schools are divided into primary, intermediate and secondary facilities. All children must attend full-time education from their sixth birthday to their sixteenth. International students must have a student permit to study in a Kiwi school for any period longer than three months.

Transport

The only way to navigate your way around New Zealand is to drive. Public transport in the cities is poor, and nationally it is pretty much non-existent. As a result traffic can be horrendous during peak hours in the urban areas, but if you are planning to travel from, say, Wellington to Auckland, be prepared to go an hour without seeing another vehicle. Be careful however, as the Desert Road that travels the length of the North Island can be treacherous due to poor driving conditions, and many fatalities occur here each year.

If you are crossing from the North to the South Island, or visa versa, a frequent ferry service is in operation – likewise if you are planning to visit Stewart Island. The smaller islands that surround New Zealand, such as in the Hauraki Gulf, are easily accessible via passenger ferry. Internal flights from Auckland are available to Wellington, Christchurch and Queenstown, but this can be an expensive option.

And finally…

While New Zealand offers fabulous scenery and a relaxed pace of life, it is a long way from home. Many people who move to this part of the world often feel cut off from friends and family and therefore find it quite hard to settle in. Also, one of the very things that may have attracted you to New Zealand, the exchange rate, could work against you should you decide to move back to the UK.

As with any overseas purchase, it is advisable to rent a property before you commit to buying your own. Never has this statement been truer than when considering a home in the New Zealand countryside. What seems like an idyllic move now could leave you feeling rather isolated. This really is a case of try before you buy.

Finally, think carefully about the location of New Zealand. While it offers a unique culture it is, at least, a three-hour flight away from its neighbours. So, if you are in the habit of popping over to Europe for weekend breaks, bear in mind that this will be a lifestyle no longer available to you.

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