Buying in NZ

Hi All,

I recently went to NZ for the weekend. I hadn't been there in almost three years and I was quite surprised by what I saw. Compared to Australia, sentiment in their property market is very poor.

The media and property magazines are all bemoaning the current situation: medians are falling as are new building starts as are most year on year figures. On top of that the NZ government is introducing some new property tax laws (unknown as yet but probably taking away depreciation benefits or also making their market similar to many other nations ie CGT,stamp duty,) on May 20. The consensus is that these will be negative and will result in falls between 5-20% (according to one magazine).

Add to this higher interest rates, lots of stock on the market, leaky building and BlueChip scandals and it seems all negative.

So, I'm wondering if it is a good chance for a counter cyclical purchase or two?

Anyone have any opinions on the NZ market?
 
NZ is a strange beast. Be careful applying Australian thinking there.

Stayed with ex-pat friends in Hamilton, to me it seemed like a reasonable area, nice wide leafy streets, houses in good condition, close to main roads and facilities. House is nice, well presented, polished floors, new bathroom, etc. But they've had it on the market for months and been unable to shift it.

Turns out they bought in an "undesirable" area, and the definition of "undesirable" is not the same as this side of the pond. There are subtle undercurrents in NZ society that take a while to figure out.

I'm sure it's ripe with opportunities but I would talk to lots of NZ locals before I bought there.
 
hi dcarr,

you are correct, it can be quite different. i lived there for over 3 years, so i am familiar with auckland and a few other regional areas.

i know that a few aussies have invested there over the past few years (especially from 2001 on) and made some good returns.

was just curious if anyone was considering it at the moment in its negative sentiment state?

cheers tab

p.s ive spent a bit of time in hamilton. nice enough, but pretty much a half way city between auckland and tauranga / mt maunganui. nice enough to drive through, not sure about living there.
 
Maybe wait until the Budget. A change to capital gains tax would give the property market a shock but tinkering with depreciation probably wouldn't. Probably best to see how the tax changes play out and then wait for the reaction - doubt the market will rise by much before then as the economy is hardly booming (2.5% cash rate reflects this).
 
NZ is basically where the Australian market should have been, without the stimulus package. It is a good reference point.
 
yep i think the market is waiting for the budget.

as far as i have read, a comprehensive CGT has been ruled out but depreciation is on the cards. will just bring NZ into line with oz- but how much it, and the possibility of some other kind of tax, will spook investors remains to be seen.
 
Another factor is the AUD/NZD exchange rate..today 1 AUD buys 1.30338 NZD.

This is the lowest I've seen the NZD against AUD for a while.
 
Another factor is the AUD/NZD exchange rate..today 1 AUD buys 1.30338 NZD.

This is the lowest I've seen the NZD against AUD for a while.

Yes, exchange rate-wise it's the best time for a NZ holiday since November 2000. But it could get better according to BusinessWeek:

“The kiwi is being sold heavily on the cross against the Aussie,” said Tim Kelleher, vice-president of institutional banking and markets in Auckland at Commonwealth Bank of Australia, the nation’s biggest lender. The New Zealand dollar may slide toward NZ$1.35 and then NZ$1.38 per Aussie, he said.
 
But what sort of capital growth could you expect, surely lower than in Australia, and no tax advantage unless you moved there.
 
Yeah interesting, I have had a IP in Auckland before and disposed of it in 2005. I've noticed that some of the better areas in auckland have seen the prices come back quite a bit, Grey Lynn, Ponsonby. There are some houses priced like 2005! I think its a great time to buy in inner Auckland.

As far as the exchange rate is concerned it always fluctuates back and forward between $1.30 and aprox $1.15ish even though it maybe over a 12 or 18mth period. I will be a monkeys uncle if it gets alot worse than 1.30 as it is far to cheap for Aussie banks and others to sit on their hands. They will have to buy it at such a cheap price and enjoy the yield. Just remember if the cash rate in N.Z is 2.5% then i can earn 3.25% on A$1 converted.
 
Sometimes I look at NZ and it ticks alot of boxes.

1) Aussie exchange rates is at decade highs (1.30). This means 500k houses are $370ishAU. If this falls back to 'norms' (1.10-1.15) you gain near enough 15-20% profit. With no CGT or stamp duty the drawback here is being able to sell in a buyers market.

2) The market is jittery waiting for the new laws to be announced and the economy is sluggish. It could be a case of investing counter-cyclically ala the old greedy\fearful Buffettism.

3) There is plenty of stock on the market- find a distressed seller and get a good price. With suppressed IR's, locking in long term seems like a given, especially when rates in NZ had been quite higher than here for some time.

Does anyone else see the NZ market this way?
 
Don't forget ... NO STAMP DUTY.

Trading poperties has far less financial friction in NZ than over in OZ.

I am looking to buy in the Auckland/Epsom Grammar school zone for my kids education. The eldest is abut 11 years away from secondary school and the next one is just a twinkle in my eye. I was thinking of buying there in about 7 years; but maybe I will move my plans forward several years if the $NZ and the market goes backwards enough in the shorter term.

Unfortunately the price tag will be around $1m for what I want .. but I may just buy a leaky home at a lower price and fix the leaks.

Rental yields used to be way higher than in OZ - generally cashflow netural/positive or only slightly negative .. I don't know what they are now.

cheers

RightValue
 
We've been thinking about moving back soon - but the salaries are lower (by around 10k per person, which isn't too bad), the tax is slightly higher - maybe 2k each - and the school fees are around the same, plus there's a higher GST and super is pitiful (down $15k each a year). Family decisions should be made on lifestyle not tax...but finances are an important factor.
 
Kiwi friend of mine bought a house in Hamilton very recently (also has one in Auckland). She couldn't believe again how easy it was to buy.

All she required from the bank was written confirmation from her employer on a letterhead (she's the boss, so wrote it & got the owner to sign it) what her income was and they gave her a loan! They didn't want to know about her other investments. She told me it felt like going to the bank manager back in the 90's where in her words "give a big smile & use big words & they'll give you big money!".

The property is slightly negatively geared, but balanced with the rest of her portfolio she's still +CF. She loves NZ & looking at buying more as she also believes it's undervalued.

In November she bought a 1x1 unit central Brissy and had to jump through hoops, give DNA, valuations etc. With all of her properties she's less than 50% LVR.

I've recently introduced her to this forum. She doesn't sleep much either now because of it! She's a 60yo spinster this year & has invested by herself and got this far by saving. Sure values have increased since she started, but she reckons she hasn't really put much thought into where & why she should invest. She just had cash so thought she should put it into property then sell when she retires in the next few years. Her head has been spinning since reading through some of this forum! I reckon she'll be putting in her notice at work soon, pulling her equity & we won't be seeing as much of her after that!
 
Looking on realestate.co.nz


lots of apartments for sale in central Auckland and Parnell.

This one is less than 100m from Auckland Uni sience faculty

Not for the faint hearted
Seller Paid $245,000, Reserve Under $95,000
Uninterrupted Panoramic City and Sea Views
Happy tenants paying $320 PW. Freehold
University and Grammar Zone
Building Issues identified and will be sorted
Sellers over the spin, out it goes.
The view alone will be worth the effort


Some apartment buildings are "leaky buildings" looks like this in one .. but a 16% return on $95k - it is only 34sqm.

yields appear to be decent.

apartments appear to be being sold off quite a bit.

cheers

RightValue
 
Looking on realestate.co.nz


lots of apartments for sale in central Auckland and Parnell.

This one is less than 100m from Auckland Uni sience faculty

Not for the faint hearted
Seller Paid $245,000, Reserve Under $95,000
Uninterrupted Panoramic City and Sea Views
Happy tenants paying $320 PW. Freehold
University and Grammar Zone
Building Issues identified and will be sorted
Sellers over the spin, out it goes.
The view alone will be worth the effort


Some apartment buildings are "leaky buildings" looks like this in one .. but a 16% return on $95k - it is only 34sqm.

yields appear to be decent.

apartments appear to be being sold off quite a bit.

cheers

RightValue


Hi Rightvalue,

thats pretty cheap especially being freehold, however auckland city is swarming with those shoeboxes. Great for uni students however and at such a yield (also remember its 30% cheaper in $AU).

depends how bad the leaky building is i suppose and your risk profile - will you be able to sell it in the future??

but also check out blue chip ares like ponsonby, remuera. i reckon if you find one that has been on the market a while you could negotiate your way to a good deal. When I was over there last, I saw a 2 bed 2 bath townhouse (2 level) in Ponsonby for 425k. These places rent for about 480-510pw.
 
I would love to buy an investment property in NZ, not only because of the favorable exchange rate and the depressed market there at the moment, but because I love NZ and not only would I love to own my own little piece of it but may consider moving there one day.

At this stage I would have to buy a property as an investment and would be heavily reliant upon both the rental returns plus any negative gearing aspects to make it financially viable for me.

*assuming I will have to declare any NZ rental income on my Australian tax return, can I also negative gear any interest I pay on the loan and/or claim for any depreciation and repairs/maintenance?

* If I can negative gear interest payments on NZ properties, is that on loans from both Australian and NZ banks or only that portion from Australian banks?

*do I have to pay any tax to the NZ government on rental income from any NZ investment properties?

If anyone can either help me with my inquiries or can direct me to specific threads answering my questions, as my own search has proved fruitless, I will be very appreciative.

Cheers
 
I would love to buy an investment property in NZ, not only because of the favorable exchange rate and the depressed market there at the moment, but because I love NZ and not only would I love to own my own little piece of it but may consider moving there one day.

At this stage I would have to buy a property as an investment and would be heavily reliant upon both the rental returns plus any negative gearing aspects to make it financially viable for me.

*assuming I will have to declare any NZ rental income on my Australian tax return, can I also negative gear any interest I pay on the loan and/or claim for any depreciation and repairs/maintenance?

* If I can negative gear interest payments on NZ properties, is that on loans from both Australian and NZ banks or only that portion from Australian banks?

*do I have to pay any tax to the NZ government on rental income from any NZ investment properties?

If anyone can either help me with my inquiries or can direct me to specific threads answering my questions, as my own search has proved fruitless, I will be very appreciative.

Cheers

Maybe best starting a new thread in the accounting/tax section?
Just my thoughts...I've read somewhere that you can claim the negative gearing in Australia...i'd assume it applies on loans from both jurisdictions...there is a double tax agreement between NZ & Aust so that if you do pay tax in nz, you won't have to pay it again (through some complicated system) - IMO, talk to an accountant, good luck finding the answers!
 
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