$ in Australia, Property in NZ

[Iggy_Type_R]

Hi,

I know that o/s investment has been raised a few times, but I can't really find anything too useful in the Search... may be I am too impatient ... in any case, if this has been raised before please point me the right way.

I want to buy a property in NZ. I want the $ to come from Australia, since our interest rate is lower. I live in Australia, and have several IPs around Aus.

Late last year I had a deal fall through in NZ because of some weird bottleneck about issues which I have still not been made aware of with doing the "$ in Australia, Property in NZ" thing.

So my question is (mainly to the brokers on this site): is this possible?

If it is, please call me 0411 884057 so we can do business

Much appreciated

Iggy

 

[Rolf Latham]

Hi ITR

We have lookd at this a few times and have found that if you use NZ security generally you are looking at NZ money.

If the volumes are big enouhg you may find one of the globals will be able to help.

Ta

Rolf

 

[pobrien3]

HSBC can do a loan for an Australian security property in USD or Hong Kong Dollars. Maybe if you try HSBC in New Zealand they might give you the option of an AUD loan.

Regards

Patrick

 

[D.T.]

Borrowing in O/S currency would really suck if the exchange rates moved out of ya favor!

 

[slippery642]

Apparently St George and Citibank will lend in au$ against security in NZ. Don't expect anything greater than 80% though...

Cheers,

Sam.

 

[geoffw]

Like Dave (dtraeger2k) said, things can be bad if the currency rates move against you. There were many people in the late 80s/early 90s who lost heaps with O/S currency loans on Oz properties- when the Oz$ plummeted.

That's the risk- one which may scare some lenders now.

 

[ally]

Hi Iggy

I read your post with interest. My husband is from NZ and would have liked to buy a property there in the event we wish to move back there as we believe it is a great place to raise kids (Christchurch in particular, which is where his family is all at).

However, have you seen the current exchange rates? The Australian Dollar only buys you NZ$1.01 at present and it has been lingering around there for a while. I can recall last year it was about NZ$1.25 which was making the idea far more attractive.

Take this info on board, just in case you wish to wait a little to see if it climbs back up again.

Ally

 

[Iggy_Type_R]

Thanks for the replies

Yeah I agree the currency situation is looking a bit weird at the moment.... I will have to do some maths and decide whether the risk is worth the 1.5% interest rate discount.

I am working with NAB on getting a preapproval, but I will certainly try Citibank and St George! Thanks very much for the suggestion!

I don't expect more than 80% LVR anyway these days! May be I am dealing with wrong lenders.....

 

[LeighK]

I was wondering if anyone had success with the financing of NZ properties from Australia?

Or if there was any new information to add to this topic. I have been amazed at the properties that are advertised as returning 15% to 20% yield and therefore am very interested in NZ as a buy and hold strategy.

Cheers
Leigh K

 

[Iggy_Type_R]

I have so far not found any lending institution that is willing to take a NZ securty under the mortgage...

Only way I see is by having an entity in NZ to buy property (or using Australian entity) but financing thru NZ.

 

[Will1]

Hi, I'm quite loud on this one. Do not do it. To restate something I posted elsewhere:

The problem comes when the exchange rate moves. You may sell the property and not have enough to repay your loan. The rent may be not enough to go near to covering your FX mortgage payments. etc. If you think things will go the other way and you will make money; you are speculating on currencies, not real estate and you can do so at lower costs and more efficiently in the margin currency markets. (The most liquid but most scary markets there are IMHO )

If you are determined to borrow in foreign currency, the solution is to put in place a currency hedge < Lots of instruments readily available, forwards/ futures/ swaps, options> but if you do this to take the sting out of any currency moves, adding the cost of this hedging will put you in a position not too dissimilar to that of an local loan and local interest rates.

The 1.5% you talk of is what the world currency markets think the difference is given inflation and FX difference. There is no easy arbitrage available in currencies.

Sorry to be so neg....

Will1

 

[Iggy_Type_R]

Originally posted by Will1
Hi, I'm quite loud on this one. Do not do it. To restate something I posted elsewhere:

The problem comes when the exchange rate moves. You may sell the property and not have enough to repay your loan. The rent may be not enough to go near to covering your FX mortgage payments. etc. If you think things will go the other way and you will make money; you are speculating on currencies, not real estate and you can do so at lower costs and more efficiently in the margin currency markets. (The most liquid but most scary markets there are IMHO )

If you are determined to borrow in foreign currency, the solution is to put in place a currency hedge < Lots of instruments readily available, forwards/ futures/ swaps, options> but if you do this to take the sting out of any currency moves, adding the cost of this hedging will put you in a position not too dissimilar to that of an local loan and local interest rates.

The 1.5% you talk of is what the world currency markets think the difference is given inflation and FX difference. There is no easy arbitrage available in currencies.

Sorry to be so neg....

Will1

Actually I totally agree with you there. For the currency to stuff you up you would need a 1.5% ratio movement of currency. If Interest rate is 6%, then 1.5% is a 25% difference. Therefore if the currency moves up 25% that you are borrowing against, you will run into problems.

I think that makes sense? I get quite confised just thinking about it!

 

[Will1]

NO...It is worse much worse!

To take the emotion out of any real country as an example folks:
Say the countires are Australia and Xray land and the currencies are equal today. $X1 = $A1

Say you buy a property for 200 000 $X
and borrow the equivalent in AUD say $A200 000 then the AUD rises say 5%.

you now owe AUD 200000 on a property worth AUD 190 000, and your rent is lower by 5% toward paying it back. If you sell you're out of pocket.

Say the currency moves even more.... wouldn't happen eh... AUD have risen what......20+% against the greenback in 2 years! In that case you would be out 40 000 plus 20% of your rent for example.

Sorry to be so rude on this one, but IMHO (ok not humble) it is a huge mistake in a leveraged investment.

The only way to do this is to get the rent in the currency you're borrowed in and even then.....


Will1

 

[WillG]

Surely the ANZ (Australia New Zealand) bank would have this sorted, wouldn't they ?