New Zealand Real Estate- Intro
New Zealand is a democracy with a 99% literacy rate and features the best of every continent with very few negatives. New Zealand is very remote from the U.S., a 6,000 mile, 12-hour flight. The real estate industry in New Zealand has many positives: an English speaking population, available local financing on favorable terms, no transfer or capital gains taxes, and 29% of New Zealanders rent creating a steady rental market.

The New Zealand landscapes and nature are simply amazing. New Zealand encompasses two islands, with three-quarters of the population living in the North Island where the climate is warmer than the south. With in the 1,000 miles from the North Island’s tip to the tip of the South Island, some of the most beautiful scenery is found from snow-capped mountains, glaciers, amazing beaches, volcanoes and abundant marine life as well as good surfing and incredible skiing.

The price of real estate has risen in the past few years, however, many reasonable priced homes may still be found in the clean, beautiful towns throughout the country.

New Zealand Real Estate- Restrictions on foreign ownership
Non- Kiwi buyers are able to purchase on the same grounds as local New Zealanders with the following exceptions:
- Land in excess of 5 hectares (12 acres) and/ or worth more than NZ$10 million, (around 6.5 million)
- Land on most off-shore islands
- Land over 0.4 hectares (1 acre) that includes or adjoins “sensitive” land (land on specific islands, containing or next to reserves, historic or heritage areas, or lakes.)
- Land over 0.2 hectares (0.5 acres) that includes or adjoins the oceanfront.

In these cases, permission must be sought out from the Overseas Investment Office by the buyer.  The process for the application is somewhat quick, the decision is usually made within 10 business days once the Office has received all the necessary information. Any applications involving “sensitive” land must be approved by a Minister and could take up to 25 business days. The fee for an application to the Office is NZ$3,500, and the fee for the Minister increases to NZ$3,800. Additional fees apply where amendments are made to the original application. For more detailed information on fees and the application process, the website of the Overseas Investment Office is: http://www.linz.govt.nz/overseas-investment/

New Zealand Real Estate- Buying property in New Zealand
If you are not in the market for a property with restrictions to foreigners, then buying property will not be a big hassle. Real estate agents are plentiful and may be found online; www.realenz.co.nz lists over 70,000 properties. Two of the biggest names in the New Zealand real estate business are Bayleys, www.bayleys.co.nz, and Harcourts, www.harcourts.co.nz.

It will take an average of four to six weeks to settle the deal and take possession and the process will involve the following steps:
1- Make an Offer
There are two types of offers you can make once you have decided on a property:

Unconditional Offer: You are legally obligated to go through with the sale once the vendor has accepted your offer. Make sure you are 100% confident that it is the property you want when making an unconditional offer, as well as ensuring the funds to purchase are in place and the title has no issues.

Conditional Offer: If all of your conditions are satisfied, you are bound to complete the purchase. Conditions may include: the existence of another claim of ownership on the property, failure to secure a mortgage, an unsatisfactory surveyor’s report, etc. Make sure to discuss any areas of potential problems with your attorney so that you are fully protected.

When the offer is made, you will pay a deposit, usually 10% of the purchase price. If a conditional offer is the case, the deposit will be held in a trust account until all conditions are met.

2- Sign the sale and purchase agreement
A sale and purchase agreement will be prepared by the real estate agent and will include details of the offer, the date of closing, and any conditions that must be met before the sale proceeds. Be sure to discuss the terms of the agreement with your lawyers before signing the contract.

3- Title Check
In New Zealand, property ownership is based on the “Torrens System”. A nationwide database holds information about certificates of title. Make sure to have your attorney perform due diligence on the property if you have made a conditional offer to the seller and the title has not yet been checked.

4- Closing
The balance of the purchase price will be paid to the seller on the agreed date of closing. Your name will be recorded on the Certificate of Title for the property and will be officially recorded at the land registry.

New Zealand Real Estate- Transaction Costs
For legal costs, expect the amount to be between NZ$1,000 and NZ$2,000 ($670 to $1,300).

The seller will pay the real estate agent commission. The amount of commission charged varies by city or region, and will generally amount to 5% of the purchase price, plus Goods and Services Tax (GST). (GST is charged on virtually all goods and services supplied in New Zealand. It is charged at a rate usually of 12.5%.)

New Zealand Real Estate- Taxes
Transfer Tax- Transfer tax does not apply on the sale of real estate in New Zealand.

Inheritance/ Gift Tax- This tax is not imposed in New Zealand.

Rental Income Tax- Annual tax returns must be made to the Inland Revenue for non-residents earning rental income in New Zealand. For residents earning less than NZ$38,000, (about $25,300) the rate is roughly 19.5%. Remember that you can usually deduct interest, depreciation and other expenses including travel expenses to inspect the property. For more information about this, the government has a booklet on “Rental Income” at: http://www.ird.govt.nz/forms-guides/title/forms-r/ir264-guide-rental-income.html?id=righttabs

Property Tax- Local authorities levy property taxes in the form of “rates”. The Regional, District or City Councils are responsible for the upkeep of city and district public amenities. These amenities include maintenance of public parks, supply of water, refuse collection and street cleaning and public areas. Because of these factors the rates as a percentage of value, vary widely from area to area. Rates in the bigger cities such as Auckland tend to be higher due to greater infrastructure demands. There are standards that are set in the Rating Evaluations Act and the rules of the valuer-general that the districts must comply with. These rates range from 0.5% to 2% of the property value. Most homes pay between $630 and $1,260 annually.

Capital Gains Tax- On residential property, there are usually no transfer taxes or capital gains taxes, so you will not be taxed on the purchase or sale of your house. If investing for the long term with your primary income is rental income, there is no capital gains tax when you sell the property, however, if you purchase a property with the intention of reselling it for profit, then your capital gains are taxable. This will usually apply to professional property developers.

New Zealand Real Estate- Financing
Local financing is possible with attractive terms and is relatively easy to obtain. Long-term fixed-rate mortgages are near impossible to arrange in New Zealand, so apart from that, the other terms for mortgages are familiar:
- Loan-to-value percentage can be as high as 95% for owner-occupied properties
- 80% LTV for income-producing properties
- Maximum loan term of 25 years

There are also minimum loan amounts. Most properties you would be interested in would meet these.

HSBC makes loans with no application fee, and offers up to $500 toward legal or appraisal fees. To make banking even more, user-friendly for expatriates, they also offer foreign currency home loans up to a maximum LTV of 70%.

Foreign-currency home loan- This mortgage has the advantage being that you can take out your New Zealand property mortgage in any major currency in which you receive income. So, if you earn income in euros, you can take a euro mortgage. The rates are variable and are based on the HSBC New Zealand transfer pricing rate plus 2%.
Once the funds have been exchanged for the purchase, any currency risk on your loan repayments are eliminated, while reducing your interest rate by 50% for US dollar loans. Your loan is almost free, at least until rates start going back up. If the rates on your foreign currency mortgage go up past the local currency rates, HSBC will allow you to re-exchange your mortgage into Kiwi dollars, with no additional fee.

HSBC will make a foreign currency home loan on residential property only. The property may be a rental, with projected revenue counted toward debt-to-income ratios, but you can’t take out this kind of loan on a commercial property. The website for HSBC is: www.hsbc.co.nz