Fact checked
No stamp duty. No land tax. A mortgage approved in as little as five working days. Affordable housing with enormous potential for capital growth — these are just some of the reasons why some Australians would consider investing in New Zealand. But what are the things you should know before setting your sails to the neighbouring country?
- Are foreigners allowed to invest in property in New Zealand?
- When do foreign buyers need consent?
- Do Australians need special permission?
- What are the steps to buying a property in New Zealand as a foreigner?
- What are the tax rules on Australian property ownership in New Zealand?
Are foreigners allowed to invest in property in New Zealand?
Overseas buyers are generally allowed to buy a property in New Zealand provided they meet the rules and regulations surrounding foreign property ownership.
Take note that not all properties are open for foreign ownership — recent amendments to New Zealand’s foreign property rules place restrictions on which types of properties overseas buyers can purchase in the country.
In 2018, the New Zealand government introduced changes to the Overseas Investment Amendment Act, which banned most non-resident foreigners from purchasing existing homes classified as “properties on sensitive land”. The government also introduced a residency test.
The bank did not affect buyers from Australia and Singapore due to the existing free trade agreements.
When do foreign buyers need consent?
Overseas buyers need consent to invest when investing in sensitive New Zealand assets, which fall into three groups: sensitive land, significant business assets, and fishing quota.
Land Information New Zealand sets out the scenarios where foreign investors or buyers need consent for transactions involving the abovementioned categories. Here are a few of the scenarios:
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The overseas person acquiring a direct interest in sensitive land or fishing quota.
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The overseas person acquiring an ownership or control interest of more than 25% of an entity that holds sensitive assets, where it previously held no interest.
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A person who directly or indirectly has an interest in sensitive land or fishing quota becoming an overseas person, for example, a company that, after the transaction, would now be more than 25% owned or controlled by overseas persons.
Do Australians need special permission?
As mentioned earlier, the existing free trade agreement between means that Australians do not need special permission to buy property in New Zealand.
Australian citizens are not required to apply for permission in the Overseas Investment Office and are issued a New Zealand resident visa on arrival at the border.
What are the steps to buying a property in New Zealand?
The process of buying a property in New Zealand is like the process in Australia — most home and land sales are completed using an agent.
1. Find a property
The best way to find available properties is to look at property websites, which often host listings from real estate agents and private sellers. Some agents even have their own websites.
You can also visit local real estate offices or get brochures in the area to see listings that might not be even available online.
2. Choosing the right property and doing some checks
In New Zealand, you will either get an attached or a standalone property. Townhouses and apartments are considered attached properties while standalone ones are what you consider detached homes in Australia.
It is a must that you do a series of checks in your chosen property before making any offers. Some sellers commission their own reports, which they give out to potential buyers. However, you should always ask for independent advice and do your own checks to avoid any problems.
It is also ideal for Australian homebuyers to seek advice from a lawyer or a conveyancer to carry out due diligence checks. They can help you in the process of title check or in obtaining the Land Information Memorandum or LIM. They can also help you get an independent valuation, which you can use when negotiating prices with the seller.
3. Make an offer and sign the deal
Once you have done all the checks and you feel like the property is what you need, you will have to make an offer and sign the sale and purchase agreement. Take note that your lawyer must first check the contract before you actually pen your signature.
By then, you can now carry out pre-settlement arrangements and even have one final inspection.
4. Borrow money
This is where it gets a little complicated. Most banks and lenders in New Zealand require borrowers to have some local credit history, which you might not have especially if you are coming straight from Australia.
Check your Australian bank or lender if they have a presence in New Zealand — this will help a lot in your application for a mortgage as the lender will have something to depend their analysis of your credit on.
You can always reach out to a broker to navigate the complex system of lending for foreign buyers in New Zealand.
Take note that you will also have to meet the depositary requirements set out by lenders in New Zealand. If you are buying an investment property, you might have to prepare your finances as lenders could require higher equity for them to approve you of a mortgage.
Also read: The pros and cons of buying an investment property
5. Settle
Once you’ve decided where to buy, you can apply for pre-approval with a New Zealand lender. If you go through a broker, you must either choose one who is New Zealand-based, or an Australian who is accredited to write New Zealand loans. Pre-approval gives investors an added degree of confidence when they make the trip to put an offer on a property. An agreement between you and the vendor is then drawn up and sent to each party’s solicitor. Once finance has been arranged, the solicitor arranges for an inspection and for the preparation of a land information memorandum (LIM).
A LIM is an overview of the property from the local council’s perspective, including the property’s history and anything that the new owner should know about it. Your solicitor will then draft an agreement for sale and purchase and, having received the mortgage documents from your New Zealand lender, prepares the transfer of title.
The best thing about settling on a New Zealand property, aside from the fact that it only takes around six weeks, is that you can do it from home. Your solicitor can courier the documents to you in Australia to sign, and the settlement can proceed as soon as you send them back.
What are the tax rules on Australian property ownership in New Zealand?
New Zealand’s similar political, legal, banking and regulatory environments make it easy for Australian investors to get involved.
As a result of the Closer Economic Relations (CER) trade agreement struck between Australia and New Zealand in 1988, Australians can take out NZ dollar-denominated mortgages and purchase property – although they pay tax in Australia, not New Zealand.
Fortunately, a double taxation agreement between Australia and New Zealand means that Australians earning rental income from properties in New Zealand only pay tax once – in Australia. While New Zealand itself has no capital gains tax (CGT), Australian residents must pay CGT on any gains derived from New Zealand-domiciled assets.
Expenses such as interest incurred on borrowings, depreciation and maintenance expenses relating to investment properties can be offset against rental income received, as is the case in Australia.
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