NZ New Zealand IP

Would love to hear if anyone has an IP in NZ?
My partner is from NZ but resides in Perth. In time ( 2-3 years ) we would love to buy some property there.
What are some things we need to consider? Is it correct that a 30% deposit is required due to being a "foreign investor" or because he is a citizen he is not classed as such? Is foreign defined by your passport or by where you are earning your income?
What are the advantages/disadvantages to having an IP in NZ versus an IP in Oz from a tax perspective?
Another option, rent the NZ property as a holiday rental as opposed to full time tenants....perhaps better for taxation purposes?
Any stories from people who have done this or knowledge people have would be greatly appreciated!
Thank you all

 

I personally do not own an IP but a close friend does in Dunedin and receives good rental yield - approx. 6% and has seen CG i the past 5 years - and I am looking into it (future PPOR for retirement). As a NZ Citizen you aren't entitled to much if you are not a resident for tax purposes.

I plan to use trusted family to make the purchase i desire over there. Some advantages would be avoiding foreign buyer tax, guaranteed rent from family, no stamp duty, no capital gains tax, exchange rate from AUD to NZD just to name a few...

Over the past few years CG has been good in Auckland due to population growth and subsequently that spilled into the middle North Island as people opted for longer commute times over higher rents. More recently however prices are decreasing and I don't think now is the right time to buy in certain parts.

I am looking in Wellington area as that is home for me. Plenty of well priced PPOR options however IP options appear to be less favourable.

 

Thanks Damo! My partner is from Waiheke Island so that would be an option for us as well as North of Auckland such as Warkworth/Snells etc which is insanely expensive right now ( I cannot believe people pay those prices to live so far from AKL )
I, like you, may wish to retire there one day so this would essentially be an IP for now but something we may live in down the track.
Agreed now is not the time to buy due to the recent boom and likelihood of decline soon. We are fortunate that my partners close family are developers who develop multi million dollar projects so will heavily lean on them for assistance/advice etc and potentially will buy a section and get them to build as due to the 30% deposit rule it would be much easier to get the deposit together for a section rather than an established property. We also have many tradey friends on Waiheke to assist.
Thanks for clarifying the "foreign buyer" situation.
As interest on IP is tax deductible in oz I wonder how much he would miss out on having the IP located in NZ instead

 

We have no investments in NZ outside a small amount invested in one Bank,but if I wanted too Queenstown would be one small area that I have watched grow --blow-up then grow again ..
Some of the weekly rental returns within the short term holiday in Queenstown once the snow starts to fall would shock most property investors..
Spectacularly unique
I Love New Zealand..

 

PS hope your friends IP in Dunedin isn't on Hyde Street

 

I have not long personally sold my property in NZ (born there, raised south of Queenstown)

To be honest it was fairly easy to manage, a good property manager is the key, from a tax point of view it was no different, my accountant just treated it as income/expense exactly like the Aus properties. One difference is depreciation schedules are very different & difficult to get done properly. I had to basically specify what I wanted for my Aus return, it’s more of a surveyors job in NZ as opposed to a valuer.

My view is NZ has had very nice growth recently and it’s slowed, incomes are just that much lower however prices up north are just as high as here. Not a lot of room to grow.

Only places I would consider would be Christchurch, Queenstown, wanaka.

Christchurch because its got room to grow, lots of industry & infrastructure going in. Becoming very much like Melbourne in the CBD

Queenstown and wanaka because there’s money there and will always have demand, scarcity & views will never disappear. One of the best places in the world to hold real estate in my view

 

Thanks Codie! We would probably be looking at waiheke or somewhere north of AKL on the coast purely because the majority of family and friends are based on the NI.
It wont be for a few years and we are happy to wait for a bargain.
Do you feel you "lost out" much with the NZ IP considering you couldn't claim on the interest versus your Australian IPs?

 

Fair call I’m sure it’s lovely up there! I just know nothing about that area

RBNZ are actually looking at a rate cut shortly as well possibly even this month apparently (my parents have multiple properties in NZ still, so I keep a pulse)

Well you can actually claim on your interest, it’s basically just treated as foreign income, so income/rent was still added to my income & expenses & deductions were still treated exactly the same way. It was actually no different. One thing to be mindful of though is CGT is treated very differently here than it is there, as well as NZ is bringing in ringfencing shortly (my understanding is any depreciation or capital works is only offset against capital gain not income) but don’t quote me on it I’m not perfectly across it, Worth looking into!

 

Thanks Codie, all very valuable info. Appreciate you taking the time to post.

 

+1 for Queenstown.

Side note: Some people aren't aware but groceries in NZ cost MORE than in Australia. As an Aussie holidaying in Auckland, Queenstown etc, I couldn't believe how expensive everything was.

 

Not to mention petrol is always around $2.20L...

Add to that an average income of $50k, petrol, food, & a lot of basic necessities costing more due to less competition than Australia, and accomodation increasing bridging the gap. New Zealand all though beautiful is becoming a very difficult place to thrive in. There’s been No such thing as 10% deposit there for a few years it’s been 30-40% if you want an IP, even for locals. (Being relaxed to 20% now)

Australia FHB’s think they have it tough..

 

Hence why all the kiwis move here I would love to live there but its just too expensive and disposable income would drop significantly. I also don't like grey skies
I bet there's a lot of people living week to week there

 

@ellejay might have some wisdom on this topic?

 

I have a few IPs in NZ. We did well in the recent boom and sold down a few to increase cashflow. You need a 30% deposit but who knows, that may change by the time you're ready to buy.

Australians are exempt from the foreign buyer restrictions although I recently couldn't get a construction loan in NZ because of my overseas income.

The obvious benefits are lack of stamps and land tax. Currency fluctuations may also have a positive or negative effect though.

Buying for the holiday market may be a good idea as the Labour Government in NZ are introducing a raft of legislation that will continue to add costs to landlords. I'm currently building a holiday home on a corner block I own and will then subdivide and sell the existing house.

 

I think because of the lack of land or most of NZ land is used the price of real-estate in NZ will be of a premium one day. Unlike Australia where most of the land is inhabitable. I owned an IP in NZ until 2016. Owned it for 10 years. I was born there and I love the place. As an investment though I would be picking an area that has infrastructure and job creation. Too many spots rely on tourism. The Bay of Plenty ticks a lot of the boxes I like e.g. Tauranga, Mt Maunganui, Papamoa. Has the biggest commercial Port and the place is expanding with lots of job creation in development. Whakatane and Rotorua are only a 45min drive from there and are still cheap options and the ripple affect hasn't happened yet. Whakatane is coastal and I would prefer this option over Rotorua. Auckland I would compare to Sydney where it has already peaked and you would be paying a premium right now. Anything north in my eyes is too isolated and doesn't hold the infrastructure or job creation to warrant holding long term up there. As far as holding an investment over there, so long as you were filing a NZ tax return (if your partner still holds a IRD number) you can be off setting this refund or tax bill on your AUD tax as both countries are double tax agreement countries where you can get a tax credit transferred to either country. There are many aspects I like about property investing in NZ but for me investing in the country I spend most of my time made more sense. I do still however hold other assets and continue to pay tax over there so having to deal with exchange rates and transferring money in-between is a pain and a waste of money. What about investing in Brisbane?

 

Thank you all for your valuable input, I have learnt so much already!
@nuzullandchicky we are going to visit Noosa/Sunny coast later this year with the view of potentially relocating there in the future. If we decide that it is going to be our home down the track then we will likely buy something there next year and rent out until we relocated in a few years.

 

Thanks Ellejay, def food for thought re full time rental versus holiday rental.
If we buy/build on waiheke the holiday rental market can be very lucrative in summer for sure. Holding it throught the winter would be my concern. I suppose we will revisit the legislation in place when the time comes and weigh up the pros and cons.

 

UPDATE 2-New Zealand's central bank stuns markets with hefty 50bp rate cut, kiwi dlr dives..

Interesting to see the way the New Zealand Dollar tumbled overnight..

 

I’m not sure about the 30% but it makes a difference if you are borrowing in Aus or NZ. If borrowing through an NZ institution then they will take into account any Aus mortgage when they assess your ability to service the debt but will not take into account any overseas earnings (Aus rent). Makes it pretty bloody difficult to borrow.

 

A few things to be aware of, if buying in NZ. I have family living over there, who own rentals, and are having a quite mutter about how their tenants live in better properties than they do

The current government has legislated that all rental properties must be fully insulated - this means ceiling cavity, walls AND underfloor if not on a slab.

Properties need to comply with the new and extensive earthquake regs, which means the cost of bringing many properties up to code ends up more than the property is worth - so there are quite a few vacant properties, especially commercial as owners simply walk away.

If you subdivide a block, you are automatically considered a developer and must pay 33% of the value of the newly created block, whether you sell it or not.

There are lots of other bits and pieces that affect income and CG - I don't know them all as I don't intend to invest there - but one really does need to investigate. NZ might seem tempting with no SD or CGT - but they do get you in other ways