Investors seeking strong rental locations are looking at New Zealand property

Country: New Zealand

A main attraction of New Zealand real estate must surely be space. Think New Zealand and it’s impossible not to imagine its rolling hills, Lord of the Rings- style snowy peaks and beautiful swathes of south Pacific coastline. Divided into North Island and South Island, New Zealand’s total land mass spans 268,680 square kilometres, a similar size to Italy with whom it closely corresponds in latitude, although with a far more temperate climate.

Over half of the country’s population of 4.3 million live in the four main urban conurbations of Auckland, Hamilton, Wellington and Christchurch. European settlers, mainly British, Irish and German, have been drawn to this part of the world for centuries but is this the right point in history for today’s would be émigrés to make the move? With property prices in freefall around the world, statistics show that New Zealand real estate is not immune from the global meltdown. January saw just 812 consents for new developments, the country’s lowest since records began 34 years ago. According to Statistics NZ, sales figures for January dipped to 3,706, the lowest number since the early 1990’s.

Sales of NZ property may still be falling but buyers are slowly returning as was proved at a recent auction, which attracted over three hundred, where a three- bedroom villa in Whisper Cove, previously valued at $1.07 million (around £414,000) sold for $500,000 (around £193,571). Agency Bayley’s MD Mike Bayley says: “It’s been a highly encouraging past few weeks. All seven residential coastal New Zealand homes went under the auctioneer’s hammer during one afternoon at the Whisper Cove seaside settlement. All five residential Wellington properties at our auction were sold and eight out of eleven New Zealand commercial properties and industrial properties in Wellington sold at another auction in the capital.”

Agency Harcourts’ CEO Bryan Thomson agrees that the market is showing signs of recovery: “Prices of New Zealand properties are at best stable. There’s a shortage of good quality properties in some areas. We believe this year will see a growth in the number of sales back to a more realistic level. Prices at best will be flat but, as always, there is good demand for well presented and well located New Zealand homes and investors are re-entering the buying market.” Agents Barfoot & Thompson also saw a rise in February sales but some pundits urge caution. UBS NZ senior economist Robin Clements advises would-be buyers to house-hunt now, but not necessarily to buy, just yet: “The next round of the recession could bring wide-scale job layoffs and more forced house sales and it won’t be until the middle of the year that people will be able to tell where the economy is going. My base case is that we will muddle through without that worst-case scenario but that is the risk and house prices will continue to fall for much of this year.”

Calling the bottom of the market is a challenging task for anyone but buyers can give themselves the financial edge says Andrew Hains, client adviser for Montfort International: “Buyers should seek specialist advice at the earliest possible stage which will help them reap rewards in terms of tax advantages in New Zealand and in the UK.” The company offer advice on all aspects of life for would- be- migrants including help with visas, pension transfer and the conundrum of whether to sell in the UK and buy or rent abroad. Originally started to help those moving to Australia, as demand grew for New Zealand in New Zealand then so did the company: “We received so many inquiries about New Zealand real estate that we decided to explore the market. Demand is constantly increasing,” Hains adds. Client feedback reveals a host of explanations for choosing New Zealand as a destination; better climate, dissatisfaction with the British economy and family links are some of the most common says Haines who believes that lifestyle is the ultimate driver.

So what does the New Zealand property market hold? Entry-level apartments in Auckland and apartments in Wellington start from around $300,000 NZD (around £116,125) to $400,000 (around £154,833) Savills are selling a five- bedroom rural home with pool and five acres of orchard and paddock near the beaches of Stillwater, Auckland, a popular area with good schools, for £559,000. For anyone seeking more space, the modest sum of £266,000 buys an entire vineyard in Cromwell, in iconic Central Otago, which comes with jaw dropping views of the snow-capped mountains, an income as the land is currently leased to a local winery, and access to nearby skiing, fishing and golf.

New Zealand Property Solutions sell throughout the country including Auckland property, Wellington property and Christchurch property as well as the Bay of Islands and the alpine resort towns of Queenstown and Wanaka. Property Consultant Kat Geeves says that, unlike much of the world, the NZ property market has not suffered too badly: “Action taken by the government in cutting the official cash rate has rapidly filtered through to mortgage interest rates with the result that financing for property investment is more affordable.” Geeves finds that prices have held in urban areas with more remote rural locations taking the hardest hits but she believes that that, unlike many destinations, over supply is not a factor: “There’s a shortage of residential NZ property and in the current financial environment this supply shortage will not be rectified in the near future. Our banks are strong and still lending on the basis of traditional criteria as they have done over recent years. There is mortgage money available for home buyers.”

But how should Brits negotiate the mortgage maze? Mary O’Brien of New Zealand Mortgage Solutions ‘holds the hands’ of many buyers, around 90 per cent of whom are investors, looking for strong rental locations. “They will require approximately 30 per cent deposit from the UK and I can organize the finance of 70 per cent from a leading New Zealand bank.” O’Brien lists the many financial advantages the buying process has over the UK; no stamp duty or capital gains tax and minimal legal fees and has this advice for anyone considering buying: “Obtain a pre-approval on bank letterhead through me before you look at purchasing or travelling to New Zealand. Then start looking on the web for property, market and rental statistics.” Interest rates have become increasingly attractive. Variable rates are now around 6.40 per cent and short- term fixed rates, up to three years, are around 5.79 to 5.95 per cent.

The Rugby World Cup, due to take place in New Zealand in 2011, may be another driver of the market as investors seek strong rental locations. New Zealand Property Solutions are selling apartments at new development Celestion in Central Auckland, which come with a two-year rental guarantee at six per cent net, free furniture package worth $25,000 (£10,000) and full cost of deposit bonds paid by the developer. With picture perfect harbour or city views, prices start from NZD $440,000 (around £170,124) up to $589,000NZD (around £227,919).

First published in May 2009.
Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.

Ginetta Vedrickas

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Some information contained within this article may have changed since it was first published. Homes Overseas strongly advises you to seek current legal and financial advise from a qualified professional.