Buying Property in New Zealand for Foreigners

Embarking on the journey of buying property in New Zealand opens doors to unique opportunities and challenges. Whether drawn by the scenic landscapes or investment prospects, navigating the real estate landscape in this island nation requires a careful understanding of regulations, market dynamics, and potential risks.

If you want to invest as an expat or high-net-worth individual, which is what i specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).

Buying property in New Zealand 101

Can foreigners buy property in New Zealand?

In New Zealand, restrictions on residential property ownership apply to foreigners, except under specific circumstances. Citizens and permanent residents considered ‘ordinarily resident’ face no restrictions. Foreigners with a residence class visa, not yet meeting the ‘ordinarily resident’ criteria, may buy or build a home, subject to consent from the Overseas Investment Office (OIO).

Australian and Singaporean citizens or permanent residents have different rules. Generally, non-residents require Overseas Investment Office approval to purchase a house or land, with limited exceptions. Off-the-plan apartments in sizable developments may be acquired by foreigners under specific conditions.

Can us citizens buy property in New Zealand?

Certainly, individuals holding US citizenship have the freedom to invest in real estate within New Zealand. Nevertheless, there are particular guidelines and restrictions related to acquiring specific property types, including land exceeding 5 hectares or designated for forestry or farming. Approval from the Overseas Investment Office may be necessary in such cases as well.

Who can buy property in New Zealand?

Property ownership in New Zealand is generally accessible to both residents and non-residents, although specific considerations apply, especially for the latter group:

• New Zealand citizens and residents enjoy unrestricted access to property ownership without any limitations.
• Australian citizens also have relatively open access to purchasing property in New Zealand. However, for certain types of sensitive land, they may need to undergo the Overseas Investment Office process.
• Non-resident foreigners are governed by regulations outlined in the Overseas Investment Act. The acquisition of “sensitive” land, such as foreshore, lake beds, and areas adjacent to water bodies, may require approval from the OIO.
• Individuals holding a resident visa generally have the ability to buy property without OIO consent, but specific restrictions may still apply. It is crucial to review the conditions associated with the type of visa held.
• Long-term business visa holders, with a substantial duration of stay in New Zealand, may be exempt from OIO consent for certain property acquisitions.
• Citizens of Australia and Singapore may benefit from specific exemptions or streamlined processes under the Closer Economic Relations (CER) agreement for Australians and the Singapore-New Zealand Free Trade Agreement (SPA) for Singaporeans.

How to buy property in New Zealand

1. Research: Gain insights into the local property market, prices, and regulations. Consider engaging a real estate agent for professional assistance.
2. Finances: Establish your budget and secure financing. Most New Zealand lenders stipulate a minimum deposit of 20% of the property’s price.
3. Legal Assistance: Employ the services of a lawyer or conveyancer to navigate the legal aspects of the purchase. They play a crucial role in overseeing due diligence processes.
4. Property Search: Collaborate with a real estate agent to identify a suitable property. Take into account factors such as ownership type (freehold, leasehold, etc.) and land status.
5. Making an Offer: Once a desirable property is found, proceed to make an offer. This can be executed through various methods, including auction, negotiation, deadline, or tender.
6. Settlement: Upon acceptance of your offer, enter the settlement phase. This involves the transfer of property ownership, and the completion of any outstanding payments.

The process for buying a house in New Zealand is practically the same.

Buying an investment property in New Zealand

• Thorough Inspection: Conduct a comprehensive evaluation of potential properties by enlisting a qualified inspector. This ensures a thorough assessment of the property’s condition, identification of issues, and estimation of potential maintenance costs.
• Market Analysis and Growth Evaluation: Stay updated on trends in the New Zealand property market and assess the economic outlook. Evaluate the growth potential of the chosen location, taking into account how market conditions may influence your investment.
• Professional Engagement: Seek support from professionals, including real estate agents, lawyers, and property managers. A local real estate agent can offer valuable market insights and assist in property selection.
• Due Diligence: Perform due diligence on the property, encompassing a review of the title, existing tenancy agreements, and zoning regulations. This step ensures well-informed decision-making before committing to a purchase.
• Negotiation and Acquisition: Engage in negotiations with the seller upon identifying a suitable property. Upon agreement, proceed with the purchase process, involving the signing of a sale and purchase agreement and completion of necessary legal steps.
• Property Management: For non-resident investors, consider employing a local property management company. They can handle day-to-day responsibilities such as tenant management, rent collection, and property maintenance.
• Tax Considerations: Learn the ins and outs of New Zealand investment property taxes. Be sure you’re following all of the rules and regulations when it comes to local taxes by consulting a tax professional.

Buying land in New Zealand as a foreigner

1. Overseas Investment Act: New Zealand enforces regulations under the Overseas Investment Act, restricting foreign individuals and entities from acquiring sensitive land without approval. “Sensitive land” encompasses areas like foreshore, lake beds, and land adjacent to water bodies.
2. Screening Process: Acquiring sensitive land often requires undergoing a screening process by the Overseas Investment Office (OIO). Consent from the OIO is typically necessary before proceeding with the purchase.
3. Exemptions: Certain land transactions may be exempt from consent requirements. Residential land, for instance, may have distinct rules. It’s essential to consult with the OIO or legal professionals to determine if your intended purchase falls under an exemption.
4. Good Character Requirement: The Overseas Investment Act includes a “good character” stipulation for individuals seeking consent. This entails evaluating the background, history, and intentions of the buyer, and entities are also subject to this requirement.
5. Legal Guidance: Given the regulatory complexity, seeking legal advice when contemplating land purchase in New Zealand is highly advisable. A legal professional well-versed in property law and foreign investment can provide guidance throughout the process.
6. Local Council Rules: In addition to national regulations, various regions may have distinct rules regarding land use, zoning, and development. Consult the local council in your desired area to understand any additional requirements.
7. Financing: Explore financing options, considering that some banks and financial institutions may have specific criteria for lending to non-residents. Secure financing before making an offer.
8. Professional Engagement: Collaborate with a local real estate agent familiar with the market and regulations. Additionally, enlist a local lawyer specializing in property law to facilitate a smooth transaction and ensure compliance.
9. Due Diligence: Conduct thorough due diligence on the targeted land, including obtaining a Land Information Memorandum (LIM) report. This report provides details about the property, including any issues, consents, or restrictions.
10. Residency Considerations: While land purchase doesn’t grant residency, if residing in New Zealand is part of the plan, explore suitable visa options with New Zealand Immigration.

Is real estate in New Zealand expensive?

As per recent reports, the price of real estate in New Zealand witnessed a decline in 2023. The median home price in June 2023 was NZD 780,000 (approximately USD 480,102), ranking among the less affordable globally.

Notably, the average house price in New Zealand recorded NZD 908,853 (around USD 559,413) as of October 2023, marking a 5.63% decrease over the past 12 months.

The New Zealand property market has undergone a significant downturn, leading to substantial losses for homeowners and investors as the prices, which surged during the Covid pandemic, began a sharp decline amid rising mortgage rates.

It’s crucial to acknowledge the dynamic nature of the New Zealand property market (or any other market, to be honest), where prices can fluctuate based on factors such as location, property type, and other variables.

Where is the cheapest place in NZ to buy a house?

Identifying the most cost-effective places to purchase a home in New Zealand is contingent on a variety of factors, such as geographical location, prevailing market conditions, and individual preferences. Noteworthy regions include:

• Southland Region: Situated in the southern part of the South Island, Southland has gained recognition for providing housing options that are relatively more affordable.
• Manawatu-Wanganui Region: Cities like Palmerston North within this region are often deemed more budget-friendly when compared to larger metropolitan areas.
• Whanganui: Positioned on the west coast of the North Island, Whanganui is acknowledged for its affordability.
• Gisborne: Located on the east coast of the North Island, Gisborne has been noted for having housing costs that are comparatively lower.
• Northland Region: Certain areas in Northland, particularly those outside major urban centers, may present housing options with more favorable price points.

Nevertheless, real estate markets are dynamic, and prices are subject to change. Seeking advice from local real estate professionals or utilizing online property platforms is recommended for the latest information on affordable housing opportunities in New Zealand.

Property tax in New Zealand

In New Zealand, land is not subject to taxes; however, local property taxes, known as rates, are administered and collected by local authorities. These rates contribute to funding local services and infrastructure. Non-resident individuals are obligated to pay income tax on their New Zealand-sourced income, which includes rental income.

Deductible expenses from gross rental income encompass rates, insurance, mortgage interest payments, agent’s fees, repairs and maintenance, legal fees, and depreciation allowance. Gains from real property sales typically do not incur taxes in New Zealand. These gains are only subject to normal income tax rates in specific situations, such as when dealing with land as a business or if the property was acquired with the intent of resale.

Other fees for purchasing property in New Zealand

Real estate agents in New Zealand typically charge a commission ranging from 3.5% to 4% of the transaction cost, plus 15% GST. This fee is generally borne by the seller.

If you opt for the services of a conveyancer to assist with legal paperwork and requirements, the fee is usually around NZD 1,500 (USD 923). Buyers are responsible for covering this fee.

When acquiring a property, buyers are required to pay a registration fee of NZD 80 (USD 49) for each property transfer.

It is advisable to secure insurance coverage for your property and its contents. The insurance cost varies based on the property’s value and the specific coverage selected.

What are the requirements for purchasing property in New Zealand

Several criteria, including residency status, nationality, and the sort of property one desires to purchase, impact the process of acquiring property in New Zealand. While Australian people have fewer limitations on buying property, citizens and residents of New Zealand generally enjoy more flexibility to do so.

When dealing with sensitive land, non-resident foreigners may need approval from the Overseas Investment Office. Classification and type of property impact the application process for OIO approval.

During the process of acquiring property, it is important to attend to numerous vital details, such as securing funding, consulting with attorneys, understanding tax consequences, obtaining insurance, conducting surveys, ensuring building inspections, connecting utilities, and obtaining approvals from local authorities. For a smooth journey through the regulatory maze, it’s crucial to use local experts like attorneys, realtors, and financial planners.

What are the common mistakes to avoid when buying property in New Zealand?  

1. Inadequate Due Diligence: Thorough research and due diligence are imperative before making any property purchase. This involves understanding various property titles, including freehold, leasehold, cross lease, and unit title, along with their respective advantages and disadvantages.
2. Delaying Legal Consultation: A common mistake is neglecting to involve a lawyer early in the process. Seeking legal advice and having a lawyer review all pertinent documents and agreements before committing to a purchase is crucial.
3. Hasty Decision-Making: Succumbing to the excitement of making an offer and acting hastily without proper preparation can lead to errors. Taking the necessary time to comprehend the property, assess the market, and understand the terms of the agreement is essential before reaching a decision.
4. Overlooking Future Needs: Future needs must be considered when acquiring a property, taking into account factors such as location, property type, and potential for resale or rental income.
5. Disregarding Professional Assistance: Underestimating the value of professional guidance, whether from a real estate agent, property manager, or home builder, can result in costly mistakes. Seeking expert advice and assistance throughout the buying process is of utmost importance.

What are the financing options for buying property in New Zealand?

• Mortgages: New Zealand lenders can normally give non-resident buyers money for their property purchase. Remember that non-resident borrowers sometimes have a lower maximum loan-to-value ratio and different lending standards.
• Pre-Approval Process: Seeking pre-approval from a New Zealand lender before initiating a property search is a recommended step. This process helps determine the maximum loan amount and establishes a clear budget for the property search.
• Guidance from Advisors and Brokers: Consulting with financial advisors and mortgage brokers specializing in cross-border transactions is valuable for foreign buyers. These professionals can assist in securing favorable mortgage terms and navigating the intricacies of the lending system in New Zealand.
• Deposit and Fund Transfer: Foreign buyers typically need to provide a deposit, and the funds for the property purchase must be transferred to a New Zealand bank account. Consideration of currency exchange rates and potential transfer fees is essential when transferring funds internationally.

What are the benefits of buying property in New Zealand  s a foreigner?

New Zealand stands out as an appealing destination for property investment due to several factors. To start with, investors may rest easy knowing that the real estate market is strong and steady. Beautiful beauty, from scenic landscapes to coastal areas, often surrounds the country’s properties, making living there appealing.

Investors in New Zealand can explore diverse options in the property market, including residential homes, rural properties, and commercial real estate, allowing for effective portfolio diversification. With a history of moderate to strong capital growth in certain regions, New Zealand offers potential for favorable returns on property investments. The country consistently ranks high in global quality of life indices, offering a peaceful and high-quality living environment.

The ease of doing business is notable, thanks to a well-established legal and financial system that simplifies the property-buying process for foreigners. Additionally, the English-speaking environment facilitates communication and integration for international buyers. For those considering property as an investment, there’s the prospect of earning rental income, particularly in areas with high demand.

While property ownership itself doesn’t automatically grant residency, it can be a strategic step toward meeting criteria for certain visas or residency options in the future. New Zealand’s commitment to the rule of law and respect for property rights ensures a secure and reliable environment for property ownership.

What about the risks?

Like any real estate market, New Zealand’s property values can experience fluctuations influenced by economic conditions and interest rates. Investors should stay informed about regulatory changes, particularly regarding restrictions on foreign ownership, which may impact investment plans. Currency exchange risks should also be considered, especially for those purchasing property with a different currency.

Managing a property remotely presents logistical challenges, such as overseeing maintenance and addressing tenant issues, particularly for non-resident investors. Local market knowledge is essential to make informed decisions and navigate the region’s property values and growth areas. Additionally, the country’s susceptibility to natural disasters, including earthquakes, should be taken into account when assessing property locations.

Financing challenges, potential changes in tax laws affecting foreign investors, and adherence to legal considerations and ownership restrictions are critical aspects that require careful consideration for a successful investment venture in New Zealand.

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.