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Investing in New Zealand — Is the Grass Greener?

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Investing in New Zealand — Is the Grass Greener? Property | international opportunities Investing in New Zealand — is the grass greener? 40 Property | international opportunities Investing in New Zealand — is the grass greener? The advantages of investing in New Zealand are clear: no stamp duty, strong rental demand and enormous potential for capital growth. But how easy is it to buy property in New Zealand? And is it worth the hassle of managing a foreign property? ew Zealand offers an attractive 1996). According to the New Zealand lifestyle, with clean air, close- Property Investors Federation, Nknit communities and thriving around 170,000 investors own 400,000 metropolitan centres set against a of these properties. backdrop of sprawling landscapes. Unemployment rates are steady With a growing population and at a low 3.8%, which, together with increasing rental demand, the country strong domestic demand and foreign is attracting Australian investors in investment, has been underpinning a droves; in regional areas, at least, strong economy. Australians are proving to be the The Reserve Bank of New Zealand is dominant force in the property market. increasing cash rates to try and dampen “We had a number of Australian growth – most recently, and largely investors, when the market was down unexpectedly, in June this year – but it six or seven months ago, coming into has had little effect so far. the market and buying in our provincial “I think it’s too early to see the effect towns,” says Murray Cleland, president of the interest rate rises we’ve had of the Real Estate Institute of New this year,” Cleland says. “The housing Zealand (REINZ). market in New Zealand traditionally “Now that values have shot up, that slows through the winter period, but activity has flattened off a bit, but I I think in the next month or two we imagine the investors that got in there will start to see the real effects of these earlier will be making some good interest rate rises.” capital gains if they chose to sell now.” Strong growth About New Zealand According to REINZ, median property Statistics NZ estimates that there are prices have more than doubled 4.18 million people living in New nationally in the last decade, climbing Zealand, in approximately 1.47 million steadily from just NZ$164,000 in May residential dwellings (up from 1.27m in 1997 to NZ$350,000 in May this year. 41 Property | international opportunities In the 12 months to May 2007 Wellington prices have shot up by 13.3% Cleland says that property values “We’re seeing in our figures that about Hamilton, a 90-minute drive south are on the increase across the board in 50% of markets are going up and 50% of Auckland, has shown very strong New Zealand, with national property are slightly decreasing,” says Cleland. growth of 11.8% and, on the South prices reaching a “milestone” median of However, Blue Hancock from Island, property values in Christchurch NZ$350,000 in May 2007. Quotable Value (QV), New Zealand’s and Dunedin have increased 12.4% and “The housing market is strong largest property valuer, says that despite 8.7% respectively. because we’ve high net immigration, some expectations that property prices In Wellington city, where property good job security, easy access to may level off, the overall market has prices have shot up by 13.3% in the 12 finance, and the costs of building new “continued to strengthen”. months to May 2007, “growth has been houses and acquiring the land for them “Sale prices in the main urban very strong,” says Cleland. have increased markedly in recent areas keep rising, driven by significant These upward trends are also years,” Cleland says. activity in the lower-value localities,” reflected in the provincial cities, with With property values rising, says Hancock. “Although immigration Wanganui (14.1%), Nelson (12.3%), Cleland believes that home ownership appears to be slowing, high levels of New Plymouth (11.3%) and Tauranga is becoming “an increasingly employment continue to contribute to (6.7%) all on the rise. remote prospect” for many “middle” sale price increases.” “But probably the star performer has New Zealanders. In May, QV reported growth in been the Southland region, where we’ve “The need for investors to invest national property values of 11.1% in seen huge increases of 36%,” Cleland in rental properties has never been the previous year, calculated over the says, referring to REINZ figures that greater,” Cleland says. three months ending May 2007, in reveal property values in the region comparison to the three-month period jumped from NZ$130,000 in May 2006 Hot spots ending May 2006. to NZ$177,000 in May 2007. ANZ monitors the supply-demand balance within the New Zealand property market by analysing the number “But probably the star performer has been of available properties and the number the Southland region, where we’ve seen of property sales in a region against the population growth of that area. huge increases of 36%” Statistics released by ANZ on May 27 reveal that Auckland and Wellington The residential property market has Cleland says the provincial and are currently the nation’s metropolitan remained buoyant in most of the main regional areas of New Zealand are hot spots, showing clear excess demand cities, with Auckland city’s property experiencing a period of strong relative to supply. They also reveal values up by 7.5%, QV reports, and, economic growth and development, that the majority of other regions according to Statistics NZ, the average and is now “leading the residential throughout the country are showing weekly rental was NZ$275 in 2006, house price growth tables”. early signs of a market that is set to – significantly above the national median Don Nicolussi, director of property move in favour of buyers. weekly rent of NZ$201 per week. investment strategist Cashflow 42 Property | international opportunities Properties, says there are excellent investment opportunities available to those who are willing to look in Median property prices regional locations. have more than doubled “We try to focus on regions with nationally in the last decade! strong economic fundamentals,” says Nicolussi. “We live in Invercargill, and we’re surrounded by some great opportunities. Annualised capital growth for Invercargill was around 25% in the past 12 months and there’s no sign of a slow-down.” Investing in Invercargill Invercargill, New Zealand’s southern- most town, is the commercial hub of the agricultural region Southland. In the growing regional city, population 50,000, investors can still access genuine cash-flow positive opportunities. “Even though there has been significant growth in property here in New Zealand, there’re still plenty of opportunities available, such as in Invercargill,” says Nicolussi. “Rental visitors to the city. “In the early 1990s, yields are a lot higher than in Australia Invercargill had the highest rate of Exchange rate at the moment.” population decline of any city in A two-bedroom unit in the city New Zealand or Australia,” says Tim The Australian dollar is currently centre is currently on the market for Shadbolt, Mayor of Invercargill. worth NZ$1.1043*, which NZ$95,000 and a three-bedroom house In the 1960s, Keith Richards of The effectively gives you a 10% in tidy condition is NZ$160,000. Just a Rolling Stones made the infamous discount when purchasing a 20-minute drive south of Invercargill, comment, when passing through property in New Zealand. Keep a three-bedroom house is asking Invercargill, that it was the “arsehole in mind, however, that your NZ$101,000, while a two-and-a-half- of the world”. Shadbolt, however, has investment is vulnerable to dollar bedroom house in nearby Bluff will set employed drastic measures to reverse fluctuations – so if the Kiwi dollar you back just NZ$86,000 – with a rental the negative view of the region. weakens, so does the effective assessment of NZ$140 per week. The combined coffers of the Property values in Invercargill are Invercargill City Council, the value of your property. Visit the sharply moving upwards after the town Invercargill Licensing Trust and the Reserve Bank of Australia website fought back from a declining population Community Trust of Southland (www.rba.gov.au) to access up-to- in the 1990s and transformed itself, unlocked an “unprecedented, date currency rates. using innovative ideas and community incredibly high level of community *Source: Reserve Bank of Australia as at 10 July, 2007 funding to attract residents and wealth”, Shadbolt says, and the $ 43 Property | international opportunities Acquisition expenses are much lower in New Zealand. There’s no establishment fee, no application fee and no mortgage stamp duty! Mortgage rates unique, integrated structure of that he has seen reverse a negative Current loan interest rates are Invercargill’s “Big Three” has since population trend. comparatively unappealing, with been instrumental in “everything that’s And, according to Nicolussi, the several recent rate rises – the most happened in this city”. growth is set to continue. “A New recent in June – forcing variable The Southern Institute of Zealand company is currently drilling mortgage rates up around 10%. Technology (SIT) began offering free for oil just outside town, and the New Zealand’s Official Cash Rate tertiary education to New Zealand tenders for drilling rights in the south (OCR) of 8% is the highest in the citizens under their Zero Fees scheme sea basin just off the coast near Bluff are developed world. in 2001, boosting student numbers soon to be announced,” says Nicolussi. from around 1,400 in 2000 to 4,500 “The Invercargill property market has “Interest rates in NZ are really bad in 2004.
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