Buying property in New Zealand is a relatively painless process but there are some limitations and things to think about.
Mortgage finance
Generally non-residents can borrow up to 70% of a property’s value. For Kiwi citizens residing in the UK some lenders will go to 75% and for Kiwis living in Australia (and Australians) we have a few non-bank lenders that will go to 90% for properties in Auckland, Wellington, Hamilton, Christchurch or Dunedin.
Non-residents cannot get low-doc lending so we must be able to verify your income. This means either three consecutive pay slips and/or two years’ worth of tax summaries.
If you are thinking about buying property in New Zealand then you can start by applying for finance. Our online application takes about 10 minutes to complete and gives us 90% of what we need to get you started.
Apartment lending
Be very careful if buying apartments in New Zealand, especially off the plan. Banks are tough on apartment lending and this seems to catch out offshore investors. For example, you can only borrow 50% on apartments less than 50sqm, 50% on serviced apartments, and 50% on leasehold apartments. If you are a non-resident, the maximum you can borrow on apartments is 70% (80% for Australia.)
Foreign currency loans
If you are overseas you might be able to access a foreign currency loan. New Zealand interest rates are comparatively high so on the surface this might look like a good option. The thing to consider is that your asset will be in New Zealand dollars (earning NZD income) but your debt will be in a foreign currency. This leaves you exposed to changes in the exchange rate. If the NZD drops then you will get hit with a margin call on your loan (bank will ask you to contribute more capital.)
Buying property
You can sign a sale and purchase agreement from overseas. It makes sense to use a due diligence clause in the contract.
If you are not physically seeing the property then you’ll need a building inspection and possibly a registered valuation. We can arrange these for you. The cost of a building inspection is approximately NZD$400 and a valuation is NZD$500.
When it comes to signing mortgage documents and settling on the property, again you can do this from overseas. Your solicitor will email you the mortgage documents and property transfer forms. You will need to sign these in front of an attorney and then fax or email back and courier the originals. We use Home Transfer Centre for a number of our overseas clients and find this low cost and effective.
House insurance
In New Zealand house insurance is compulsory if you have a mortgage. The lender will require you to set this up, and this is something we can do for you.
Late settlement
More recently we’ve had a few clients overseas that have settled on their properties late. The interest-penalty for late settlement is around $150 to $200 per day depending on the value of the property.
New Zealand can look like a good place to invest, especially given the craziness going on elsewhere in the world. With property prices falling and the prospect of a lower currency, there are likely to be more investment opportunities in late 2010 and 2011.
