Eligibility for buying Property in New Zealand

In 2018 the New Zealand Government passed legislation to prevent most overseas buyers from buying real estate in New Zealand. The legislation was designed to slow down foreign capital pouring into an already overheated housing market.

If you are a New Zealand citizen living overseas, or a permanent resident residing in New Zealand, then the new law doesn’t apply to you and you are free to buy property. If you are overseas and need to borrow money, the property will be deemed for investment and the maximum loan to value ratio will be 70%, meaning you need a 30% deposit.

The same is true for Australian and Singaporean citizens who can purchase in New Zealand due to free-trade agreements with both countries.

Developers can apply for an exemption for their developments and foreigners can buy into these developments. 

Mortgage finance for overseas buyers is hard

As far as borrowing goes, banks are typically hard to deal with when it comes to foreign based income. They will only accept PAYE income and from reputable employers in reputable countries. If you are self-employed or a contractor, then it becomes very difficult to satisfy bank criteria even if you are a New Zealand citizen.

Rents in New Zealand will be too low to demonstrate servicing purely off that income so there will be reliance on offshore income to meet bank criteria.

Banks will shave foreign income by 20% to 30% before they calculate servicing and in New Zealand the ability to service a mortgage is tested at a mortgage rate of 7.00% with principle and interest repayments. Again, it will be deemed an investment property so a minimum of 30% deposit will be required.

Banks will be difficult to arrange finance through, so foreign buyers who are not citizens and that need to borrow some of the purchase price will need to get funding through non-bank lenders. This is typically at mortgage rates of 5.50%-7.50%.

Non-bank options can go as high as 80% LVR for New Zealand or Australian citizens working in Australia and the servicing criteria.

Check list for foreign buyers:

1. If you are buying an existing property you will need to be a NZ citizen (or Australian or Singaporean citizen.)
2. All foreigners can buy newly developed property that has an exemption to the rules.
3. You should have a minimum 30% deposit
4. To borrow from a bank your foreign income must be PAYE from a permanent job (not self-employed and not a contractor)

If you have questions about the above or want to chat through your own situation give us a call on 0800 21 22 30 (within NZ) or +64 09 376 9688 if you’re calling from overseas.

The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Squirrel shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of Squirrel. We recommend seeking professional investment and/or mortgage advice before taking any action.

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