Why Invest In New Zealand?

Kathy's Blog

In the past two months I have been fortunate enough to spend time in both China and Singapore and could not help but compare their real estate markets with that of New Zealand.

I was aware, after having emigrating from South Africa to New Zealand, the benefits of investing in New Zealand property, such as no stamp duty, no capital gains tax and the well legislated and governed tenancy legislation.

However, after being exposed to other markets it just goes to show how fortunate we are in New Zealand with our investing and what a good place it is to do business in. In the World Bank Group's “Doing Business in New Zealand Report 2010", (http://www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/profiles/country/nzl.pdf) , New Zealand ranked 2nd out of 183 countries for ease of doing business!

Private ownership

One thing I have taken for granted is being able to own property outright. In China all land is owned by the Central Government and the concept of private ownership is no more than 30 years old. In Singapore approximately ninety percent of all land is also owned by the government and the main form of property ownership is via leasehold.

The majority of land and property in New Zealand is freehold. A very small percentage is leasehold and as an investor there is plenty of choice to buy only freehold. This does not mean there is not money to be made in both China and Singapore, and yes foreign investors have made and lost in both markets, however knowing you own the land outright does have some appeal.

Changes in Legislation

Property Taxes

New Zealand is one of the few countries in the world where there is no stamp duty, no mortgage stamp duty, no land tax, no property purchase tax and no capitals gains tax. The taxes that are in place do get changed with notice and consultation. For example recently the Companies Tax and the highest personal tax bracket tax was decreased for which there was warning for a long time period and had not been changed for a number of years. When I was in Singapore the government changed the rules regarding ownership of property 3 times in a period of 6 months, with no warning. This had a direct effect on first home buyers, investors and developers.

In China taxes on real estate investing include Sales Tax or what we refer to as GST or VAT, Deed tax, Stamp Duty and real estate tax even on your own personal home. For developers it gets even more interesting and they are liable for Land Value Appreciation Tax. In China each Province’s taxes are different and if you develop in different provinces you need to have separate legal entities for each province. The taxes are enforced differently in each province, and worst of all you cannot offset losses in one entity against the other, as it is for investing in NZ.

With New Zealand, the benefit of an easy tax regime is that no matter whether you are investing in Invercargill on the South Island, with its strong rental demand and strong cash flows, or Auckland with the opportunity to develop and increase cash flows, the tax legislation is all the same and all treated the same. Australian investors also receive excellent tax incentives from the Australian Tax department for owning New Zealand property. For Australians on the highest marginal tax rate owning New Zealand property can provide great tax benefits.

Foreign Investment in New Zealand is encouraged

I deal with a large number of overseas investors who enquire about investing in New Zealand and ask what restrictions there are.  I sometimes have to scratch my head and think maybe I missed out on something but there aren’t any, especially not if they are buying residential investment property which is mainly what I deal in.

Unlike other countries like Singapore, where if you want to invest, you need to first be a resident and like China you need to also be a resident or have a local partner.

The New Zealand Government welcomes overseas investment and buying from overseas is a lot simpler than it sounds. The New Zealand Government even encourages foreign investment due to the need to help meet our growing population's increasing demand for property. NZ is internationally recognised as being easy to do business with, and has an open, transparent business environment. To further encourage overseas investors it is often possible for them to raise finance in New Zealand.

Ease of doing business in New Zealand

One thing that really impressed me when buying my first investment property in New Zealand was the ease of doing it, and the openness and honesty of the people I dealt with as a new immigrant and pretty green to investing. I was told that you could literally buy and own a property in one day.

Coming from a country where stamp duty is involved like South Africa and Australia, this is impossible as you have to wait for the Government departments to process and charge you for the luxury of investing and selling property. In NZ there is no need to wait, as there is no stamp duty. Of course when a “red hot” deal comes along, as some agents like to call them, you don’t necessarily have to buy the property in just one day, but you do need your offer to go in immediately, and have as many few clauses in the offer as possible to protect you.

As Tina, the mortgage broker mentioned in the last blog, have your pre approval in place, and yes have 2 or 3 days for the lender to approve the property itself, but if you don’t have this when the “red hot” deal comes along, you will miss out, as sometimes approvals can take longer than expected and an agent with a cash offer will skip you.

Economically Stable

Why invest in New Zealand? New Zealand Legislation makes for one of the most competitive, fair and free economies globally to do business in. It lends itself greatly toward investment and in particular for foreigners investing in property. NZ has a strong positive population growth, which equates to high demand for rental property, with good rents attainable.

Having had a look at other country’s real estate markets and requirements, with regards to investing, has made me look back on the New Zealand market and note the benefits of investing in the country. Things work really well, the economy is stable and the ease and transparency of doing business here are huge positives. No getting bogged down with too much red tape.

Join me for a property investing education in Australia

I am honoured and privileged, to be attending and presenting at this year's Property Women's Annual Conference in Australia on the 13^th and 14^th of November 2010.

I can really boast about NZ and how fortunate we are, and what a great place it is, not only to invest in, but also to live in.

At the conference I will be sharing some of my secrets with regards to identifying and securing “red hot” deals and how to invest in cash flow properties in New Zealand.

Join me on the beautiful Gold Coast in Australia for Property Women's Annual Conference.  Find out more here!

Kathy Engelbrecht
http://www.houses4you.co.nz/

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