Why international buyers are focusing on New Zealand
New Zealand property attracts very strong international investment for a variety of reasons:
Commercial and industrial property returns in New Zealand are among the most attractive in the world. Quarterly monitoring of the New Zealand market is undertaken by MSCI, which compiles commercial property performance indices around the world, including total returns for a $16 billion New Zealand portfolio of investment-grade office, retail and industrial real estate.
These show average total returns (income plus capital growth) of:
11.3% currently and for the past 3 years
10.4% for the past 5 years
9.8% for the past decade
11.1% for the past 15 years
The New Zealand commercial property market is therefore providing a solid, long-run average return of around 10.5% a year. Income yields, predominantly between 5%-9%, are much higher than in many parts of the world. The New Zealand market is also less volatile than some other property markets and doesn’t exhibit sudden capital value swings.
Very low interest rates are the main market stimulant at present and this is likely to remain the case for the next few years because of current low levels of inflation in New Zealand.
No Stamp Duty and Limited Capital Gains Tax
A passive offshore investor does not pay any stamp duty on the purchase or sale of a property in Zealand. There is also no capital gains tax in New Zealand on any profit made on the sale of a property provided it has not been sold within two years of purchase and trading property is not your main vocation.
Favourable exchange rate
There has been a significant correction in New Zealand’s previously overvalued currency from a peak of US$0.90 in 2014 to current levels around US$0.65-$0.67 where it has been for some time. There has also been a significant depreciation of the New Zealand dollar against the Chinese currency. This has increased the affordability of New Zealand property for offshore investors and in combination with very low mortgage interest rates is contributing to the current strong foreign investment interest in New Zealand.
With its well-developed legal and commercial systems, New Zealand provides a strong diversification option for property investors in a balanced service, rural, manufacturing and tourism driven economy in which many major multinationals are already invested. New Zealand has been one of the world’s top economic performers in recent years.
In a global context, the New Zealand commercial property market is a relatively uncomplicated and its manageable size is regarded as an advantage by many offshore investors.
New Zealand has a stable, democratically elected parliamentary government, with elections held every three years. It does not have the added complication of separate state and federal governments and laws.
Stable Banking Sector
The financial system is sound and the banking sector is monitored by New Zealand’s central bank, the Reserve Bank, to ensure that stipulated capital, liquidity and funding buffers are in place. Many international banks operate in New Zealand and a number of Chinese banks have established branches in recent years.
New Zealand has a legal system similar to that of Great Britain, Australia and Canada. The judiciary is completely independent of Parliament. The political and legal systems are free from corruption and there is no civil unrest.
The attractiveness of New Zealand as a place to live and work is a key factor sparking international investor interest. Most parts of New Zealand are less than an hour’s drive from a stunning, unpolluted coastline and the South Island is internationally renowned for its mountainous beauty. With many countries over populated, struggling economically and facing security concerns, investors are looking to New Zealand as a safe haven for both investment and lifestyle.