Situated in the south western Pacific ocean, New Zealand is a country of untold beauty, and while often associated with Australia they are actually some 2,000 km apart!  New Zealand  is fairly isolated with great distances to neighbouring New Caledonia, Fiji and Tonga.  The nation has a population of some 4.1 million, and covers just over 268,000 km2 - a vast area, with a relatively low population.

Introduction to New Zealand

New Zealand is a country which is steeped in history, from the discoverers of centuries gone by, to the Maori people who are still heavily associated with the country, often highlighted in tourist promotions.  The country itself is split into two main islands, and a number of surrounding islands, offering a mix of mountainous and lowland regions, and a climate which is often mild and temprate.  Such is the vast array of differing landscapes, the country has become a popular location for the movie industry - with many making use of the beautiful sites available.

New Zealand itself has  a vibrant economy, although there has been much work to ensure the country continues to grow.  Industry is dominated by agriculture with many products exported all around the world - an area in which New Zealand has a reputation second to none.

Over the last twenty years the country has made a significant change from a highly regulated market place to a more free trade principle. While initially causing some upset in the work force and taking some time to adjust to, the economy is now on a very firm footing,.  The “brain drain” of years gone by has also been reversed, with many expats returning as well as an increasing number of foreign visitors looking to relocate.

Property Market in New Zealand

While the economic environment in New Zealand has been a little unpredictable over the last few years, there are signs that the property market has further to go.  Annual increases of over 10% have been reported over the last few months, perhaps a sign of increased overseas interest in a country which has received much “free” publicity from a variety of movies shot there.

It has to be said that the authorities also have a large hand to play in the increased interest, due in the main to their free market approach and attract tax system which encourages both locals and expats to acquire property with as little “red tape” as possible.  The National Bank have recently been attempting to cool down what may turn out to be a run away property market, using the blunt interest rate tool which many countries opt for - the country has recently seem two quarter point interest rate hikes, with the national rate now standing at 8%.  

It is inevitable that rates of 8% will start to have an impact sooner rather than later, although there is concern that a controlled slowing of the market is becoming harder to arrange.  It may be that in the short term the property sector needs a shake-out, with some areas seeing increases of over 60% since 2004.  The next 12 months will be crucial for the future direction of the market, but inevitably something will have to give.

Buying Property in NZ

In what may be a surprise to many, New Zealand has one of the most developed and smooth running property markets in the world.  The system has had much use with over 75% of the New Zealand population owning their own homes, and has been welcomed by overseas investors and expats.

The system is heavily geared towards the involvement of local lawyers and estate agents, and while this thought may chill many would be investors, they seem to act very speedily.  While there are no restrictions as such to foreign investors, any property over 4,000 square meters in size will need prior permission - something which should not be hard to gain.

The purchase process itself involves the lodging of an official offer in writing prior to any funds changing hands. If the offer is accepted then the buyer will be expected to pay a 10% deposit to the seller, ensuring that they are serious about the transaction.  After this, a number of searches and checks will be carried out, and presuming that all is well, a final agreement will be signed, the balance of funds transferred, and the property has changed hands . Simple!

The expat population are very often drawn to the main cities such as Auckland, Christchurch and Wellington which as well as offering quality housing, offer employment and links with the outside world.  This intensity has often resulted in a number of hot spots and it is essential that local advice is take before even considering an offer.  As much of the housing is already owned by New Zealand nationals, this can often leave just a small “float” for the remaining investors - fashions change and prices can move quickly, you need to be aware of this.

Foreign visitors who are accepted as New Zealand nationals will not be held to any restrictions regarding property transactions, and will be treat in the same way as traditional New Zealand nationals.

Future Property Market for New Zealand

For a country which is so far removed from the rest of the world by distance, New Zealand has really prospered over the last few years. As mentioned earlier, the so called “brain drain” of 20 years ago has been reversed and the country is attracting significant numbers of skilled immigrants.

Not only does this significant influx of foreigners encourage and help to grow the economy, but it ensures a constant demand for housing.  As many of the “hot spot” areas have resulted in prices being pushed to unrealistic levels, we should start to see signs of demand spreading to other areas - maybe on the outskirts of the major cities.

Even though the country has seen interest rates rise to some 8%, the property market and the economy seem to have ignored the rising cost of finance.  It is hoped that the most recent change in base rates may result in a slowdown, but the signs have yet to appear. 

It may therefore be worthwhile holding off on any major property transactions until some of the heat is drawn from the market.  While that is not to say that there is value, even after the recent rise, the market needs to find a balance after such a marked revaluation. New Zealand offers much potential for those willing to wait a little longer.