PROPERTY INVESTMENT
Data supplied by the New Zealand Institute of Economic Research
New Zealand has recorded a sustained period of strong economic growth over the past two decades – resulting from the economic restructuring and adopted macro economic policies implemented during the late 1980s/early 1990s.
The economy is now enjoying the benefits of long-term balanced sustainable growth - providing the broad New Zealand commerce and industry sectors with a high degree of certainty about the economic environment and improved international competitiveness.
Currently the economy is experiencing a period of inflation in the 4 – 5 per cent range – the direct consequence of strong economic growth and buoyant domestic conditions seen over the last eight years, compounded by ‘imported inflation’ of higher petrol prices and a falling NZ$ on the international cross-rate.
Gross Domestic Product
New Zealand’s annual average growth in real GDP in the year to March 2008 was 2.4 per cent, down from 2.6 per cent in March 2007. The New Zealand Institute of Economic Research forecasts the annual average real growth to be 0.5 per cent in the March 2009 year. The bounce back will be relatively quick with growth averaging 3.4 per cent in the four years between 2010 and 2013.
Exports
The volume of exports of goods and services is expected to grow by 2.0 per cent in the March 2009 year, and between 3 - 3.7 per cent in subsequent years. The New Zealand dollar has weakened significantly, especially against the Australian dollar, during the middle half of 2008.
Inflation
Annual consumer price inflation gained momentum, increasing to four per cent in the June 2008 year. The New Zealand Institute of Economic Research expects inflation to remain outside the Reserve Bank’s 1 – 3 per cent target range until late 2009 or early 2010. New Zealand property yields (rental income returns on the purchase price) are among the more attractive and obtainable anywhere in the world.
Property investment
New Zealand’s prosperous economic growth and productivity gains have provided an underlying strength to the property investment market throughout the majority of the past two decades. Long term sustainable economic and business growth create a positive outlook for property - with the commercial, industrial and tourism markets regarded as the property sectors offering the most potential.
New Zealand has an easily understood land title system based on the Torrens system of Land Registration. The Land Transfer Act 1952 provides a public register of land information. With its well developed legal and trading systems, New Zealand provides a strong diversification option for property investors internationally in a balanced rural and manufacturing economy, in which many major international corporates are already invested.
There is no stamp duty in New Zealand. New Zealand residents and offshore investors do not pay domestic capital gains tax on any profit made on passive investments. For more information on New Zealand's tax policies you can visit www.ird.govt.nz
Opportunities
With its well developed legal and trading systems, New Zealand provides strong diversification options for international property investors - offering a balanced rural and manufacturing economy, in which many major international corporates have already invested over a number of decades.
The $NZ
The high NZ dollar through 2007 and the start of 2008 placed pressure on New Zealand exporters. Following recent reductions of the official cash rate along with further predicted reductions, it is likely that the New Zealand dollar will decline marginally over the short to medium term future.
Swings in the value of the New Zealand currency point towards further volatility in the short to medium term. As long as New Zealand’s Reserve Bank maintains a relatively high interest rate environment it is envisaged that the exchange rate will remain at above its long term average.
Country profile
New Zealand is a constitutional monarchy with a relatively stable, democratically elected parliamentary government. New Zealand has a legal system similar to that of Great Britain, Australia and Canada. It does not have the added complication of separate state and federal laws. The judiciary is completely independent of Parliament.
The country’s political and legal systems are free from corruption. The attractiveness of New Zealand as a place to live and work is becoming a key factor in sparking international investor interest. As many countries experience internal strife and uncertainty, investors are looking to New Zealand as a safe haven for both investment and lifestyle.
Foreign investment opportunities
Foreign investors wishing to acquire commercial property in New Zealand can freely do so without the approval of the Overseas Investment Office (OIO) for most classes of property. For those properties requiring OIO approval, obtaining this approval for commercial property has historically not been difficult. There are no exchange controls affecting remittances to and from New Zealand and a free flow of capital in and out of the country is permitted.
Some multi-national investors choose to take a financial stake in property, while not actually becoming resident. While this is certainly possible, there are some conditions. As in many countries, some type of land can't be bought by foreigners without consent.
Potential investors will need regulatory consent if they want to buy:
Businesses worth more than NZ$100 million. For a business valued at less than NZ$100 million, but the shares or voting power is 25 per cent or more in the hands of foreigners, then consent is required.
Land size of more than five hectares: Farms must be marketed locally in New Zealand first, for at least 20 days before overseas buyers can have the opportunity to buy
‘Sensitive’ land such as property adjoining the foreshore, lakes, and reserves or an historic or heritage area.
Any size land on any of the country’s smaller islands.
Additional facts
For more information on these guidelines, visit the OIO website click here.
For more research information on the NZ Property market visit www.bayleys.co.nz/research
