Foreigner in New Zealand Property Market

Stamp Duty New Zealand

New Zealand is frequently voted one of the best places to live on earth and that was before coronavirus swept the globe. When the world recovers and we all return to some semblance of pre-pandemic normality, New Zealand will most likely retain this title, given its handling of COVID 19 – the low death rates and relatively minimal lockdown and economic disruptions.

I’m a foreigner so can’t invest in New Zealand property, right? Wrong. You can.

When we talk to foreign property investors, they often mistakenly believe that buying property in New Zealand as a foreigner is not allowed, meaning investors automatically overlook Auckland in favour of Sydney, Melbourne or London. The good news is that this isn’t actually the case and there are certain scenarios where foreigners can invest in New Zealand. But before we come on to that, why should you invest in New Zealand in the first place?

Why should you invest in New Zealand Real Estate?

We all know that New Zealand is a beautiful country, famed for its climate, diverse countryside, friendly, warm people, low population density and clean air. But what about investment economics? Do they make sense for foreign property investors? We’ll come on to this in more detail in other articles, but the fundamental reasons foreigners should consider investing in the New Zealand property market (or Auckland, to be more precise) are these:

  1. Supply and demand imbalance. Auckland has a huge supply and demand imbalance, so if you’re an investor, you should only buy property in Auckland rather than in other areas of the country.
  2. Property taxes for foreign investors are very favourable compared to other countries.
Auckland Skyline

What property can you buy in New Zealand?

Like many countries around the world, New Zealand has restrictions on foreigners purchasing real estate. Generally, only New Zealand citizens and residents are permitted to buy residential property to live in. However, there are certain exceptions where foreign buyers can purchase residential property.

Foreign buyers can purchase new build apartments for investment, but not to live in themselves (although there are some scenarios, albeit limited, where foreign buyers can purchase for owner occupation).

If you’re a foreign buyer, you can purchase apartments off-plan in large apartment developments if the development has one of three certificates. Each certificate carries different rules, obligations and rights.

Certificate Can buyFor Owner OccupationMust on sell*
Transitional exemption certificatex
Exemption certificatexx
Individual applicationx

*The Overseas Investment Office may set a timeframe within which the purchaser must sell the property.

Transitional Exemption Certificate

Foreign buyers may buy an apartment in a development that has a Transitional Exemption Certificate without needing any further consent. Their purchase must be the first sale of the property (i.e. not an assignment or re-sale property) and settle before 22 August 2023. There are no other restrictions–buyers can live in the apartment and do not have to on-sell it. The New Zealand government publishes a list of developments with Transitional Exemption Certificates on its website which you can read here.

Exemption Certificate

Foreign buyers may purchase apartments in large developments (i.e. 20 units or more) that have been granted an Exemption Certificate without needing to obtain further consent. Certain criteria and rules apply; buyers must purchase the property before construction of the flat is complete and buyers are not permitted to live in the apartment.

A developer is only permitted to sell 60% of the scheme to foreign buyers under the terms of the Exemption Certificate. The developer must maintain records and provide a copy of the certificate to purchasers before they enter into a sale and purchase agreement. The New Zealand government publishes a list of developments with Exemption Certificates on its website which you can read here.

Individual Applications

If a development does not have a certificate and a foreign buyer wants to buy an apartment that is over the 60% limit for an exemption certificate, it is possible to apply for a one-off consent. The development must have at least 20 apartments and have 1 or more multi-storey buildings as one development.

In this scenario, the buyer is not permitted to live in the apartment and, importantly, they must on-sell it within a timeframe set by the Overseas Investment Office. The fee for this consent is $NZ 2,040. In practice, the Overseas Investment Office does not typically ask investors to sell their property within a given timeframe. However, this does not mean they will not do so in the future.

If these requirements are not adhered to, purchasers may face significant penalties and may be required to dispose of the property.

New apartments - foreign buyers can invest in off plan apartments in New Zealand

Additional requirements you need to meet as foreign buyer

As a foreign investor buying property in New Zealand, you’ll also need to obtain an Inland Revenue Department (IRD) Number.

This is an 8 digit number you must-have if you wish to buy, sell, or transfer New Zealand property.  You must have an IRD prior to settlement.

To apply for an IRD number, you will need a New Zealand Bank account or, alternatively, have a Customer Due Diligence form completed by a New Zealand reporting entity to submit with your IRD application form. A list of reporting entities can be found on the government website here. It will not be possible to obtain a mortgage until you have a New Zealand bank account and an IRD number, meaning you’ll need to get your affairs in order sometime prior to settlement.

Recent tax changes

You may be aware that the New Zealand government announced tax changes in March 2021 that affect residential property investors in New Zealand. Crucially, newly built property is exempt from two of these changes:

  1. Property investors in new build housing are exempt from the extension to the bright line test.
  2. Property investors in new build housing are still able to deduct interest costs from their taxable income.

Exceptions for Singaporeans

Singapore nationals are not subject to these restrictions due to the Free Trade Agreement between the two governments. Singapore residents may apply for consent for a home to live in. Of course, certain rules apply and we’ll cover more on this in future articles.

Learn more about Investing in New Zealand

So, whilst there are certain restrictions for foreign buyers, it is still possible to invest in New Zealand and with its amenable tax structures, investing in New Zealand can be an excellent investment choice for many.

If you’re considering buying overseas property in New Zealand, we have written a detailed Buyers Guide specifically for foreign investors of off-plan property in New Zealand. We’ve also written a County Guide to New Zealand for those who aren’t familiar with the country.

Important notice:  PropTech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect.  You use the information at your own risk and accept no liability if you rely on this information.   PropTech Pioneer are not tax advisors, accountant, conveyances, lawyers or financial advisors.  You should seek independent advice from professionals before making any investment decision.