Are you a foreigner considering investing in New Zealand? Here’s our guide the key points you need to know about the types of property ownership in New Zealand.
New Zealand is becoming an increasingly popular location for international property investors buying off the plan property. No stamp duty, no capital gains tax (although the bright-line test does apply) the ability to offset interest payments on your mortgage (this only applies to new build apartments), a housing demand and supply imbalance in areas such as Auckland and less than 2,000 cases of COVID-19 since the start of the global pandemic. These are just some reasons investors are now looking to New Zealand. Why not read our Investor’s Guide to Buying in New Zealand for more information, email [email protected] for your copy.
New Zealand has four primary types of property tenure; freehold, leasehold, unit title (also referred to as strata title/stratum estate) and cross lease.
Each title grants different rights, responsibilities, and restrictions to the owner. Foreign investors are only able to purchase specific new build apartments (you can read more here) which typically carry a Unit Title, but for completeness we cover all forms of property tenure.
Freehold (or Fee Simple) – This is the most common form of title in New Zealand. It is the ‘permanent and absolute tenure of land or property with the freedom to dispose of it at will’. The owner of a freehold property owns any building built on the land for an unlimited period of time. Easements may give rights to neighbouring owners or utility providers to use or pass over the land.
Leasehold – is the legal right to live in or use a building or piece of land for a period of time. Leaseholders do not own the land the property sits on. The owner of the leasehold property will have a lease with the freeholder (the landlord) stipulating how long the lease is for. Ownership of the property returns to the freeholder at the end of the lease. Typically, leaseholders will pay an annual rent (ground rent) to the freeholder.
Unit Title (Freehold Strata Title or Stratum Estate) – is the most common form of ownership in apartment buildings. Unit title holders are ascribed an apartment and have an undivided share of the ownership of the common parts (i.e. lobby areas, driveways, gardens etc). Membership of the Body Corporate is automatic. Annual fees are payable to the Body Corporate for the upkeep of common areas and services.
Cross Lease: Holding a cross lease ascribes two interests in the property – a share of the freehold title (with the other cross leaseholders) and a leasehold interest in the area of the building (typically the apartment) that you occupy. Leases are typically for 999 years. This form of title is similar to Share of Freehold in the UK.
Don’t forget, when you’re investing in overseas properties you must consider the factors that will impact the performance of your investment.
Property investment is complex and multiple factors dictate whether a property is a good is investment. Before making a commitment to purchase any property, be sure to run financial models so you have a really clear understanding of the likely performance of your property.
We hope you found this article useful, read in conjunction with our other articles on investing in New Zealand this should give you an understanding of the market. We’ve produced articles not just for New Zealand but also Australia and the UK, so make sure you take the time to consider all your options and make sure your investment is right for you.
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 is not a tax advisor, conveyance, lawyer, financial advisor or mortgage advisor. You should seek independent advice from independent professionals before making any investment decision.