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Last Updated: Dec 08, 2016




New Zealandís house prices continue to rise, but at a slower pace, amidst a decline in property demand. However, demand is expected to surge again in the coming months, after a 7.8-magnitude earthquake devastated the country in November 13, 2016, leaving many New Zealanders homeless.

Post-earthquake rebuilding is expected to bolster the housing market.

The nationwide median house price rose by 6.26% to NZ$515,000 (US$366,423) during the year to end-Q3 2016, a sharp slowdown from a year-on-year rise of 15.39% duringthe same period last year, according to the Real Estate Institute of New Zealand (REINZ). When adjusted for inflation, house prices rose by 6.07% y-o-y to Q3 2016.

During the latest quarter, house prices increased 3% (2.87% inflation-adjusted) from the previous quarter.

Despite the overall slowdown, all twelve regions continue to see rising house prices. Nelson/Marlborough recorded the biggest house price rise of 21.6% y-o-y in Q3 2016. Strong house price rises were also seen in Waikato/Bay of Plenty (17.6%), Wellington (16.1%), Northland (15.4%), Taranaki (14.8%), and HawkesBay (14.7%).

Modest to minimal house price rises were also recorded in Auckland (7%), Manawatu/Wanganui (6.9%), Otago(5.7%), Canterbury/Westland (3.4%), Central OtagoLakes (2.7%) and Southland (0.3%).

Auckland has the countryís most expensive housing with an average price of NZ$825,000 (US$586,988), followed by CentralOtagoLakes, with an average price of NZ$694,500 (US$494,137) and Wellington, with an average price of NZ$480,000 (US$341,520). In contrast, Southland has the cheapest housing, with an average price of just NZ$200,000 (US$142,300).

New Zealand saw spectacular house price rises of about 114% (82.6% inflation-adjusted) from 2001 to 2007. Then after a pause, there were four further years of substantial price rises 2012-2015. Because of this, housing in New Zealand has become really expensive, for a country with such a small population relative to its landmass.

New Zealand house pricesResidential construction activity is surging. In the first nine months of 2016, the number of new dwellings consented rose 14.4% to 22,217 units from the same period last year, according to Statistics New Zealand. Likewise, the value of new dwellings consented also increased 18.3% to NZ$893 million (US$635.4 million) in September 2016 from a year earlier.

New Zealandís economy is projected to expand by a modest 2.8% this year, after growing by 3% in 2014 and 2015, 1.7% in 2013 and 2.8% in 2012, according to the International Monetary Fund (IMF).

Analysis of New Zealand Residential Property Market »


RENTAL YIELDS
Last Updated: Aug 23, 2016



We find that rental returns on apartments in Wellington have now moved ahead of Auckland. This may reflect a jump in prices of larger properties. ďForeign buyers are mostly drawn to the Auckland areaĒ, explains Bill Sandston, a real estate lawyer.

In Wellington, the capital of New Zealand, rental yields range from 6.88% to 8.43%, with smaller apartments earning more.

In Auckland, rental yields on apartments range from 6.09% to 7.18%. Unfortunately, we were only able to sample smaller apartments, but these usually earn much better returns.

In Christchurch, our sample properties consisted of houses, not apartments. Houses tend to have lower rental yields, so the fact that we found low yields in Christchurch probably reflects the kind of property we looked at, rather than any objective difference.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: May 04, 2016



Rental Income: Rental income is taxed in New Zealand at progressive rates, from 10.5% to 33%.

Capital Gains: Capital gains are not normally taxed in New Zealand.

Inheritance: There is no estate duty payable in New Zealand.

Residents: Residents are taxed on their worldwide income at progressive rates, from 10.5% to 33%.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: May 04, 2016



Total transaction costs are relatively low at 4.23% to 4.80%, of which 3.5% to 4% (plus 15% GST) goes to the real estate agent as commission. The buyer pays the registration fees while the seller pays the agent's commission. Each party pays for their lawyers. There are no stamp duties. There are only two procedures needed to register a property and each procedure takes a day to complete.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jun 20, 2006



New Zealand propertiesNew Zealand law is neutral between landlord and tenant.

Tenancy Laws: The Residential Tenancies Act 1986 guarantees the rights of both parties and sets the parameters of their relationship.

Rent: Landlord and tenant can freely agree on the rent, and any increases are allowed provided that the landlord gives sufficient notice or there has been no rent increase over the last six months. A tenant can call upon a Tenancy Tribunal for rental assessment if he thinks the increase is excessive.

Read Landlord and Tenant  »



ECONOMIC GROWTH
Last Updated: Dec 08, 2016


Solid economic growth, but currency weakness ahead?

New Zealand gdp inflationNew Zealand is one of the worldís most open economies. Since the Asian financial crisis, New Zealand has experienced years of unbroken economic growth boosted by strong personal consumption.

New Zealandís economy is expected to expand by a modest 2.8% this year and by another 2.7% in 2017, according to the IMF. Economic growth was 3% both in 2014 and 2015, the strongest performance since 2007, according to the International Monetary Fund (IMF).

During the recent global crisis the economy contracted only briefly and mildly - by 0.4% in 2008. The economy grew slightly by 0.3% in 2009. New Zealand emerged swiftly from recession, after only five quarters of negative GDP.

The kiwi gained 13% against the US dollar in just 13 months toOctober 2016, after reaching a six-year low in September 2015. However in September 2016, the countryís trade deficit widened to NZ$1.44 billion (US$1.02 billion), up by 26% from a year earlier and the biggest trade gap since the series started in 1951. This could suggest future currency weakness.

The RBNZ recently reduced its official cash rate (OCR) to a record low of 1.75%, in the wake of Donald Trumpís US election win. Justifying the cut, RBNZ Governor Graeme Wheeler noted: ďPolitical uncertainty remains heightened and market volatility is elevated.Ē

If U.S. President-elect Donald Trump pushes through with campaign promises of a more closed approach to trade, New Zealandís trade-reliant economy will be adversely affected.

New Zealandís net external debt is low, at about 24.6% of GDP (2015-2016), slightly down from 25.1% of GDP in the previous fiscal year.

Unemployment stood at 4.9% in Q3 2016. From an average of 8% from 1990 to 2000, the countryís jobless rated dropped to an average of 5% from 2001 to 2015, according to the IMF.

In the third quarter of 2016 inflation stood at 0.4%, well below the central bankís target range of 1% to 3%.







  • Low transaction costs
  • Strong and stable economy
  • Neutral rental market
  • Low to moderate income taxes
  • Cheaper than ever before!
  • Yields OK
  • Market heading South
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $7,082 For a 120 sq. m. property, usually an apartment.
Rental Yield: n.a. For a 120 sq. m. property, usually an apartment.
Rent/month: n.a. For a 120 sq. m. property.
Income Tax: 0.94% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 4.52% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: n.a. Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

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