New Zealand Property | Property laws

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Property laws

Investment in property has been recognized as the unfailing means of acquiring wealth. The phrase ‘safe as a house’ is clichéd. Yet, it is the only truth in the context of return on investment scenario. Return on investment in property is a slow process. However, it is an investment that never fails. History also testifies to the fact that investment in property is a minimal risk investment. The return from the property, services the investment. The net worth grows over time and generates income for further investments in property.

Like any other investment, Property investment is a skill which has to be learned. The investor must be aware that there are risks attached to any kind of investment. He must also consciously acknowledge the fact that during the process of investment the risks attached seem to be magnified. He must also accept that, the right choice of property, combined with considered management are absolute essentials in any property investment. Property investment is a serious business that requires the right kind of commitment.

Before actually launching into the purchase of a property, the investor must be clear as to the purpose of investment. If investment may be for:

Personal use
To buy and Let

The purpose will determine the type and location of the property. In the former instance property may have to be located close to the place of work or near an educational institution. The type of property may not per se be of importance. Its location may be important. In the latter case all aspects of the property assumes importance. It is a property purchased as an investment and the investor expects a return on property investment.

Investment Property should be selected keeping in mind the following environmental factors:

High employment area
Attractive buildings and surroundings
Public Transport facilities
High capital growth
Developing areas
Low maintenance costs
High demand by letting agents

The Return on Investment (ROI) expected will include factors such as

Appreciation of the asset
Regularity of rental income
Long term stable tenants
Care by property managers.
Tax benefits

Investing in foreign countries requires an understanding of the laws and systems as it impacts on investment by foreigners. It also requires an understanding of the socio-economic fabric of the country as it will have a bearing on the value of the property. Therefore, investing in property in a foreign land requires the investor to stay in the country for some time or a study of the socio-economic-demographic and political setup of the country in so far as it impacts on foreign investment in property.

Investment Environment in New Zealand

Who can acquire property in New Zealand?

Foreigners are permitted to acquire homes, units and town houses. House-land packages can be acquired if construction on the land has begun. Strata titled hotels and motel units in new developments can be purchased in new developments and newly completed houses in housing units can be bought provided total area purchased does not exceed 50% of built up area. This included redeveloped areas but does not include refurbished residential real estate.

Australian citizens do not require permission to acquire property in New Zealand, unless they are purchasing property through a foreign incorporated company. An Australian citizen with a foreign spouse need not obtain permission if he is purchasing property in zoned residential area as joint tenants. A foreign spouse of a New Zealand citizen would have to get permission to buy property in non zoned areas.

Foreigners do not require permission to buy business or commercial properties valued at less than $50 million. However, if they located in a sensitive sector or contain real estate or accommodation facility, permission must be obtained.

Restrictions on Foreigners

Foreign investors have a restriction on the size of land they can purchase. The size of land cannot exceed 4,074 Square meters unless specifically permitted by the District Registrar.

Foreign citizens buying property may enter into a contract subject to obtaining permission. A contract that does not have a stipulation to the effect will be treated as a defaulter under law. A foreign citizen wishing to acquire property in an auction must obtain prior permission of the Foreign Investment Review Board. Efforts are made by the FIRB to process such requests before the date of auction.

Foreigners who acquire residential land with permission to construct on it within a stipulated time must complete the process in time else, notify the authorities as to the reasons for delay.

Such reasons will be examined by the Overseas Investment Commission(OIC) and extension may be granted. Persons wishing to leave New Zealand but wanting to retain the property acquired during their stay must notify the Government and obtain the necessary permission. They are liable to prosecution if they fail to do so and they will also be put into untold difficulties in obtaining a return visa to the country. Persons desirous of moving home can exchange their home for another with the prior approval of the OIC.

The procedure for obtaining permission

A form called R2 form will have to be filled up for straightforward real estate applications. D1 forms will have to be used by developers wanting advance approval to sell up to 50% of the property to foreigners. The Urban Land Policy document or the General Policy guidelines can be consulted by foreigners regarding the procedures to be followed.

The applications are normally processed within 30 days of receiving statutory notice and another 10 are required by the OIC for communicating their decision. The time period can be extended up to 90 days.

Loans and Mortgages and property purchase processes.

An investor interested in a property must make an offer in writing to the seller and the same must be unconditionally accepted by him. All surveys, searches and pest inspections can be conducted by the investor during this period. Thereafter, he must enter into a formal contract and pay 10% of the purchase price at the time of signing the contract.

This is a non refundable deposit. A mortgage loan can be applied for and obtained at this point in the transaction.
The country has a smooth and sophisticated mortgage mechanism. Up to 90% of the purchase prices is allowable subject to limitations imposed by the income and expenses of the applicant. The mortgage repayment can never exceed 30% of the net of income and expenditure.
Once the finance has been arranged the final payment will have to be made to the vendor and the property must be registered with the land registrar.