Authored by the expert who managed and guided the team behind the New Zealand Property Pack
Everything you need to know before buying real estate is included in our New Zealand Property Pack
Are you considering investing in New Zealand’s real estate market? What are the legal steps, tax implications, and cultural differences you need to understand before taking the plunge? What challenges do foreign investors typically face, and how can you overcome them?
These are the questions we hear most often from foreign investors because we’re actively connected to this market. We’ve spent time working with local agents, developers, and investors, so we know what works—and what doesn’t. That’s why we’ve written this article: to provide a clear guide that answers the questions we get asked daily.
Our goal is to help you, as a foreigner, to navigate the property buying process with confidence. If you think there’s something we missed or want more details, let us know (please do!). Your input helps us refine and improve our advice for everyone.
1) Understand New Zealand's auction process, as it's a popular selling method and can help you secure a good deal
You might be surprised to learn that auctions are a popular method of selling property in New Zealand.
In recent years, auctions have accounted for a significant portion of property sales, with 12.7% of sales in September 2024 and 15.5% in September 2023 happening this way. This trend highlights a strong preference for auctions among both sellers and buyers.
One reason auctions are favored is that properties often sell for higher prices compared to private sales. For example, in Christchurch, auctioned properties fetched 5.6% more than those sold by private treaty. This makes auctions a lucrative option for sellers and a competitive opportunity for buyers.
Auctions also attract a diverse range of buyers, including first-home buyers, who are increasingly attending auctions in regions like Hawke’s Bay and Auckland. This growing interest shows that auctions are becoming a preferred method for many, offering transparency and efficiency.
By understanding the auction process, you can better navigate this competitive environment. Familiarizing yourself with how auctions work can give you an edge, potentially allowing you to secure a property at a favorable price.
In New Zealand, auctions are not just about the sale; they are a social event, often held on-site, where the excitement is palpable. This atmosphere can sometimes lead to buyers making quicker decisions, adding to the dynamic nature of the process.
2) Consider properties for short-term rentals in New Zealand’s tourist hotspots like Queenstown and Rotorua for lucrative returns
Investing in short-term rental properties in New Zealand, especially in tourist hotspots like Queenstown and Rotorua, is a smart move.
In 2023, New Zealand experienced a tourism boom with over 2.96 million tourists visiting, nearly doubling the previous year's numbers. This influx of visitors brought a substantial economic boost, with international tourists spending over $10.81 billion during their stays. Such a surge in tourism means more demand for short-term rentals, especially in popular areas.
Queenstown's short-term rental market is particularly vibrant. A typical Airbnb listing here is booked for 292 nights a year, with an impressive occupancy rate of 80%. Hosts can expect an average daily rate of NZD416, leading to an annual revenue of around NZD113K. As of September 2024, there were 2,339 active Airbnb listings in Queenstown, showcasing the strong demand for accommodations.
Auckland is also seeing a boom in its short-term rental market. The city welcomed over 2.4 million visitors in 2023, marking a 47% growth compared to previous years. This increase in visitors has led to a rise in Airbnb listings, reflecting the city's thriving rental scene. Such trends indicate that investing in short-term rental properties in these areas could be highly profitable.
With New Zealand's tourism industry on the rise, properties in these key locations offer potential for lucrative returns. The combination of high occupancy rates and increasing visitor numbers makes these investments particularly attractive. For those looking to capitalize on the tourism surge, focusing on areas with proven demand is essential.
Sources: Road Genius, Airbtics, Zodiak
We did some research and made this infographic to help you quickly compare rental yields of the major cities in New Zealand versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you’re planning to invest there.
3) Avoid properties with leaky building syndrome in New Zealand, as they may need expensive repairs and impact resale value
In New Zealand, leaky building syndrome has affected around 174,000 homes, causing a major headache for homeowners.
Fixing these homes isn't cheap. Repair costs can range from $1,700 to $2,000 per square meter, covering everything from scaffolding to replacing cladding, windows, and doors. This makes it a hefty investment for anyone looking to buy or sell.
Real estate experts call it "the most expensive self-inflicted disaster in New Zealand history", and it's easy to see why. The financial burden is enormous, and it has left many homeowners struggling to resell their properties.
Some folks have even faced foreclosure because the repair costs are just too high. It's a tough situation, especially when you're trying to make a smart investment in the property market.
When considering a purchase, it's crucial to be aware of this issue. Leaky homes can seriously affect resale value, and the last thing you want is to be stuck with a property that's hard to sell.
So, if you're eyeing a property in New Zealand, do your homework. Check for signs of leaky building syndrome to avoid unexpected expenses down the road.
Sources: Archipro, LC Lawyers, Eye of the Fish
Our team came across this video featuring an in-depth case study on New Zealand’s leaky homes crisis, exposing the costly repairs and their impact on property resale values.
4) Don't underestimate New Zealand's climate and natural hazards, like earthquakes and flooding, as they affect property insurance and maintenance costs
New Zealand's unique climate and natural hazards, like earthquakes and flooding, significantly impact property insurance and maintenance costs.
In recent years, particularly in 2023 and 2024, natural events have led to substantial financial burdens. For instance, the Auckland floods and Cyclone Gabrielle caused damage estimated between $9 billion and $14.5 billion, directly affecting insurance claims and premiums. This means if you're considering buying property here, you should be prepared for potentially higher insurance costs.
Earthquakes are a frequent occurrence in New Zealand, with hundreds happening each year. While most are minor, the potential for severe earthquakes remains, as seen in historical data. This constant risk means that property insurance in high-risk areas is more expensive, reflecting the increased likelihood of damage. The 2023 Auckland floods and Cyclone Gabrielle also led to higher insurance premiums in affected regions, showing how natural disasters can drive up costs.
Moreover, the Ministry for the Environment's 2023 report highlighted the growing frequency and severity of extreme weather events due to climate change. This trend suggests that property values and insurance costs will continue to be impacted. As natural hazard risks increase, so do insurance premiums, making it crucial for property owners to consider these factors when planning for the future.
For those eyeing property in New Zealand, it's essential to factor in these natural hazards. The country's unique climate can lead to unexpected costs, especially in areas prone to earthquakes and flooding. Understanding these risks can help you make informed decisions about where to buy and how much to budget for insurance and maintenance.
Don't underestimate the impact of New Zealand's climate on property expenses. The combination of frequent earthquakes and severe weather events means that insurance premiums are likely to rise over time. This is something to keep in mind as you explore property options in this beautiful but unpredictable country.
Sources: Chapter Zero, Ministry for the Environment, NIWA
5) Invest in regions with upcoming infrastructure projects to maximize profit, as these often boost property values
Investing in properties near upcoming infrastructure projects can be a smart way to maximize profits.
Take Auckland, for example, where the City Rail Link (CRL) has already made a noticeable impact. Properties around CRL stations have seen a significant boost in value. The midtown Station site is undergoing urban regeneration, which is expected to create more residential and employment opportunities, further increasing land and property values. This is a clear indication that infrastructure projects can drive up property values.
Being close to train stations is another key factor. Auckland Council economists found that properties within a 500-meter walk-up distance from train stations enjoy a value premium, with the highest premium at around 260 meters. This means that proximity to the train network can significantly enhance property values, making it a crucial consideration for potential buyers.
Looking at the bigger picture, the New Zealand Construction Industry Report from 2024 highlights growth in the construction sector, fueled by investments in transport, energy, housing, and other infrastructure projects. These developments are expected to increase property values in regions where they occur. The National Infrastructure Pipeline, valued at over $120 billion, includes various projects that are anticipated to boost property values in areas with confirmed funding. This shows that strategic investments in infrastructure can lead to property value appreciation.
Real estate experts are also optimistic about property value growth in regions with upcoming infrastructure projects. For instance, the Southern region of the United States is projected to see significant home price growth, suggesting a trend that could be mirrored in other regions with similar developments. In Auckland, population growth driven by infrastructure developments like the CRL is expected to increase employment opportunities and commercial activity, further boosting property values. This indicates that infrastructure developments can lead to economic growth and higher property values.
In summary, investing in properties near upcoming infrastructure projects can be a lucrative opportunity. With the right timing and location, you can benefit from the increased property values that often accompany these developments. Keep an eye on regions with confirmed funding and strategic infrastructure plans, as they are likely to offer the best returns on investment. Infrastructure projects can be a game-changer for property investors.
Sources: City Rail Link, Interest.co.nz, Business Wire
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6) Focus on new builds or large development apartments in New Zealand, as foreign buyers are banned from purchasing existing residential properties
In 2018, New Zealand introduced a law that stops most foreigners from buying existing homes.
But don't worry, there are still ways to invest. You can buy new builds or apartments in big developments. This is a great opportunity if you're eyeing the New Zealand property market.
The Build-to-Rent sector is booming, with many new units popping up. This surge is thanks to government policies that make it easier for foreign investors to get involved in new projects.
New Zealand's focus on new builds is part of a strategy to keep housing affordable for locals. By channeling foreign investment into new constructions, the country aims to balance the market.
Investing in these new developments not only aligns with the law but also taps into a growing market trend. It's a win-win for both investors and the local economy.
So, if you're considering a property investment in New Zealand, new builds are your best bet. They offer a legal and promising avenue for foreign buyers.
Sources: Property Guides, LINZ, DLA Piper
Foreign ownership restrictions in New Zealand are clearly outlined in this video, focusing on the Overseas Investment Act and the ways non-residents can still invest in new builds and large developments.
7) Understand that New Zealand's zoning laws can affect property development potential and value
In New Zealand, local government zoning laws play a crucial role in shaping the property market.
These zoning laws determine how land can be used, directly influencing property values and development potential. For example, in 2024, New Zealand made a bold move to ease zoning restrictions, allowing for more housing development. This change was designed to support growth over the next 30 years, a significant shift from the previous three-year planning horizon.
Auckland, New Zealand's largest city, is a prime example of zoning laws' impact. Back in 2016, Auckland implemented a policy to relax zoning restrictions, which resulted in a construction boom and reduced housing costs. This success story highlights how zoning reforms can make housing more affordable and encourage development.
In 2021, a study on Auckland's upzoning effects revealed interesting insights. While upzoning increased the redevelopment premium, the overall impact on house prices varied. Properties that were underdeveloped saw a greater appreciation in value compared to those already intensively developed. This suggests that zoning changes can create opportunities for property value growth, depending on the site's redevelopment potential.
For potential buyers, understanding these zoning dynamics is key. In areas where zoning laws have been relaxed, there might be more opportunities for investment and development. However, it's essential to consider the specific zoning regulations in place, as they can significantly affect a property's future potential.
In summary, New Zealand's property market is heavily influenced by zoning laws, which can either restrict or promote development. Keeping an eye on these regulations can provide valuable insights into future property value trends and investment opportunities.
Sources: Planetizen, AUT Work Research, Auckland University
8) Time your purchase in New Zealand to market dips for better investment returns, as the property market is highly cyclical
New Zealand's property market is notoriously cyclical, with regular ups and downs.
Over the last three decades, Auckland's house prices have climbed by an average of 6.8% annually, while the rest of New Zealand saw a 6.0% increase each year. This pattern of peaks and troughs is something to keep in mind if you're considering buying property here.
Recently, the median property price in New Zealand has been rising by about 5.71% per year. However, Auckland is expected to see a 6% annual increase, compared to 5% for the rest of the country. These differences show how various regions can experience unique market cycles.
Investors who timed their purchases during market dips, like the one in May 2023, have enjoyed significant returns. Buying during a dip can minimize the risk of dramatic value falls shortly after purchase. The recent dip in 2023-2024 offers a strategic opportunity for buyers, as prices are expected to stabilize in 2025.
Understanding these cycles can be crucial for maximizing your investment. For instance, the 2023-2024 dip is seen as a prime buying opportunity, with experts predicting price stabilization by 2025.
Sources: Opes Partners, Najib Real Estate, 360 Property Management
We have made this infographic to give you a quick and clear snapshot of the property market in New Zealand. It highlights key facts like rental prices, yields, and property costs both in city centers and outside, so you can easily compare opportunities. We’ve done some research and also included useful insights about the country’s economy, like GDP, population, and interest rates, to help you understand the bigger picture.
9) Be aware of New Zealand’s "bright-line test" taxing profits on properties sold quickly, despite no capital gains tax
New Zealand doesn't have a general capital gains tax on property sales, which might surprise you.
Instead, they use the Bright-Line Test to tax profits from property sales within a certain timeframe. This test was introduced to tackle property speculation and discourage quick flips. Unlike a general capital gains tax, the Bright-Line Test specifically targets short-term sales, making it a unique approach in the property market.
The rules of the Bright-Line Test have changed over time. For example, starting in July 2024, the bright-line period will be reduced, and overseas properties will be included. This means if you sell a property within this new timeframe, the profit is taxable. It's a different setup compared to a general capital gains tax, which would apply to all sales regardless of how long you've owned the property.
Since its introduction in 2015, the Bright-Line Test has significantly impacted the property market. The extension from 5 to 10 years for the bright-line period indicates a shift in how properties are bought and sold. This change aims to deter speculators by encouraging longer holding periods, which could help with housing affordability.
For property investors, understanding these rules is crucial. The Bright-Line Test is designed to influence market behavior by making quick sales less attractive. This approach not only affects investors but also plays a role in shaping the overall housing market in New Zealand.
So, if you're considering buying property in New Zealand, it's essential to be aware of these rules. The Bright-Line Test is a key factor in the property landscape, and knowing how it works can help you make informed decisions.
Sources: Inland Revenue Department, Fundmaster, Fundmaster
10) Consider using property management companies in New Zealand, as locals often rely on them for handling rentals
In 2023 and 2024, the New Zealand rental market saw a surge in demand for rental properties due to household growth and the high cost of buying a home.
Buying a home was about 40% more expensive than renting, making renting a more attractive option for many. This trend was particularly beneficial for landlords who used property management services to find the right tenants.
These services were invaluable because they offered consistent tenant screening procedures, ensuring landlords found tenants who could afford long-term stays. This was crucial in a market where finding financially stable tenants was challenging.
Foreign investors often struggled with managing properties from afar, mainly due to New Zealand's complex rental laws. Local property management companies became essential partners in navigating these challenges.
Success stories, like those of investors Jamie and Nicole, highlighted how property management companies helped them handle the intricacies of the New Zealand rental market effectively.
Locals frequently use these companies to manage rentals, offering a valuable resource for foreign investors unfamiliar with the market. This insider knowledge can be a game-changer for those looking to invest in New Zealand properties.
Sources: Buildium, New Zealand Mortgage Solutions
11) Know that New Zealand property deals often require a "lim report" to uncover crucial information and potential hidden issues
In New Zealand, buying a property often means getting a "LIM report" (Land Information Memorandum), which is crucial for understanding what you're really purchasing.
These reports became a big deal around 2023 and 2024 because they started uncovering hidden issues like zoning problems or unapproved work. Imagine buying a house thinking it's all residential, only to find out there's a commercial structure that wasn't approved. That could lead to legal headaches or fines.
Homebuyers during those years found LIM reports essential for making informed decisions. They used them to check if a property was a good fit and to negotiate better terms with sellers. Real estate agents were also on board, urging clients to get a LIM report early in the buying process.
These reports aren't just paperwork; they're a tool to avoid surprises. For instance, if a LIM report shows a property is in a flood zone, you might think twice or at least be prepared for potential issues. It's like having a crystal ball for property pitfalls.
So, if you're thinking about buying property in New Zealand, remember that a LIM report is your best friend. It helps you see beyond the surface and make sure you're not walking into a money pit. It's not just about the house; it's about the land, the zoning, and any hidden quirks that could affect your investment.
Sources: Convey Law, Dentons, Realtor NZ
Don't buy the wrong property, in the wrong area of New Zealand
Buying real estate is a significant investment. Don't rely solely on your intuition. Gather the right information to make the best decision.
12) Explore investment opportunities in new developments through New Zealand's KiwiBuild program, which focuses on increasing affordable housing
KiwiBuild is a key player in New Zealand's affordable housing scene, especially in Auckland.
Since its start in 2018, KiwiBuild has delivered 2,335 new homes by 2024, with over 2,000 of these in Auckland. This focus is crucial because Auckland's housing market is known for its high demand and limited supply.
KiwiBuild homes are priced to be more accessible, with the average price in Auckland at $613,437, compared to the national average of $800,000. This pricing strategy has increased the number of owner-occupiers and helped shrink the private rental market, which would be larger without KiwiBuild's influence.
Even with challenges like high interest rates and inflation, the affordable housing sector is seeing more investment. Over half of survey respondents noted an increase in debt and equity investments, indicating a positive investment climate for 2025.
For those eyeing real estate, this could be a golden opportunity. The market conditions suggest that investing in affordable housing might be a smart move, especially with the favorable trends projected for the coming years.
Understanding KiwiBuild's impact can give you an edge in the property market, especially if you're considering investments in new developments. The program's focus on affordability and its success in Auckland make it a noteworthy consideration.
Sources: The Spinoff, ME Blog, GlobeSt
One of our partners shared a video where a homeowner details their experience with the KiwiBuild program, explaining eligibility, pricing, and investment opportunities in affordable housing.
13) Consider investing in energy-efficient homes, as demand for sustainable properties is rising, leading to higher prices and rental yields
In New Zealand, the demand for sustainable and eco-friendly homes is booming.
People are increasingly interested in homes that are not just beautiful but also kind to the planet. This shift is largely because both consumers and governments are prioritizing sustainability. As we move through 2023 and 2024, more homeowners and investors are focusing on making their properties energy-efficient and reducing waste.
Even the DIY & Hardware Store market is catching on, with a noticeable trend towards eco-friendly products. Shoppers are looking for items like recycled timber and energy-efficient appliances, showing a broader preference for eco-friendly housing options. This is not just about being green; it's also about cutting down on energy costs and reducing carbon footprints.
Investing in sustainable homes can be financially rewarding. These properties often have higher resale values, especially as energy costs rise and regulations become stricter. Certified green buildings are attractive to renters too, offering lower utility bills and healthier living spaces.
The New Zealand government is also playing a role by introducing minimum healthy home standards for rentals. This means landlords need to ensure their properties are energy-efficient, with proper insulation and no wind draughts, making them more appealing to tenants.
For those looking to invest, the trend towards sustainable and eco-friendly homes is a golden opportunity. There's a growing demand for energy-efficient properties, which can command higher prices and rental yields.
Sources: BCG, Renewable Power Insight, Statista
14) Understand Maori land ownership laws in New Zealand, as they may impose restrictions or obligations affecting property use and value
Understanding local Maori land ownership laws in New Zealand can give you a significant advantage when buying property.
Maori land might only make up 5.6% of New Zealand's total land area, but it holds a unique place in the property market with its own rules. In 2023, only 27.5% of Māori owned or partly owned their homes, down from 31.2% a decade ago, showing both challenges and opportunities in this area.
The Te Ture Whenua Maori Act 1993 is a key piece of legislation that governs Maori land. It has faced issues like the principle of immediate indefeasibility, which can make land transfers tricky. For instance, there was a case where land was transferred without following the act's rules, leading to a six-year litigation process.
Knowing these laws can help you navigate potential restrictions or obligations that might affect a property's use and value. This insider knowledge can be crucial, especially if you're looking at properties with Maori land status.
By understanding these nuances, you can make more informed decisions and potentially find opportunities that others might overlook. This could be particularly beneficial if you're considering investing in areas with significant Maori land.
Sources: DFAT, Beehive, RNZ, Auckland University Law Review
We made this infographic to show you how property prices in New Zealand compare to other big cities across the region. It breaks down the average price per square meter in city centers, so you can see how cities stack up. It’s an easy way to spot where you might get the best value for your money. We hope you like it.
15) Consider properties in New Zealand with renovation potential, as the strong DIY culture can lead to significant profit if you have the skills
New Zealanders have a strong DIY culture when it comes to home improvements.
This passion is evident in the steady growth of the DIY & Hardware Store market, which remains a significant sector despite minimal growth. Many homeowners are keen to tackle home improvement projects themselves, reflecting a deep-rooted cultural practice.
Between 2019 and 2022, the home improvement market in New Zealand grew consistently, reaching a market size of nearly 4.5 billion euros in 2022. This trend is expected to continue, with projections showing a 2.36% growth from 2024 to 2029, potentially reaching a market volume of US$16.55 billion by 2029.
Media reports often highlight the appeal of upgrading existing properties over buying new ones, especially as housing costs continue to rise. Renovations become a more attractive option for increasing property value, making it a smart move for potential buyers.
Real estate market reports emphasize the demand for properties with renovation potential, suggesting that these can offer significant profit opportunities for those with the skills or resources to undertake such projects.
In New Zealand, the DIY spirit is not just about saving money; it's about adding personal value and character to homes, making it a worthwhile investment for many.
Sources: Statista, Superior Renovations, Statista
While this article provides thoughtful analysis and insights based on credible and carefully selected sources, it is not, and should never be considered, financial advice. We put significant effort into researching, aggregating, and analyzing data to present you with an informed perspective. However, every analysis reflects subjective choices, such as the selection of sources and methodologies, and no single piece can encompass the full complexity of the market. Always conduct your own research, seek professional advice, and make decisions based on your own judgment. Any financial risks or losses remain your responsibility.