Why Aussie investors should consider New Zealand property
Australia’s average property value has fallen during 14 out of the last 16 months. Average values in Sydney and Melbourne have also taken a beating, dropping by 10.4 and 9.1 per cent respectively over the year to March 2019.
This data from research firm CoreLogic paints an unfortunate picture for property investors in the country’s largest markets, who will no doubt be looking for opportunities to diversify as a result.
Here are four reasons why these investors should consider opportunities in New Zealand’s fast-growing property market.
1. Solid price growth
While Australia’s property values are trending downwards, New Zealand’s are doing the opposite.
Real Estate Institute of New Zealand data shows that the national median property price has gone up by 5.7 per cent during the year to March 2019. Auckland’s has dipped slightly during this time, while prices in other cities like Wellington (16.3% increase) and Dunedin (11.9% increase) have rocketed upward.
2. Better rental yields
The average gross rental yield for residential property in an Australian capital city is just over 3%, SQM Research estimates show. This makes it near impossible to find cash flow positive investment property in Australia unless you go rural.
On the other hand, Real Estate Institute of New Zealand data shows that some Auckland suburbs have far higher average yields. Papakura, for example, has an average yield of 5%, according to REINZ data. In centres further south, like Wellington, Christchurch, and Dunedin, those numbers get even higher.
Several areas throughout New Zealand offer unique property opportunities.
3. Less supply, more demand
Australia consented almost 19,000 houses in February 2018 alone, while NZ consented just 2,412. This month is fairly typical for both countries, with Australia regularly consenting around eight times more homes than New Zealand despite having a population only five times the size.
This means there are fewer homes in New Zealand and more demand – a fact that helps keep prices increasing here.
4. Tax benefits
New Zealand’s tax system is very accommodating for property investors. Here in New Zealand, there’s no stamp duty, land tax, purchase tax or capital gains tax payable – as long as the property is held for at least five years (at the time of writing). However, you may still have to pay capital gains tax in Australia.
You’ll also only have to pay tax on any investment income once, as New Zealand and Australia have a comprehensive double-tax agreement. In some cases, you may even be able to claim losses on New Zealand investment property twice, to reduce your taxable income in both Australia and New Zealand.
If you’re keen to invest in New Zealand’s booming property market, you’ll need a specialist accountant to make sure you’re crossing your t’s. Book a free consultation with the team at Property Tax Returns to get started.