New Zealand Property Today

An updated overview of property in New Zealand as a viable investment choice for overseas purchasers

The property market in New Zealand was one of the global markets heading for a slowdown, negative correction or even a crash if you believed the media reports of early 2006 – but according to a leading property market statistics agency New Zealand’s residential property prices are still rising and demand is still steady.

Confusing and contradictory reports in the press and on television seem to have been the cause of many enquiries received from our readers about whether or not New Zealand remains a good investment destination which is why we thought we’d produce an update on New Zealand property today for any investor or buyer contemplating their options.

Is property in New Zealand a good investment?

Currently New Zealand represents the very best in terms of mature real estate markets that offer property investors strong yet steady growth in underlying property prices, sustainable demand for rental property and decent yields as well as transparency in the property buying process and a stable economic and political environment in which to invest.

Specific reasons why New Zealand is a good investment choice include the fact that it recently came out on top of the Jones Lang LaSalle 2006 Real Estate Transparency Index proving that it is a mature market safe for investors to commit to.  Furthermore Quotable Value Limited, New Zealand’s largest property information company recently reported a 10.4% average gain in residential property prices in New Zealand between September 2005 and 2006 proving that the market is stable, strong and offers investors the chance to tap into good capital appreciation potential.

Naturally enough an investor has to consider who his potential rental or resale market will be and locate assets likely to reap the best in terms of gains and yields.  Certain towns and cities in New Zealand are considered to be suffering from an oversupply of property which will naturally affect both the rental potential of a piece of real estate as well as the resale value of it…to demonstrate this one can compare the rate at which Palmerston North and say Tauranga residential property prices have increased recently.  In Palmerston North where there is strong net migration, strong overall demand for property and something of a supply deficit prices grew at 16% in August 2006 whereas in Tauranga where the market is far less dynamic prices only increased by 1.2% thus proving that New Zealand can be a profitable market if investment choices are made carefully.

What does the future hold for the New Zealand property market?

According to the general consensus of opinion from the New Zealand Institute of Economic Research, activity in the residential housing market in New Zealand will contract between now and 2009 because of four main factors namely a slowing labour market, higher interest rates and mortgage repayments, moderating house price rises and higher prices for imported goods – this is in line with international predictions for established housing markets around the world, i.e., that they will slow in the medium term.  This makes New Zealand an attractive market for those investors seeking long term, stable capital appreciating and rental yield generating assets rather than those seeking an emerging market in which they can make swift and dramatic profits.

How does New Zealand’s real estate market compare to other countries’ property markets?

New Zealand compares favourably to all established housing markets in the world – and by established I mean in nations such as Canada, the US, Australia and the UK. 

The reason it compares so well is that it has the best property transaction transparency in the world, there are no capital gains taxes, no land taxes and no stamp duty to pay on real estate, it’s a nation with high levels of annual inward migration creating fresh demand for housing and it is a nation with a rapidly expanding tourism market that offers investors an alternative market to tap into and potentially profit from.

New Zealand does not compare well with emerging property markets where investors are often reported to make dramatic double digit capital gains in a few short months – investors seeking emerging market risk and reward should therefore look elsewhere.  New Zealand is suitable for the more cautious investor seeking a stable investment environment for the long term.