There are only three groups of people allowed to buy property in New Zealand: Kiwis, Australians and Singaporeans.
All other foreign buyers must apply for to the New Zealand Overseas Investment Office (‘OIO’) for government permission if they want to buy New Zealand property. Singaporean nationals are in a unique position in that they don’t need to make an application.
Singaporeans have an opportunity in New Zealand—especially if they are locked out of the expensive private market in Singapore.
Why can Singaporeans buy in New Zealand?
Singapore and New Zealand, as two small island nations in the Asia Pacific, have shared a longstanding diplomatic relationship for the past 50-odd years.
Singapore is New Zealand’s ninth largest trading partner—and a strong defence partner. The two countries also have a free-trade agreement (the ANZSCEP) which was signed in 2000.
In 2018, the New Zealand government introduced a law banning foreign buyers from purchasing residential property. But because of the free-trade agreements New Zealand has with their respective countries, Singaporean and Australian passport holders aren’t impacted by the ban.
More specifically, Singaporeans can buy (or build) an investment property or home to live in, in New Zealand, without applying for consent if you, your partner or spouse, are:
- A New Zealand citizen or hold a residence class visa and are “ordinarily resident” in NZ
- An Australian or Singaporean citizen.
You may also purchase properties in New Zealand if you are a Singaporean resident and live more than half the year in NZ.
NZ and Singaporean property markets
Why would someone from Singapore invest in New Zealand rather than in their home country? This article provides you with answers to this question.
Singapore and New Zealand are among the world’s most unaffordable property markets, according to the Demographia International Housing Affordability Report. However, there are six key differences between the two markets. Taken together these differences make New Zealand the more attractive market to invest for Singaporeans.
Doing Business in New Zealand, transparency
New Zealand consistently ranks as one of the easiest countries in the world to do business in. In the World Bank’s Doing Business 2023 report, New Zealand ranked first overall, ahead of Singapore, Hong Kong SAR, China, and Denmark.
New Zealand scored well in all of the Doing Business indicators, but it was particularly strong in the areas of starting a business, dealing with construction permits, and getting electricity.
According to Transparency International’s 2022 Corruption Perception Index, New Zealand ranks 1st out of 180 countries, with a score of 88. This means that New Zealand is perceived to be one of the least corrupt countries in the world.
New Zealand properties give you better yield
Residential property investments in New Zealand gives you a better rental yield and capital growth.
Rental Yield
The rental yield of a residential property is the annual rental income divided by the purchase price of the property. It is a measure of how much income an investor can expect to generate from their investment.
The rental yield of residential properties in New Zealand, based on data from the Real Estate Institute of New Zealand (REINZ) from 2010 to 2023 has varied between 4.5% and 5.5%. However, there has been a slight downward trend in recent years, with the average rental yield in 2023 estimated to be around 5.0%.
The rental yield of residential properties in Singapore from 2010 to 2023 has ranged from 3.5% to 4.5%. In recent years, there has been a slight upward trend in rental yields, with the average rental yield in 2023 estimated to be around 4.7%.
The rental yield in New Zealand properties is about 1% higher than Singapore rental properties.
Capital Growth
The capital growth rate of New Zealand residential properties from 2010 to 2023 is estimated to be around 6.1% per year. This is based on data from the Real Estate Institute of New Zealand (REINZ), which shows that the median house price in New Zealand increased from $370,000 in 2010 to $945,000 in 2023.
The capital growth rate of Singapore residential properties from 2010 to 2023 is estimated to be around 5.3% per year. This is based on data from the Urban Redevelopment Authority (URA), which shows that the private residential property price index has increased by 106% over the past 13 years.
The capital growth in New Zealand is also higher than the capital growth in Singapore.
Freehold in New Zealand versus leasehold in Singapore
Apartments in Singapore come with a 99-year ground lease.
This means you don’t own the land beneath the building; it’s rented to you by the government for one year short of a century.
But what happens after this lease is up? The Singaporean government doesn’t currently appear to have an answer.
In NZ most properties are “freehold” or “unit title”. This means that the owner, owns both the house and the land underneath it in perpetuity. Investors generally don’t have to pay a ground lease, and don’t have to worry about what happens when the ground lease.
In New Zealand, Singaporeans can buy a house or townhouse, not just an apartment
Singapore is known as a city state and has a land area of just 719 kilometres squared.
For context, all of Singapore is only about the size of central Auckland (New Zealand’s largest city). But there are 5.7 million people living in Singapore – more than the population of NZ.
Because there are so many people living in such a small land area, Singaporeans primarily live in high-rise apartments. Standalone homes and townhouses cost significantly more money.
But in New Zealand, because there is 366 times more land, there is a much wider variety of properties available. Fewer people live in apartments -instead New Zealanders primarily live in standalone houses and townhouses.
This means Singaporeans are able to purchase a standalone house or a for significantly less than they could in Singapore.
Investing in New Zealand can be a great opportunity for a Singaporean national, who may find themselves locked out of their own property market.
For instance, it’s possible to buy a 4-bedroom standalone house in New Zealand for ROUND NZ$1,200,000, a comparable house in Singapore could cost $3 million in Singapore.
What properties should Singaporeans invest in?
Just like everyone else buying property in New Zealand, Singaporeans have the choice between investing in existing properties or new-builds.
Recently, new tax laws have meant that all investors purchasing existing properties will pay significantly more money to the government. These changes are around how the tax is calculated. The largest change is that investors can no longer deduct their mortgage interest costs when calculating their taxable profit.
This means property investors purchasing existing properties will be taxed as if they don’t have a mortgage to pay, despite the fact that they still do.
However, new builds have a 20-year exemption for these new tax rules, whereby mortgage interest will be deductible when calculating taxable profit, which means there is a much larger incentive for Singaporeans to choose a new build investment, rather than purchasing an existing property.
The interest will be deductible even if the loans were taken in Singapore and interest is paid to Singapore lenders.
Rule of Law, enforcement
Like Singapore, New Zealand has established rules of law for investors. This will ensure your investment in investment properties in New Zealand will be protected. This is evidenced by the following factors:
- Strong property rights: New Zealand has a strong legal system that protects the property rights of landlords and tenants. This includes the right to own property, the right to lease property, and the right to enforce contracts.
- Fair and transparent rental market: New Zealand has a fair and transparent rental market, which is regulated by the Residential Tenancies Act. This Act sets out the rights and responsibilities of landlords and tenants, and it provides a dispute resolution process for resolving any disagreements.
- Stable government: New Zealand has a stable government with a strong track record of upholding the rule of law. This means that investors can be confident that their property rights will be protected and that they will be able to enforce their contracts.
In addition to these general factors, there are a number of specific laws and regulations that protect the interests of investors in rental properties in New Zealand. For example, the Residential Tenancies Act includes provisions that:
- Require landlords to keep their properties in a reasonable condition.
- Limit the amount of rent that landlords can charge.
- Give tenants certain rights to security of tenure.
- Provide a process for landlords to terminate tenancies, but only for certain specified reasons.
How we can help
We are an established Chartered Accounting firm with extensive knowledge and experience in advising clients on investment properties. We will be able to mitigate your risks by providing you reliable information and advice at time of purchase and support you during the tenure of ownership of your property.
We are well networked with reliable property developers, mortgage brokers, property managers and other advisors to ensure you receive the best help when you buy residential investment in New Zealand.
We will be able to advise you on the right locations to buy your investment property, how to fund the purchase, network you with the solicitors who can advise on your purchase and link you with reliable property managers. We will also ensure all your future compliance with your New Zealand tax responsibilities.
We do not offer investment advice or opinions, and we are not liable for any information contained in this material. Individuals are urged to conduct their own thorough research, seek professional advice, and assume full responsibility for their investment decisions. We do not claim ownership of the content presented in this article, and it is being shared with the author’s permission. This article belongs to Daran Nair of Greenlane CA Limited, NZ.
