Purchasing Permanent Accommodation
You do not need to be a New Zealand citizen to buy property in New Zealand. Many foreigners purchasing permanent accommodation, including rental properties, and there are no restrictions on the types of properties they can buy.
Buying conditions are the same as they are for Kiwis. Generally, you will buy a house based on how much money you have for a down payment and how much you have available each month after expenses to make your mortgage payment.
Financing for the majority of your purchase will be arranged through a bank or mortgage brokerage such as the following:
- ASB Bank – http://www.asb.co.nz/personal/home-loans
- BNZ (Bank of New Zealand) – http://www.bnz.co.nz/
- Westpac – http://westpac.co.nz/
- The National Bank – http://www.homebuyerscentre.co.nz
- KiwiBank – http://www.kiwibank.co.nz/personal-banking/home-loans/
- Mike Pero Mortgages – http://www.mikepero.co.nz
- The Mortgage Lender – http://www.themortgagelender.co.nz
These are just some of the many banks and mortgage brokers available in Auckland. There are many, many small, independent contractors as well.
Rates as of this writing (March 2011) range from 5.2% up to 12.5%. Of course, it’s best to shop around to determine where you can find the loan that’s right for you.
It is recommended to visit a bank or mortgage company and meet with a professional to assist you with the application process and help you decide what kind of loan you need. You can even do this before you look for a home so you will be pre-approved to purchase any home up to a certain price point.
Most banks require a cash down payment, known as a deposit, of at least 20% of the property value, but you can borrow up to 100% if you meet certain conditions, including purchasing private mortgage insurance. Regardless of your down payment, you will need to demonstrate your monthly income and expenses to prove that you can afford the payments on your property. The higher the down payment, the less income you will need.
The Purchasing Process
After determining how much house you can afford and what type of mortgage is right for you, it’s time to start house hunting. Determine where you want to look and start shopping — you can find advertisements in the Herald Homes section of the New Zealand Herald newspaper, the Property Press and online at websites like http://www.realestate.co.nz under “Property.” Speak with agents and visit Open Homes. Make sure to visit any property you plan to buy at least two times, at different times of day, before you make an offer.
Unlike other countries, real estate gents in New Zealand do not value property, which can be somewhat frustrating when trying to pin them down to a price. Most real estate agents want you, the buyer, to tell them what you think the house is worth, so it pays to do some research in advance. You can look up past property sales and other information online at http://www.qv.co.nz. Home sellers who sell privately are more willing to ask for what they want which removes a great deal of guess work. Often private home sellers will also arrange to have a registered valuation performed as well to ensure they are marketing at the best price.
You will need a lawyer to buy a house as buying a house in New Zealand is viewed as a legal transaction. A real estate agent is not necessary, as they primarily work for sellers only, but if you wind up working with one, the seller will pay their commission. A lawyer will work for you making sure the contract to purchase the house is fair to you and represents your interests, adding the clauses that you need, the chattels that are to be left in the house and the settlement date. Ask your bank or mortgage lender to recommend a good property lawyer.
New Zealand sellers typically sell their houses three different ways which they indicate in their listings. “By Negotiation” means they are willing to negotiate a price with prospective buyers. They may or may not advertise an asking price. “By Tender” means offering a blind bid based on what you think a property is worth, after which the highest qualified bidder usually wins the property. “Auctions” are very popular in New Zealand, and the way agents prefer to sell properties, because of the possibility of a bidding war inflating the price. But don’t let this scare you away. Properties don’t always sell at auction, and often times buyers do not get the price they want during the auction, but learn what buyers are willing to pay. It is possible to negotiate a price that is favorable to you after an auction.
It is highly advisable that any offer you make is subject to a satisfactory building inspection, satisfactory LIM report and subject to finance, this gives you several get out clauses. The buyer is responsible for paying for a building inspection and it generally costs around $400 but is well worth the money, especially given the high number of buildings in the Auckland region that have leaky building or foundations issues. The building report will also give you items that you can use in a negotiation if you wish to buy for lower than the asking price.
If you are serious about a property being sold at auction, let the agent know in advance. Some houses sell before auction, particularly if a buyer who doesn’t want to let it go makes an offer the seller can’t refuse. So if an agent knows you are serious, he/she will let you know if there is any interest. Don’t let an agent pressure you, however. You may be the only interested buyer on a house, but the agent will want you to believe you have competition. So keep your eyes and ears open.
One of the tactics used by agents, for all types of sales, is to have open homes that are only half an hour long, ensuring that the maximum number of people are in the home at the same time to create a, possibly, false sense of interest and urgency. Often they will also neglect to mention important information unless you specifically ask – for example, the property has had leaky building rebuild work done. Another of their dubious methods may be to say that they have other people waiting to offer if you can’t get your mortgage sorted in time. Agents in New Zealand receive their commission as soon as you pay your deposit, so they will try a large number of passive/aggressive, and sometimes outright rude, tactics to get you to complete a purchase as soon as possible. Try to stay calm throughout the process and not to feel pressured.
On auction day, you must be prepared to buy. You need to have your finances in order and will need 10% of the purchase price in the form of a check after bidding closes. Auctions can be emotional, so remember your limits and try not to get swept up in the moment. It may help to go to an auction for a property you are not interested in first, to get an idea of what to expect.
A property will not be sold at auction until the reserve price is met – this price will be above the opening bids. Once this happens, the auctioneer will announce that the property is “on the market,” meaning that whoever wins the bidding is committed to buy.
Once your offer is accepted and the paperwork goes through you will agree on a Settlement Day, before which you can perform a final inspection of the property. After that, it’s time to call the moving company and settle in.
New Zealand is a safe and stable economy, so there is no real risk in buying property other than the normal ups and downs of the property market.