Published on 07 October 2005 at 07:49 pm
Filed under: Australasia:- New Zealand Property Guides » New Zealand for Property Investors
Property investment in New Zealand has made sound financial sense for the last one hundred years already, and with the effective economic changes successive governments have made in New Zealand over the last twenty years, the future health of the real estate sector is practically guaranteed!
Intense international property investor interest in New Zealand only took off in earnest a few years ago, but since then the real estate market has enjoyed substantial gains and a sustained buoyancy that has belied the global norm. In terms of the attractions offered by the property market for investors they are manifold and in some cases unique - read on to find out more…
One of the first attractions for property investors are the numerous taxation advantages of buying and owning real estate in New Zealand: -
Between 2000 and 2005 the average price for residential property in New Zealand increased by an impressive 70.6 percent. But what’s even more impressive about that figure is that if you sold your investment property to cash in your gains you would not be charged capital gains tax in New Zealand on that increase in underlying value.
Moreover, you would not have been charged stamp duty on the purchase in the first place making your discount to market value substantial when you compare like for like in the majority of countries worldwide.
These taxation advantages available to a real estate investor make the property market in New Zealand that much more attractive, but the attraction does not end there! The rate of depreciation claimable by an investor on his property is 4% and that rate is deductible on any property regardless of its age and becomes applicable from the date of purchase. This rate is far higher than the rate of depreciation deductible in Australia for example and has led more investors to examine New Zealand more closely.
And finally in terms of taxation advantages, there is no inheritance or estate tax in New Zealand making the purchase and ownership of property attractive to retirees, expatriates, second homers and of course, property investors.
New Zealand was always a popular spot with those seeking to retire away from it all or to escape to a brand new life but because of its geographic position - i.e., so far away from anywhere! - the numbers of those applying for immigration were steady and those buying property speculatively from overseas were even more limited. Any market growth was dependent on increases in the intrinsic wealth of the local population. That all began to change when the Lord of the Rings trilogy of films were released and the wider world got to see for themselves the inimitable, breathtaking and absolutely beautiful natural landscape of New Zealand. The films produced a flurry of tourist activity; the New Zealand tourist board took the lead and further promoted the country and very quickly the numbers of those seeking residency, investment and residential property, second homes and retirement homes shot up.
The entire success of New Zealand’s property sector cannot of course be attributed to the Lord of the Rings trilogy - rather the ongoing strength of the market sector is underpinned by the dynamic economic growth that New Zealand has enjoyed since transforming its economy into a free market economy that is globally competitive. This has resulted in substantial wage increases, impressive horizontal inward foreign direct investment and the creation of more job opportunities which in turn has made the local population far wealthier in real terms and forced the price of property up.
For property investors considering New Zealand for the first time, the attractions of the market sector are strong and sustainable demand for rental, resale and brand new property from a domestic market that is getting progressively wealthier, strong demand from overseas purchasers seeking a base or new home in New Zealand and numerous financial benefits that make buying, owning and selling property a potentially very profitable venture.
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