What Does No Capital Gains Tax Mean For NZ Investments?

In most countries across the world, capital gains realised by individuals and companies are subject to a flat-rate tax on the sale of certain assets. It can be on buildings already constructed or undeveloped building like apartments, houses or land; real estate annuities or bare ownership. Even stocks in companies like shares or bonds, and goods like precious metals see capital gains.

In all cases, the capital gains consist of the difference between the sale price and the purchase price. Not all national legislations provide capital gains tax and most of them have different rates of taxation for individuals and companies, which governments across the world often use as a tool to attract investments.

New Zealand is one of these countries that have flexible laws regarding capital gain tax, which justifies its high position in the ranking of the top countries in terms of heritage. The country does not have a capital gains tax on the sale of stocks, bonds, and other equity investments. There is a formal law stating that real estate bought for the sole purpose of resale can be subjected to capital gains taxes, but this law has barely been enforced in the recent period. The Leftist party, which had proposed a new tax on capital gains a few years ago, has seen its worst performance ever at the election.

So the situation of No Capital Gains tax in New Zealand seems to be here to last. What does it mean for New Zealand investments? Is it encouraging the local economy or pulling it down?

A growing economy

In 1984, New Zealand embarked on a radical transformation. A pioneer of the welfare state, the country transformed herself into a laboratory of the market society. To the point that now all the “decision makers” of the planet give New Zealand flattering notes and urge the “backward” European countries to take inspiration from its example. The highly liberal policies of a small group of high-ranking officials triggered that great upheaval in setting a favourable taxation system, for example.

New Zealand has now one of the most open and dynamic economies in the world, working on free market systems. With an average growth of 3%, New Zealand is 4th in the ranking of the fastest growing developed countries. Driven by strong agriculture and growing tourism industry, New Zealand and the economic capital Auckland, in particular, are attracting more and more investors and entrepreneurs from around the world every year.

An investment-friendly country

New Zealand is economically healthy with a very low fiscal deficit and controlled public debt. Ranked “Best Country to Do Business” by the World Bank in its 2018 “Doing Business Report“, New Zealand is the ideal country to make your investments. In addition, the average return on investment is between 4 and 8% depending on the product, which allows a return on investment faster and higher than in France or any other developed country.

As non-residents, you can invest in new apartments, buying off-plan buildings with more than 20 flats. Each project can reserve up to 60% of the apartments and houses to non-resident owners, with some limitations related to the amendment of the Overseas Investment Act. It is not possible to live in the property purchased anymore and only rental activities are possible. New Zealand Services with select development projects accessible to non-resident and reliable owners. You might, however, want to go past the house facades and focus on the interior as Kiwis are specialists of washing house the home’s exterior and window cleaning. If you buy in sometimes unsafe Auckland, check the residential security and hire master locksmiths for your doors.

For now, the taxation of commercial properties is not in the policy of the new government and represents a very good alternative in New Zealand to any real estate investment, accessible to all. The best strategy remains to focus on stable assets and diversify the investment portfolio. Investment funds composed of commercial buildings successfully meet these 2 golden rules! The value of each fund is thus measured by the value of real estate acquisitions. The acquired properties are located in different cities and neighbourhoods of Auckland and affect various sectors of activity (service company, supermarket, nursery, gas station, restaurant…). All the funds proposed by New Zealand Services have a return on investment of between 7% and 10%!

Fueling the boom in real estate prices

In New Zealand, the average rental return is between 4 and 8% depending on the assets, which allows a return on investment faster than many other countries. Real estate speculation has been all over the place in New Zealand for the past ten years, as there are a lot of profits to be made thanks to the flexible taxation on capital gains, a phenomenon that some people have dubbed “house washing”.

According to several studies, the New Zealand property market is still the fastest growing in the world. Although the Prime Minister has repeatedly refused to use the term, most New Zealanders agree that the country is in a deep real estate crisis. The worst is in Auckland, where one-third of the Kiwis live, and where prices have reached new heights.

Ten years ago, the average price of a house was 500,000 dollars in New Zealand. Lately, it has reached a peak of 1 million dollars for a house. For this sum, you won’t have a sea view nor a marble kitchen. At best, you will be able to buy an ex-state house with three rooms, to be renovated, on the outskirts of the city. This is a model of a house from the years 1930-1940, marketed after the war on the private market.

As for the average rental prices, they often exceed 500 dollars a week, or 32% of the average income of a household in Auckland. Nationwide, the number of people who own their homes has dropped to its lowest level in sixty years and, unsurprisingly, in Auckland, the numbers are even worse.

Time will only tell if recent legislation and the continued no capital gains tax will change the housing market. We’ll be sure to keep our eyes on it and keep you updated in the months ahead!

How To Beat The Competition For A Rental Property

So, you live in a super hot rental market that sells houses in a day and rental properties barely stay on the market long enough to get advertised. You’re looking for a gorgeous two bedroom with outdoor space in a prime location, and you’d really like to pay under market value if possible. Oh, and you have a pooch so it has to be animal compatible.

Ah mate, you’re dreaming!

But honestly, with these factors and variables, finding a rental property that you actually like in a tough market is going to be difficult, and we won’t sugar coat it. You’re going to need to put in some serious time and effort and get extremely organised before you even start to look, and then the same applies for when you start to look. Persistence and perseverance will be your top attributes, and a positive attitude will be mandatory. Besides this, there’s also a few important things that you can do to beat the competition and get that rental property you’ve always wanted. Because we want to see you happy in your new home, we’re willing to share these top tips! Read on for more.

Get prepared

We’re sharing our most important tip right at the very beginning. The very best way to beat your competition is to be on top of things right from the get go. Being prepared with everything that you’ll need for the application, references, documents and other odds and ends will mean that you have an edge on the competition. Most renters will wait to fill out any paperwork or to gather what they need after they’ve seen a property, because they don’t know what exactly will be required or because they don’t know if they’ll even like the place.

But we’re letting you in a little secret: Most rental property managers will want basically the same documents and paperwork. This means that you can have a vague idea of what they’ll be looking for, gather it, and get your documents in before anyone else and without having to spend half a day scrambling for payslips and reference details. We’ve listed some of the main things you’ll want before you even start looking for properties.

  • Payslips: You’ll want the most recent one here showing what your take-home pay is.
  • Bank statements: Most recent should be fine.
  • Letter of employment or contract: A document showing that you are currently employed and what your status is (full time, part time, permanent, etc.)
  • Passport, visa or citizenship documents: Proof of ID and proof of right to be in the country.
  • References and contact details: You’ll want a reference from your previous landlord as well as potentially a character reference from a colleague or professional contact.
  • Proof of current address: This can be a utility bill or piece of official mail recently delivered with a postmark.
  • Guarantor Information: If you are relying on a guarantor you’ll want their information and most of the above handy, such as payslips and job information.  

Fill out application beforehand

If you have access to the rental application, have it printed and filled out before you view the property. While it might seem silly to fill it out before you’ve even seen it, this little bit of prep will mean that you can be the first application in and therefore first to be seen by the property manager. Many property managers will go with the first suitable application that meets all the requirements, so the closer you can be to the top of the stack of applications, the better.

Look in the right season

If you want to live near a university, play this to your advantage by looking at times when students are moving out, versus near the start of the school year when flats will be at capacity. In other areas, winter tends to slow down renters, where spring and summer heats up with competition.

Look the part

If you’re going to be meeting with the rental property management company or the landlord, it’s important that you clean up and look presentable. First impressions do count, and while this isn’t a job interview or a first date, it is important that the landlord sees you as a professional person who is reliable and pays rent on time, which can be conveyed with a professional look.

Have a great cover letter

Simply having a cover letter will boost you ahead of most competition, because many renters don’t think to send one in with their application. Here is a good example of one you can include. Keep it short, concise and well organised, and make sure to include any extras like owning a carpet steam cleaning machine to keep the carpets pristine, or having a long history of good tenancies.

Offer up rent in advance

If you can afford it, this can go a long way with getting you to the top of the application list. Losing money and not receiving rent on time is a huge issue for property managers, so seeing that you have the ability to pay rent in advance shows that you’re committed to the property, and gives the property manager ease of mind. Offering up to 3 months in advance can work wonders with your application.

Think about a longer lease

While this is certainly not for everyone, it is something to think about. Depending on where you live, you may be required to sign a year lease, or month to month. If you really love the place and know that you want to be in this area for longer, consider offering up the option of signing a longer lease. Property managers hate renter turnover and much prefer to have long-lasting and reliable tenants.

Don’t delay with any payments

Once you have secured a successful application, do not delay by any means with any payments due! If you fail to pay the deposit quickly, property managers may simply move on to the next application without giving you extra time. Make sure to get your payments in as quickly as possible to secure the property.

Following these tips will help you reach the top of the competition without having to spend too much time running around the city looking at properties. Remember to be organised and have everything ready to go for each property you view, and you’ll be in your dream rental property in no time!

Homeowners selling at a loss

Most New Zealanders are still making significant capital gains when they sell their houses – but a growing number in some parts of the country are struggling to get what they paid for them.

Mormon church buys site for first Auckland temple

Russell Nelson, president of The Church of Jesus Christ of Latter-day Saints, announced that a site on Redoubt Rd had been purchased.

“I am pleased to announce that the new temple will be built in Auckland on Redoubt Rd,” he said, referring to a hill near the church’s existing missionary training centre at 19 Redoubt Rd and its Redoubt stake centre.

Why major developer will spend ‘hundreds of millions’ on a Drury town hub

Asked how much Kiwi might invest at Drury, Mackenzie said it could be hundreds of millions of dollars.

“The area has been identified by local and central government as a major expansion area in the next 10 to 20 years. We’re building a new town centre – there will be thousands of people living there – with hundreds of shops surrounded by land zoned for residential and commercial,” he said.

Fence gone, but not the legal bills

David Walmsley spoke for his mother and himself, perhaps one last time, at the High Court in Wellington on Friday.

He told a judge he still had a sense of injustice over the structure he erected with Wellington City Council approval about four years ago on the upper boundary of a family property in the upmarket suburb of Roseneath.

Real estate agent stole, gambled away $264,000

A real estate agent is now bankrupt after gambling away more than $250,000 which he stole from a business partner to fund his addiction.

While the businessman he stole from has found success after the setback which nearly tipped him under, he says he has not only forgiven the offender but believes gambling should be prohibited.

Quick Tricks On How To Comply With The New Rental Regulations In NZ

In wake of the new regulations passed by the Housing and Urban Development Ministry, we see many investors wondering if buying bare land for sale, and building a property as per the new regulations ground up or putting that land up for sale when the market goes up are better options than buying a pre-existing rental.  

Many bills have been passed in the past few years to ensure that the tenants in New Zealand are privy to a warm, clean, weather-proofed home. The latest bill was introduced in Sept 2018 by Housing and Urban Development Minister Phil Twyford. The bill was a reaction to the findings of research that suggested NZ’s rental houses are of lower quality as compared to owned homes.

As per the reforms the new standards are designed to improve the living conditions of the tenants and to set minimum standards for facilities that the landlord is required to provide. The ministry has made considerable efforts to make the 600,000 rented households happy and safe. This was a bid to promote healthy and fair renting conditions.

These changes have made the tenants jump with joy, but have made the landlords a little wary. The latest set of changes have increased the weather-proofing standards and have eliminated letting fees, which has left a lot of homeowners bewildered as to where they stand on their investment. This article will shed light on the latest healthy homes standards laid out by the Housing and Urban Development Ministry.

HEATING

The rented properties should now be facilitated with fixed heating devices that are capable of achieving a minimum temperature of 18 degrees. It was observed that a chunk of rental homes had inadequate heating facilities. In New Zealand, as high as 22% of rented homes have unhealthy or unaffordable heating. To ensure the standard is met, an online tool will be released to measure the heating requirements for the living room. The minimum size that the online tool will approve of is 1.5 kilowatts.

INSULATION

It is found that many homes do not have adequate insulation, which plays an important part in retaining the heat inside the walls and keeps the space warm and dry. Homes with below standard insulation are cold and damp which in turn can cause mould and moss to grow on walls, ceilings and other damp places around the house.

As per the new standards, for newer constructions, the insulation must meet the standards set by the 2008 building code and for the existing ones, it must be above 120mm in thickness. For the owners who have met the standards set by the 2016 building code will require no further action on their part. This regulation is aimed towards rentals that were not required to upgrade as per the 2016 act. It is also in favour of the landlord to invest in insulation as mould or moss treatment is much more of a hassle. It also helps prevent legal hassles in case the tenants suffer health hazards due to the mould or the moss.

VENTILATION

As per the latest standards, the houses must have windows that open in all the major rooms of the house – the living room, dining room, the kitchen and the bedrooms. The bathrooms and the kitchens must be fitted with adequately sized extractor fan/fans in order to expel moisture. This step is taken once again to ensure the house is free from moisture and dampness so that mould does not affect the health of the tenant. It can also be detrimental to the health of the structure; it can damage walls, ceilings, floors and the possessions of the tenants.

The fans are recommended over opening windows in the shower or bath as it is sometimes not possible due to security reasons or bad weather to do so, hence mechanical ventilation such as extractor fans and range hoods are preferred.

DRAINAGE

Most houses in NZ suffer from lack of proper drainage and moisture ingress facilities. Moisture can enter the house due to leaks, water pooling, and rising damp. As per the new standards, all of this  changes. A landlord has to place high standard drainage and guttering, downpipes and drains.

And for a house with an encased subfloor, the landlord must have ground moisture barrier installed if the structure allows. Maintenance of the drains should not be neglected, and though not mandatory, employing a gutter cleaning service periodically can improve the health of the drainage system.

DRAUGHT

One of the reasons why heating a house is expensive is that sometimes the structures have draughts. Fixing a draught will cost a small sum to the landlord, which will, in turn, save the tenants from hefty heating bills. The homeowners will have to fix any unnecessary gaps and holes in the walls, ceilings, floors, doors and windows, which can cause apparent draughts. They must also seal unused chimneys and fireplaces for the same reason.

THE TIME FRAMES

The ministry has laid down certain deadlines that the landlords have to get the upgrades done within:

July 1st, 2021 – The private landlords have to ensure they meet all the requirements listed in the healthy home standards within 90 days from any new occupancy.

July 1st, 2021 – Is the date by which all the boarding houses have to meet the standard set by the HHS.

July 1st, 2023 – Registered Community Housing and houses under All Housing New Zealand must comply with HHS standards.

July 1st, 2024 – Each and every rental home must comply with the HHS standards.

The new standards have come in to place to address the long pending issue of the low-quality rentals that plagues most of New Zealand. It exempts tenants from any maintenance issues and holds the landlords accountable for their assets.

Our advice to the landlords would be to meet these basic standards of living, which are quite cost-effective and once met will only yield them higher rents. Getting the house weatherproofed, getting roof cleaning done, getting foundational problems fixed, and getting a paint job done routinely, are some common maintenance measures that can contribute towards the health of a home and keep both the tenant and the landlord happy. Tenants should get a building inspection done before buying the house to ensure that not only these standards laid by HHS are met, but also to gauge other flaws in the structure before signing a contract.