Purchase Procedure Summary

What is the purchasing procedure?

A deposit of 10% of the total purchase price is payable on the signing of the agreement. The deposit is placed in the vendor’s solicitor’s interest-bearing trust account with the purchaser receiving full interest less withholding tax, bank charges, commission or any other charges. The balance of the purchase is payable upon settlement.

Acquiring

Resident Non Resident
Private
Ownership
  • Legal Counsel
  • Valuer
  • Legal Counsel
  • Valuer
Investment Ownership
  • Legal Counsel
  • Accountant to establish ownership structure
  • Legal Counsel
  • Accountant to establish ownership structure/tax file number

Note: New Zealand currently does not have any form of stamp tax. The costs of acquisition are, therefore, just advisory fees. These could be expected to fall between $1500 and $2500. You should always seek independent legal advice before purchasing a property. If the property is to be an investment property, you should also seek accounting advice.

Owning

Resident Non Resident
Private
Ownership
  • Body corporate fees and rates - apartment specific
  • Repairs and maintenance costs
  • Body corporate fees and rates - apartment specific
  • Repairs and maintenance costs
Investment Ownership
  • Body corporate fees and rates – apartment specific
  • Property management fees – typically 10% of rent.
  • NZ accountant to prepare and submit tax returns
  • Repairs and maintenance costs
  • Body corporate fees and rates – apartment specific
  • Property management fees – typically 8.5% of rent
  • NZ accountant to prepare and submit tax returns
  • Repairs and maintenance costs

Note: If the property is used as an investment it will be subject to NZ income tax even if owned by a non-resident and a tax return must be submitted. Where the property is owned by a non-resident of a country that has a double taxation agreement with New Zealand, there may be some dispensation against getting taxed twice under the terms of the specific double tax treaty between New Zealand and that country.

If you are an overseas resident, the value of your property in your own currency terms will vary in line with movements in currency between the New Zealand dollar and that of your own country.

The following is provided as an indication only of costs on two sample apartments:

1 bedroom sample property 2 bedroom sample property
Unit number 1301 1515
Description 86m2 116m2
Price $506,000 $832,000
Acquisition costs $2,000 $2,000
Ownership Costs
ACC rates $1,490 $2,276
ARC rates $267 $447
Body Corp $3,297 $5,581
$5,054 $8,334
Investment Ownership
If the property is long term
Weekly Rent $550 $700
Annual Rent $28,600 $36,400
Indicative management fee 9% 9%
Indicative management costs $2,574 $3,276
Potential net rent $26,026 $33,124
Cashflow before funding costs and tax $20,972 $24,790

Interest costs from any borrowing associated with the purchase need to be allowed for.

Where the property is held for investment ownership the net annual cashflow (after deduction of any interest on borrowings associated with the purchase) will be taxable in New Zealand. In calculating the amount of tax payable an allowance is made for depreciation of furniture and fittings. The tax rate will depend on the ownership structure chosen by the purchaser. If the property is owned by a company, the current tax rate will be 30% pa but is expected to drop to 28% in 2011.

The above rentals assume the property is let for ordinary residential accommodation. Given the high quality of the building and its premier position, if the property is furnished it may be possible to obtain a corporate let which might pay a significantly higher rental.

Please note that a minimum period of 6 months applies to all rental leases.