Whether you are a long-term NZ citizen or resident looking to buy your first house, trade-up or downsize, a New Zealander living overseas or someone from another country looking to call New Zealand home, the Covid-19 pandemic has turned many plans on their heads.
The post-pandemic landscape in New Zealand is changing with some locals seeing their businesses or employment disappear or at least change and large numbers of Kiwis returning from overseas potentially earlier than they expected with more predicted to arrive over the next couple of years. Moving to New Zealand is also becoming an increasingly popular idea for residents of other countries with some already having moved here as essential workers and others keen when borders reopen.
While many predicted that the New Zealand housing market would crash following the worldwide pandemic and subsequent lockdowns that has not yet eventuated with high prices and high competition still prevalent in the real estate market across the country.
Whether the buoyant situation remains in the face of on-going global issues alongside the NZ Government’s attempts to cool the local housing market is yet to be seen. But currently, the property market continues to be positive.
Changes to traditional housing markets
One impact of Covid may be changes to the traditional housing market in which big centres like Auckland and Wellington have the highest property prices.
Working from home was one of the big changes seen during the pandemic. During New Zealand’s lockdown, around 40% of people worked from home and many businesses found they were able to successfully transition staff to work from home and maintain almost near business as usual. As a result even after the lockdown was lifted, many companies opted to give staff the opportunity to continue working from home either full-time or part-time.
This has reduced the need to be tied to the precise area where your company is headquartered – usually bigger cities like Auckland or Wellington. Many companies are looking at downsizing office space and this combined with other factors such as high commercial rents in Auckland or costly earthquake strengthening in Wellington could see a shift to offices being based in suburbs.
Rising house prices were already pushing buyers, particularly first home buyers out of major areas like Auckland, and into surrounding areas like Tauranga and Hamilton but the Covid pandemic could have further impacts on traditional housing markets as people look to change lifestyles, move areas in search of job opportunities or take advantage of working from home.
Even Wellington, the seat of government, with its high proportion of safe public sector jobs, has not been immune to the changes. After lockdown footfall in retail and cafes in areas like Kapiti and the Hutt Valley were up, while Wellington CBD was down.
Large agencies like Immigration New Zealand which moved its visa processing services to Porirua and NZ Police which opened a non-emergency call centre in Kapiti were already looking at opportunities for cheaper commercial space in the surrounding areas and this may increase post-Covid with the realistation that work doesn’t have to happen in the CBD.
This could end up driving prices down in central cities but up in the surrounding suburbs as people look to shift their living and working space.
Although the market has so far held up well, somes areas like Queenstown and Rotorua which have traditionally been reliant on tourism and are therefore being affected by the pandemic more strongly and for longer than other parts of New Zealand may still see a downturn in the coming years. These areas may become more affordable to average Kiwis if this happens.
If you are planning on buying a house in NZ right now whether you are a returning New Zealander or a local, there are some important things to consider.
Restrictions for foreign buyers
If you are from another country and the way New Zealand handled the pandemic has made you keen to move then you may be frustrated by changes to NZ’s property laws which effectively ban most foreigners from buying property.
If you arrive on a temporary visa, your only option is to rent a property until you gain your New Zealand residency and then look to buy. The rental market in New Zealand is running about as hot as the real estate market so your choices may be limited by your budget.
You may also get caught out by the foreign buyer ban if you are an NZ resident who has been overseas for some time. While citizens are free to return home and buy property whenever they wish, residents are caught by the rule that says they must have been living in New Zealand for the 12 months prior to wanting to buy a home without restrictions.
If you haven’t been in New Zealand for the previous 12 months you must apply to the Overseas Investment Office for approval of your purchase and sign an agreement that you will live in the property and remain in New Zealand for at least six of the following 12 months. There is a fee that goes along with this application which is around $2000 so you should factor this in to any budgeting you are doing for your house purchase.
While there is no guarantee your application will be approved figures from the OIO show that around 90% of applications made so far have been given the green light.
Financing your new home
If you are trying to get onto the property ladder, then there are a few options open to depending on your circumstances. However, if you are returning to New Zealand after living overseas you may be more limited in your choices.
One is using KiwiSaver to help fund your first home. Even if you have been living overseas if you are a New Zealand resident and you had a KiwiSaver set up before you left you can withdraw funds to purchase your first home. However, depending on whether you have been paying into the KiwiSaver fund while you have been away you may not have as much as normal.
You may also be eligible for a First Home Loan however there are strict criteria around these loans including income caps and house price caps which in today’s market might be hard to meet. If you are returning from overseas you may not be able to access a loan unless you wait until you have been back in New Zealand for some time.
The most traditional way of financing a house, of course, is with a mortgage and these are accessible to anyone – local or returning Kiwi. Mortgage rates are low which makes getting a mortgage right now very attractive. However, the government is moving to change loan to value ratios which will restrict banks more and may lead to higher interest rates. If you are returning from overseas you may be able to apply for a mortgage before you arrive in New Zealand, if you have an idea of where you want to live and a job offer. Applications can be done with your bank via phone or email.
Should I invest in property post-Covid?
Property investment has been a popular choice with Kiwis but with the future uncertain you might be wondering if investment is the right option now. Remember that if you are returning to New Zealand as a resident from a long time overseas you cannot buy a property as in investment, only for you to live in. Citizens are free to buy as they please.
There are several things to consider when you are decided whether to invest in property in the post-Covid market.
On the plus side, there may be more people looking for rental properties in the coming months. Not only will many returning Kiwis potentially be looking for places to stay while they resettle into the country, but New Zealand’s good handling of the pandemic is also making it popular with overseas industries like the film industry.
This means the market for short to medium-term rentals could be hot in the next few years, especially if you can provide furnished properties.
However, with property prices remaining high potential investors might find It difficult to find a suitable property on a budget.
Non-Covid-related changes are also making being a landlord more costly and difficult with changes to the Tenancies Act and the Healthy Home Standards, so you may want to consider whether the increased financial and time cost of compliance is worth it. Investing in a good property manager would help ease some of that burden.