I was recently in London undertaking in partnership with Sable Mortgages a series of presentations on NZ property targeted at London based kiwis. It provided a great opportunity to profile the website and present a view of the NZ economy to a very well informed audience. During these sessions I was struck by two things.
1. There is an amazing wealth of young NZ talent in London that is so well connected and achieving success in business. By virtue of the web these kiwis know of everything going on back home
2. They are passionate and knowledgeable about home and all plan to return
The age old view of a “brain drain” has always been the political banner waved to justify poor economic performance, the fact is far from a brain drain as these kiwis are exercising their brains and gaining valuable insight into the wider world – they often leave penniless students and return asset rich and worldly wise adults ready to contribute to the development of this country. Sure they do not all return but over time a vast majority do and we as a country are better for it.
Returning to the subject of this post. Over the course of 4 nights of presentations over 250 attendees absorbed these presentations; keen to be better informed as to the opportunities of investing in property in NZ whilst they enjoy their time in the UK. The presentation was a classic situation of seeing that when you add it all up, you can see why for them investing in property in NZ makes sense – sometimes it just needs to be spelled out in black and white to reinforce the benefits.
- No capital gains tax
- No stamp duty – the UK Stamp duty is paid by property buyers, and is levied at 1 per cent for houses between £125,001 to £250,000, 3 per cent for £250,001 to £500,000 and 4 per cent for £500,001 or more
- Ability to leverage equity from one property to another
- Taxation benefits of LAQC
- As prospective returning kiwis borrowing NZ dollars to buy NZ property presents no currency risk as the intention is to live in NZ in time
- NZ lenders like UK based kiwis earning in GB pounds!
Added to this is the fact that even relative to salaries these kiwis can buy more for their money, take this situation as used in the presentation.
These 2 houses theoretically could have been bought 5 years ago – both for the price of £162,500 or NZ$427,000, the one on the left is a 5 bedroom house in Greenhithe on a good size section, the other a 3 bedroom semi in Hemel Hempstead (community distance to London – comparable access to each city’s CBD).
5 years down the track with appreciation as has been seen in both markets of a comparable 50% – each house now would could have been sold for respectively £250,000 and $657,500. The big difference though is the net return on that investment. In the UK allowing for stamp duty and capital gains tax and the slightly lower mortgage rates the return would be £65,000 or $170,000; however the NZ house would net the owners $215,000.
As ever we know analysis like this is always with the benefit of hindsight and today’s market is very different from 5 years ago, however the component costs and taxes haven’t changed (although there is demands in the UK for short term stamp duty relief to stoke the market from it’s stagnant position). All I can say is that over drinks (of course suitable stock of Speights, Stienlager and Marlborough Sauvingon Blanc) there was great interest from these UK pound cash rich kiwis keen to snap up some “good buys” in NZ for their planned return in a few years.