I own a home in NZ. What to do?

So, the big move across the ditch is happening, or you may even be here already.

Many Kiwis making the jump across the pond own property in New Zealand. This may be the family home, or rental property, or even both.

A very common question is what to do with the NZ property? Keep it, or sell it?

There is no right answer, but it is important to take account of the issues that can determine which path you take.

Here’s a summary of these key elements that I think need to be considered:

1. Deposit on a home in Australia

Many Kiwis move across to Australia with the intention of buying a home. There are good reasons to do so:

• Rentals are hard to come by and they are expensive.

• The Aussie property market is in pretty good shape, especially in places like SE QLD and WA.

To buy a home you need a deposit. At the very least you will require 5% of the purchase price, plus applicable stamp duty. Ideally, you want 20% (plus stamp). If your capital is tied up in a NZ property, then it’s going to make it very difficult to purchase a home in Australia.

2. Accidental landlord

Renting out your home comes with its own challenges:

• Rent received may not cover the costs of owning the home. This has a detrimental impact on your ability to borrow in Australia and you will constantly need to send money back to NZ to cover the outgoings.

• Your home is now occupied by tenants. Most tenants are good. Some are not. Any tenancy carries risk. You will need a good property manager.

• Is your home really an appropriate “rental”? Do the gardens require significant upkeep? Do you have a pool? Are your shagpile carpets in peril? Is it up to Healthy Homes standard?

Getting into property investment should be a conscious choice. Becoming an accidental

landlord could turn out to be a massive pain in the arse.

3. Borrowing capacity in Australia

If your NZ outgoings are greater than the rent received, then this will negatively impact your borrowing capacity in Oz.

Aussie banks will need to take your NZ borrowing into account. They will discount the rent received and inflate the costs. This means it likely knocks your borrowing capacity for six. 

Your NZ property may be a big old handbrake that stops you from buying a home in Australia.

4. Cost of Ownership vs Return

The main reason why Kiwis hang on to the NZ property is due to the market being in pretty ordinary shape. It’s been heavy going for the past couple of years and there’s not a lot of light at the end of a rather long tunnel. There’s nothing wrong with holding out for a better price, but this comes at a cost.

• Selling a home whilst tenanted isn’t easy. You have to tip toe around tenants and the laws make it tough to sell during a tenancy.

• Home ownership costs have ballooned. Council rates and insurance premiums are stupidly expensive and eat a big chunk of your rental income.

A crystal ball would be very handy, so we could accurately predict what NZ house prices are going to do over the next few years. Alas, I don’t think anyone has the answer. Whilst you are waiting for the price to return to your dream level, you will be paying the high price of ownership, with this thought bashing around your brain at unsociable times of the night.

What to do with your NZ property is a very personal choice and depends upon what your intentions are in Oz. You may have a mortgage free home that’s bomb proof - if that’s the case, then hang on to it. On the other hand, you may have a $1m home with a $900k mortgage - that’s going to really hurt your chance of buying a home in Australia and keep you awake at night.

What I can recommend is that if you have a moderately sized mortgage that is (more or less) covered by rent, then seriously consider a “top up” of your home loan BEFORE you leave NZ.  That way you can access some of your captive capital that can then be used to fund a deposit on a property in Australia.

Fortunately there is a great resource that you can lean into … me! Get in touch with me to discuss your Aussie property goals and find out how you can make them happen.

https://www.unohomeloans.com.au/brokers/paul-davey

Nga mihi.