The latest few rounds of cooling measures implemented by the Singapore government may compel Singaporeans to look for overseas investment opportunities in order to avoid paying more. These cooling measures include higher Additional Buyer’s Stamp Duty (ABSD), higher property tax and lowering of the Total Debt Servicing Ratio (TDSR).
Singaporeans who are keen on making property purchases and investments may turn to overseas markets such as New Zealand as a good alternative. Here are 8 reasons why Singaporeans are investing in the New Zealand property market.
1. Citizenship Advantage
There is a current ban on all foreign ownership in New Zealand properties with the exception of Australian & Singaporean. This gives Singapore Investors an advantage to tap into a solid market that has continued to grow at an average of 5.8% annually in the last 20 years according to CEIC Data.
2. Freehold Tenure Properties
With a freehold title, there is no ground rent and you can rent out your property for a longer period with a higher return on investment (ROI). Your property will also have immunity from lease depreciation too.
3. No Stamp Duty
Stamp duty is a major upfront cost that many buyers are ignorant of. The amount could be up to 30% of the net cash investment when you commit to a purchase. Some countries like Singapore impose Additional Buyer’s Stamp Duty (ABSD) for foreigners and locals who are buying more than one property. When added together, the stamp duties will equate to a higher cash outlay.
The good news is the New Zealand government does not impose any stamp duty on either local or foreign purchasers. Every dollar of your investment goes straight to your equity and any increase of your property price will translate to an immediate gain on your investment.
4. No Capital Gain Tax
In New Zealand, there is no capital gain tax on property sales, hence this maximises your net returns. However, Singapore investors in the New Zealand property market should be aware that their property sale is still subjected to a bright-line test, which means that profits from their property sales are still taxable if property is disposed within a stipulated time frame. For new builds, the bright-line test is 5 years while homes in the resale market are 10 years.
5. Strong Capital Growth
The New Zealand real estate market has consistently delivered serious returns over the last 40 years, averaging 6.3% per annum (CEIC Data). Property owners & investors are known to benefit from a doubling effect on their property prices every 10 years.
6. Gift with No Inheritance Tax
In many countries such as the US, UK and Japan, inheritance tax rates could go as high as 40%, reducing the size of your gift to your loved ones. When passed, this became a tax burden to your loved ones as they will need cash to pay off the tax before the property could be legally transferred. Fortunately for New Zealand, there is no inheritance tax payable on assets passed to your next generation. This has remained a compelling reason for many long term investors to park their wealth in New Zealand properties.
7. Strong Rental Income
With more than 35% of the population relying on renting, property investors are presented with an extremely consistent and stable rent income that is less affected by external factors. A tenant pays you a rent which will be used to service your mortgage repayment in the early years and eventually becomes a source of passive income when the loan is fully paid. A strong rental market like New Zealand ensures the reliability and consistency of this income source.
8. Own Multiple Properties
When you purchase a New Zealand property, you are taking a loan from a New Zealand lender. Your Total Debt Servicing Ratio (TDSR) in Singapore remains intact. You may borrow up to 70% of the property purchase price, unlocking your cash to buy more units if you desire.
While most banks are not lending to Singapore investors in countries like Australia, UK, US, Thailand, Malaysia or even Vietnam, Kiwi lenders offer Singapore investors mortgage interest rates from 3.89% to 8% per annum, making borrowing in New Zealand an attractive option.
If the reasons above sound enticing and make sense, do speak with our Singapore client consultant to understand more about the investment opportunities in New Zealand and start multiplying your wealth now.