How to Buy Property in New Zealand: What to Expect

Buying property in New Zealand involves navigating specific legal and financial frameworks. This guide provides a comprehensive overview of the journey, from understanding eligibility requirements to managing the associated costs.

Eligibility and Restrictions for Buyers

New Zealand law distinguishes between different buyer categories, with specific rules governing who can purchase property. New Zealand citizens and those who are “ordinarily resident” in New Zealand can acquire property without needing special consent. To be ordinarily resident, an individual must hold a residence class visa, have lived in New Zealand for at least the past 12 months, been physically present for at least 183 days within that period, and be a New Zealand tax resident.

For non-residents and “overseas persons,” restrictions apply under the Overseas Investment Act 2005. An “overseas person” is defined as an individual who is not a New Zealand citizen and is not ordinarily resident in New Zealand, or an entity where an overseas person has more than 25% ownership or control. Residential land is classified as “sensitive land” under this Act, meaning overseas persons require consent from the Overseas Investment Office (OIO) before purchasing it.

There are specific conditions under which an overseas person might obtain OIO consent to acquire residential land. This includes individuals holding a residence class visa who intend to reside in New Zealand but are not yet “ordinarily resident,” or if the property is part of a new build development for which consent has already been granted. Australian and Singaporean citizens are generally exempt from these consent requirements for residential land due to free trade agreements. Even with consent, conditions often apply, such as requiring the buyer to live in the property as their primary residence and be physically present for a certain number of days each year.

Preparing for Your Property Search and Securing Finance

Embarking on a property search in New Zealand involves several preparatory steps. Buyers typically identify suitable properties through real estate agents, who act as intermediaries between sellers and buyers, or by searching online property portals and attending open homes. Engaging a real estate agent can provide access to listings and market insights.

Securing finance is fundamental. Most lenders in New Zealand require a minimum deposit. A 20% deposit is optimal for owner-occupied properties, providing access to more lenders and potentially better interest rates. While a 10% deposit is common for first-home buyers, options for a 5% deposit exist under specific schemes like the Kāinga Ora First Home Loan.

The loan-to-value ratio (LVR) measures the loan amount against the property’s value. Owner-occupiers can borrow up to an 80% LVR, while investors face tighter restrictions, often requiring a 30% or more deposit.

Obtaining mortgage pre-approval is a recommended early step, clarifying borrowing capacity and demonstrating readiness to sellers. For a mortgage application, banks require proof of identity, income (such as recent payslips or employment contracts, or financial statements for self-employed individuals), savings history, and a detailed breakdown of existing debts and household expenses. A mortgage broker can assist by assessing financial situations, comparing loan products, and guiding applications. Brokers are often compensated by lenders, meaning no direct cost to the buyer. Engaging a conveyancer or solicitor early is important for legal advice on the purchase agreement and due diligence.

The Purchase Process and Due Diligence

After identifying a property and securing financing, the next stage is making an offer, typically via an “Agreement for Sale and Purchase” document. This legally binding contract outlines the terms and conditions of the property sale. Offers often include conditions protecting the buyer, such as finance approval, a satisfactory building report, a Land Information Memorandum (LIM) report, and, if applicable, OIO consent. These conditions allow the buyer to withdraw or negotiate if criteria are not met.

Due diligence involves thoroughly investigating the property before committing unconditionally. A Land Information Memorandum (LIM) report, from the local council, summarizes property information including zoning, building consents, drainage, natural hazards, and rates. A pre-purchase building inspection is also important, visually assessing the property for significant defects, maintenance issues, or potential future problems.

A solicitor conducts a title search to verify legal ownership and identify property rights or restrictions, such as easements, covenants, or registered mortgages. A property valuation, often required by lenders, provides an independent assessment of market value. Once all conditions are satisfied or waived, the agreement becomes unconditional. A pre-settlement inspection is conducted shortly before settlement to ensure the property is in the agreed-upon condition. Settlement involves the legal transfer of ownership and exchange of funds, facilitated by the conveyancer or solicitor.

Additional Costs of Buying Property

Beyond the agreed-upon purchase price, several additional costs are involved. Buyers should budget for legal or conveyancing fees, covering the solicitor’s work in reviewing documents, conducting searches, and facilitating settlement. These fees range from $1,400 to $3,000+, depending on purchase complexity and the legal firm.

Valuation fees for a property assessment range from $500 to $1,200, averaging $1,000. A Land Information Memorandum (LIM) report from the local council costs between $250 and $400. A pre-purchase building inspection costs between $350 and $1,000+, varying with property size and inspection scope.

Mortgage-related fees include loan application or establishment fees, though some lenders waive these. If a buyer’s deposit is less than 20% of the property’s value, they may incur Lenders Mortgage Insurance (LMI) or a risk fee, which protects the lender. Land Transfer fees, paid to Land Information New Zealand (LINZ) for registering new ownership and any associated mortgage, are $122.00 for the transfer and an additional $122.00 for a new mortgage. Ongoing costs include property taxes (rates) paid to the local council, and house insurance, typically effective from the unconditional agreement date.