Article: Our House = Our Home

Market  Update with Carie TownleyMarket Update with Carie Townley

Foreign Investors - What’s happening in NZ? Property investment by foreigners seems to be ever growing in the New Zealand market, with an increasing number of people from outside the country wanting to buy real estate.

Whilst people from abroad are actively investing in the real estate market, restrictions have been placed for those coming across the shore to buy.

After new legislation passed in October 2015, a new set of rules applies to ‘offshore’ buyers. According to New Zealand’s Overseas Investment Office, who is in charge of foreign investment policies, anyone wanting to buy property in NZ after 1 October 2016 will need an IRD number, which will need to be provided before settlement date is due.

Most banks in NZ have stopped lending to foreign investors which has led to them borrowing from their home countries or bringing cash into the country to make purchases.

What impact does it have on NZ property market?

Foreign investing has made a significant impact on the property market all around the country. New Zealanders have seen an increase to the cost of investing in real estate, especially in Auckland where property prices have hit the one million dollar mark.

What does the future look like?

Whilst these overseas investors come from different countries, most originate from the UK, China, Hong Kong and Singapore. The growing number of foreign investors is likely to continue to grow with a large number of developments and hundreds of homes being built.

What’s Trending- Body corporate fees VS buying a house

Buying an apartment, unit or townhouse usually means being part of a body corporate who handles the management and upkeep of the building and sometimes the entire vicinity. It is responsible for common areas and in some cases may pay for services like pools, gyms and in some cases concierge. This incurs ongoing costs to cover these services.

The same body corporate is also in charge of making sure the building is adequately insured.

In most cases there will be a ‘sinking fund’ in place which is a pool of funds that can be reached into, in the event of unexpected costs such as major structural repairs or emergencies that are not covered under insurance.
On the other hand, living in a house (typically freestanding), means the responsibility of taking care of the maintenance and arranging insurance falls on the owner. However, there will not be any ongoing costs for strata or any other services.
Here, we look at some of the pros. and cons. of the different dwelling types.

Body corporate: Advantages

Cost of maintaining the building is shared and the building management will usually organise for the work to be done.
Structural housing insurance could be cheaper because you purchase insurance in bulk as part of the owners corporation.
Maintenance; cleaning, lawn mowing, gardens, insurance, electricity in common areas and general repairs.
Proposed changes, general disputes and collection of funds from the owners to cover these costs is all handled by the body corporate.

Disadvantages

As a unit/apartment is typically smaller than a house and there are common walls with others, there may be restrictions to the type of renovations that can be made.
Strata levies can cost annually, anywhere from $1,500 to $30,000 (potentially more), depending on the services provided and the type of dwelling. These fees are typically paid quarterly.

Free standing house: Advantages

There are typically little or no restrictions to renovations and/or extensions (unless placed by the council).
Any costs to repairs and/or renovations are considered a benefit to the owner.

Disadvantages
Any form of maintenance or repairs is the responsibility of the owner, entirely at their cost.
Because the cost isn’t shared with anyone else, other factors like property size and/or insurance, would usually be absorbed solely by the owner.
So what’s the better investment choice?

There is no right answer, here. It all comes down to personal preference and financial circumstance. Lifestyle suitability could also be a playing factor when deciding between investing in a body corporate dwelling or a house.

For a personal mortgage reduction analysis to identify the strategies that are in your best interest, contact Carie today on 0275 228 940, email .(JavaScript must be enabled to view this email address).


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