Halo Financial breaks down their ten top tips for ensuring your finances are in order for your New Zealand property purchase.
1. What is your total budget?
One of the most important parts of your purchase will be making sure that you know exactly how much you can spend right at the beginning of the process. In addition to the actual cost of the property, you will need to make sure you have enough cover all the fees and taxes that crop up along the way, the cost of actually moving from the UK to New Zealand, and lastly, the costs of eventually maintaining your life in NZ. Don’t forget exchange rates, too, which can affect your budget and overall costs when transferring money from another country to and from New Zealand. Make sure you factor in your currency planning to ensure you have control over your budget.
2. How will you fund the property purchase?
There are a number of ways that you can pay for your new property purchase in New Zealand. Will you be purchasing with a mortgage, paying in cash in full, or by releasing equity from your current UK property? Depending on the route you decide to take, you will usually need to speak to professionals as part of this process, such as an independent mortgage broker and your local bank to assess how easy it is for you to obtain a mortgage in New Zealand, the deposit you will need and how much the repayments will be.
3. Have you factored in all costs?
Do you know exactly what further costs you will need to pay as you proceed with your purchase? Everything, from making trips to New Zealand, legal and estate agent fees, property taxes and much more will need to be considered. We recommend setting aside up to around 10% of the purchase price of your property to cover all additional costs. If you are emigrating, you will also need to think about the additional costs of maintaining your life in the country. Will you be transferring your pension over on a regular basis – and if so, what is the best way to do so? Will this cover all your monthly bills and mortgage payments, as well as the cost of living in the New Zealand? How will you make money transfers internationally?
4. Have you considered the effect currency market movements will have on the price of your property?
The currency market fluctuates continually, meaning that whenever you transfer funds from one currency to another you are doing so with a certain amount of risk. The New Zealand Dollar can be volatile. As a commodity currency, its strength is affected by economic activity in China and the US, supply, demand and pricing of global commodities. The exchange rate between the NZ Dollar and its main currency pairings fluctuates significantly in response to economic, market and political events. Notable events in recent years, such as the surprise Reserve Bank of New Zealand interest rate cuts in 2015, had a marked effect on NZD exchange rates, and while this was eventually offset by positive economic data and a strong economy, anyone making any large New Zealand Dollar transfers at that time would have been in for a shock!
This volatility needs to be factored into your property purchase and/or emigration plans as early as possible in the process. Whether your timescales are a year, 18 months, or longer, timing and forward planning are essential if you are to protect your money and make the most of the exchange rate.
There are, however, ways that you can manage this risk. We recommend using a currency specialist such as Halo Financial to transfer your funds – by opening an account early on in your planning, you can ensure you are equipped with all the tools and resources you need to make the most of your money – particularly important when you are spending significant sums. With dedicated support from Halo Financial, you can access the long-established tools and expertise of market professionals to take advantage of market volatility and set the ideal settlement date for your particular circumstances. By using a specialist currency company instead of your local bank, you will have access to many years’ currency expertise, better exchange rates and eliminate a number of costly banking fees fee on your international money transfers.
5. Do you have a bank account in New Zealand?
New Zealand’s banking system is dominated by four banks – Commonwealth Bank of Australia, Australia, New Zealand Banking Group (ANZ), Westpac, and National Australia Bank. This quartet accounts for nearly 90 percent of the entire New Zealand banking sector. Aside from these, there are fewer than 20 other banks operating in the country – both domestic and foreign owned.
Opening a New Zealand bank account can be done without too much hassle and the four largest banks enable you to do this before you even arrive to live in the country. Generally, you will need to apply to open an account online and once this is confirmed you will be able to start depositing money into the account immediately (be warned that some banks may charge you to transfer money from them into your new account). We do recommend setting up your bank account in advance as this will ensure you can move quickly when you need to move money around.
To open a bank account once you arrive to live in New Zealand – or to activate an account you have already set up – you will simply need to bring your passport and proof of address (and account details for existing accounts) into a local branch of your bank.
Banking in New Zealand is not free. The amount you will be charged will depend on the bank you use and the type of account you open.
6. Have you thought about how you will manage salary or pension payments?
If you are planning to use a salary or pension to fund your life in New Zealand, you will need to decide whether to keep your pension in the UK or transfer it to a New Zealand policy. Your solicitor or financial advisor will usually be the best person to discuss this with. If you decide to keep your pension policy in the UK and transfer it to New Zealand on a monthly basis, we recommend speaking to your currency exchange specialist to ensure you make the most of your funds every month – Halo Financial have a regular currency trades plan, which can be used to make the most of these monthly transfers.
If you do decide to go down this route you will need to ensure that you are only taxed once on your salary or pension income. A double taxation scheme between the UK and New Zealand means that you should only be charged one set of tax automatically, but it is worth keeping an eye on this, just in case.
7. Have you considered retirement in New Zealand?
New Zealand offers two main retirement schemes. The country’s Superannuation scheme is paid by the government to all eligible people in NZ. To be eligible you must have lived in New Zealand for at least 10 years since you turned 20, with five of these years being since you turned 50 (you do not need to have been classed as a ‘permanent resident’ for this duration). Superannuation in NZ is part of your taxable income, with the amount you eventually receive governed by your earnings. It is important to note that Brits can use National Insurance payments to make themselves eligible for New Zealand Superannuation, while you should also be aware that if you’re drawing a pension from the British government this will also affect your NZ superannuation.
The other major NZ retirement scheme is KiwiSaver – a government backed, voluntary, savings plan. All NZ residents are entitled to join KiwiSaver. You can choose to contribute 3 per cent, 4 per cent or 8 per cent of your gross wage to KiwiSaver and must stay in the scheme for at least a year. What’s more, you are entitled to a compulsory employer contribution to your KiwiSaver account at a minimum of 2 per cent of your gross salary.
When you reach 65 years of age you are entitled to withdraw any funds that are in your account as a lump sum – although as NZ has no retirement age you can continue working and withdraw your funds at a later date.
8. Have you considered retirement in New Zealand?
In New Zealand, everyone pays income tax, no matter what they earn – high earners benefit from a particularly generous rate compared to other countries.
All figures below show rates for those being paid through the PAYE system:
– Those earning up to NZD 14,000 will pay an income tax rate of 11.95 per cent.
– Those earning between NZD 14,001 and NZD 48,000 pay an income tax rate of 18.95 per cent.
– Those earning between NZD 48,001 and NZD 70,000 pay an income tax rate of 31.45 per cent.
– Those earning more than NZD 70,001 pay an income tax rate of 34.25 per cent.
Those who fail to notify the tax office of their earnings will pay 46.45 per cent income tax, no matter what they earn.
9. Have you considered retirement in New Zealand?
Two New Zealand cities feature in the Annual Cost of Living Index from Mercer, which ranks 207 cities worldwide in order of most expensive by measuring the comparative cost of over 200 items, such as property, transport, groceries and leisure, in each location. Auckland was ranked 81st and Wellington 101st, lower than they have been in the past, owing to the rising cost of living in many Asian cities.
10. Have you considered retirement in New Zealand?
If you are buying a property to let to holidaymakers, you will need the relevant landlord, contents and building insurance policies.
If you are migrating to New Zealand, you need to consider life assurance for your new life in New Zealand, any private health insurance you may need, and, of course, the relevant property insurance for your New Zealand home.
When moving your belongings and any pets to New Zealand, you must also check the correct insurance applies. Check with a trusted removals specialist.
If you are running a car in New Zealand, you should consider the right instance for your vehicle. While it is not compulsory to have car insurance in New Zealand, we recommend at least getting third party insurance to cover you for any accidental damage to other vehicles.