Can you invest in a New Zealand property from overseas, or using overseas income – or both? Yes – with a few caveats. Read on to find out more.
What is considered overseas income?
Overseas income includes income from any source overseas. This is usually one of two types of income:
- Personally earned income like wages and salary. If you are earning money from overseas (whether you’re physically overseas yourself or not), that may be considered overseas income.
- Rental income for properties based in other countries.
There are a more types of overseas income, from interest you earn in overseas bank accounts, foreign pensions, and any interest earned from overseas investments. Essentially, any income that doesn’t begin and end its journey in New Zealand may be considered “overseas income”. If you are an NZ tax resident, even if you didn’t bring any money into the country, you will need to pay tax on any worldwide income.
What about overseas debts?
Overseas debts are looked at by banks in the same way as you lived in New Zealand. A lender will look at the mortgage limits you currently have, and as they do in NZ, apply a test rate.
A lender will also look at any other debt you have accrued across the ways, such as credit cards or personal loans. 3% of the limit of the credit card is loaded as a monthly expense. This means a super high credit limit can hinder your lending or servicing capacity! Your personal loan amount would be taken for the actual payment made in the New Zealand dollar.
How is overseas income considered for a property loan?
Banks are a wary of people investing with overseas income, as it can be negatively impacted by things such as currency movements or volatile global markets. Approach any form of property investment from another country the same way you would if you were living in New Zealand. Lenders tend to like to stick with what they know – but that doesn’t mean overseas income is ignored entirely!
Here’s what happens:
- They’ll generally only consider 70% of your gross income as ‘real’ in terms of servicing, to account for overseas tax.
- They’ll be even more strict with the typical 40% deposit requirement to buy an investment property.
Every lender will have slightly different rules around how they view overseas income, but this is a general rule of thumb. Some lenders are strict, others are more flexible. It’s important to speak to a mortgage broker if you have an overseas income because we may be able to help you find one of the more flexible lenders.
What if I’m investing from overseas?
A lot of the answer to this question depends on your citizenship.
According to the Overseas Investment Amendment Act 2018 (OIA), you can only buy New Zealand property under special circumstances. You can buy if you fit one of the below criteria:
- You’re a Singaporean or Australian citizen.
- You are buying an apartment off-the-plan from a development with an OIA exemption.
- You yourself have been granted an exemption from the OIA.
If you’re a New Zealand citizen, you can buy property no matter where you are in the world. One of the benefits of our excellent passport! Only having overseas income can still make it tough to get a loan. You will also need to pay any taxes in New Zealand to account for any income and losses from your NZ property.
Having trouble investing in property due to overseas income or trying to invest in New Zealand property from overseas? Get in touch with the team at Money Empire and discover how we can help you move into a new home or grow your property portfolio.