Buying Property in Christchurch, New Zealand

So, I had some time on my hands, and recently met up with a representative from Williams Corporation, a residential property developer based in New Zealand, and chatted about the property market, and how a Singaporean can think about buying property in New Zealand in general, and Christchurch in particular.

I’d been looking at lifestyle or geo-arbitrage, and if you’re deep in the FIRE movement, you’ll know what it is. It’s basically utilizing your current resources, and moving to a country/city with a lower cost of living, and enjoying a better quality/cost of life, and better utilization your existing financial resources.

This is something I routinely look into, partly to keep myself updated on property trends in various markets, and especially when I feel like living in Singapore is so ridiculously expensive.

Who can buy property in New Zealand?

In 2018, New Zealand banned foreign ownership of property in NZ, the only exceptions being Australians and Singaporeans due to a free trade agreement.

The ban was made largely due to wealthy foreigners buying up NZ property and pushing up prices over the last decade, driven primarily by the Chinese.

While the median house prices in other cities in New Zealand like Wellington and Auckland have been on the rise, Christchurch, because of the 2011 quakes, have seen prices remain stagnant, and this is where the opportunity lies.

Property in Christchurch

Which brings us to the meeting. He took me through 2 property developments, both within the Christchurch central area, walking distance to the CBD and parks and offices.

It was a 2-bedroom townhouse, right in the middle of Christchurch, walking distance to town and offices, restaurants and cafes, and it cost $490,000.

Christchurch vs Singapore property

Now where I live in Singapore (near the airport), it’s considered far flung. The commute to work in town on public transport I reckon will take more than an hour easily.

Driving takes about 45 – 60 minutes in peak traffic.

The property that I live in cost me $950,000. Plus a $100,000 car, that takes me over $1m on these 2 big ticket items. Oh, and did I mention the property is on a 99-year lease, of which we’re almost approaching the 40 year mark.

I’m guessing you can see where i’m going with this.

What the Jeep?

Also, I was having lunch the other day at the mall, and there was a car promotion going on by Jeep. So I was curious and went to take a look at the models and also the price list.

The cheapest model, the Jeep Renegade, so, so beautiful, came in at $118,000.

Since I’d just checked out the property prices in Christchurch, I thought I’d take a look at what the exact same model would cost in NZD.

It was $42,000. Singapore Dollars and New Zealand Dollars are currently at 1 SGD to 1.15 NZD. Let’s just say for easy comparison’s sake, that we’re on par.

Everything is half off!

Last I checked, New Zealand has a great culture, great people, a decent economy, and way less humans. Just the way I like it. Sigh… I don’t know why we’re not already there, tending to our sheep, soaking in the fresh air and feasting our eyes on those mountain views.

Airbnb and short-term rental yields

Anyhow, back to the matter at hand. From a purely investment standpoint, Christchurch is lagging other cities like Wellington and Auckland quite a fair bit, due to the earthquake in 2011.

So the growth story here is that has the rebuilding takes shape, and more infrastructure and businesses come back to the city, housing prices will fall back in line with the national average and rise faster.

This may also happen as the other cities start getting overpriced (as they already are), and people start looking to work and live in Christchurch.

So, from an investment return point of view, we’ll have:

• Rental yield (Airbnb, Vrbo, Bookabach etc)
• Capital gains

For foreign ownership of New Zealand property, we will need to put down a 30% down-payment. On a $490,000 property, that works out to be $147,000.

We did some projections on airbnb rental that worked out to be cash flow positive after estimated expenses and mortgage payments. One of the estimates actually came up to be +$13,645 per year. On top of a projected capital gains of between 3% – 9%, rosy projections painted a >$200,000 overall profit over 5 years!

Is the New Zealand property market in a bubble?

Of course, we’re already looking at a super bloated NZ housing market, where they have been specifically called out, alongside Australia and Hong Kong as prime candidates for a housing crash/correction.

Some experts even pegged the chances of a crash or harsh correction within the next 2 to 4 years at 40%.

Covid-19 effect?

As we’re witnessing the effects of Covid-19 live in action slowly take hold across the globe, I’m left wondering if this would blow past quickly, and we would simply treat covid-19 from next year as a flu variant, or would it have a drastically deeper impact on businesses as a whole, and could that trigger another subprime crisis?

Concluding thoughts

For every 10 people saying Christchurch housing is going to get a boom from all the work the government is pouring into building up infrastructure and tourism, I can find another 10 professing that the sky is falling and household debt, fueled by Covid-19 uncertainty resulting in job losses will be the perfect storm to bring down NZ’s housing market.

I do think the global economy is looking pretty shaky at this moment, and will likely sit this one out, and perhaps re-evaluate at the end of the year.