Aussies stampede into New Zealand property eyeing better yield after CGT change: ‘Salary replacement’

New Zealanders are increasingly enticing Aussie investors to the land of the long white cloud as tax changes in Australia have triggered a surge in interest in the property market across the ditch. A less generous capital gains tax discount and negative gearing removal in Australia have seen many investors look beyond local residential property.

But other factors including lower prices, a favourable exchange rate and no stamp duty have meant more investors are eyeing New Zealand as a destination to build wealth. Auckland-based Ilse Wolfe coaches property investors to achieve a high-yield strategy and says inquiries from Australians have dramatically spiked this year, in the order of 800 per cent.

“It’s had a massive uptick recently,” she told Yahoo Finance.

“Politically, our doors have never been more open.”

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Wolfe has been investing with Australian clients for six years but recently held her first webinar for Australian investors with nearly 1,000 people registering online. The demand is so high she is flying to Melbourne next month to meet with the growing number of interested investors and tout what she calls her “cash hacking” strategy.

Her firm targets second-hand properties that can have an internal renovation to add an extra bedroom and increase the rental yield – a slight twist on the BRRR method, which stands for buy, renovate, rent, refinance, repeat.

“Effectively, it’s almost a backwards way of getting a discount,” she said of identifying homes that can add extra internal space.

Pitching to Australian investors increasingly focused on yield, Wolfe said her clients can “get actual passive cash flow” with the strategy shortly after purchasing the property.

“We can help them achieve two to three times the Australian yield,” she said.

“Interestingly, we have a lot of Australian clients who are themselves, buyers agents, developers and they literally can see that contrast,” Wolfe said of the two national real estate markets.

MORE: Aussie investors head to New Zealand after sweeping CGT changes, SMSF ban

Melbourne based IT worker and small-time property developer Kaveen Jayawardena has been investing with the help of Wolfe, employing the strategy in regional markets in New Zealand’s north island.

Born in Sri Lanka, Jayawardena came to Australia in 2008 and has been investing in New Zealand for years. He recently bought four units in New Plymouth and added an extra bedroom in two of them, and hopes to buy another one soon.

“What I found was really good was no stamp duty there. I was astonished when to heard that,” he told Yahoo Finance.

With all things considered, he said the rental yield he is able to get on such properties is better than similar markets in Australia, where prices remain very high.

“The return of investment works really well there,” he said, adding that he would never think about investing via negative gearing, despite New Zealand allowing partial tax discounts with negative gearing. “I’m not here to lose money,” he said.

Jayawardena has “seen a lot of momentum” in chat groups and property forums online with Aussies looking at New Zealand as a better investment destination.

Yield-focused strategy to replace salary for investor

Kiwi born Tommy Pyatt is not your regular FIFO worker. But as a coach for the Chinese national half pipe ski team that’s what he calls himself as the job takes him to various countries throughout the year, including Australia.

He has looked at investing in real estate in different countries but decided New Zealand was the best bet and has purchased six investment properties recently.

“Looking at other options in America and Australia, where I spend a bit of time, I’d seen way harder barriers to entry. And way higher taxes as well,” he told Yahoo Finance.

“And the number one thing for me is yield. In New Zealand, it seems very easy to find some multi-unit investments that the yields are ripe. Some of those more expensive towns in Australia, they just don’t come close.”

He plans on holding the properties for the long-term with the ultimate goal of “salary replacement”.

“That’s what the yields are all about. We can’t sit around waiting for capital gains that might flatten off for a decent period of time in the future.”

New Zealand has seen one of its deepest house price corrections in the last few years, dropping more than 30 per cent in real terms, with the national median sale price currently sitting at about NZ$750,000, or just over AUD $600,000.

CGT change a ‘huge’ factor in NZ appeal

Wolfe said the change to CGT in the latest federal budget in Australia has been a “huge” pull factor for her business.

“I have just signed up new [Australian] clients who have quickly liquidated there and pulled over here,” she said.

While Australians face a higher rate of capital gains tax from July 2027, New Zealand property investors don’t have to pay CGT on properties held for longer than two years. However, investors residing in Australia will still face the local CGT regime and owe tax to the ATO on any capital gains.

But the promise of much better bang for buck on yield, the favourable exchange rate, less costly up-front fees when investing in New Zealand and a lower official cash rate of just 2.75 per cent, are all helping to seal the deal for investors keen to cross the ditch and seek out improved cash flow from their investments.

“If you think about an Australian purchasing domestically, there’s a stamp duty, there’s the buyers agent fee, then there’s the ongoing annual land tax. So then you convert that into New Zealand dollars, you’re suddenly feeling pretty wealthy,” she said.

Online searches for NZ property listings surge from Australia

Earlier this year, New Zealand Finance Minister Nicola Willis invited Aussies to jump across the ditch following the tax changes, telling Aussies: “Where the bloody hell are you? Come over!”

“You’re welcome to come and invest in New Zealand. We do not have a capital gains tax. Our inflation rate is lower,” she said.

“This is a government that isn’t planning to raid you with more taxes. We would love to welcome more Australian investors.”

And it seems to be a message that has been heeded.

According to new data from property listing website realestate.co.nz released on Friday, the number of Australia-based property seekers surged 163 per cent year-on-year in May, when the tax changes were announced, and accelerated to almost 190 per cent by August.

“We expected the announcement to have a flow-on effect to New Zealand, but the scale and speed of the shift have been striking,” CEO Sarah Wood said.

“Australians aren’t just browsing – they’re searching, saving properties and making enquiries at levels well above what we were seeing a year ago.”

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