‘That was the big effect Lord of the Rings had on me. It was discovering New Zealand. And even more precious were the people- not at all like the Australians,’ – Sir Ian McKellen
Are you planning a move to New Zealand? We have gained a lot of experience about what makes a successful financial move. These are our top three financial tips to consider before making the move.
1. The New Zealand dollar (NZD) is overvalued
According to the Reserve Bank of New Zealand (RBNZ), New Zealand’s central bank, the New Zealand dollar is significantly overvalued. This has several implications for someone wanting to move to NZ.
One of the major issues is the loss of money in foreign exchange. If you look at a currency exchange such as GBP to NZD, recent sterling losses and New Zealand dollar gains will see a significantly reduced return for your hard-earned pounds. If you sold your property in the UK to buy in NZ, you will have far less to spend at current rates.
The central bank is employing many macroeconomic tools and monetary policy alterations to combat this, however thus far in 2016, policymakers have cut the overnight cash rate once and are very likely to do so again before year-end. Good news: this will significantly reduce the value of NZD, giving you far more in exchange.
2. Use a Broker to Save Money
Although the GBP to NZD exchange rate is competitively unfavourable at current levels, there is still a tried and tested way of saving a great deal on exchange, especially when making large transactions.
By avoiding banks and other similar institutions, opting to use a reputable dedicated currency broker instead, you will likely get a far more competitive rate of exchange. When purchasing a house, for example, you could save a massive amount.
Just as an example, lets say a bank offered a GBP to NZD exchange rate of 1.85 and a broker offered 1.87. On the face of it that doesn’t seem like a significant difference. However, when you exchange a large amount it makes a marked difference. For example;
£200,000 at 1.85 equates to NZ$370,000.
£200,000 at 1.87 equates to NZ£374,000.
That is an extra 4,000 New Zealand dollar’s for exactly the same amount of sterling.
3. Beware of the Auckland housing bubble
Average house prices in New Zealand are comparatively high thanks to a housing bubble in New Zealand’s capital city, Auckland. It is worth noting, however, that much like the United Kingdom prices outside of New Zealand’s capital drop considerably.
For those wishing to move to Auckland, be prepared to spend a considerable amount. Prices in the capital averaged at around NZ$750,000 in November 2015 and have been steadily rising since.
The government and central bank have been working hard to deflate the bubble and lending conditions to landlords have tightened considerably and new restrictions are set to be introduced in early September.
‘The banking system is heavily exposed to the property market with residential mortgages making up 55 per cent of banking system assets,’ RBNZ Governor Graeme Wheeler said. ‘Investor lending has been increasing rapidly and is a significant contributing factor to the current market strength. The proposed restrictions recognise the higher risks associated with such lending.’
New Zealand ranks top for personal taxes
In 2014 the US-based TX Foundation ranked New Zealand’s overall tax system as second-best in the developed world, with personal taxes hitting top spot.
These are the key features of New Zealand’s tax system:
- no inheritance tax
- no general capital gains tax, although it can apply to some specific investments.
- no local or state taxes apart from property rates levied by local councils and authorities
- no payroll tax
- no social security tax
- no health care tax, apart from a very low levy for New Zealand’s ‘accident compensation injury insurance’ scheme
New Culture, Similar Outlook
Finances aside, although New Zealand is a very different culture from that of the UK, there are surprising similarities that makes settling in that little bit easier. One of the main similarities is spoken English. As many expats will attest, moving somewhere with a completely alien language can be a real obstacle and make settling in a long process. Whilst the dialect and colloquialisms differ, the common language makes for a good start. In 2013, 6.7% of New Zealand’s population were British.
New Zealand, like the UK, is an island nation. You are never more than 75 miles from the sea.
New Zealand also shares many of the UK’s high quality living standards. Both have state-funded education, low levels of social problems, high-quality health care and a renowned for beautiful scenery.
New Zealand, however, has better weather on the whole, which is perhaps one of its main attractions for the British. Another major difference is the fact that New Zealand’s population is far, far lower than that of the UK’s; 4.5 million compared with over 64 million in the UK.