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# 107110 7-Aug-2012 15:06
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Hi,

Does anyone know if the finance required to buy land only in NZ differs from buying a property with a house.

Specifically, do you need a similar amount of deposit for land only, or more? less?




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  # 669071 7-Aug-2012 15:12
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Generally you need a bigger deposit (In my experience that is, and with commercial land), but it may depend on your bank.

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  # 669072 7-Aug-2012 15:14
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ajobbins: Hi,

Does anyone know if the finance required to buy land only in NZ differs from buying a property with a house.

Specifically, do you need a similar amount of deposit for land only, or more? less?


Best to talk to your bank. But I would think you would need a higher deposit because you can't rent land like you can a house to cover a mortgage.

 
 
 
 


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  # 669073 7-Aug-2012 15:14
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ajobbins: Hi,

Does anyone know if the finance required to buy land only in NZ differs from buying a property with a house.

Specifically, do you need a similar amount of deposit for land only, or more? less?


Talk to your Bank or Broker, It will come down to where the land is, and what you want to do with it, 

I suspect a bank could be happier to loan money for with a bare patch of land in an existing subdivision with lots of other houses around, c.f a bare piece of land seriously in the boonys surrounded by trees and sheep....

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  # 669074 7-Aug-2012 15:17
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Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.




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  # 669077 7-Aug-2012 15:24
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You need to talk to your bank as it depends on things such as are you looking at a fully developed good quality section on which you yourself plan to build in the next year or two, commercial, farmland, etc., etc.,or 1,000 hectares of swamp 100 km from civilisation.

In the first case you may get 95% mortgage (as our own bank may do), and the last nothing - the rest somewhere in between.

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  # 669084 7-Aug-2012 15:28
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davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.


I would have thought apartments would be less risky, because their value is based on the return you get from renting them out.

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  # 669086 7-Aug-2012 15:31
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mattwnz:
davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.


I would have thought apartments would be less risky, because their value is based on the return you get from renting them out.


I'm not sure what the banks' issues are.  I think it's to do with the number of apartments being constructed, and that you buy off the plans....rather than buying/selling built apartments.






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  # 669093 7-Aug-2012 15:39
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davidcole:
mattwnz:
davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.


I would have thought apartments would be less risky, because their value is based on the return you get from renting them out.


I'm not sure what the banks' issues are.  I think it's to do with the number of apartments being constructed, and that you buy off the plans....rather than buying/selling built apartments.




With apartments, my understanding is that because you only have a fraction of the land the building is on (less the higher the building), you don't get the same kind of capital gains, therefore it takes longer to build up equity through increase in property prices.

On that basis, land on the other hand would be the opposite.

I'm thinking something rural (and therefore could rent it out) and quite cheap. One I looked at was under 100k.




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  # 669129 7-Aug-2012 16:43
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Banks calculate risk and reward on a number of different criteria. 

They don't like apartments because there is little scope to add value as there would be in a house and if something goes wrong they have to deal with body corporate which they hate as it is a pain. 

As far as buying land goes I would talk to a range of banks as they have a portfolio of properties to spread the different types of risk and reward. One bank may have a lot of properties which are only land in a certain area while another may be looking to extend that part of the portfolio. 

Basic land comes with big potential to increase value but also risk that something unforeseen may limit future value. 

I'm in the process of buying a first house, the very start of the process, and I already hate the property market. 





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  # 669130 7-Aug-2012 16:43
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davidcole:
mattwnz:
davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.


I would have thought apartments would be less risky, because their value is based on the return you get from renting them out.


I'm not sure what the banks' issues are.? I think it's to do with the number of apartments being constructed, and that you buy off the plans....rather than buying/selling built apartments.




Buying of the plan is definitely risky. I think apartments that are retrofitted inside older buildings are also considered quite high risk.

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  # 669134 7-Aug-2012 16:48
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ajobbins:
davidcole:
mattwnz:
davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments).


Prolly, worth hitting up a bank, or mortgage broker for some info. It's fairly easy to find stuff about apartments being higher risk (in the eyes of a bank) but couldn't find anything about land only.


I would have thought apartments would be less risky, because their value is based on the return you get from renting them out.


I'm not sure what the banks' issues are.? I think it's to do with the number of apartments being constructed, and that you buy off the plans....rather than buying/selling built apartments.




With apartments, my understanding is that because you only have a fraction of the land the building is on (less the higher the building), you don't get the same kind of capital gains, therefore it takes longer to build up equity through increase in property prices.

On that basis, land on the other hand would be the opposite.

I'm thinking something rural (and therefore could rent it out) and quite cheap. One I looked at was under 100k.


The thing about buying and selling land is that you go have to usually pay CGT on it if you sell it, as you probably won't be living on it if you don't have a house on it. Not sure if there is much in the way of capital gains on land at the moment either. When diary was doing very well, land prices did jump, but I think they have fallen away quite a bit, guess it depends where it is too. Also there are limited buyers for rural land, as opposed to a house in a city or suburb.
Just speaking from persoanl experience, you can't really make any money from leasing the land out for livestock, unless you buy a lot of it. When we leased out our lifestyle block land for sheep, it didn't even cover the rates.

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  # 669137 7-Aug-2012 16:59
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Last time I purchased a developed residential section from memory the bank would only lend up to 70% of the registered valuation of the land (either independent valuation or CV).

As mentioned I would guess banks and circumstances may vary and you have to make some specific enquiries, but IME you would need a much larger deposit for land alone.




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  # 669236 7-Aug-2012 19:41
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70% if the land is serviced.
50% if it's not.

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  # 669289 7-Aug-2012 20:58
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mattwnz: 
The thing about buying and selling land is that you go have to usually pay CGT on it if you sell it,


There is (presently) no CGT in New Zealand.

Of course... the IRD could try and say that you are a property developer, or a property investor, in which case a gain is a taxable income.

But it's still not CGT, it's income tax (that the CG was your expected income is semantic).  Like any other derivation of income leading to income tax, your expenses are deductible.






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  # 669369 8-Aug-2012 00:55
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davidcole: Mortgage is a mortgage isn't it? Unless the risk is considered higher (like apartments). 


if you own land with no house on it, you cant really just go live on the land.  thats the difference.  you will still have to pay rent/mortgage somewhere else as well service the debt for the land.




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