• Buying Hotels in New Zealand: A Guide for Investors

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    New Zealand has been in the media headlines due to its significantly overheated residential property market. The commercial property market is less frequently spoken about, even if it offers great investment opportunities to foreigners.

    New Zealand continues to attract travelers who want to enjoy its nature and perhaps seek a safe haven. Here, foreign property ownership regulations are on par with most Western countries, something that I will explain more about in this article.

    Today, we cover the following topics:

    • Can foreigners buy hotels in New Zealand?
    • Foreign Hotel Ownership Regulations
    • The Hotel Market in New Zealand
    • Commercial Real Estate Agents in New Zealand
    • Best Cities for Hotel Investments in New Zealand
    • FAQ

    Can foreigners buy hotels in New Zealand?

    New Zealand has preferable property foreign ownership regulations and you can even buy hotels and resorts as an individual here. As mentioned in previous articles, the regulations bring some similarities to Australia.

    Interestingly, the New Zealand Prime Minister, Jacinda Ardern, has even stated that New Zealand needs quality foreign investments in commercial real estate such as hotels and transportation.

    At the same time, they imposed a ban for foreigners to invest in residential real estate.

    Worth mentioning is also that in other Asian countries such as Vietnam and Indonesia, it’s a completely different undertaking to buy commercial real estate.

    Working with a credible and experienced partner is crucial to navigating these markets.

    The residential property market has been overheated in New Zealand in the past years, particularly since we’ve seen a great influx of Chinese buyers.

    In 2018, the government decided to outright prohibit foreigners from buying residential real estate.

    Yet, the commercial property market isn’t near to be as overheated as the residential ditto, a reason why foreigners could continue to buy hotels and resorts.

    Foreign Hotel Ownership Regulations

    The authority of Land Information New Zealand (LINZ) provides valuable information about land investments in hotels and hotel units. Below are some notable statements.

    Investments in Hotel Units

    Developers can sell hotel rooms pre-construction to secure financing. Hotel rooms are available to foreign investors and you can buy units without approval from the Overseas Investment Office.

    The requirements are:

    • The hotel is constructed on residential land
    • You lease the room to the hotel for the remaining days
    • You cannot live in the units, but stay there for 30 days a year
    • You have to sell or renew the lease when it expires

    Sensitive Land for Hotel Constructions

    Before you take over a project or initiate construction, it’s important that you confirm whether the land is considered sensitive. It’s hard to define what sensitive land as this involved different types of land, each plot has an area threshold.

    You can read more about sensitive land on the authority of Land Information New Zealand’s website. Here, you can read the Overseas Investment Amendment Act 2018 that provides valuable information.

    Keep in mind that you should advise with a local partner and lawyer to help you with consultancy, to find interesting objects, and guide you through the buying process.

    The Hotel Market in New Zealand

    New Zealand has become an increasingly popular tourist and investment destination.

    This has led to an upswing of visitors and in 2019 as many as 3.9 million people visited this small nation. Over the past 5 years, we’ve seen an increase of 8.43% in total.

    With that said, we have seen the following interesting trends according to Colliers New Zealand:

    • The number of Chinese visitors declined in 2019, but we’ve seen a great increase in the past 5 years as a whole
    • Great growth thanks to US visitors. The reduction of Chinese visitors has been offset due to this change. Several direct flights have been launched between New Zealand and the US, including direct flights to New York and from LA to Christchurch

    New Zealand’s Hotel Industry Relies on Australians and locals

    The hotel sector relies heavily on domestic travelers and Australian guests. This segment accounts for more than 50% of the hotel rooms occupied. Domestic guests account for 60%

    In 2019, we also saw the following RevPAR (Revenue Per Available Room (RevPAR) changes:

    • Queenstown: +2.8% ($208)
    • Auckland: -6.1% ($162)
    • Wellington: +2.8% ($144)
    • Christchurch: -0.8% ($122)
    • Rotorua: +2.3% ($111)

    2020 didn’t turn out as expected due to the COVID-19 pandemic. 4 million visitors were expected to visit New Zealand and with a new supply of 1,660 hotel rooms in 13 hotels.

    Commercial Real Estate Agents in New Zealand

    You can find plenty of international real estate agencies that have offices in dozens of countries. Some of the most well-known in New Zealand include:

    • Harcourts
    • Ray White
    • Century21
    • Colliers New Zealand

    I also recommend you checking New Zealand’s Real Estate Authority (REA). Their main task is to protect and promote buyers and sellers of real estate, improve the quality, and the confidence in the real estate work.

    ERA provides plenty of guides related to the buying process, the drafting of the sales and purchase agreements, and more.

    Best Cities for Hotel Investments in New Zealand

    New Zealand is small and investments are targeted to a few cities. This goes for both residential and commercial property. Below you can read more about the most interesting cities to invest in hotels and what makes each city unique.

    Wellington

    Wellington is the capital city of New Zealand with a population of around 220,000 people. It’s significantly smaller than Auckland, which has a population of around 1.65 million.

    Despite being a smaller city, Wellington attracts plenty of investors thanks to its high quality of life, great infrastructure, and many business and investment opportunities. Over the years, numerous foreigners have entered the market.

    Wellington will have a limited supply of hotel rooms in the coming years, even if it saw the most hotel rooms completed in 2019. This supply will most likely need to be absorbed first.

    The capital saw some of the best-performing markets in terms of RevPAR growth in 2019. This was mainly due to greater demand from corporations and the government.

    The demand for hotel nights was distributed as follows for different nationalities:

    • Domestic: 79%
    • Australian: 10%
    • Other: 6%
    • USA: 3%
    • Chinese: 1%

    Auckland

    Auckland is the biggest city and will see a great launch of new hotel rooms in the coming years. Around 2,500 hotel rooms were under construction in 2019, compare that to wellington where around 50 new hotel rooms were under construction.

    Yields are comparatively low in Auckland to other cities such as Christchurch and Wellington. The market is expected to grow less due to the increased supply of new hotel rooms mentioned.

    Many high-end hotels were planned to be launched in 2020, including names like Travelodge, QT Auckland, Park Hyatt, The Hotel Britomart, and Mercure.

    The demand for hotel nights was distributed as follows for different nationalities:

    • Domestic: 52%
    • Australian: 15%
    • Other: 20%
    • USA: 7%
    • Chinese: 6%

    Christchurch

    Christchurch has a population of around 385,000 people and is comparatively international to Wellington. We will see a moderate supply of new units in the city, worth mentioning is that it has comparatively high yields.

    RevPAR numbers have remained stable at the same time as we saw a 19% increase in hotel rooms from 2017-2019.

    Many public and private projects have been launched, including the Avon Riverside Precinct, the Riverside Farmers Market, new hotels, and the central library.

    The demand for hotel nights was distributed as follows for different nationalities:

    • Domestic: 56%
    • Australian: 14%
    • Other: 20%
    • USA: 7%
    • Chinese: 4%

    FAQ

    Below I have included some commonly asked questions and our replies. If there’s anything else you wonder about, feel free to contact us or write a comment below.

    How is a hotel defined in New Zealand?

    According to the Overseas Investment Act 2005, a hotel is premises used or intended to be used, in the course of business principally for providing temporary lodging to the public.

    Can I become a resident by investing in New Zealand property?

    According to New Zealand’s Immigration Department, you can apply for residency if you belong to any of the below investor categories:

    • Investor 1: Min. investment NZ$10 million for at least three years
    • Investor 2: Min. investment NZ$3 million for at least four years

    How much do I have to pay in stamp duty?

    New Zealand doesn’t levy any stamp duty for residential or commercial real estate purchases at the moment. You don’t have to pay any stamp duty when buying a hotel, for example.

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