What does all this data mean?

For each country, the table shows:

1. The average growth rate over a year.
2. The average long term annual growth rate
3. ‘Safer-guess’ growth rate

The average annual growth rate is just that. I look at how fast house prices have gone up over a single year. Then I take the average.

The long-term growth rate us where I look at how fast house prices have gone up over a 10 year period. And I take the average of that.

This gives you a better idea of how your investment might perform if you own it for a decade.

For example, in Russia the average one year growth rate is 14%. But because it's so volatile over a decade the average annual growth rate is only 8.5%.

The ‘Safer-guess’ growth rate looks at how much house prices have gone up by over 10 years. But this time it says: “67% of the time house prices went up by at least X%.”

It’s a more conservative measure and let’s you make a less aggressive assumption about how much house prices could go up in the future.

Again, using Russia as an example. On average the 10-year growth rate is 8.49% per year. That means that half the time Russian house prices went up by more than that. Half the time they went up by less than that.

Whereas, two-thirds of the time, they went up by at least 6.52%. Only a third of the time did Russian house prices go up by less than that over a decade.

It’s also important to note that I’ve used OECD data going back to 1970. But, some countries in the table don’t have data going back to 1970. For instance, Chile, Greece, and Israel only have 20–30 years of data, not the 55 years I’d ideally like.

But, it still give you the general gist.

More from Opes:

• How are NZ's house prices changing right now? (Annual)
• Does New Zealand have a Capital Gains Tax?
• How the OCR (really) impacts inflation

3 reasons you might make less money than you think

Some countries outside New Zealand have had huge house price growth.

Looking at those numbers it’s easy to think: “Wow, I could make a lot of money if I buy a house overseas!”

But the reality is a bit more complicated. Here are the 3 reasons you might make less money investing overseas than you initially think:

#1 – Capital gains taxes can drain your dollars

New Zealand doesn’t have a Capital Gains Tax, but many other countries do. This means that you pay tax on the profits of your sale.

Let’s say you invest in a country with a 20% capital gains tax. In that case if your house goes up in value by 5%. Then your effective capital growth rate is 4%. That’s because of the tax.

So if you buy an overseas property and it doubles in value, that doesn’t mean you’ve doubled your wealth.

#2 – Inflation and currency movements can make your wealth worthless

Let’s say you invest in a country where house prices grow really fast. House prices might be rising because of high inflation.

That matters because if there’s high inflation, then the local currency could go depreciate.

That could mean that you make a lot of money in the local currency. But then when you bring the money home … you didn’t build as much wealth as you thought.

And I’ll give a very important example of that below.

#3 – Local interest rates can be sky high

Some countries where house prices grow fast also have very high interest rates. This can mean that the property’s cashflow is poor. You see that in the next example.

Case study: Turkey

Turkey is a good example of how things can get complicated when you own a house overseas.

Since 2020, Turkish house prices have gone up a staggering 14× in Turkish lira (local currency).

And yes, that sounds incredible. Let’s all pack our bags and start buying houses in Turkey!

But over the same period, inflation was very high. Which is why the Turkish lira depreciated. It lots a lot of its value.

In January 2020, 1 Turkish lira = $0.187 New Zealand Dollars.

By 2024, it had crashed to about $0.041 NZD.

So if you bought a property for 100k Turkish lira in 2020 and sold it for 1.3 million more in 2024 … you’d think you made a killing. A 1300% return!

But once you pay the capital gains tax for overseas investors, you’re left with about $1.28 million lira.

Convert that 1.4 million lira back to NZ dollars at the new exchange rate, your 1300% gain shrinks to only about 180% in New Zealand terms. Not bad. But nowhere near as good as it seemed on the surface.

And here’s the kicker: during this time, Turkish mortgage interest rates hit around 45%. If you had a mortgage, the interest costs alone would have swallowed huge chunks of your gains.

So on paper, Turkish property owners got rich. In reality? Not so much. Because of the capital gains tax, currency fluctuation and interest rates.

Is my overseas property a good investment choice?

Overseas property can grow your wealth, but only if you look beyond the headline numbers.

Before counting how much money you’ve made on your overseas property, always factor in:

• Capital gains tax (for overseas investors) in the country where you own the property.
• Inflation and currency movements that can shrink your returns when you bring the money back to New Zealand.
• Local interest rates that can eat into profits if borrowing costs are high.

When you take all three into account, you’ll see whether your overseas property is truly building wealth … or just looking good on paper.