Hi Krish

I think the stats are that NZ property residential prices dropped by about 10% during 2008, and then stayed reasonably stable during 2009.

If you sell now, you may be selling near the bottom of the market, but having said that, it may be a couple of years before you get back to the 2007 value (ie 10% above current value).

You haven't mentioned what your income situation is, and whether you are in a position to continue funding the losses on renting the property for a few years. 

If you are employed and earning a reasonable income, then the $100 / week deficit between the rental income that you receive and the cost of mortgage and other expenses (ie $5000 per year) is probably mainly deductible against your Australian income – or at least the interest part of that anyway – which sounds like it will be most of the loss.  (From memory I think there are some expenses you can't claim if the property is out of Australia, but I believe the interest cost is deductible. Best to talk to a tax expert on that.) 

This may mean that you are effectively getting a tax credit to cover part of the ongoing investment losses (eg up to $2000 / year if you are on the 40% marginal tax rate.)

By waiting a while before selling, my guess is you would get a better overall outcome.

As an example, if say your Tauranga property is worth NZ300k, if the market recovers to its 2007 levels in 2 years time (ie up 10%), you will add $30,000 to your selling price by waiting.  It will have cost you an extra $10,000 in rental losses over that time, but you would still be $20k ahead. And if you are paying Aust income tax, you can probably get some of those rental losses back through negative gearing.

If you sell now, you may be taking away a $10k deficit after paying off the mortgage (have you factored in selling costs – say 5% of the sale value).

But it really all depends on what your income situation is, whether you can afford to continue paying the rental losses for a while, and have enough extra to cover things like rises in interest rates, no tenant for a month or 2 etc etc.

Mike