Property investing in New Zealand 2020 & COVID-19

 

Property investors – listen up! 

 

Whether you’re a first time investor or you’re looking to expand your property profile, there has never been a better time to buy. 

While many people are pressing pause due to fears the economy will crash thanks to Coronavirus, seasoned property professionals are on the prowl, with the strong scent of perfect purchasing conditions wafting over the market.

Investors know that while it won’t last forever, with everyone else in panic mode, they’re able to take advantage of the current climate’s booming opportunities – and there’s no reason why you can’t do the same. 

There are two very powerful factors at play in the New Zealand real estate market that are giving buyers a new opening. These are insanely low interest rates, coupled with a strong property market that’s holding its price. 

So, what does that mean for investors? Capital growth. 

 

Money has never been so cheap! 

 

Let me break it down a bit more. New Zealand has never had interest rates under three per cent. And they’re tipped to go under two per cent which is unheard of.

Money is cheap right now. This means you can borrow money at a low cost and still have good yields. 

To give you some context, when I bought my first property we were paying 22 per cent interest! If you were to pay off $100,000 on your mortgage, you’d be able to save $400 a week so getting debt down was important.

Now, if you were to pay off $100,000 you would only save $40 – so at the moment (depending on your circumstances) there is zero point in paying down debt in a low interest market. 

This environment is about putting yourself in a position for growth at a very low cost. 

 

 

A race to the bottom. 

 

Now of course interest rates won’t be low forever. They will go up – that is inevitable.

However, I do suspect we will see interest rates remain low for a number of years, but will that be five years or seven years?

That is anyone’s guess, but as history tells us, it is unlikely that they will rise overnight.

The other aspect to consider is while interest rates will go up again at some point in the future, luckily for investors, as rates rise – rents do not go down.  

So, if you’re getting $400 a week and your costs drop is an investor, do you lower that? No, of course you don’t – that’s called business, right?

And when rates start going up there is usually an 18 month lag because it’s likely you’ve been on a fixed rate, so you have time to plan for your rate increase and put the necessary steps in place to cover any potential shortfalls. 

 

 

Not everyone can buy now. 

 

But if money is so cheap, won’t all the renters start buying their own homes and then they’ll be no tenants? That is a real question I was asked only the other day.

My answer to that was, no, because renters still need to come up with a large deposit. 

More often than not it isn’t the mortgage repayments that stop people from purchasing their own home, it’s the hefty deposit that they have to come up with to get themselves on the property ladder. 

The entry level in New Zealand is a 20 per cent deposit. Now if you look at a $500,000 property, you still have to have $100,000 to give the bank to even get a look in – and that’s regardless of what the interest rates are.

Because of this, many people are stuck renting for much of their lives as they scrimp and save to get that mega deposit put away. 

 

 

Seize the opportunity! 

 

On top of that, the general population are still probably pretty nervous about the global effects of COVID-19.

While they’re pre-occupied investors should be viewing it as a massive opportunity to buy.

All of the current information suggests that we’re in a great market and we should be taking advantage of it. Now is the time to position yourself for positive wealth creation.

 

 

You’re invited to our next Property Investor Night

 

For more information on how you can get an edge in this market join our free property investment seminar and learn the exact steps you need to take in order to propel yourself forward in property with momentum and speed. 

Knowledge is power – so while others remain stagnant and confused, equip yourself with the right information to succeed. 

There are limited spots available, so to secure your seat click here. 

Use the form below to book your spot!

 

Sue Irons

Director – Positive Real Estate NZ

 

 

Reserve your free seat!