What and where you buy today is going to be crucial in the success of your property investing journey.
Property investing is about creating wealth slowly. For the average New Zealander, they want to know that their investments are safe and secure, and if they are leveraging against their family home, it has to be protected so all you have today is not lost by one bad investment decision. Speculating in the property market is for people that are prepared to lose their investment, not Mum and Dad Kiwis.
Location is critical.
You need your investment properties to grow in value over a period of 10 to 15 years. If you stick to the major centres in New Zealand, their capital growth is far better than the provincial regions in New Zealand. The provinces will grow over time, but have you got 25 to 40 years to create enough wealth to be financially free in your retirement.
Auckland is the Commercial centre of New Zealand. It is a world class city and is experiencing amazing growth. You just have to look at the big cranes on the skyline to realise that billions of dollars are being invested in commercial, industrial and residential buildings. Add to that the infrastructure projects like roading, underground train lines, transport hubs, shopping centre and the list goes on.
Where money is being spent, growth always happens.
Hamilton is the Agricultural centre of New Zealand. Farming drives this region. Sheep, beef and dairy are the major industries here. The support network around this is huge. Land is still relatively cheap compared to Auckland, so housing prices are affordable. Infrastructure is rapidly going into this area too. Two major inland ports are being developed to service the two largest ports in New Zealand, Auckland and Tauranga. All freight in New Zealand moves through the Waikato. There are jobs and lifestyle here.
Tauranga is the retirement capital of New Zealand. It has the largest port in New Zealand, great climate, beaches and again major infrastructure projects in roading and shopping centres, has made this an attractive area to retire in. People are willing to pay to live in the Bay of Plenty.
Wellington is the Political capital of New Zealand. The Government is going nowhere. Wellington has the highest incomes of all New Zealand. Land is expensive because they are not making any more, and it has a large sea border. Rents are high but people can afford them. Inner city apartments appeal to the growing number of young people that work in the city and want to dine and play there. Cafes and bars are within walking distance of residential complexes. These people don’t own vehicles, they walk or uber around.
Christchurch is still the second largest city in New Zealand and is known as the lifestyle capital of New Zealand. Swimming, fishing, hiking, canoeing, snowboarding and skiing all rank high on why people choose to live in Christchurch. The rebuild of the whole city continue and Christchurch will end up with the most modern facilities of all the main cities.
After where to buy, the next question is “what?”
House and land has always been considered the number one type of property for people to live in. However, times are changing. People are having smaller families and they are more time poor. Spending the weekends gardening and mowing lawns is not for a lot of people today. Smaller families mean less bedrooms required. The 4 and 5 bedroom homes are now a smaller group of the total. One and two bedroom units are by far the dominant player in new builds.
If you are looking at central business districts, apartments are now in vogue. In Auckland the new unitary plan has allowed for medium to high rise units to be built around the transport hubs. Further out from the CBD, sections that once had one family home on it are being developed with multiple townhouses on them. As land gets more expensive, the use has to accommodate more units and house more people. The roads are not coping well with all the additional traffic, so make sure public transport is close by or you may struggle to get a tenant.
Always understand who your tenant is. Where do they work, how much income do they have, do they have children and where will they spend their leisure time. It is crucial to study the demographics of any area. Understand what will drive a tenant to your property and also who will be the purchaser of this property when you decide to sell. Who will pay you good market value in the future because of its type and location.
Do you buy new or second hand?
This can sometimes be a difficult question to answer, and a lot will depend on the age and quality of the building. New properties have a lot in their favour. Modern building materials and meeting “healthy homes” requirements. Bank generally will lend a higher amount on new properties for investments, so you deposit goes further. You leverage more today you make more wealth in the future. New properties have a higher chattel value for depreciation. Older properties have little if any depreciable value left in them. New homes require little maintenance over their lifespan as opposed to older properties that can become a “money pit”
New homes attract a better class of tenant who is prepared to pay more to live in a nice new property.
In summary, look for a location where you are going to get a good rental income, in a capital growth area.
These areas are driven by population growth. Demand for property drives up prices, and in New Zealand at the moment we have a major shortage of properties to meet the demand of our growing population. Where infrastructure is going in, jobs are plentiful and these people need to be housed.
Give these people the type of home they want and can afford, and you have a recipe for building a successful property investment portfolio.
To learn more about building a successful portfolio, and the strategies that successful investors use, join my at my next live or online event. If you’re ready to move forward with property I can help you make it happen.
See you soon!
Property Coach and Investment Mentor
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