Answers to Frequently Asked Questions about why you MUST start investing in the New Zealand property market TODAY if you're dead serious about doubling or even tripling your wealth over the next 15 to 20 years!
Am I taking an unnecessary risk
investing in property right now?
You would only be taking an unnecessary risk if you were looking to "buy" and then "sell" the same property again
within 12 - 24 months.
That's not to say that the New Zealand property market won't continue to perform during such a short period; it's just that history has
shown that "risk" associated with ANY investment is correlated to the length of time the investor holds on to it.
In other words, the longer you can retain ownership of your property/s, the less likely you are to incur a loss at the time of
re-sale.
For example...
If you purchased a property in say, 1988 and sold it again in 1990, you would've almost certainly taken a loss - The New Zealand property
market was in the vice-like grip of a severe down-turn AND a six-year-long recession to boot!
Once again, if you purchased a property in February 1997, then sold it a year later, you may well have lost 10% - 15% of your purchase
price - the Asian Crisis wreaked havoc with global property markets during this period.
However, if you purchased a property in Auckland in April 1987 and held on to it until April 2007, you would've gained over 350% - and
that would've been despite the 1987 share market crash, the 1986-1992 recession, mortgage interest rates hitting 20% pa during the late
1980's, the Kiwi Dollar ranging from a low of US$0.36 to a high of US$0.81, the Dot Com crash, two changes of government, six prime
ministers, the threat of nuclear war from both Iran and North Korea, and of course, 9/11!
Remember the golden rule: "IT'S NOT ABOUT "MARKET TIMING"... IT'S ABOUT "TIME IN THE MARKET".
Could the New Zealand property market
"bubble" still burst?
While nothing can be ruled out, it is unlikely for the following seven reasons:
1) Recent downward pressure on the ridiculously over-priced homes in the upper-middle to high end of the market has already brought some
sanity back to the meaning of the phrase, "fair market value".
2) The 4-year long rise in home loan interest rates appears to have peaked.
3) Inflationary pressures are, at last, easing.
4) Population growth in Auckland, Hamilton, Tauranga and other main centres
is on the increase.
5) Less people can now afford to own their own home and are therefore putting additional pressure on the demand for
quality rental property.
6) The New Zealand property market is still attractively priced in the eyes of foreign investors - particularly now, in light of our
easing Kiwi Dollar.
7) Rents are finally starting to rise after years of sub-par activity. Increased rental demand will further underpin rent levels.
What fuelled the recent NZ property
boom?
There were a whole range of factors that, when brought together, formed a powerful catalyst for what has proven to be the strongest
property boom on record in this country.
It all started way back in 1998-1999 when the economy had bottomed out following the carnage of the Asian Crisis.
By 2000, a new era of economic growth was underway: net migration figures were booming; building consents were rising; home loan interest
rates were approaching historical lows; unemployment had plummeted; and our currency, when measured against major internationals, had
made it increasingly attractive for offshore buyers to invest in the New Zealand property market.
There were other strong economic and social forces at work as well. For instance, the need to save for retirement had become
engrained in our national psyche by this time.
Falling bank deposit rates had begun seeing a shift away from traditional savings schemes into property, largely because of the appeal of
capital gain well in excess of what banks were paying out in interest.
Superannuation fund, unit trust and share market investors had become disillusioned by the high fees and relatively low "return on
investment".
But there was an even more compelling reason for the magnitude of the boom... "asset-rich baby-boomers" with debt-free family
homes had begun leveraging off their equity and investing in property for their retirement.
By the peak of the property boom, more than 30% of all new housing loans were for investment property!
Can the NZ Government really
hope to cool our housing market?
In a word, "no".
Like all other asset classes in existance, the New Zealand property market is driven purely by supply and demand. No amount of
political spin and/or veiled threats from ministers of finance or Reserve Bank governors is going to change the
fundamental direction of the property market.
It will do what it's always done... and always will do... it will trend up, down and sideways (but ultimately
"up" over any length of time) based on nothing more than supply and demand.
Are foreign investors restricted
from owning NZ property?
New Zealand still remains one of the only countries in the western world where foreign ownership of property has no restrictions attached to it.
What about Land Tax, Capital Gains Tax and
Stamp Duty?
There are no plans to introduce any of these highly unpopular, revenue-generating taxes into New Zealand by either major political party.
Is rental demand in New Zealand likely
to increase in the future?
New Zealand already has some of the most expensive property in the world relative to local income.
In Auckland, for example, it will take 6.9 years for a first-home buyer on the average wage to buy a house - and that assumes they save
ALL their income during this period!
Utterly impossible!
Clearly, this scenario points ominously to a dramatic increase over time in the number of people who'll be forced to "rent" instead of
"buy".
Add to this the fact that New Zealand will have no choice but to bolster its quota of new immigrants to the country, primarily to fill
the large gap being left by retiring "baby-boomers".
Put all these factors together and you've got a compelling argument for a major "rental squeeze" in the not-too-distant future.
What is the long-range forecast for
home-ownership in NZ?
According to the Centre For Housing Research, New Zealand, the rate of home-ownership is expected to plummet over the next 10
years.
Overall, home-ownership rates are expected to drop by a massive 5 percentage points, to 62 percent by 2016.
The number of owner-occupier households is expected to increase by 43,101 and renter households by 151,890. The strongest growth in both
renter and owner-occupier households within the New Zealand property market sector is expected to occur in the greater Auckland
region.
New Zealand property market