Why residential rentals are still a good investment
by Adam Smith
New Zealand’s residential property investment sector has always been a topical subject, and is often one of the key vehicles for Kiwi families when helping to plan towards a better retirement for themselves.
From the defeated Capital Gains Tax ruling to the new Healthy Homes Standards legislation and the ring fencing of losses, there’s been plenty for investors to absorb over the last year.
With so much change – and the uncertainty that comes with it – we know that many investors (even seasoned ones) have been wondering whether property is still the right way to grow their wealth long-term.
Our take? We reckon the future’s looking as bright as ever – and here’s why:
Rents are rising
Month after month, stats from TradeMe show that rents across the country are rising at a significant pace. The median rent in New Zealand has increased by 3.1% (year on year for the month of September), and locations such as Wellington have increased in excess of 10%.
It’s expected that these trends will continue over time, due to basic supply and demand pressures, so investors who can hold onto their investment property in the long run will be likely to see real benefits down the road.
Property’s not getting any cheaper
While the outrageous gains of the Auckland market may have slowed, capital gain on property is a near certainty for those that invest long-term. Data collected from REINZ in September showed that the median national sale price was up 6.6% – better than a term deposit by far!
Healthy homes make for happy, settled tenants
The costs of becoming compliant with the new Healthy Homes legislation may be a bit of a burden for some investors but, long-term, there’s plenty to like about it. That’s because homes which have better heating, ventilation and insulation will be sought after by Kiwi families and encourage tenants taking on longer agreements, a win-win for both renters and investors. Also, as the cost of the borrowing is low, the ability to finance any renovations is very cheap.
As the old saying goes…
We’re firm believers in the adage “it’s not the timing of the market, it’s your time in the market”.
The earlier you start accumulating investment property and the longer you are able to hold onto it (weathering those short-term storms that pop up now and again), the better you are going to be when it comes to looking after yourself in retirement.
So, get in early, hold tight during the stormy times, and hopefully watch your financial future prosper over time.
Looking to get started in property investment, or thinking of growing your portfolio?
For no obligation advice about how to get started on the right foot, contact our team.
