“Property is such a key part of our lifestyle which keeps driving the market. So my advice is if you can raise the funds, if you can get the mortgage, and if that’s what you want to do for your future and your family, then buying a property is still a great option.”
From biting the bullet and purchasing your own home to considering going commercial, Brendon Skipper, CEO of realestate.co.nz, shares his valuable insights into the practical side of the real estate market, stepping away from the political football field.
With a somewhat volatile property market, a housing shortage in some parts of the country and banks tightening their lending criteria, getting onto the property ladder right now can seem like a daunting prospect. However, if you’re willing to think outside the box and get a little creative, there are opportunities out there.
If you’ve run the numbers and found that purchasing a home to live in isn’t achievable right now, consider investing elsewhere. Data gathered by realestate.co.nz over the second quarter of 2017 shows that it’s a great time to buy a rental property in Otago, Manawatu-Wanganui or Gisborne. In Otago, where the average weekly rent is $463 and the average asking price is around $370,000, you could earn a return of almost 6% after 12 months of renting the property out. In both Manawatu-Wanganui and Gisborne the average asking price remains under $335,000. With rental properties in hot demand, these regions could also be a smart option for savvy young investors who feel they’re unable to get onto the property ladder in Auckland or Wellington. Loan-to-value restrictions put in place by the Reserve Bank in October 2016 mean that most investors are now required to put down a 40% deposit. However, a 40% deposit in Wanganui or Dunedin could go further than a standard 20% deposit in Auckland. Crunch the numbers and consider whether an investment property is right for you.
Build a business
It’s important to remember that property isn’t the be-all and end-all. With extra pressure on some parts of the market, we’ve seen Kiwis becoming more creative with their investments and how their retirement may be funded. It’s that ‘number eight wire’ kind of mentality; if you’re renting a studio apartment so you can afford to build a business, that’s investing in your future. Owning a business can also open up lifestyle opportunities. Not everyone wants a $4million home in Ponsonby, and that diversity is part of what makes the Kiwi dream so unique and diverse. Purchasing a café in the far north or running your own B&B in the Coromandel may offer you the perfect balance of lifestyle and income.
If you’re thinking about dipping your toe into the property market, why not consider a commercial property? Commercial opportunities come in all shapes and sizes, from a single floor within an office building to a warehouse, showroom or retail space. Often these sorts of properties come with a tenant locked in, which offers you a fairly predictable and stable income stream in the long-term. When it comes to investing, it’s important to think with your head and not your heart. Commercial buildings don’t usually carry the same level of emotion that comes with a residential purchase, allowing you to take a step back and make strategic decisions.
Brendon Skipper is CEO of realestate.co.nz
Read more of Brendon’s columns here.