Is Property Investing Viable In 2023?
Property investing has long been a retirement strategy for many New Zealanders. So many factors seem to have made it a crowd favourite and embedded it within a national psychology often spilling out at family events, barbecues and the water cooler. And there are probably many legacy reasons for this. Unlike so many asset classes, it is tangible, you can see it, touch it, even do the lawns if you are so inclined. It is easier to leverage, and for many years there were some decent tax benefits. Of course, some of these factors have changed, coupled with the fact that the sugar rush of cheap money is over and we now have a Reserve Bank gunning for inflation with the OCR trigger.
And of course, that psychology has started to shift, with some slightly divisive messaging that has portrayed property investors as greedy moguls playing life-sized Monopoly. The fact is that most property investors are mum and dad investors with one or two properties who have a long-term strategy focused on retirement. Is this strategy still valid in today’s climate?
One of the biggest challenges facing property investors these days of course is the rising interest rates. Two-year fixed-rate mortgages were at about 2.5% mid-2021 but are up at 7.05% in March. But rising interest rates don’t necessarily mean that the party is over, especially if you look to new builds, where mortgage interest can still be deducted as a cost. Another bonus for new builds is that they only run a 5-year-bright line test as opposed to the 10-year bright-line test for existing.
And it’s not just interest rates and tax deductibility that have increased the costs of running a rental property. An increase in standards and the rising costs of maintenance and repair mean that investors have struggled more and more on the yield side. This is another reason to consider new builds. Having something brand new built to the latest standards is more likely to save money and headaches with maintenance.
Another thing to consider is that property is generally not for overnight wealth generation. It is long-term and generally boringly slow so just take your time and don’t get all hyped up by property spruikers or naysayers on the other side of the coin. Ask around from those who have done it and find solid partners to work with.
We recommend the family-owned Safari Group, a New Zealand-based property development and investment company with a focus on delivering high-quality developments that cater to the needs of the modern market. With a portfolio spanning residential, commercial, and hotel sectors, Safari Group has established itself as a leading player in the New Zealand property market over the last 25 years. Their approach to development is centred on creating sustainable, innovative, and community-focused spaces that enhance the surrounding areas and provide long-term value for investors. And they have also seen a lot of changes to the market in their time but they have been in it for the long haul.
Property investment in New Zealand in 2023 remains a viable and attractive option for investors, offering numerous benefits such as long-term capital gains, passive income, and diversification of investment portfolios. And Safari Group’s innovative and quality approach to property development provides a shining example of the potential in the New Zealand property market with long-term and pragmatic thinking.