With the official cash rate at an all-time low of 1 per cent and an expanding population demographic of baby boomers and older Gen Xers looking for ways to maximise returns on investment, property is an enduringly attractive asset class. However, the phrase "safe as houses" is a bit misleading.
Just like any other type of investment, property requires due diligence and an understanding of the individual investor's appetite for risk.
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As someone who has spent many years helping people build their wealth through property investment and debt reduction in New Zealand, I am concerned that too many Kiwis still do not know what to do when it comes to property – either to get the best out of investment or to steer clear of misinformation.
In my experience, around 95 per cent of people who approach Propellor Property Investments are confused or have been misinformed about property investment.
Based on my 15 years in the business, there are a few things existing and would-be property investors should know as we look towards the new decade.
There are more ways to invest in property than ever before
One example of a way into the market is the shared ownership model, which brings together investors to buy a single investment property outright and share the returns. There are several companies, including my own, PPO (Proportional Property Ownership) exclusive to Propellor clients, offering this type of model. This approach will suit some would-be investors, while others will prefer the autonomous ownership model of more traditional property investment. Independent financial and legal advice can help you identify the risks and benefits and decide what is right for you.
Property investment advice is a specialty
Not everyone who works in the property sector is qualified or authorised to offer advice on how to invest, so you should always check on their qualifications. According to an October 2019 report by the Urban Land Institute and PwC in the United States, "Investor competition is on the rise, and it calls for a more creative approach to property selection ... The competition to find investments that meet the return requirements of a growing investor pool has resulted in looking to new and more complex methods to find markets and property sectors that may fall outside the traditional size and growth metric." This is accurate, and it means investors need advisers who are highly experienced, very close to the market, and veterans of many previous property cycles.
Every investor can access good advice
You can – and you should. It is critical to get advice specific to your needs so you know what is right for you. All legitimate investment opportunities will have upsides and downsides, and these will vary between investors. Start with information gathering, so you know what is out there and what suits your situation and financial and lifestyle objectives, both now and in the long term.
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Learn how to use what you have
Many people who are at a stage of life where they want an investment property will already have a family home. This is an asset, and you may be able to leverage it to build your wealth. If you don't know how much equity you have or how to use it as a springboard into property investment, seek independent financial advice so you understand your exact financial position before you make any decisions. You want your primary asset, the home you live in, to remain protected as you build your investment portfolio.
Look for proactive leaders
Misinformation is out there but getting good information should not be difficult. Our priority is to protect our clients. We also host information sessions for people to learn more about property investment and ask questions about the shared ownership model. Propellor offers free one-on-one meetings as well as free property strategies for clients. Good leaders in the sector will give valid information freely, because we want a highly educated public. If you feel like it's hard to get a straight answer, take care.
Use all available resources
There is plenty of solid and well-researched information in the public domain, such as a PWC report on emerging trends in real estate in Asia Pacific. It is well worth reading around what is a large and constantly changing topic, so you can fact-check information given to you by different parties, and raise questions that may occur to you through your reading.
Know the numbers
When it comes to property investment there is a lot of speculation, but one thing we can know for sure is what property is selling for. The latest data from REINZ indicates that house prices in New Zealand have set a new record, shooting up 8.2 per cent from a median of $561,000 to $607,000 – the first time median house prices have topped $600,000. Make sure you work with a trusted adviser to crunch the numbers and look at a few projections, from conservative to optimistic, so you have a good idea of what potential rates of return will be. Remember: no one can perfectly predict the market, but with good advice and the right approach, property investing can deliver great
• Nikki Connors is the founder of Propellor Property Investments; Metropolis Design; and Proportional Property Ownership.