Written by Grant Patten
Photography by Blake Wheeler
Property prices are falling and interest rates are rising, so you might be wondering: is this a good time to invest in property?
The answer is no if you don’t have a secure job, don’t have secure financial buffers and don’t feel confident you can meet your mortgage repayments over the long-term.
But property investment is worth considering if your employment and finances are secure.
True, house prices are going backwards at the moment, falling 0.9% over the three months to May, according to CoreLogic. Also, interest rates are rising, with the Reserve Bank of New Zealand increasing the official cash rate by 1.75 percentage points since October.
However, the most successful property investors tend to be those who buy and hold for decades, rather than those who try to time the market by quickly buying and selling.
Remember, there are costs associated with buying a property (conveyancing, building inspection fees, mortgage arrangement fees, valuation fees) and selling a property (conveyancing, real estate agent commissions). That eats into any short-term profit you might make. Also, the property market is very unpredictable in the short-term – no one can say with any certainty whether prices will move up, down or sideways during any given year. That’s why property investment is rarely profitable when done over the short-term.
The situation is different over the long-term, though. First, those transaction costs become less significant the longer you hold a property. Second, although past performance is no guarantee of future performance, history suggests that prices rise strongly over the long-term. For example, between December 2003 and May 2022, New Zealand's median house price surged from $263,562 to $1,027,121, according to CoreLogic, despite occasional corrections along the way.
So if you’re the kind of investor who plays the long game, there’s no reason why you shouldn’t buy now, assuming your employment and finances are secure. Indeed, this downturn might even work in your favour, because you will have much less competition.
Want to buy an investment property? I can help you compare loans from a range of lenders, so you can get a great loan that suits your unique circumstances.
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