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Housing New Zealand Opens Its Doors To Private Investors

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Brian Dalley
Brian Dalley

Few are now talking about the changes to tax on residential property investment which is understandable as the government has done just enough to keep opposing sides happy.

It was always going to be that way whilst there is a shortage of affordable rental accommodation throughout New Zealand. The Government simply cannot afford to build the number of properties required to house the less fortunate hence the door to benefits for private investors being left ajar.

With so much negative publicity surrounding all types of investments it’s little wonder many are opting for the safety of a bank volt, however in doing so that could erode away the original value of their investment if one chooses to live off the return.

Let’s take a quick look at the return on investment when money is placed in a bank vault and left to others to invest as opposed to you taking control of your money and investment.

Say ten years ago you put $250,000 on term deposit and I chose to purchase an investment property for $250,000. 

My investment property today would be worth just under $450,000 and your $250,000 would be worth, $250,000. That is if we both lived of the returns. 

Say I purchased not one, but two investment properties and between the tenants and myself repaid the mortgage so now I have $900,000. 

Sure there are other factors to take into account, compounding interest if you were to reinvest the interested earned on your cash investment, and capital gain if you invested in property. I’m not going to bore you with the figures but instead will leave that to the procrastinators with nothing better to do. 

I look forward to seeing the figures in the comments section for if they are calculated correctly they will support what I already know. Residential Property investment is still well worth a look. 

The only real change needed to become a successful property investor is to pay down debt rather than shelve it, as has been the preference of most investors in the past. This is why things got so out of control and brought the world to its knees. People living beyond their means. 

I feel although it wasn’t the government’s responsibility to do so, they should at least have put pressure on loan providers to abolish interest only loans for purchasing residential property unless it is for short term, speculative investment. Leave the carrot dangling and eventually it will be nibbled at, starting another cycle destined to end in the same way. Boom and bust.

I have encouraged people for years to invest in residential property and will continue to do so should it prove to be in their best interest. Sure investing in property isn’t for everyone and I have never said it is. However, if it is affordable to do so, investing in property will probably feature very high on one’s list, or should do. 

Housings New Zealand’s Lease programme without doubt would have to be one of the most secure types of investments you could get into. Rent guaranteed for a period of time, Management cost known up front, and unlike other investments the original amount you invest is likely to increase in value without the need to reinvest the return on investment.

Couple this with the fact that Housing New Zealand require properties to lease throughout the country and the demand on rental properties is said to increase, I find it difficult to understand why anyone would disagree.

Brian Dalley is a former NZMBA Mortgage Broker, Property Investor, and Real Estate Agent with over 15 years experience in the industry.  You can read more of his and other professional’s views and opinions on his website 

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