Real Estate investing in New Zealand

[Julian Stewart]

Hi all,

I'm just starting out and reading lots of books / getting smarter. But the math is totally different in New Zealand from all the books I read.

In New Zealand a family home will cost you $500,000 and you can rent it for $500 per week.

Loan interest rates are 6%.

With this most of the formulas taught in these books do not seem to apply as the rent basically just covers the loan interest. In fact, from the investors, I spoke to here have to top up their rental properties with extra money each week and solely relying on appreciation. 

I'm wondering how common is this situation in other countries? 

And what is the best strategy for this??

Any advice would be much-appreciated thanks!

[Dean Letfus]

Your question and situation is quite vague @Julian Stewart, so it's hard to give you a decent response.  NZ is negatively geared these days, as Australia has been for a number of years.  What we do have is predictable growth and quality of tenants higher than most countries. IF you look up demographia's charts you wil see that New Zealand and Australia are both very expensive housing markets. Larger countries like the USA tend to have more diverse values so bargains are easier to find. I have lived in several Asian countries and I can tell you most of them are all negatively geared as well. 

But it depends on what your investing goals are. I have invested in NZ, OZ and the USA in addition to being involved in real estate in several other nations. USA is king for cashflow hands down but there are significant issues with property management and general dishonesty in the industry.

NZ has the best capital growth and low risk market by far, but it is negatively geared.  More speculative markets like Singapore, Malaysia, Hong Kong and even Canada tend to be far more volatile. If you buy at the right time you can make a lot of money in equity but pick the wrong phase of the cycle and you have to hold for a long time.