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!

[Hadar Orkibi]

@Julian Stewart  are you in NZ? you profile doesn't show where you are from...

In NZ main cities like Auckland Chch and Wellington, Hamilton it is very difficult to achieve the returns we are getting in the US. started why i started investing in the US. 

Auckland is a mature market now, more like Sydney, London and LA. Its a capital gain market not cash-flow. unless you can invest in Commercial or develop to hold. 

There are few strategies that could work in NZ but it is depending on your location. 

One of them is to buy multiple income properties like Home and incomes and block of flats, these offer better returns. 

Another strategy is to pile few properties in the early recovery and sell half at the peak. 

Paying down debt on the ones you keep...

[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.

[Marcus Rodger]

I am in a very similar situation (Based in Christchurch, New Zealand. Are you able to recommend any books regarding effective negative gearing and general advice for similar markets? 

Another issue which the OP didn't bring up was how available property in NZ differs from other markets (notably USA). Here, most multiple family dwellings have been split up into individual units and sold individually. This makes investing in multiple income properties  challenging for investors without a lot of cash. 

This also makes "house hacking" (IE: buying a duplex and living in one half while renting the rest) a lot more challenging.

Re "where are you from?" the forum signup didn't let me put down NZ, perhaps this affected the OP too

Please feel free to add to my ever-growing reading list

[Dean Letfus]

@Marcus Rodger, I see every limited value in a lot fo books, especially about things like gearing and tax as the laws change frequently.

In the NZ market the basic precepts are fairly simple.

If you can afford to negatively gear safely and you have decide it is a safe enough strategy for you then pick the market with the highest likelihood of capital growth, which is generally, Auckland, Wellington and Hamilton, and start investing.

There are markets where you can still buy cash positive in New Zealand but you need strong local knowledge and good boots on the ground to buy well in many of those smaller areas.