Property Investors Could Be Left High And Dry
News Release 7 December 2006
Bollards Warnings Could Leave Local Property Investors High And Dry
New Zealanders who allow themselves to be put off by soaring property prices and renewed, hawkish Reserve Bank warnings against property investment risk losing out to foreign investors because New Zealand property remains significantly undervalued compared to the rest of the world.
Directors of newly launched independent property strategists Catalyst2, Tanya Kwasza and Nikki Connors, are warning that New Zealanders who retain a narrow national focus are ignoring one of the key drivers of the growing property investment market here.
“International investors – including financial groups as well as individuals from Australia, Japan and Europe – are investing heavily in New Zealand and this will continue to strengthen property as a high performing, low risk investment.
“We’ve heard a lot of complaints that the cost of New Zealand property is rising significantly, putting it out of reach of the average Kiwi. This, together with the real risk that locals heed the warnings from the likes of the Reserve Bank and hold back because they expect the ‘property bubble’ to burst, may say local investors coming off second best to overseas investors,” Connors said.
Further, people shouldn’t hold their breath waiting for Government to introduce a capital gains tax on property.
“It will require lots of consultation from the public. While there will always be tax law changes, New Zealand is not ready for a capital gains tax on property and all the commentary is largely intended to discourage property investors from the market.”
Overall, locals should be getting into property investment now while they still can.
“If viewed as a long term investment, our clients are less likely to be at the mercy of short term property market fluctuations. The reality is that property has always grown long term and the statistics back this up.
“Investing in property gives you significant tax benefits in many ways, particularly if that investment is for a long period. Property is one of the few investments where depreciation is used to minimise current taxes. The tax saved provides for added cash flow to fund the investment.”
Connors said other trends for would-be local investors to watch out for were the hidden fees that some property investment companies were charging, including rental guarantees.
“Although we also offer rental guarantees, these are not funded by the client paying artificially inflated prices for the properties, and in addition, landlord protection insurance and the employment of experienced property management should be enough to take care of your tenant worries, including lack of tenants, damages and arrears.
“When you have your property professionally managed, many of these headaches disappear. The usual fee for a property management company varies between 8 - 8.5 per cent of the rental and it is deducted every month.
“This fee is also included in all the
financial projections we create for our clients - however in
some instances, property investment strategists such as
Catalyst2, can negotiate a discount,” said
Catalyst2 are independent investment property strategists, who help their clients build their wealth through property. Principals Nikki Connors and Tanya Kwasza have extensive experience in the property industry. Catalyst2 offers a complete property investment solution, and works with a team of independent advisers chosen for their vast property investment experience.