Property Investors urged: “Don’t buy second-hand”

MEDIA RELEASE
30 May 2007

Property Investors urged: “Don’t buy second-hand”

Mom and pop property investors are being urged to abandon the traditional model of buying a second-hand property, ‘doing it up’ and then either selling it or renting it out, because it is unlikely to be a viable investment, particularly in Auckland.

Managing Director of property brokers KEY2 (MREINZ), Russell Benshaw, says buying new property from developers is not only perfectly safe, but buyers won’t have to deal with the unrealistic expectations of sellers which pervades the current climate.

“Don’t get caught up in the feeding frenzy. People are paying too much for second-hand property at the moment because they fear losing out. We have had experienced property investors coming to us for new angles, because they recognise that the second-hand market is no longer viable.”

Mr Benshaw said the days of the traditional Kiwi who buys second hand property to ‘do up’ is numbered because modern lifestyles mean people are just too busy for all the DIY stuff.

“Interest in new property in New Zealand, and particularly Australia, is very high. Last month we had more than 500 visitors to our website in just seven days, and our inquiries for offshore investments have risen 50 per cent from just 10 per cent at the beginning of the year.

“Investors are turning to new property because of strong tenant demand (long term tenants want to live in nice homes), low maintenance and higher cash deductible allowances,”he said.

Mr Benshaw said building regulations mean that not only is new property safe, but developers are unlikely to build in areas that don’t stack up as a sound investment.

“Our advice is look for new property in a street where most people are owner occupiers, because there is less competition for tenants and the overall neighbourhood is better maintained.

“Furthermore, changing lifestyle trends mean we now encounter more people than ever who are committed to being lifetime renters – but they insist on good quality property.”

Mr Benshaw said Australia is also popular with experienced investors at the moment because new property inflation there is driven by demand and supply, and not heavily by public sector costs as it is in New Zealand. Australia’s growth is sustainable because it is driven by demand.

“So while prices there are rising, they still remain dramatically more affordable than buying second-hand in New Zealand. Rents are increasing across the Tasman, which favours the property investor – we also know there is a chronic shortage of rental housing in Brisbane especially at the moment.”

Mr Benshaw said entry point property is still acceptable for Kiwi investors, with brand new four bedroom brick and tile houses selling in the low to mid-$300,000s in the greater Brisbane area.

“Further to that, the Kiwi investor can borrow 95 per cent of the purchase price at a 7.39 per cent floating rate in Australia.

“In short it’s an investment market with lower entry, rising rents, cheaper finance and higher expected capital growth over the next five years,” he said.

Property investment is heavily governed in Australia to protect property investors, even more so than in New Zealand.

“The law is that buyers don’t sign any contracts unless they’re first vetted by the buyer’s solicitor, and then they have to be a Queensland registered solicitor. Legislation has been passed to stop the previously common practise of two tier marketing and the ripping off of outsiders.”

Mr Benshaw said his message was simple: “Don’t buy second-hand property in New Zealand unless you have another specific use for it in the future, either for retirement, for the kids or because there is an opportunity for a better deal”.

ENDS

About KEY2

Key 2 is an Auckland based licensed real estate company which specialises in brokering property investment for clients – both in New Zealand and Australia – by sourcing the investment property for the client and leveraging off their existing equity with a view to creating long term wealth for the investor.

KEY2’s consulting service is free and the company will, if asked, refer clients to independent solicitors, accountants and property managers. The company is based in Albany and has been in operation for more than three yea

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