Investors Returning To Secure Property Investment

Media Release October 2007

NERVOUS INVESTORS RETURNING TO SECURE PROPERTY INVESTMENT

As investors back away en masse from the finance company sector following a series of high-profile collapses, many New Zealanders are approaching the property market, traditionally an investment mainstay, with renewed interest.

The concept of investment for the security of a future passive income remains as valid as ever, say Nikki Connors and Tanya Kwasza, directors of independent property strategist Catalyst2. “There’s definitely been a shift as the investment market has become more volatile, and we’ve experienced a significant increase in queries and activity from everyday investors looking for alternatives.”

With investors focusing on future security as the top priority for investment, the directors are experiencing an influx of people seeking advice on selecting the right property, rather than choosing the route of DIY investment.

“Investors are looking for expertise, because selecting an investment property is not the same as choosing a family home. They’re asking for advice on new developments – what questions to ask developers, and what common traps to avoid. And they also want to know about rules of property investment, such as always protecting your home first, and the difference between property investment and property management.”

People are seeking advice about new property developments as it becomes more apparent that the finance sector failures have significant ramifications for the property market. Many of the companies now in receivership had extensive investment in property development and construction on their loan books, with new building feeling the squeeze as slated developments fall through.

In Auckland alone, numerous developments that had been planned over the next two years have been cancelled, as funding pressures combined with high building and labour costs, along with the planned local body levy on new apartments, amalgamate to make the overall cost of building prohibitive.

These increased costs are part of a changing domestic economic climate for investors, with higher interest rates and rising house prices meaning fewer New Zealanders will be able to afford their own home. On average, it takes 2.5 incomes to service the average Auckland mortgage, with statistics showing that over the coming years, more than half of Kiwis will be renting their home.

The Catalyst2 directors say that with no institutional landlords in New Zealand, the private sector will be required to cater for the growing demand for reasonably priced, quality housing.

“Housing New Zealand, which currently rents and subsidizes 60,000 properties, has an estimated waiting list of 100,000, and cannot afford to continue to purchase properties to meet this demand. So the question is: How can the average New Zealander keep a roof over their head and enjoy a good quality of life?”

The answer, say the directors, is a refreshed recognition of the benefits of long-term property investment, especially among middle-income Kiwis. “We recognize the deep-seated love for property in this country, and it’s still very much within reach, with the right guidance.”

Every day investors need to remember the following rules – especially in the current climate:
1. Have a long-term view when investing in property;
2. The power of leverage in creating wealth through property;
3. They should be able to contribute towards the cashflow requirements;
4. Investment property can be purchased without any cash deposit by using the “un-utilized” equity in their homes;
5. There are still significant tax benefits in investing in property;
6. Ensure the right legal structure is in place before purchasing investment property;
7. Only utilize those professionals with investment property experience – that includes mortgage brokers, accountants and solicitors;
8. The wrong financial structure can create enormous difficulty in managing cash flows, and can lead to failure;
9. The wrong property choice can also lead to failure or heartache – remember there is definitely such a thing as bad property!

ends

About Catalyst2

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.

ENDS

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