Industry-first Information Release Raises Question Over Infatuation With Housing Market

In an industry first, ABC Business Sales is releasing data about New Zealand’s average business sales price and it’s raising a very topical question:

Should young New Zealanders be saving for their first business instead of their first house?

New Zealand’s SME business sales industry has historically been very guarded with this information, but given the increased media and public interest in the performance, opportunities and challenges within the SME business market following Covid19, ABC Business Sales feel now is the right time to share it.

“As industry leaders we believe there would be real economic benefit for New Zealand if the currently disproportionate amount of money invested in the property market can be diverted towards more productive assets such as businesses – particularly SMEs,” says ABC Business Sales managing director, Chris Small.

“For example, investment in New Zealand business provides more employment and improves our GDP and productivity.”

An additional key revelation from the data (refer below for details) is the comparative returns from investing in a small to medium sized business versus a house.

“There’s potentially a six to seven times greater return on offer from investing in a business compared to investing in a house,” says Small.

“It’s this sort of information that could be encouraging young New Zealander’s towards a goal of saving to buy their first business instead their first house. It’s also why we want to help educate people on the costs, returns and trends of SME business ownership.”

“The average business sales price in New Zealand of $653,000 is significantly less than the average house price of $725,000. Yet the average annual return on a $725,000 residential investment property is $35,000 while the average annual return on a $653,000 business is $215,000.”

Cont’d/…

The data, sourced from ABC Business Sales’ inaugural Market Intelligence Report shows that the average business sales price for SMEs in New Zealand was approximately:

• YTD October 2020 - $653,834
• YTD October 2019 - $628,491

About the data:

This data is derived from ABC Business Sales annual activity. ABC enjoys a dominant 30%-40% market share in the $0-$5m SME business sales market.

In total there are approximately just under 1000 sales per year within the entire NZ SME business sales ($0-$5m) market. In keeping with ABC’s dominant share of that market, their averages were derived from sales volumes of:

- YTD Oct 2020 – 323 sales 
- YTD Oct 2019 – 366 sales

The data specifically looks at completed transactions in the $0-$5m price bracket of business sales which represents 90% of New Zealand businesses. There are 167,000 NZ businesses designated as SME’s with employee numbers ranging from 1-19.

Institutional transactions (which can be in the hundreds of millions) have not been included to prevent a skew in the data.

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