Feb 23, 2023
With the current downturn in house prices in New Zealand, many potential buyers are wondering if now is the right time to invest in property. It is a complex decision with many factors to consider, including cash flow, interest rates, and whether it is a long-term investment. Our team at Trustees Executors are experts in investment solutions and can help tailor a portfolio that incorporates all your needs.
One of the key considerations is the current interest rate environment. With mortgage rates reaching historic lows in the past 2 years, many first home buyers entered the market. However, it is important to remember that interest rates do fluctuate and we have been seeing these rates on the rise for the past 6 months. CoreLogic chief property economist Kelvin Davidson stated that mortgage rates are probably at or near their peak currently, and that fixed mortgage rates would likely remain greater than 7% as long as inflation is high. It is important to consider variability in rates and remember that if you are borrowing a large amount, higher mortgage rates will result in higher repayments.
Another factor to consider is the long-term outlook for house prices. While prices have been in a downturn, many experts predict that they will bounce back over time. This means that investing in property now could be a good opportunity to get in at a lower price and benefit from future price increases. With the median house price in New Zealand dropping by over 13% since 2021 (according to The Real Estate Institute) many investors may see this as a red flag, however, experts report that the rate of price decline is slowing down.
It is important to remember that house prices can be volatile and can fluctuate with the economy. We recommended having a diversified investment portfolio, with property as just one part of a larger mix. This helps to spread risk and reduce the impact of any potential fluctuations in the housing market.
Ultimately, whether or not now is a good time to invest in property depends on your personal financial situation and investment goals. If you are considering buying a property, it is important to talk to a financial adviser to help you weigh up the pros and cons and determine whether it is the right decision for you.
Cash flow is paramount. Maybe you have saved or been gifted a large amount of cash to use towards a deposit on a home. It is important to think about your ongoing financial position. If you are tight on cash flow, it may be more difficult to meet the ongoing expenses of homeownership. Market lows prove to be the most difficult time to borrow money, so ensure you factor in lending criteria during your investment planning.
In conclusion, investing in property can be a great way to build long-term wealth and provide a sense of stability and security. In spite of that, it is important to carefully consider your personal circumstances and to have a diversified investment portfolio to help spread risk.
If you are in doubt, our team at Trustees Executors can guide you to help you make the right decision for your circumstances. To find out more or to request investment advice contact us here.