Young property investors intending to buy
Young Kiwis have twigged buying investment property can be the best way to start on the property ladder.4 June 2020
Young investor property buyers searching for opportunities
More than any other age group, the under 30s are looking to buy property investments in the next six months, according to a spending plans survey published this week by independent economist Tony Alexander.
In his survey of 4000 New Zealanders – small business owners, property investors, real estate agents, bankers and others – a net 8% of respondents said they would like to spend more on investment property in the coming three to six months.
Meanwhile, of the 333 respondents who were under 30, a net 18% of them were planning on spending more for their own home and a larger net 22% of them were planning to spend on investment property.
“This indicates they’re very interested in the route of getting onto the property ladder via property investment,” says Mr Alexander.
From his findings, New Zealanders are increasingly looking beyond this recession and out the other side, he says. There’s light at the end of the tunnel.
“Looking at the spending (intentions) my belief is because investors are looking forward, that’s one key reason why the property market will not fall away,” says Mr Alexander.
“To property investors, no one’s talking about people leaving, there is no brain drain, that to me is one of the unique features of this,” he adds.
Young investors likely to look in the regions
Real estate blogger and investor, Andrew Duncan, says the regions are where he would advise new young property investors to look – towns which are riding the current “remote working wave.”
Places like Palmerston North, Gisborne, Hamilton and Whangarei are where it’s possible to find investment properties which give around a 6-7 percent yield (a measure of the cash an asset produces each year as a percentage of the asset’s value). Properties with these kinds of yields will essentially pay for themselves with no top ups necessary by landlord owners to pay for rates, insurance and the mortgage, and they’re still sustainable when interest rates go up, says Mr Duncan.
“If I’m young and an investor, I’m really focusing on maintaining my freedom. If I buy in Palmerston North (at these yields) it pays for itself. If I want to take time off, it’s still possible,” says the experienced investor.
Christchurch may call to young property investors looking for opportunities
Canterbury is one region which is relatively undervalued in comparison to other parts of the country which may catch the eye of young property investors.
According to Canterbury Property Investors’ Association president, Hamish Wilson,
“Christchurch has been and still remains significantly undervalued – it’s not seen the shift that Invercargill and Dunedin have seen.”
Investors,therefore,have more chance of achieving capital gains and yields are better, he says. Property investors, who buy based on the numbers and without emotion, should always look to add value to the home, which will increase the yield, he adds.
There’s always a pool of tenants available in Christchurch because of the diverse workplace, adds the association president. Mr Wilson, who runs a property management company, says he has had three enquiries recently from expat families coming home to Christchurch, so this will be another tenant group for the city’s landlords.
Young investors with some help from their parents
In some cases, parents are helping their children with their first property investment, says Bayley’s Christchurch agent, Angela Webb, who specialises in this sector.
Ms Webb helped a young buyer last weekend, a university student looking at student investment properties. He was very knowledgeable about the market and his parents are coming to Christchurch to look at some properties with him, she says.
“Buying when you’re young can mean you’re so well ahead of the game,” she says.
The Bayleys’ agent, who has been building her own property portfolio for the past 20 years, advises new investors to start with one or two bedroom units and to allow for around four weeks of vacancies a year when doing their figures.
She says she has seen growing numbers of young people in the market attracted to the Financial Independence, Retire Early (FIRE) movement which she says is huge in America.
“This is all about people creating wealth from a very young age and retiring early,” she says.
If considering your first investment, Ms Webb says to talk to a mortgage broker who is used to helping investors and they will help you with any questions on the possibilities of using their Kiwisaver, and which banks are changing their investor lending policies. The lifting of LVR restrictions has been good news for investors in theory, but banks are not necessarily changing their lending approach to them.
The agent says she has been pleasantly surprised by the activity of investment enquiries since lockdown lifted, coming from people in Auckland, Wellington and Dunedin among others. The Bayleys agent is also seeing people who left Christchurch after the 2011 earthquake, coming back after time spent overseas or in other New Zealand cities.