I was interested to read this article in the NZ Herald on Friday.
So, it is predicted that due to current demand from homebuyers combined with the shortage of available housing stock, prices are expected to rise in Auckland by 12% within the next year. Tony Alexander, chief economist at the BNZ has said that we need 13,000 houses to be built in Auckland each year just to keep up with normal population growth, and we are not even close to reaching that mark. The longer this continues, the worse the shortage of housing will get, and the higher the prices will climb due to the increased demand.
It is mentioned that the only thing that might slow this market down is increased interest rates (slim chance of that getting to any sort of level within the next 12 months to have any real effect here).
If this boom plays out as predicted, then why wouldn’t you get out there now and take huge action so you can get some rungs on the property ladder and take advantage of the predicted 12% price rises over the next year! If you buy a house for $300K, that is an increase in value of $36,000 – even if you don’t renovate. So do you want to pay $300K now, or $336K in 12 months? You would need to save an extra $7,200 just for your deposit (assuming 20% deposit). Not to mention that chances are your yield won’t be as good as it is now. Let’s look at that side of the story… if you have an 8% gross yield on a property that was purchased for $300K then the weekly rent would be $461.50 (ish). If the same property was purchased for $336K then you would need weekly rent of $516.90(ish) in order to maintain the 8% gross yield.
You tell me… do you think rents are going to increase by over 10% this year? I don’t.
The property market will run its course with or without you. Don’t look back at 2013 and say “man, I wish we’d got stuck in earlier”. If you think you need to increase your knowledge about property investing in order to prevent making a financially crippling mistake, we are here to help. If you have been sitting on the side lines thinking about whether it is a good time to get started or not, come and talk to us about how our coaching program can help you to achieve the results that you want for you and your family.
Today’s quote: Even if you are on the right track, you will soon get run over if you stand still for long enough.