Should You Invest?
New Zealand has a strong economy, supported by a thriving
tourism market. The strength of the tourist industry means
occupancy in well chosen developments close to amenities and
attractions is likely to be high and as such, stable rental yields
of between 5 and 7% are attainable. However with property prices on
a downward spiral, capital appreciation will perish. Investors that
are able to make cash investments and are willing to wait
until the long term for returns could consider New Zealand, but
this is not the destination for 1st time investment purchasers.
- Strong economy.
- Thriving tourism industry means occupancy is high, especially
in certain areas, and creates a prolific short-term accommodation
market.
- Possible rental yields of between 5% and 7% attainable.
- However, capital appreciation will perish as housing prices are
on a downward spiral.
- Investment with good returns is possible but investors should
expect this to happen over the longterm.
- Not ideal for first time buyers.
Rental Yields
Rental yields very greatly across New Zealand, the lowest being
just under 2% whilst some properties, such as those in Wellington,
can produce yields of up to 10%.
Price History
As a result of eight years of unbroken economic growth, New
Zealand has experienced a strong labour market and low unemployment
which in turn have led to strong house price growth. The housing
market has seen rapid increases in prices with a particular peak
towards the end of 2007, but with mortgage rates now hitting the
10% mark there is widespread belief that house prices will begin to
decelerate. The Reserve Bank of New Zealand became concerned by the
house price inflation and took action by increasing base rates to
8% in June 2007. With growing interest rates nearing some of the
highest in the world, mortgage repayments are steep which is likely
to deter investors.
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