Opportunity only shows itself to people who look for it. In the current market there are great deals to be had, but you have to look for them. And if you want to upgrade, you’ll never get a better selection to choose from!
It is worth remembering that if you sell and buy in the same market, you don’t lose and might even gain. Obviously in this market it pays to sell first! And good places with realistic prices are still selling. March sales were down 50% on last year but there were still over 5,000 sales.
As for falling prices, property prices will drop but mostly where people are forced to sell – death, divorce, or debt. Everyone will simply choose to sit it out rather than sell.
THE GOLD: I reckon the best strategy over the next two years is: (1) don’t die, (2) don’t stray, and (3) put on hold any aspirations to be a property developer.
New houses are where you are likely to see some of the best bargains at the moment, especially if they have been on the market for a while. Put simply, builders and developers need to move stock. Given the cost of new builds, we’re talking reasonably expensive property. One client is looking at a new top-end town house that has dropped in price by over 30%.
You might also find some great value in freehold apartments in Auckland. To me, it looks as though many vendors are selling for less than the cost of building. Banks also make it hard for prospective buyers by only lending up to 80% – which has put the brakes on demand. For good clients we can still get up to 90%. Long term, apartments will be a growth market given limited land, higher petrol prices, and a growing population. But not all apartments are created equal. KEEP AWAY from leasehold. Some leasehold places have seen ground rents increase by 300%, destroying any value left in the house.
Now is not a good time to buy your first investment property. Don’t buy if it means negatively gearing (when the rent isn’t enough to cover the mortgage interest). Property prices will not increase for at least the next three years, so why invest in something that loses you money? Investing now needs to be all about yield – with interest rates set to fall and rents increasing I’d target a yield of 7% or more.
Smart buying tips:
- Look for new builds to deliver good value.
- Auckland freehold apartments will deliver good long-term results – but buy right.
- Avoid leasehold apartments!
- Aim for a yield of at least 7% before buying an investment property.
