Property investment NZ passes through phases of favour as a viable instrument that yields good returns according to the prevalent market conditions. The global recession had seen property also lose favour with investors who sought other channels to put their money into. However, recent investor confidence surveys reveal that the mood is changing and property has returned as the highest return-yielding investment.
New Zealanders have again switched to investing in property since rental returns have been found to be higher than interest accruing from term deposits, after a long gap of two years, during which people with funds available for investment opted for other investment instruments like bank term deposits etc, and did not consider property.
The percentage of people with similar inclinations jumped from 14% to 19% who have switched to investing in property again. Property is a double-edged income asset, yielding rental income in the short term, and yielding higher returns on investment in the long term as its value appreciates. Generally, property investment is seen to double in value over a period of seven years.
The change in investor sentiment towards property can be attributed to a general change in confidence among investors and lower interest rates. This is likely to see an upswing in the property market with higher demand for property which may push prices further as well. With rents going up, more and more people will seek to supplement incomes with rents and rental property will be back in demand. Statistics gathered by research agencies reveal an increase in rents at a rate higher than the increase in property prices, perhaps due to a shortage of constructed property available.
The government had also tried to curb the New Zealanders’ instinct to over invest in property by implementing new tax laws after the 2010 budget which would act as deterrents to property investment, and give an impetus to exports.
Commercial property also saw improved returns in the last twelve months. Both residential and commercial property is now being sought not just by local residents, but foreign investors as well, wishing to get beneficial returns on their investments in safer areas, since both Asia and Europe are going through a phase of economic uncertainty. With currency rate fluctuations and risk adjusted returns in New Zealand, foreign investors have zeroed in on property in this country to secure their surplus funds and investment.
Term deposits with banks and other financial institutions are the next most preferred channel for investing funds.