Is this the best time to be investing in New Zealand real estate? The answer depends. Take a look at both the pros and cons regarding the current market before making a decision to tie up capital funds in property investment.
The Pros
For one thing, the amount of new residents coming into the country is on the rise, with an estimated 20,000 people arriving annually and a net increase to the population of approximately 11,000. This represents a real demand for additional housing, both rentals and purchased homes. At the same time, supply is decreasing. Due to economic concerns, much of the real estate in New Zealand is being offered at reasonable prices and favourable interest rates.
The global recession is affecting New Zealand less than other countries and a rebound is expected sooner here, as well. The same is true for Australia, our biggest trading partner. The financial health of New Zealand has always been stronger due to the absence of subprime lending practices in conjunction with stable banking structures and government support of financial institutions. The American policy of printing cash has resulted in a strong influx of liquidity worldwide which is expected to help the global economy.
Economic-wise, things are definitely looking up in the foreseeable future.
The Cons
With immigration rates at their highest in the past decade, New Zealand's government has decided to tighten the policy on admitting foreigners to the country. This could certainly have a negative effect on future housing demand.
American and European policy may cause global inflationary conditions. Inflated value of assets along with debt increasing to astronomical proportions may significantly erode the value of the dollar over time and result in widespread inflation across the worldwide economy with resultant higher interest rates. Exports are already subjected to a higher-than-average (in a recession) exchange rate due to New Zealand's superior economic conditions. This may allay the expected recovery of the employment rate in this country.
When you consider all the pros and cons affecting the current real estate market, is this really the best time to be investing in property? This may represent an optimal opportunity for financing the purchase at a favourable rate and being poised to take advantage of increased demand for housing. For investors with a steady and stable income, property investment is a great way to expand a financial portfolio whilst also realising a decreased tax liability.
Author Resource:
Paul Easton works with Matthew Gilligan - an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and business accounting
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