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Why property investment is so popular in New Zealand
Kiwis have had a long standing ‘love affair’ with property as an investment. The main reason people invest in property, or any other investment for that matter, is because they want to build wealth and create an income for themselves. This income may allow them to leave full-time employment and retire early, supplement part-time employment or supplement the NZ superannuation.
Whether you are in retirement, approaching it rapidly or it’s not even on your horizon, these statistics, mainly sourced from the 2013 Census Data, are interesting to read and are relevant whatever your age:
By 2030, 1 in 4 Kiwis will be over 65.
In 2000, there were 5.3 Kiwis in the workforce for every person aged 65 or older. In 2040 it’s estimated there will be only 2.3.
Approximately 76% of those aged over 65 own their own home. This drops to 60% for those aged over 85.
In 2013, 16.8% of the population were receiving the NZ Superannuation
The median (half receive more, and half receive less than this amount) gross personal income from all sources for those aged 15 years and over was: $18,500 in 2001, $24,400 in 2006 & $28,500 in 2013.
The median family income from all sources was: $46,100 in 2001, $59,000 in 2006 & $72,700 in 2013.
In 2013 there were 435,966 residents of NZ aged over 65. Of those, 3.32% had an income of $50-$70,000, 1.4% had an income of $70-100,000 and 1.29% had an income of over $100,000 per year.
90% of people prefer a gradual transition into retirement, with either self-employment, part-time work or a less stressful role.
These facts are not comforting and, more to the point, they are unlikely to get much better. The world will not return to what it was like in the 1950s. How people fund their retirement is a growing issue for many countries. As healthcare has advanced, the number of years we are likely to live in retirement has doubled in just a few decades. If you retired during the 1970s, you could expect about 10 years in retirement before you passed away in your mid- seventies. If you are retiring today, when the average life expectancy for a man is 81 and for a woman is 83, you are likely to spend between 16 and 18 years in retirement. For most of us, the NZ Superannuation is not going to be enough to live a comfortable lifestyle, assuming that it will still be available when you retire. It is becoming increasingly challenging for the government to fund, as people are living longer and the number of tax payers per retiree is decreasing.
If retirement is a long way off for you, who knows how long you will spend in retirement? The only certainty is that it will be longer than today and you will need a lot more money during retirement than your parents and grandparents did, if you don’t want your standard of living to deteriorate.
So, why property?
Here are the key reasons why property as an investment is attractive:
The NZ Superannuation is not enough for most people to live on
History – property has been a comfortable and familiar investment for many years
You can use leverage to increase your returns
You can use the equity in your home to get started instead of saving for a deposit
There are some tax benefits
The rental income you receive helps fund all or most of the property’s expenses
Over time the value of your property will go up
You can have control over most parts of your investment
The security of bricks and mortar
This is the first part in a six part series on Property Investment
Lisa Dudson is a bestselling author and Registered Financial Advisor with over 15 years industry experience. Her latest book The New Zealand Property Guide is a great resource for investors. Lisa offers financial advice through www.acumen.co.nz and co-owns the New Zealand's leading property investment agency www.ifindproperty.co.nz
Go in the draw to win a copy of Lisa Dudson's new book - The New Zealand Property Guide. Email nz-editors@yahoo-inc.com with your details to go in the draw. Find out more about the book here.
