House prices might drop 40%.

We could be in the beginning of World War III.

Yes there are a lot of dark clouds at the moment, and those really bad things could happen. But it’s also possible that the property market will do more or less the same thing as it has done during the other cycles I have experienced since I bought my first rental in 1997 (and still own today, that’s long-term investing).

If you are a long-term property investor, not a trader or speculator, then chances are you are better off holding tight for 2, 3 or even 5 years until the next cycle comes around and away prices go again.

If you are an investor, you have spent a lot of time and energy finding the right property to buy. It’s a good solid build, in a good location, that attracts quality tenants. You’ll have a cashflow that enables you to hold the property even if prices dip or drop. You are in this for the long haul, 10 years plus. Whether houses prices go up or down this year or the next is largely irrelevant to you.

Yes, if you sell now you ‘might’ be able to buy something cheaper later, ‘if’ prices fall further. But it’s a lot easier to say than do. It’s very expensive to buy and sell property. It takes a huge amount of time. It takes risk – if you own a property that is working for you, the building is fine, the tenants are OK, you can hold pretty much indefinitely. If you sell it, and buy another property, you are taking a risk that the property you buy isn’t as good as the one you had… it could be a lemon, you won’t know until you’ve owned it a while.

I can’t see anything right now that would drive me to sell up.

Interest rates have already increased substantially and may not have a lot further to go.

Immigration is slightly negative, but that’s mainly due to immigration policy which is making it very difficult for people to get visas to move here. That could change anytime, we need more workers, we need to let more people into NZ.

Building costs are likely to continue rising. This will reinforce house prices to some extent as new build costs set a floor for entry level house prices.

Inflation, a negative when you fill up your car or buy groceries, is actually going to help the housing market. Inflation is driving up wages at the same time as houses prices are staying the same or falling. Over time this will make housing more affordable.

In a nutshell, the housing market moves in cycles. We’ll go through a rough patch and things will get better again… If you’ve got a good property and you’re in this for long term, then pat yourself on the back for not having all of your life savings in the stock market, you wouldn’t be sleeping very well right now.

Thanks for reading.

John Kenel
Assured Property

We’ve got some new 2-bedroom townhouses coming up in Hamilton shortly.

It’s only a small development of just 8 houses, so ensure you don’t miss out by joining the Assured Property “Priority List”. We’ll let you know about it before they are released to the public. Simply PM us your name and email address.

#assuredproperty #housing #rentals #propertyinvestment