Nicola Kelland - Property Obsessed

Kiwi’s have loved property for many, many, years but I have noticed, in the last couple of years especially, that this affair with property seems to be intensifying. When I was in my twenties and thirties owning your own home was a natural part of being married and having children. We would buy a house, try to improve it, sell it for a bit more than we paid and buy a new one as our needs changed with a growing family. Very few of my friends owned more than one property, and the one they owned was their home, not an income producing investment.

Increasingly I am seeing buyers in the market in their thirties buying a new home for themselves, but rather than sell their existing home they are keeping it as a rental investment. The current low interest rates and with the value of property increasing, they see property investment as a sure way to increase wealth for the future. They may be right! But I also remember the days when we thought buying shares was a sure bet, we all heard the stories of the gains that you could make in the sharemarket and we even had “share parties” and “share groups”. Obviously the effects of the sharemarket crash in the later part of the 80’s changed our minds. It does worry me that people put all their eggs in one basket, any good financial advisor will advocate a mix of products for investment. Putting all your money into property is no different than putting it all into shares, it may not be the smartest option.

The restrictions that the Reserve Bank is implementing on bank lending, may make it harder for property investors to grow their portfolios, unless they have good equity in their existing properties as larger deposits will be required. I only hope that these property obsessed purchasers have thought about the long term and the need to ensure that through hikes in interest rates, changes of circumstances and financial conditions they will be able to ride out any changes and not be forced to sell during a down turn in the market. Property is in the main a long term investment and as I have been told by many successful property investors, you don’t make money selling real estate you make money buying it.