Every cloud has a silver lining – even in a soggy market. Many homeowners can use the current economic conditions to their advantage, when advised properly. Understand how you can leverage your current home equity to buy an investment property today.
The negative effects of the current cost-of-living crisis and plight of homeowners who bought at the height of the market are now grappling with high interest rates.
But it’s not all doom and gloom. If you’re in the Boomer and Gen X camps and purchased a property 20-30 years ago, there are options to leverage your current home equity to buy an investment property.
Likewise, if you’ve been fortunate enough to pay down a significant amount of your mortgage, you can also leverage your current home equity to buy an investment property. Read our step by step guide to owning investment property in NZ, it outlines all the stages required when planning to invest in property.
So what’s the latest in the property market?
The number of residential properties sold was down by 25.6% LFL nationwide, with Auckland down 35.1% vs. June last year according to Real Estate Institute of New Zealand data. Only 6 out of 16 regions saw price increases year on year; including Taranaki (+10.7%) and Gisborne (+7%). Five regions saw monthly increases – including Auckland where the median sale price increased by 2.7% to $1,048,000.
Canterbury median house prices are +5% year on year, and Southland +4.1%. New subdivisions are being built in the Canterbury region, with a focus on local infrastructure, amenities and excellent arterials into Christchurch CBD making this location popular with both movers and investors alike.
Why are there so many new property listings?
The total number of property listings increased nationally by 26% vs. June last year from 6,218 to 7,805, and the number of new property listings in Auckland is up by 33% for that 12-month period.
“The increased number of property listings coming to market continues the trend we have seen all year, with high levels of choice for buyers nationwide,” said REINZ Chief Executive Jen Baird.
If you have the ability to leverage your current home equity to buy an investment property, now is a great time with abundance of choice and lots of listings to choose from.
Trade Me Property reported that mortgagee sales property listings have increased and many Kiwis are still moving to Australia in search of higher pay and a lower costs of living. The biggest motivators for buying are downsizing and relocation according to the State of the Nation Report published in Feb 24 by Trade Me.
Despite knowing they won’t get the prices they would have a year or two ago, with interest rates tipped to stay where they are for now, the number of property listings are likely to remain at current levels until the RBNZ lowers the OCR.
What should I consider if I am ready to invest?
If you do have significant equity now and would like to make it work for you, the process should be relatively simple.
As a general rule, you can take out a new loan which is secured against your existing property as the deposit for a property purchase, once the bank has decided how much they’re prepared to lend you (usually up to 80% of your home’s value). Banks do regard such loans as being higher risk than those for owner-occupied properties because the rental market can fluctuate, and they know you’ll be dependent on finding reliable tenants who pay their rent on time, in order for you to keep up with mortgage repayments.
As a property investor, you will need to have a Debt-to-Income (DTI) ratio greater than 7 under the new rules introduced by the Reserve Bank in July 2024. Use our Mortgage Calculator to work out your potential mortgage repayments.
However, if you decide to buy a new-build direct from a developer, you may not be subject to the DTI or the (recently eased) Loan-to-Value (LVR) restrictions, which were initially introduced to try and cool the overheated housing market at the time – while promoting a growth in supply of quality new rentals.
Learn more about how you can leverage your current home equity to buy an investment property….
If you think you can leverage your current home equity to buy an investment property, new or otherwise, Properli Financial Advisers can meet with you and run a number of scenarios, based on your specific situation, providing the information and options you need to make the right decisions. We’re sure you have loads of questions, some are answered here in our FAQ’s section of the website.
At the moment, our team can access great incentives and low deposit options offered by current developers. Understand how you can get a mortgage for an investment property in NZ.
Contact a Properli Financial Adviser, to navigate your way to owning an investment property.
