Each year, we like to write about the best places for property investment in New Zealand, this article focuses on what could come next in 2022. But, our predictions for 2022 are vastly different compared to what we were putting forward for 2021. COVID-19 has yet again impacted New Zealand, and this time on a different level. We had kind of assumed that everything would have cooled off by now, but the property market is still on the go, living costs are rising, and border restrictions are still in full swing.
So with all of this in mind, let us discuss the best places for property investment for 2022.
Where we think the best places for property investment in New Zealand in 2022.
We think for 2022, stick to the main city centres, like Auckland, Tauranga, and Wellington. Maybe Hamilton, but we will see how it goes later on throughout the year. The main centres are where the jobs are, and where you’re gonna have the biggest possible shortage of housing, because ultimately supply and demand is what drives growth.
With the additional high density Resource Management Act (RMA) reform, concentrating on these cities is where you will get the best bang for your buck. If you’re buying within a 20km or 25km radius from these city centres, you’re still considered central. The benefits of being considered central is that you’re able to access the necessary infrastructure, such as supermarkets, buses, and easy transport.
We can’t stress this enough – if you’re looking for an investment property in Auckland, the South Auckland corridor is going to be huge. Take a look at Onehunga and Mangere Bridge really taking off. The houses in these areas, about ten years ago, were worth half of what they are now!
If you are an overseas investor, we have a great article here where we write about investing using foreign income. If this is you, check it out.
Why these places? Well, there are a couple of factors going on at the moment.
How COVID is impacting New Zealand.
Due to COVID still rampant across the world, we have a few key potential issues that could impact how successful property investing is in relation to wealth building. With the border restrictions, and the lottery-like style of MIQ, we have low net migration coming home. 18% of New Zealand’s population lives overseas, or about 1 million Kiwis, so that is an extremely high number in comparison to places like Canada or the US, it’s 9% and 4% respectively. A lot of skilled and high income workers of New Zealand move overseas to chase money and better opportunities, however coming back in is proving to be an issue, and a lot of New Zealanders are finding themselves stuck in another country.
The current economy of New Zealand.
On top of this, we have inflation pressures and the rising cost of living, including rent, food, fuel, and rates. With the rise in the OCR from 0.25% to 0.50%, we can see the Reserve Bank of New Zealand Te Pūtea Matua is doing their best to manage the ever increasing interest rates and cost of borrowing money. House, materials, and building costs are rising also, and we have a timber supply shortage that we can see across New Zealand. Overall, supplies are limited, and with lockdowns slowing down building and construction, the flow on effect is huge! Additionally, the transport and logistics industry is experiencing a shortage of drivers, so getting things shifted around the country is proving harder and more expensive than ever.
The impacts of the latest Housing Policy.
In March 2021, the Labour Government had announced that there was going to be a Housing Policy update, which essentially was created to manage the skyrocketing house prices, which would further help the economy at not being held liable to these tangible assets. If you want to read what we’ve written in March, give our blog a review here.
The Housing Policy has been super interesting in regards to New Builds, and how these homes aren’t impacted by the new 10-year bright-line test. We know for a fact that this was to help First Home Buyers jump on the ladder, and will incentivise investors for jumping on to a new build too. While it was also created to get developers developing, we can only see the negative impacts for First Home Buyers, and how it’s a very easy way to skrrt around a law.
In this Housing Policy, there was also news around tax deductibility and what this means for your mortgage as an investor. We broke down a 143 page document into an easily understandable and digestible blog, where you can have a look here.
What we predict for 2022.
As we’ve said above, the cost of living in New Zealand is really high, and we’re seeing inflation increase the most in the last year than other ‘usual’ years. When the borders open, we will likely see Kiwi’s leave New Zealand and do the classic ‘OE’, where they will live in another country and go travelling. We will also see Kiwi’s migrate over to Australia to chase money, as New Zealand workers are well regarded in other countries for their ‘jack-of-all-trades’ approach to work.
What key pieces of information to look out for when investing in property.
When you invest in a property, ensuring you future-proof yourself is critical to building long-term wealth and achieving your financial goals. Buy in places where growth is about to happen, like new developments that are close to motorways, supermarkets, and schools. Check out development plans for the next 10-15 years, and see if it aligns with your growth and affordability. It’s really helpful to see what the local councils are offering too, if there is funding or allocation to infrastructure support or essential shopping.
When looking for an investment property, choosing the right location can really make or break your ability to grow wealth and build up passive income. If you’re keen on looking at an investment property, why not get in touch with one of our team and we can see where to begin.