Property Investment has always been an attractive investment option for many Kiwis. However, like any other investment, it comes with its share of challenges and uncertainties.
Here are 3 things we’re seeing that are bugging property investors and how they can navigate these challenges.
1. Rising interest rates
This is the #1 headache for investors. As interest rates rise, borrowing becomes more expensive, and the cost of servicing the debt increases. This can have a significant impact on the cash flow of rental properties (particularly when adding the interest deductibility changes in NZ), and as a result, investors may have to charge higher rents to cover their increased expenses – but in the current environment, those increased rents may still be insufficient with such steep rate hikes.
Higher interest rates can also lead to a slowdown in property price appreciation, which can negatively impact the return on investment.
We encourage investors to review their mortgages and consider locking in their interest rates to protect themselves against future rate hikes. They can also look for opportunities to help their properties achieve higher cash flow potential (minor dwellings, rent by the room, etc.)
2. Interest-only lending
I’ve said this a bunch of times, and I will say it again: interest-only lending is something many people still don’t understand.
There is a lot of confusion around end dates to interest-only periods. After the interest-only period ends, you have a shorter period of time to repay the principal portion of your loan. For example, if you’ve had interest only for 10 years out of your 30-year mortgage, you would only have 20 years to repay the remaining home loan. Moving from interest only to P&I and facing higher interest...
