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Is now a good time to buy an investment property or second home?

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In the current New Zealand housing market, it’s difficult not to notice that house prices are the lowest they’ve been in a long time, even though interest rates remain high.  

Economists predict that the end of the housing downturn may be in sight, and so you may be wondering, is now a good time to buy an investment property or second home in the current market.  

In this article, we’ll give you our top two things to think about so you can weigh up both options i.e. to buy or not to buy with care and consideration.  

Watch instead: Is now a good time to buy investment property or a second home?

Consideration 1: Are your emotions getting the better of you?  

Humans base their most of their decisions on emotion; what we feel we usually perceive as the right answer. Being aware of this is going to help you in making this decision.  

Buying a house in the current market could make great financial sense to you, but your emotions may be telling you it’s too much of a risk.  

On the other side of the spectrum, you may have emotions of FOMO (fear of missing out) that’s pushing you to buy as house prices aren’t going to be this low for long.  

Ensure you check these anxieties at the door so you don’t make a rash, and let’s be honest, huge, financial decision based on these emotions.    

family moving into their new home

Consideration 2: Assess the financial aspects of this purchase 

If you’re purchasing an investment property, be sure to research the long-term gain of purchasing this property or it’s ROI (return on investment) to ensure its returns are on par with what you’re looking for.  

The second thing to look at is can I afford to hold this property long enough to get that long term gain i.e. how much money do I need to put into it right now. With high interest rates, it’s probably going to run loss as an investment, meaning that you’re going to have to top this up every so often. Make sure that you do a cash on cash projection for one or two years to see if you can truly afford an investment property in the current market. 

If you’re considering buying an investment property and want some help to go over the numbers, or give you a bit of a coaching through those emotions that you’re dealing with, then feel free to book in a 15 minute no obligation call with us and one of our mortgage experts can assist you.   

Keep in mind this article is providing general information and not individual financial advice.