Property Investment
2 min read
Author: Andrew Nicol
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
This is the massive mistake I see property investors make again and again.
They buy houses in places where property values are rising today. They think that the good times will keep on rolling.
But there’s a problem. If you invest in an area that's already halfway through its house prices boom … you've already missed half of it.
Here’s what to look for instead.
If you want to get the full benefit of a house price boom … you’ve got to get in … before house prices start booming.
Most Kiwis think that house prices go up (or down) everywhere at the same time.
“If property prices are rocketing up in Dunedin … they must be up everywhere.”
That's not how it works. One area can be booming while its neighbour sits flat.
And if you let a flat market turn you off … you could miss out if property prices eventually catch up.
For as long as NZ has had decent property data, Christchurch has always been more expensive than Dunedin.
Bigger city, stronger economy. That's just how it worked. Then something strange happened.
In 2019, Dunedin's house prices were higher than Christchurch's.
And property values in Dunedin were increasing faster.
At the time, it was easy to think:
If you'd asked most people in 2019 which market would outperform over the next five years, they'd have said Dunedin.
That's not what happened.
Dunedin property prices ran out of steam. The booming market ran out of puff.
And that’s why, since 2020, Dunedin property prices are up only 17%.
Compare that to the city falling behind. Christchurch had fresh legs. It sprinted ahead. It went through a period of catch-up growth.
And now house prices are up around 55% since that same period.
If you invested back then … you could have made 3.2x the money if you invested in the flat city, compared to the booming city.
That's catch-up growth in action.
Too often, investors will look at what's happened recently and project it forward. We think:
But property markets run in cycles.
When you buy into a market that's already booming, you could be buying at 9 o'clock, after some of the big gains have already happened.
But what happens if you buy in a market when it’s struggling? You might be buying at 6 o'clock, before the recovery and boom phase kicks in.
The catch is that buying at 6 o'clock often doesn’t feel great.
I wanted to tell you this story because this headline caught my eye last week.
Trade Me released data showing that Bay of Plenty house prices are now more expensive than in Auckland!
This is big news, since Auckland has historically always been the most expensive region in the country.
Now, I've got issues with that data (which I unpack on this podcast).
But it reminded me of that time in 2020 when Kiwi property investors thought Christchurch was over. And Dunedin was the place to be.
And the truth is … Auckland house prices have struggled. They have been underperforming since 2016.
So if you look at today’s headlines … Auckland feels weak. Investors aren't excited about it. Other regions have had bigger house price increases, so they look more appealing.
Sound familiar?
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
This article is for your general information. It’s not financial advice. See here for details about our Financial Advice Provider Disclosure. So Opes isn’t telling you what to do with your own money.
We’ve made every effort to make sure the information is accurate. But we occasionally get the odd fact wrong. Make sure you do your own research or talk to a financial adviser before making any investment decisions.
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