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Housing market - house for sale - Source: ONE News -
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Property investment is virtually a way of life for many Kiwis with Treasury reporting in 2007 that as many as one and six Kiwi households own an investment property.
One man who has been advising Kiwis on how to invest in bricks and mortar for many years is Kieran Trass.
He believes investors can still be successful in a slump, but they need to be aware that there is a property cycle. He says even developers immersed in the industry end up suffering in a slump and blame it on being 'caught by the market'.
"Property is not a liquid asset. It's relatively easy to get into property but very difficult to get out, especially in a soft market," he says.
Trass says investors often grieve too long during a slump and miss taking advantage of the changing situation early.
"If you're denying the market's turning against you, and you were doing that over a year ago, you're a lot worse off today than if you'd acted then," he says.
Treasury and the Reserve Bank have expressed concern about another property boom. They argue that more investment is needed in areas that provide potential returns for the country, such as business and exports, rather than borrowing money from overseas to prop up the housing market.
Trass agrees that over-investment in property is not good for New Zealand but says it is inevitable there will another boom, just as there will be another bust and recovery. But he says particular policy can accelerate phases of the property cycle.
"There are certain changes that will drive values closer to their true fundamental levels, that will accelerate us through the slump quicker...there are some changes that will actually stall us right where we are in the cycle," he says.
He says property values, which are underpinned by inflation, will benefit from rising inflation that may climb as New Zealand emerges from the recession.
Trass has recently released his updated property investment book The Housing Bubble to help guide property investors.
To see his interview with Corin Dann, click on the WATCH tab.
