By Cam Harper*
The Kiwi Dream: Is property Investment Still the Best Bet for Retirees?
The key to maintaining your lifestyle in your golden years is protecting the purchasing power of your money.
Over time the cost of living will go up, and the value of those hard-earned retirement savings will decline if they’re not keeping pace with inflation.
Inflation risk is particularly relevant to retirees. No one can predict the length of their retirement, and an extended time horizon (increasingly common as life expectancies trend upward) means the compounding effects of inflation can really add up.
It makes sense to invest that money instead.
Investing in property, still the Kiwi dream?
It's news to no one that property investment is the most common form of investment in New Zealand.
For many retirees and soon-to-be retirees, property is an attractive investment option for its ability to deliver a regular income stream, and in part because it's a direct hedge against inflation.
Capital appreciation and rental adjustments rise with inflation, and in markets like ours – where demand outstrips supply – property investment has historically exceeded inflation across the long term.
Of course, recently we've seen first-hand the impact of high inflation on the property market, where high interest rates have rendered property investment unviable for investors reliant on debt.
Economic conditions, market fluctuations and government policies all play a part in the property investment game; just a few weeks ago ANZ’s Antonia Watson voiced her support for the long-debated Capital Gains Tax, and she won’t be the last.
For some retirees and soon-to-be the same, investing in property is too high a risk. They simply can’t commit to those long investment horizons to reap the rewards on offer.
Then there's things like property maintenance, operating costs and tenancy management which are all time-consuming and can get expensive, fast.
Other external factors come into play too: new developments or rezoning can have massive consequences on the value of your investment, and they’re completely out of your control.
In addition to a lower risk tolerance, retirees often prefer more passive investments that do not require their ongoing involvement, day-to-day decision-making and constant monitoring.
And fair enough; your golden years should be free of stress and responsibility so that you can enjoy a comfortable retirement.
Investing with property, without investing in property
Southern Cross Partners provides first mortgage secured property investments that deliver enhanced returns.
We’re a popular choice for investors who want to invest in property, without being exposed to some of the risks outlined, who seek a personal approach to investing, and who want a high level of control over their finances.
In addition to being a regular source of income, our short-term investment horizons mean our investors’ money keeps in lock step with inflation too.
Here’s how it works. Our network of trusted financial advisors comes to us with loans that don’t quite fit bank lending, despite making perfect sense.
We’re conservative lenders, so each application goes through a rigorous due diligence process so that we can accurately assess the quality and feasibility of the loan.
We assess the type of security, the loan-to-value ratio, and whether the applicant has a clear exit at the end of the loan term.
We’ll then create a short-term, bespoke loan solution to get the applicant from A to B (or until they qualify for bank lending).
We lend our own money first before offering the loan up to investors on our investor portal.
Investors can log onto the portal and review the details of each loan available for investment, to determine exactly which investment is right for them.
Should they encounter any issues or have a question, our team is just a phone call away. Better yet, we love it when our investors drop into our Auckland offices for a coffee and a chat.
If you’re thinking about retirement, or already there, we’d love to see you too.
For more details visit www.southercrosspartners.co.nz
Southern Cross Partners is licensed to provide peer to peer lender lending services under the Financial Markets Conduct Act 2013. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions.
* As Managing Partner of Southern Cross Partners, Cam Harper leads both the lending and investing sides of the business. He is passionate about helping New Zealanders achieve real financial freedom through specialised lending and secured investments.