Don't pay too much: Newland

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Buying property is not a sure bet and would-be landlords should exercise caution, one property commentator says.

Wednesday, April 17th 2013, 12:00AM 1 Comment

by The Landlord

Demand for properties for sale in Auckland is showing no sign of slowing down – but rental demand is not keeping pace.

That appears to indicate that it is investors driving at least part of the increasing demand, not a true housing shortage.

But property investment guru Olly Newland said that because of the exuberance in investment buying, rentals were becoming detached from giving a fair return.

“Those who bought years ago have little difficulty in proving that their yields are good as compared to the price they paid at the time but are often lousy when compared to present day values. Most investors today will be lucky to earn 3% after tax and expenses on the value from their properties and are relying on capital gain to make up the difference.”

He said the surge in house prices could be self-defeating and people should not count on endlessly rising rents.

“I would caution investors and home owners alike not to get carried away and pay silly money .There is always a day of reckoning somewhere down the line and there could be tears- as has happened many times before.”

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