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Will COVID-19 change the way we invest in properties?

Thursday, April 16, 2020

IMG SOURCE: UPSLASH

 

As real estate investors, our operations have come to a standstill. But how long will it take for us to start moving again, and how long will it take us to get back on our feet?


The short answer; who knows?

The longer answer is that we can assume that the residential property investment market will definitely change. These times are unprecedented - that is a fact. As has been covered in previous blogs, the COVID-19 pandemic affects everyone - landlords, renters, property investors, the lot. However, property is a long-term investment, not a passing consumer trend. Although it may reshape, we have confidence in it succeeding in the post-COVID 19 landscape.


Achieving your long-term vision

When you first get going, you give yourself a long-term goal and milestones to achieve over a certain period of time. Given the circumstances, not achieving your goal within your timeline does not equate to failure. It does, however, require some level of goal readjustment. You will need to readjust your plans in two key areas: rent returns and capital growth.

Making a return on rent

This sounds glaringly obvious, but your key stakeholders here are the ones who are paying the rent in the first place. However, those with investment properties will feel the stress of not knowing how long their properties can be supported if renters struggle to pay. Therefore, speaking with your mortgage lender is also crucial. Reach out to those who are giving you the return (your renters), understand the legalities behind rent arrears and/or rent holidays, and create a plan so you can mutually support one another in this time.

Growing your capital

While there is no definite timeline for when this will all “blow over”, try and assess what the property market might be like ‘afterwards.’ It feels strange to suggest ‘afterwards’ because realistically we don’t know what ‘after’ is.

For investing in rental property, you need to consider the target market of renters in the wake of lockdown easing. Assess potential demographic shifts. In areas where there are universities or prominent industries, investigate the rental market in that area.

Although median house prices have increased, we know that the cash rate will remain at 0.25% for the foreseeable. Additionally, quantitative easing (QE) will make retaining and gradually building your capital easier (pardon the pun) in the short run. If you were planning on investing in a new property or ready to finalise deals before the crisis took scale, this will still be possible and possibly at lower interest rates. The challenge will be maintaining the short-term boom of continued property investment and ensuring it gathers return afterwards.


Remember…

We are in this for the duration, not necessarily the ‘long run’. We don’t know for sure how ‘long’ the run is! The tough decisions you make now will likely pay off in the end, even if your short-term cash flow reduces as a result. History has shown that the New Zealand property market has remained strong throughout previous financial or environmental crises. As the real estate market was on a consistent upward climb for the past few years, it can be assumed that there are enough collective reserves to maintain its success.


 

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Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

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I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

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Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

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