No surprise property finding favour

It’s not hard to see why investors are returning to the property market.

Tuesday, June 19th 2012, 12:00AM

by The Landlord

Despite John Key’s protestations that his Government won’t be raising the pension age, it seems inevitable that anyone currently aged under 40 won't find themselves on the super payroll at 65.

A 30-year-old today seems likely to have to wait much longer than 35 years to start receiving the pension – if it’s still available at all when they start thinking about retirement.

So it was no surprise that property guru Olly Newland said this week that he’d noticed young investors in particular opting to buy investment properties to provide for themselves in later life..

It’s an investment vehicle that is easier than some to understand and there’s no danger of it being completely wiped out if the European turmoil spreads – as could be the case with the sharemarket. Even if the value plummets, you’re still left with bricks and mortar – and from a long-term perspective, an investment that is bound to be worth more in 20 years than it is today.

With interest rates low, it’s seems that it’s almost a waste of time putting a substantial amount of money into any bank account. My mortgage is currently floating at about 5 per cent. My parents are earning almost a percentage point less than that on their savings – and being taxed on what they do accrue. If they are lucky, they’ll keep up with inflation.

It could be argued that they would be better to buy an investment property with that money and earn the 8 or 9 per cent yields that are available on many currently on the market.

On what other income-returning investment will banks lend up to 90 per cent finance, currently at a very cheap rate? A sound property in a reliable area: It seems hard to find a better provision for retirement.

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