Retirement properties squeezed in Wellington market


Posted 3 years ago by Pope & Co. Mortgages

It’s considered a rite of passage in New Zealand to own a freehold home near retirement, and then use the equity to fund a smaller home with a cash surplus to enable a comfortable retirement.

Wellington’s house prices have risen 44 per cent since 2013, according to the latest Trade Me Property Price Index, putting significant pressure on people looking to downsize when the kids leave home or are approaching retirement—especially when first-home buyers and investors are looking in the same price bracket.

Unfortunately, rising house prices and a hot property market could put your ideal retirement property out of reach, unless you start planning today. Trying to downsize in a hot property market can put a squeeze on the surplus funds you hope to pull out. For example selling a home worth say $900k where there are less buyers and downsizing to a $400k-$500k home where there is more competition, smaller homes and houses that need maintenance.

A nice home between $400k-$500k in Wellington can be hard to find. It’s also very stressful to be searching for your ideal ‘retirement’ home when you’re up against the clock and need to shift.

A savvy approach to property can provide other options. For example, homeowners in their late 40s and 50s should be thinking now about where they want to live in retirement—well ahead of actually needing to downsize—and working to make that a reality.

Here are our three tips to plan for the future:

  1. Buy now where you want to live in 10 or 15 years—secure your future home at today’s prices and then rent it out until you’re ready to downsize. You may also reap the rewards of capital gain across two properties rather than one.
  2. Look further afield and consider where you might want to spend your golden years. Wairarapa offers some good choices, as does the Kapiti-Horowhenua Coast, Central Hawkes Bay and even Northland.
  3. Make the most of any existing equity to give you a valuable foot up—especially while you’re still a ‘working’ household. Some call it ‘good debt’ and leveraging to buy an appreciating asset. 

Generally, we’re living and working longer than previous generations, meaning people wait before downsizing and can then be left with fewer choices. By being savvy today you can still own a freehold home and live your ideal retirement.

Want to talk through your options? Give our team a call today 0800 000 517.

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