Private property issue #47- best places to invest

Property investors constantly ask: “I’m thinking of buying an investment property … where’s the best place to invest in New Zealand?”

So, Ed (our economist) crunched the numbers for every town in the country. And in true data-nerd fashion, he’s created a spreadsheet.

Here’s what the data says.

Top 3 places to invest in NZ

Let’s cut to the chase. Looking at the data, the top 3 places to invest are:

#1 Christchurch

#2 Waimakariri District (Rangiora, Kaiapoi)

#3 Auckland

More details on each place and our process for picking them are below.

But these towns should also get honourable mentions. You might be able to pick up an investment here too:

• Ashburton & Timaru

• Rolleston

• Wellington City, and

• Hamilton (if you can get the right deal).

You might think, “Andrew, how did you pick these places?”

How did you pick these places?

Step 1 – In our book, Wealth Plan, we show the 3 factors investors should look for when choosing a place to invest. They are:

• The property cycle (whether the area is undervalued or overvalued compared to the rest of the country)

• The expected population growth and

• The size of the population.

An undervalued area that expects considerable population growth (and already has a decent-sized population) … that’s a recipe for house price growth in the future.

Step 2 – But then we also need to consider factors like:

• How expensive properties are

• How high incomes are

• And the average rental return

An undervalued area that expects significant population growth (and already has a decent population) is good.

But if that area also has cheap properties, people who earn decent incomes (to support higher house prices), and good rental returns … that’s ideal.

Step 3 – Finally, you combine these numbers to build an overall picture of each region.

There’s no point in creating a formula that says, “a good location is 42.5% property cycle and 12.9% population growth …”

No one has ever created a model to accurately predict future house price growth.

So instead, the spreadsheet uses “heat maps” to show how each area compares for each factor we’re considering. ‘Red’ = good, ‘blue’ = not good). The redder, the better.

The bluer, the worse.

Let’s look at our top 3 in more detail.

1st Place – Christchurch

Christchurch is the most undervalued area in the country (13%).

Even though the expected population growth is below average (about 15% over the next 25 years, compared to 25% for the whole country), it’s still robust, and the existing population is large.

2nd Place – Waimakariri District

Waimakariri District is just north of Christchurch. It is also undervalued (11.5%). The population is projected to expand by 41% (above average) over the next 25 years.

And while the current population is average, property prices are relatively affordable, and people earn decent incomes.

3rd Place – Auckland

Some readers will be surprised that Auckland made the top 3 list. Property prices there have fallen 21.4% since their peak in 2021.

That’s pushed the city into “undervalued” territory. House prices are 10% below where we’d expect them to be.

And the population growth and current population are massive. Property prices are high. But, there are pockets of the city where investors can buy well under the city’s average house price.

And if you want to dig into more detail. We’ve just released this video going through the data more thoroughly.

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