The $24.8B Truth About Investors + Surviving Negative Equity | NZ Property Insights Ep. 7

Are property investors really just "unproductive speculators"? In Episode 7 of New Zealand Property Insights, Paul and Debbie Roberts dismantle this long-standing myth with hard economic data. Plus, they break down the latest REINZ figures and provide a crucial survival guide for those currently trapped in negative equity. 

In this episode, Paul and Debbie cover:

• The $24.8 Billion Truth: A new Infometrics report commissioned by the NZPIF proves that private residential property investors are a massive economic engine. Investors generate $24.8 billion in value-added economic activity, making up 5.9% of New Zealand's GDP. By spending $4.1 billion on maintenance and $10.7 billion on new builds, investors sustain 126,000 jobs across the country. 
• The 'Patient' Market: The latest REINZ data shows a market that is moving at a deliberate pace. The national median sale price rose 3.2% year-on-year to $795,000, while sales volumes remained relatively flat. With the national median time to sell sitting at 56 days, Paul and Debbie explain why this "standoff" is actually an educated investor's best friend. 
• Surviving Negative Equity: Cotality estimates that 5,000 people who bought at the 2021 market peak have recently sold at a loss, and around 1,700 first-home buyers have had their 20% deposits wiped out. If you are currently underwater on your mortgage, Paul and Debbie share practical steps to survive—including restructuring with your bank, finding a boarder, and manufacturing your own equity through DIY improvements. 

Whether you are looking to understand the true value of your investment business or just need a clear plan to navigate a flat market, this episode provides the factual insights you need.

Resource Links:

📅 Free Online Event: Learn how to succeed in any market cycle. Register for the next "How to Succeed with Property Investing" event here: https://www.propertyapprentice.co.nz/auckland-events/

🏠 Book a Free Chat: Need to stress-test your strategy? Book a free, no-obligation chat with Paul Roberts: https://www.propertyapprentice.co.nz/free-strategy-call/

💻 Website: https://www.propertyapprentice.co.nz

Transcript

Welcome back to New Zealand Property Insights. I'm Paul Roberts. 

And I'm Debbie Roberts. We are the owners of Property Apprentice and we are here to help you navigate the New Zealand property market with facts, not just headlines. 

Now, today, we're tackling one of the biggest misconceptions in the New Zealand property market.

If you are a property investor, you have probably heard politicians or commentators call us. Unproductive or speculative or speculators. Today we have the hard data to prove them wrong. 

We'll also be looking at the latest R-E-I-N-Z data showing a highly 'patient' housing market, and we cover a heartbreaking story about the human cost of the 2021 market peak.

But more importantly, we're going to share exactly how you can survive and eventually thrive if you are currently in negative equity. 

So it's an episode entirely dedicated to showing the true value of what you can do as an investor and how to protect yourself from market down cycles. So let's dive in.

We are kicking off today with a new report from Infometrics showing the true economic power of property investors. It was commissioned by the New Zealand Property Investors Federation, the N-Z-P-I-F. The goal of the report was simple: to figure out exactly how much residential property investors actually contribute to the New Zealand economy.

So for years, the narrative has been that investors just by existing houses sit on them and sell them for a profit without actually producing anything. But this report proves that the mom and dad investors are actually an extremely important part of the economy. So here's the facts. In the year to March, 2024, private residential property investors generated a staggering $24.8 billion in value added economic activity.

So that's part of our GDP. That makes up 5.9% of New Zealand's entire GDP. So through economic activity, private investors sustained 126,000 full-time jobs. That equates to 5% of all the jobs in this country. So where that money goes, investors spent $4.1 billion on maintenance and improvements to existing properties and $10.7 billion just building new properties.

So maintenance spending is a highly efficient generating. $15.3 billion of GDP and sustaining 43,100 jobs while spending on new builds is a massive employment driver as well, generating $13.6 billion in GDP, but sustaining a whopping 103,400 jobs because construction is so labor intensive. So, saying that we are unproductive or speculative.

It is just wrong. We help the economy to grow. 

Absolutely. And in the N-Z-P-I-F report, they clearly stated we are not speculators. We're a $25 billion economic engine. So you could say it like this, we don't just buy houses and sit on them. We contribute $25 billion a year to GDP, and that's nearly 6% of the whole economy.

6 cents of every dollar this country produces touches a property investor's business. I don't know what's unproductive about that and why it works. $24.8 billion, 5.9% of GDP spread across every one of the 109 industries that statistics New Zealand tracks, it's not concentrated, it's not niche, it's literally everywhere.

The unproductive speculation line has been the go-to attack for investors for decades and this sort of puts the matter at rest, any policy that squeezes investors is a policy that squeezes 6% of the economy. In an election year, that's a statement that I'd like to see property naysayers respond to

out loud. 

Absolutely. And I think even today on the news, there was a, a political party that was saying that the tax breaks foreign for property investors needs to go again. It is not a tax break. It is a business and it runs like a business. You can't treat this like a hobby. It is a business that needs to be run that way.

So this data is amazing. 5.9% of the country's GDP comes from private property investors. The next time someone tells you that property investment is unproductive, you can tell them that you are helping to sustain 126,000 jobs across the country. 

Exactly. And when you buy a rental property, you're not just putting a roof over a tenant's head, you are paying the local plumber, the electrician,

carpet layers, decorators, Bunnings, placemakers, et cetera. Not to mention the property managers, the insurance advisers, even the mortgage advisers are also getting paid by the banks during the process. All of those individuals and or their employees in turn spend that money in local supermarkets, cafes, and local businesses.

The ripple effect is massive 

and no government could actually take over a private landlord's job. No government could actually even fund that. So we are a 

necessity. Can't provide, yeah, they can't provide all of the rental properties that this country needs. 

The government housing is the smallest landlord.

It's the biggest landlord, but it's the smallest overall of properties. So let's look into how this data translates to actual investment strategies. If you are doing a buy-and-hold strategy. You are spending money on maintenance and improvements, and this report shows this as a huge GDP return on dollar spent because those renovation projects generally quite

profitable for the tradies involved 'cause it's quite labor intensive. 

And on the flip side, if you're an investor buying off the plan or building new townhouses, you are directly funding the construction industry. That's $10.7 billion spent on new builds, sustains over a hundred thousand jobs in New Zealand.

You're literally keeping builders employed and adding crucial new supply to the housing market. Not to mention the plumbers and electricians and all the other tradies that are involved in building properties. 

So whether you are upgrading an old, say 1960s home, weatherboard home to meet Healthy Home Standards or funding a brand new build, your capital is moving the economy forward.

You are running a business providing a vital service. Keeping New Zealanders employed and housed. 

Absolutely. Look, my opinion is this report's a game changer and we haven't even scratched the surface. The $24.8 billion in GDP and 126,000 jobs sustained by investors deserves a full deep dive discussion, which is why we're gonna dedicate a bonus episode to extensively break down that data for you.



So next segment is the 'patient market' and global headwinds. So for our second topic, we're diving into the latest real estate data for February. Um, the Real Estate Institute, the REINZ, has released their first figures and the theme of the month is "patience". 

We are seeing a market that isn't frozen, but it is moving at a much more deliberate pace.

Buyers and sellers are both digging their heels in prepared to wait or negotiate hard for the right price. So if we look at the facts, the national median sale price rose 3.2% year-on-year to $795,000. Sales volumes were relatively flat. Up 0.3% with 6,523 sales for the month. Homes are taking longer to sell the national median,

remembering that we don't have one property market in New Zealand, we've got hundreds of them, but the national median is sitting at 56 days, which is higher than the 10 year average for February. And when we look at the North and South divide. The South island is carrying the heavy lifting for the growth in New Zealand.

Otago saw a massive 13.2% increase in its median price, and Southland had 7% growth. Meanwhile, the north island is softer, but for how long? 

So both REIN Zed economists, warned that external factors, especially conflicts in the Middle East and its impact on oil prices, could drive up the wholesale rates and dampen, consumer competence.

But, R-E-I-N-Z, chief Executive Lizzie Riley specifically noted that property investors were less active in this current market. So I think everything should work out. So let's start with the days to sell figure. So that's 56. It's a long time in real estate. But what that tells me is there's some vendors that are not too desperate enough to slash their prices, but also they're not feeling any FOMO

Like it's a sort of classic standoff. 

Yeah. With the buyers not feeling fine now either, and this is where the psychology of the market gets interesting. A and Z economists pointed out that while we had a sharp price increase recently, just before the peak of the boom, they don't believe it's a permanent shift because it's taking so long to sell houses. Now as an investor,

a high number of days to sell is actually one of your best friends. It's a buyer's market at the moment. Yeah. 

And if you can get a delayed settlement, you are sort of locking in any potential growth over that period. So absolutely. Look for those deals. So a hundred percent. When a property is sitting on the market for 50, 60 days, the real estate agent is tired, the vendor's tired, the property's got tired as a listing, their motivation, does tend to increase significantly so

that's when you can step in, secure a property below its registered valuation, and get yourself a deal on paper. 

And don't forget if the listing's showing as being active for 50 or 60 days, that doesn't necessarily mean that's the length of time it's been on the market because the clock starts ticking again

even if someone switches agencies, so it might've already been listed for three months with one real estate company and then gets re-listed with another real estate company. But finally, the article noted that investors are less active right now and it's music to my ears. When most property investors are sitting on the sidelines because they're spooked by what's happening in the world, like global news, et cetera, that clears the field for more educated or more experienced investors.

It's a prime buying environment if you know what you are looking for and you know how to negotiate. 

And I think one of the things that was interesting in a recent article, from Tony Alexander around how mom and dad buyers are. Are gone, and he gave sort of 14 reasons, but 16, I think it was 16 reasons, but then finished it with, the people that will basically win are the experienced, well educated investors.

And so I think. What I took from that was the days of the lazy investor where you just do it all for me and I'll pay top price for that. Those days are gone because that doesn't work financially. A lot of people think the hardest thing to do is to buy the property, that's actually the easiest thing.

'cause you just need the money from the bank and if someone sells you the dream, you'll buy it. But the reality is you've got to survive with that property. So keeping that property for five, 10 years is the key, not just buying it. And so that's where you've gotta run the business. Properly, and that's what we teach our clients and back it up with financial advice.

Absolutely. And I mean, we've seen such an increase in activity from our clients, haven't we? Mm-hmm. Like even clients that joined us 15 years ago, you know, they've been in touch to tell us about the latest deals that they've been buying and clients that have joined in the five to seven years, they've really upped their game as well.

So, you know, the market's pretty hard to beat. Yeah in the current state. 

And so this sort of leads us into, last segment, which is surviving the 2021 peak, which is, you know, when we had that massive peak in the market due to the Reserve bank spending, the government spending at that time and the CCCFA that was brought in on the 1st of December and, and it just made the housing market go nuts.

Unfortunately, a lot of people bought thinking, oh, this will keep going. And it was never going to, and we were very cautious with our clients telling them to be very, very careful and back up exactly what they're doing at that point and making sure that you've got, a good amount of equity behind you if you're gonna jump in at that market.

Yeah, exactly. I think I remember doing a podcast sometime in 2020. Warning people about buying off the plans at that stage in the property cycle. But, um, you know, our final point for today, we wanna look at a sobering story that highlights the human cost of property market cycles, specifically for the hundreds of and thousands of Kiwis who bought their properties at the absolute peak of the market in late 2021.

So the article that we're commenting on featured Bevan, who bought a house in Wellington for 1.2 million during that boom, following a job loss, um, which is very unfortunate. He was forced to sell it relatively recently at a $300,000 loss. So it's a devastating story and it's nothing that we're, you know, it's, it's a horrible thing that's happened.

But if you are currently underwater on your mortgage, IE. You owe more than the property's worth. We wanna give you some hope and practical advice because there is a way through this. 

And you know, don't get us wrong, we're not saying that Bevan did anything wrong. This was Absolutely, you know, bad luck understands.

Yeah, absolutely. So, we are not criticizing what Bevan did. It's just a, a feature article that highlighted the devastating effects that buying at the wrong stage of the property market. If something does go wrong with your income, there can be some serious implications there. So when we have a look at the facts, according to Cotality an estimated 5,000 people who bought their homes during the peak, that was from late 2021 to early 2022

around January, end of January, early Feb have since resold for a lower price than what they paid for it. Cotality estimates that around 1701st home buyers who purchased in quarter four of 2021 have had their 20% deposit completely wiped out, meaning they owe the bank more than the house is worth.

Mortgage advisers note, the borrowers in negative equity are effectively trapped. They cannot easily refinance. They can't go to another bank, or get better interest rates or cashbacks. So the silver lining affordability metrics are improving. And I think every economist, yes, we've caught some things in the Middle East now, which is slowing the market down.

But I think every economist is expecting to see growth over the next few years. Lower end, lower interest rates are emerging and prices have largely stabilized and we are starting to see that creep upwards now. And most economists would agree the worst of the price falls are definitely behind us.

And, our hearts go out to Biven. Starting again at the age of 45 after losing your life. Savings is incredibly tough. Not insurmountable though. You know, he's still got 20 years before he reaches retirement age. This is just a bit of a backward step, but his story does highlight that absolute golden rule of property.

It's only a loss on paper until you get yourself into a position where you have to sell mm-hmm. Or situations outside of your control make you have to sell. So for example, for example, Bevan lost his job and that was the reason that forced the sale. If you can avoid selling when the market's not working in your favor,

time fixes everything in the property market. Time will eventually heal your equity. And in fact, the latest results that we've seen on nationwide medians show that, property values nationwide are now back to where they were two months before the peak of the boom. 

Mm-hmm. So it's that important. Real estate is a 10, 15, 20 year game.

Nobody who bought in 2007 just before the GFC, the global financial crisis. I mean, you imagine that buying in 2007 and going, oh no, you know, but nobody would regret that today if they held onto that property. Absolutely not. And if you are in negative equity right now, take a deep breath. You still have the same house, the roof still keeps you dry.

The goal now is simply survival and cash flow. 

That's why it's so important to not be an uninformed property investor. You need to know what works financially for you not to have a sales pitch, selling you the dream. This is why we've seen so many people come to us that were literally sold that dream, but it turned out to be a nightmare, and that's why we do things differently

at Property Apprentice. We don't sell houses. We help you through the process to help avoid you from making the most common mistakes that new investors make. So let's have a look at some highly practical, positive tips that you can take today if you're feeling trapped. Number one,

talk to your mortgage adviser first because they can help you through this as well. If you are struggling with your payments, don't hide. Banks have hardship teams and you can often ask to switch to interest only payments for six to 12 months to give your budget some breathing room. Or you could ask to extend the term of your loan to lower your weekly or monthly payment.

Last resort, you could even potentially qualify for a mortgage holiday. There are fish hooks involved. So speak to your mortgage adviser for help throughout this process and look at all of your options and make an informed decision. You might be able to look at increasing your income. Can you get a border?

For example, if you are renting out a spare room for $200 to $250 bucks a week, that goes straight towards helping you cover the cost of that mortgage and take some of that pressure off your shoulders. 

Manufacture your own equity. You might not be able to rely on the market to push your house price up right now, but you can add value yourself.

Painting walls. I, I've always said to clients, we can all paint. It doesn't matter whether you are a, an accountant or a lawyer. We can all pick up a paint paintbrush. 

Might not be as good as a professional, but 

you'll still 

do a 

rush. Good job. Um, but it's all in the prep work. Um, tidying up your landscape.

And I think that's one of the biggest things that people miss, is it is so good to tidy up the gardens and that can make such a difference to the value of your home, or even an outdoor area of decks, that kind of thing, which are cost effective. So that DIY. Small improvements can bump up your property's value, to get you back to 20% equity faster than you might think.

Yeah. And it's that first impression that counts. You know, that's the thing that increases the value in your property. So don't let the headlines destroy your mental health. The market always moves in cycles. We've had the boom, we've had the correction. Now we're in that stabilizing phase, heading towards the next stage of the cycle, which is where we are gonna have even more property increases moving forward.

Lean on your support networks. Talk to a financial adviser and focus on holding the line. Or even better if you're in a position to do it, focus on growing your wealth because the next stage of the cycle is the boom and better days are coming. 

So that wraps up episode seven of the New Zealand Property Insights.

We've got a lot today from the incredible $24.8 billion economic contribution of property investors to the opportunities hiding in a patient market and practical steps you can take to beat negative equity. 

Absolutely. And if this episode made you realize that you need a stronger safety net, or if you want to learn how to buy strategically,

so you don't end up trapped in the next cycle. We'd love to help you to build a resilient strategy. 

  📍  📍 So pretty much every week we run free online events called How to Succeed With Property Investing. It's all always online and it's an incredible, valuable session where we go much deeper into how to buy safely, manage your risks, spot the deals, in this amazing market that we have right now.

And it's completely free and online, so it doesn't matter where you live, and there's absolutely no obligation or hard sales techniques involved. Like I said earlier, property apprentice doesn't sell property, so if you don't have, so you don't have to worry about whether you're going to get sold an anchor when you were hoping to buy the boat.

You can find the link in the show notes or head to www.propertyapprentice.co.nz. 

 Thanks for listening and keep learning and invest safely. 

See you next time. Bye. 

  📍 ​