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It Pays To Be Vigilant Despite Wide Choice

It Pays To Be Vigilant Despite Wide Choice

Andrew Nicol says investors still need to weed out the good investments in a market with plenty of townhouses.

By: Andrew Nicol

2 July 2023

If you’re property shopping in Christchurch you’ll be looking at a lot of two-bedroom townhouses. Both affordable to buy and popular to build, they’re one of the most common investment options.

This makes them attractive options for buyers and builders. And the popularity of two-bedroom townhouses means there is a wide selection to choose from. But more choice means investors need to be more vigilant, particularly when it comes to weeding the good investments from the not-so-good.

Each month this section looks at new build properties – analysing real deals to see which is the best investment.

Here’s how Nairn Street in Spreydon compares to others in the neighbourhood.

Which Property?

This article looks at three, two-bedroom townhouses in Spreydon, Christchurch. All properties are being built by well-known developers (redacted so I don’t get angry phone calls). They are all for sale in today’s market, within two kilometres of each other.

Take a look (see table right):

Is It Well-Priced?

Without sounding too obvious, price is the most crucial factor when looking for a new build. It needs to be a good deal compared with other properties on the market.

In this case, the most affordable property (Evesham Cres) is $10,000 cheaper than Nairn Street. This is likely because Eversham Crescent doesn’t have a garage.

However, there is a $50,000 difference between the two properties with garages – Nairn Street and Mountford Street.

Even though the two properties have the same floor plan, Nairn Street has an extra bathroom.

A Good Investment?

Price isn’t the only factor to consider when eyeing a good investment. Price is what you pay. Value is what you get. Often that’s an idea used by real estate agents to sell investors a more expensive property. The idea is that a higher price = more value.

But that’s not always the case. Sometimes a less expensive property provides more value.

For example, the property with the highest gross yield is Nairn Street, at 4.50 per cent. Next is Evesham Crescent, with 4.28 per cent. For anyone new to property investment, the gross yield measures how much rent a property collects compared to the purchase price. It’s calculated as the annual rent (52 weeks) divided by the purchase price.

The most expensive property (Mountford Street) costs more than the other two properties, but the rent is about the same. This is why it has the lowest gross yield out of the three choices at 4.18 per cent. So, in this instance, price is not representative of value for an investor.

How Does It Compare?

The price of a new build will change dramatically based on whether it has a car park or a garage.

From my experience, Christchurch townhouses with garages cost $40,000-$50,000 more than the same property with a car park.

This is why, in the case of the three properties discussed in this article, the cheapest property is without a garage. But the garage will have an impact on the tenancy of these properties.

Off-street car parking is not readily available in Spreydon, which makes the garage a more desirable feature.

How Do I Buy A New Build?

If you’re looking to invest in a new build property like this, there are two ways to get one:

1. You can use the information to find a property yourself through a developer.

2. You can work with a property investment company.

These businesses build you a financial plan and then find new build properties that fit that plan.

Opes Partners is one example of a property investment company, although there are others. Property investment companies often don’t charge you a fee. Instead, they get paid by the developer. It’s a bit like mortgage brokers, who usually get paid by the bank. ν

Through Opes Partners, Andrew Nicol works with 97 developers nationwide. He and his team of financial advisers build Kiwi property investors a financial plan and match these investors with new build properties that fit the plan.