Auckland City’s updated property valuation announcements were obviously big news.
Auckland City’s updated property valuation announcements were obviously big news. All at once a third of New Zealand’s households would learn how much capital they have gained, and it was a big enough event to crash the Auckland City website. Responses fell into two basic camps. On the one hand, banks reported an inundation of requests by younger homeowners to
extend their loans. After all, their equity – as measured by property value – had soared compared to the previous valuation. Some CVs had jumped more than 50%, driven mainly by the extraordinary increases in land value. While many homeowners are celebrating their new found wealth this Christmas, for those near retirement or on fixed incomes, the news is less glittering. A big rise in valuations will come with a hefty New Year rates increase: a real worry. We see several trends for home owners – whether retired or still working – that include ways to access capital and improve cash flow:
- Downsizing to a smaller home within Auckland. Often this doesn’t release as much as you’d think though as apartments and townhouses are in demand by all age groups. And don’t forget body corporate fees.
- Relocating to another town in New Zealand. This frees up more money but you could be too far from friends and family.
- Selling underutilised assets such as boats and holiday homes – a great idea as it reduces annual maintenance costs too. The downside? It may compromise your lifestyle.
- Reverse annuity mortgages. Not many providers, and compounding interest costs erode equity while you have the same home ownership expenses
- Moving into a retirement village – frees up capital for investment, provides security and companionship, less worry for the family and affordable, often with fixed fees. The trade-off - no longer any house value growth and a capital deduction upon departure.
- Increase income. Not a feasible option for those retired. None of the options are perfect, and if you face this kind of decision we can assist you in assessing the pros and cons. Financial planning is not just for the young – revisiting your financial arrangements and reviewing your investment strategy are ongoing and we’re here to help.
While many homeowners are celebrating their new found wealth this Christmas, for those near retirement or on fixed incomes, the news is less glittering.
