For many years residential property has been seen in New Zealand as a great option for retirement saving. There are good reasons for doing so:
1. You can see and touch property
2. It's relatively straightforward to manage
3. There can be tax advantages
4. Tenants pay off the mortgage
5. You can achieve capital gains of around 3 to 4% per year on average, so allowing significant tax free gains over the long term
6. The big one - you can leverage the purchase cost off existing property without the need to find tax paid cash.
However, over the last decade or so with rampant property inflation, many investors have looked at short term profit rather then income in the long term through debt repayment.
With the flattening off of property values in the main centres where returns are highest, capital gain is now less likely to be a factor in rental property investment.
Our advice at Thompson McNeill - when looking to invest in rental property is take the long term view and plan to pay off the property by topping up rental income and other savings, as an additional form of saving for retirement.
There is a predominant view in financial circles that a universal pension (such as New Zealand Superannuation) is probably unaffordable in the long term and likely to be either means tested as in Australia or discontinued in favour of KiwiSaver, perhaps compulsory and/or with some form of Government subsidy - or some other pension scheme altogether.
This would make personal responsibility for some form of retirement income essential. Property investment is just one of the options.
Whatever form of investment you choose, don't just guess. Consult a professional adviser to ensure you make the right choices and a scheme that works best for you.