Top 5 places NOT to invest in New Zealand

Property investors are always looking for the “best” place to buy. After all, picking the right location to invest is arguably more important than picking the right property.

As the host of the Property Academy Podcast, people often ask me: “Where is the best place to invest in New Zealand right now?” So I wrote an article answering that.

But then I also often get asked: “What do you think about Tauranga?” Or, “What do you think about [insert place] of the country?”

In this article, you’ll see the top 5 countdown of places I don’t recommend investing … right now.

The truth is that you can still make money investing in these areas, and at some point they might become good places to invest.

But at the current point in the property cycle, these are the top places I don’t recommend.

Disagree with my picks? Let me know what you think down in the comments section and we’ll have a good chat.

More from Opes:

• Top 10 places to invest in NZ outside of the main centres (Video)
• How's the New Zealand property market going? (Article)
  
• What's the average house price in New Zealand? (Article)

#5 – Tauranga, Bay of Plenty

Kicking us off at No.5 is Tauranga.

My main issue with Tauranga is you pay an Auckland price ... without getting Auckland’s capital growth.

Since 1992, property prices in Auckland have risen 7% per year (on average), whereas property prices in the rest of the country have risen by about 6.2% a year.

The average Tauranga City house price is $900,000. Compare this to the average Auckland house of around $1 million.

So my thought process is: “If you’re going to spend Auckland money, you might as well get Auckland’s capital growth.”

I’m not saying that if you own an investment property in Tauranga it’s a bad investment. If you bought in Tauranga 10-years ago, you would have made a lot of money.

But if I was buying a property in New Zealand today, would Tauranga be the first place I would look? No, it would not.

#4 – Whanganui, Manawatu-Whanganui

Personally, I like Whanganui; I grew up an hour up the road.

But this little town of 47,000 people isn’t the best place to buy an investment property in 2024.

Why? Between 2015 – 2020 property prices in regional New Zealand boomed. At the same time, prices in some of the main centres stayed flat.

Then Covid-19 came along and that pushed house prices up even higher.

So, Whanganui had 2 property booms back-to-back. House prices more than tripled between 2015 and 2022.

That’s why house prices there look very overvalued.

Sure, property prices there are cheaper than New Zealand’s average, but they are really expensive for Whanganui.

This is why I expect Whanganui to underperform over the next few years. In other words, I expect house prices to go up more slowly there compared with other parts of the country.

This is a similar story for most of the central North Island. Most areas have had two property booms in a row, so I don’t see a third property boom happening for a long time.

The regions have had their boom. It now looks like the next 5 years will see prices increase faster in the larger cities.

#3 – Wanaka, Queenstown Lakes

Here’s a controversial one. I’m putting Wanaka in third place as one of the areas I wouldn’t recommend for investment.

Let’s be honest, Wanaka is one of the most beautiful parts of the country. It’s a great place to visit.

But it’s also one of the most expensive small towns in the country. Less than 10,000 people live there. Yet, it has an average property value of almost $2 million (CoreLogic, March 2024).

What’s the harm in that? One of our financial advisers, Kathy, worked with an investor who wanted to build a property portfolio for retirement. He went on holiday to Wanaka and bought a property for $1.45 million that he’d use as a rental property.

In his mind, Wanaka was beautiful and popular with tourists.

That is all true.

But in that moment, when this investor bought the property, was he in “investor mindset”, where his primary concern was buying a property that will contribute to his retirement? Or, was he in “homeowner mindset” where his primary concern was buying a beautiful place?

He was likely in homeowner mindset.

What’s the issue with that? It’s not just that he might overpay for one property, but that by buying one single expensive investment he couldn’t grow a portfolio of properties around the country.

#2 – Gisborne

Gisborne is another middle of the North Island location that had 2 property booms in a row.

Back in 2015, Gisborne was the place to buy because it was a cracking investment and was 25% undervalued.

Then, the average house price almost tripled from the end of 2016 to the peak in 2021.

They had a 2-for-1 special. Two property booms in a row.

House prices caught up, so Gisborne now looks like one of the more overvalued parts of the country.

Like Whanganui, Gisborne is unlikely to have another property boom in the near future.

This illustrates an important point. Every part of the country can be a good place to invest. But this depends on the timing of the market, and what part of the property cycle it’s in.

#1 Twizel, Mackenzie District

Finally, the worst place to buy a property in New Zealand is Twizel in the Mackenzie District.

It’s a beautiful part of the country – a great place to live and go on holiday.

But as investors, we’ve just got to look at the numbers when making a decision.

And right now, it’s the most overvalued part of the country – just over 40% overvalued at the time of writing.

Based on that, it would not be a good investment location right now.

What places do you recommend?

As I’ve mentioned throughout this article, the regions have had their boom. (So, I haven’t just picked on smaller districts for the sake of it).

You can read my list of the best places to invest in New Zealand here.

Do you agree of disagree with my picks? Leave a note in the comments section below and we can have a good discussion.