The property market is forecast to improve over summer, with growth by the end of 2025 predicted to be around 6 or 7%. After two years of practically zero growth, that’s welcome news for homeowners and property investors.
But you can’t get any benefit if you don’t own a house, which is the case for around one third of Kiwi households – and more than 40% in Auckland. And even if you do own property, you can’t exactly use your capital gains to cover those rising rates, insurance and maintenance costs.
Buying and Owning Real Estate is Expensive
Home ownership is expensive, prohibitively so for many. It’s not only the cost of buying the house, but also of maintaining it, from dripping taps to failing fuseboxes to holes in the roof. Add to that the cost of servicing the loan, the insurance and the rates – the numbers quickly get eyewatering when you tally them up.
Owning rental properties has been a time-tested retirement strategy for many Kiwi investors, but it just multiplies all these costs – and comes with the additional complication of tenants. Having a manager for your rentals will typically set you back 8% to 12% of your rent. On the other hand, managing the properties yourself is arguably more expensive, because it can be hugely stressful and time-consuming, particularly if the tenants prove anti-social or destructive.
Buying rentals can be risky: low diversification, high transaction costs, a high barrier to entry and variable returns. The tax-free capital gains are a major selling point, but these can only be realised on the sale of a property. And if it’s your own home, you still have to buy somewhere else to live!
Investing in Property Without Owning Houses
Many New Zealanders cannot afford to buy a home, and the majority can’t afford to buy rentals to fund their retirement. But nobody needs to miss out on the big gains that investors often receive from investing in property.
You do not need to own property in order to build your wealth, achieve financial freedom and prepare for retirement. You can invest in a range of sectors, including real estate.
There are several ways to invest in property without owning houses. These can reflect some of the gains of the property market without you needing to worry about a cracked retaining wall or an upcoming rates bill.
For commercial property, there are options like themed funds, or individual shares in businesses that own property. That might be retirement villages, shopping centres, office blocks or other large-scale buildings.
When it comes to residential property, however, your options are more limited. One way to benefit from gains in the property market is to ‘be the bank’: lending money to property developers and buyers, making money when borrowers pay interest on their loans.
How Zagga Works
When someone can’t get a loan from their bank for a property project, they might choose to borrow from a non-bank lender for a short time. For instance, they might be buying a new house without selling their first house and need a bridging loan. Or they might want to subdivide their section and build a new house, and need funding to get the build underway until the banks are ready to step in with funding.
As these borrowers proliferate in 2025, there is an opportunity for everyday investors lend to them and earn interest. That’s where Zagga comes in. Our online platform lets everyday Kiwi investors ‘be the bank’, lending money for property projects. Each loan is secured with a first mortgage over a property, and each month the loan pays its investors a return of between 8% and 10% per annum. The minimum investment amount is just $1,000, making Zagga loans accessible to almost every Kiwi household – unlike buying a house.
This means Zagga loans provide an option for investing in residential property without ever needing to save up a deposit, worry about tenants, or repair that leaky roof. That way, investors don’t need to own property to make money from an improving housing market in 2025.
