Where Are Your Hard Earned Savings Ending Up?

Return On Investment (ROI)


New Zealand’s official cash rate (OCR) has been at 0.25 since March 2020 and this has reduced the return Kiwis can get on bank deposits. As bank deposit interest rates are currently very low (below 1% return) with no foreseeable increase in the next 1 to 3 years investors are looking elsewhere to invest funds.


Portfolio and Funds Investment

Domestically we have some very good investment providers that can offer higher rates of return for investments that have more risk attached. There are a myriad of KiwiSaver investment options and other fully managed portfolio providers with fixed interest packages. These investments will return a higher ROI as they have a greater opportunity to invest in fixed interest securities.


Domestic Dwelling Rental Properties

With the recently released rules around interest deductibility on domestic rental properties the attractiveness of investing in these properties has reduced. A reduced claim for interest deductibility against rental income will increase the tax the investor pays on the net income of the investment.


This is the Government’s intention to help ‘cool’ the housing market. The other tool the government is using is the increase in the Brightline Test rules (Capital Gains Tax) from 5 to 10 years. The possibility of paying tax on a capital gain on the property also makes this investment less attractive. However I would point out that whichever investment path you take should not be a short-term project.


Commercial Rental Properties

When investing in a commercial rental property the risk level increases as you are susceptible to the tenant’s business success. There are some very solid commercial rental investments which usually have a lower rate of return of around 4 – 6 %. A lot more ‘homework’ including budgets and cash flow forecasting need to be completed.


With any decisions surrounding such an important part of your future it helps to talk things through and what better opportunity to come and see your advisor at MBS.