Small business might be a better place to invest your cash than a home, according to new research.
Your playlist will load after this ad
With the housing market spiralling out of control, investors are advised to look elsewhere.
Sarah Pascall is one person pinning her hopes on a new venture.
The designer took the plunge and set up a wedding dress business, despite concerns around Covid-19’s impact on the economy.
“People are willing to support the little guy at the moment so we thought weirdly, it was the best time for us,” she told 1 NEWS.
ABC Business Sale has released data showing the average cost of a business is just over $650,000, while the average house price is $725,000.
When looking at the profit that can be made, on average, a business return is $215,000 each year, compared to $35,000 for a house.
It’s the first time data like this has been made public.
“I think we need to tilt our culture towards business, which can only be good for New Zealand in terms of productivity, employment, GDP,” says ABC Business Sales managing director Chris Small..
Graeme Lamond had to start a new career when he was forced home due to Covid.
He sold his investment property and bought a barbershop with the proceeds.
“It was silly to have the capital wrapped up in something that wasn’t making any money versus something that would make it money,” he says.
Pascall says it’s a winning situation.
“With a small business owner there’s only growth, you can’t go down, you can’t lose, it’s actually possible to start, whereas getting into the housing market is actually impossible for so many young Kiwis.”
But New Zealanders’ love affair with buying houses continues.
Reserve Bank data shows lending from all banks for housing was worth $293 billion in October, more than double the amount loaned to businesses.
But like all investments, there are risks, and not everyone is business-minded.
“Residential real estate is easy to understand but there are still people in good well paid jobs who aren’t thinking about investing in business because it’s just too easy to invest in housing,” Small says.
Pascall and Lamond did their research first.
“There’s risks in anything really, especially this year,” Lamond says.
“I looked at it, it’s a good business model… just looked like a fun, interesting industry to get into.”
It’s a leap that’s paying off so far.