Should I Sell My Investment Property to Pay Off My Mortgage
Thinking about selling your investment property to pay off your mortgage? Here's the quick answer:
It depends on your financial goals. Selling could help you become mortgage-free and save on interest, but holding onto the property might offer long-term growth and steady rental income. Christchurch's property market is stable, with an average annual growth rate of 4.64% over the last 20 years and weekly rental income averaging $540.
Key Points to Consider:
- Selling Now: Immediate cash to clear your mortgage, but you’ll lose future rental income and potential property value growth.
- Keeping the Property: Steady rental income and long-term appreciation, but you’ll carry the mortgage longer.
- Costs of Selling: Includes agent fees (2.5–3.95%), marketing ($800–$2,000), and property transfer tax ($25,000).
- Christchurch Market Trends: Current property price average is $769,984, with modest growth of 1.06% in the last quarter.
Quick Comparison:
| Scenario | Immediate Impact | 5-Year Projection |
|---|---|---|
| Selling Now | $769,984 cash upfront | Miss out on 4.64% annual growth |
| Keeping Property | $540 weekly rent income | Projected value: $965,647 |
Bottom Line:
If you value being mortgage-free and need immediate financial relief, selling might make sense. But if you're focused on long-term gains, holding onto the property could be more profitable. Always weigh the costs, market trends, and your personal goals before deciding.
Christchurch Property Market Status
Christchurch's property market shows resilience, but it's essential to understand current conditions before deciding to sell.
Current Prices and Returns
As of February 2025, the average property price in Christchurch is $769,984 [4]. Over the past three months, prices have risen by 1.06% [4], indicating steady growth. However, prices vary widely between suburbs. For instance, properties in Scarborough average $1,818,750, while those in Phillipstown sit at $458,550 [4]. The average weekly rent across the city is approximately $540 [4], offering investors a consistent income stream. These figures highlight the broader trends shaping the market.
Market Direction
The overall market is trending upward. From August 2023 to August 2024, Christchurch property values increased by 0.7% [5]. CoreLogic Market Analysis commented:
"Christchurch was at the absolute bottom of its property cycle, being 22.79% undervalued" [4]
| Trend | Impact |
|---|---|
| Sales Volume | Below typical levels, suggesting cautious buyer behaviour [5] |
| Rental Growth | Modest annual increase of 1.4% [5] |
| Long-term Growth | Average annual increase of 4.64% over the past 20 years [4] |
Suburb performance varies significantly. Spreydon posted the strongest growth, with property values climbing 6.77% over the last two years. In contrast, Kennedys Bush saw a slight decline of 1.02% during the same period [4]. These trends are key for assessing short-term selling opportunities against long-term growth potential.
Before You Sell: What to Check
Getting a Property Valuation
A professional valuation can help determine your property's market value. In Christchurch, this service usually costs between $500 and $800 [6], offering an objective view of your property's worth.
Valuers carry out detailed inspections, which include:
- A one-hour review of both the interior and exterior
- Checking title details and legal compliance
- Ensuring adherence to the Resource Management Act
- Comparing recent sales of similar properties [6]
"The most important part of determining the market value is analysing other comparable house sale statistics - these statistics are the basis of how the market value is determined." [6]
Cost of Selling
Once you've assessed your property's value, it's time to calculate the costs of selling. Here's a breakdown of typical expenses in Christchurch:
| Expense Type | Typical Cost Range | Notes |
|---|---|---|
| Agent Commission | 2.5–3.95% (first $400k–$500k) | Drops to 2–2.5% on remaining amount [7] |
| Marketing | $800–$2,000 | Can go up to $10,000 for high-end homes [7] |
| Professional Photos | $200–$300 | Helps attract online buyers [7] |
| Conveyancing | Up to $1,500 | Covers legal documentation [8] |
| Administration | $500 | Standard charges [7] |
| Property Signage | $65 per sign | Optional but useful [8] |
"The hidden or unforeseen costs of a poor real estate experience or a low sale price can have far greater financial impact than the commission cost alone." [7]
Interest Rates Effect
Current trends in interest rates could also influence your decision:
- The Reserve Bank of New Zealand has indicated the Official Cash Rate (OCR) may have peaked [9].
- Around 92% of homeowners currently have mortgage rates below 6% [10].
- Bank rates are fluctuating, with signs of a possible downward trend [9].
"Perhaps the most important lesson to remember is the one learnt by borrowers in 1998 and 2008: jumping on long-term rates because they're the lowest currently on offer can come with significant costs later." – Gareth Kiernan, chief forecaster at Infometrics [9]
Think about how these rate trends might impact your mortgage payments and the potential returns from keeping your property. These considerations can help you weigh the pros and cons of selling versus holding onto your investment.
Money Comparison: Sell or Keep
This section breaks down the financial trade-offs between selling your property now or holding onto it for future gains, using market trends and associated costs as a basis.
Immediate vs Future Results
Here's a comparison of the short-term benefits of selling versus the long-term advantages of keeping your property:
| Scenario | Immediate Impact | 5-Year Projection |
|---|---|---|
| Selling Now | Immediate sale at $769,984 | Miss out on potential 4.64% annual growth |
| Keeping Property | Weekly rental income: $540 | Projected value: $965,647 |
| Market Context | 4.3% loss-making sales | 92.1% profitable resales |
Statistics reveal that properties sold for profit are usually held for an average of 9.2 years, while loss-making sales occur after just 2.7 years [1]. This indicates that holding onto a property for a longer period often leads to better financial outcomes. These figures set the stage for understanding how property values have shifted over time.
Numbers Example: Rent vs Mortgage
A property valued at $769,984 can generate around $28,080 annually in rental income.
"Lower mortgage rates will support sales activity and help stabilise property values, but affordability constraints, elevated listings, and a soft labour market will remain key challenges." - Kelvin Davidson, CoreLogic NZ Chief Property Economist [11]
While Christchurch has seen a modest price drop of 6.5%, Wellington's decline from peak values stands at a sharp 24.6% [11]. This contrast highlights Christchurch's relative market stability.
Property Value Assessment
Historical data shows that Christchurch properties have averaged an annual growth rate of 4.64% over the past 20 years (March 2005 – March 2025) [4]. While short-term fluctuations exist, the long-term potential for appreciation remains strong.
Recent market trends include:
- Property values rose by 1.06% in the last quarter [4]
- Total market listings are 25% higher than the five-year average [11]
- First-home buyers account for 25.5% of purchases [11]
"The volume of listings on the market is providing buyers with time to negotiate and secure deals on their terms, but sales remain constrained by affordability and confidence factors." - Kelvin Davidson, CoreLogic NZ Chief Property Economist [11]
Your decision should weigh whether immediate cash flow meets your current needs or if long-term growth aligns better with your financial goals.
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Meeting Your Money Goals
Paying Off Your Home
Paying off your mortgage can provide a clear financial benefit. For example, with a 4% mortgage rate, the effective return becomes 5.5% when factoring in the 28% PIE tax benefit [13].
Consider this: a $450,000 mortgage over 30 years generates $370,560 in interest. Now, if you increase your weekly payments by $100, you could:
- Cut the loan term down to 21.6 years
- Save $116,460 in interest payments [13]
These savings not only reduce debt but can also create a strong base for future financial growth.
Property Investment Growth
Christchurch property values have surged by 54% over the last five years [2]. If you're comparing investment options, the returns across different asset types can vary:
| Investment Type | Historical Returns |
|---|---|
| NZX50 | 7.8% (69-year average) [13] |
| Property | 54% (past 5 years) [2] |
| Mortgage Interest Savings | 4–6% (guaranteed return) [13] |
Understanding these numbers can help you weigh property investment against other opportunities.
Investment Mix
Combining mortgage repayment with property investment could improve your long-term financial outlook. Research shows:
- Buying a modest home and investing the extra savings in shares could grow your wealth to $7.02 million over 30 years.
- Opting for more expensive properties might result in $5.74 million in the same timeframe [12].
Diversifying your investments across asset types can help manage risks and improve returns. Here's how:
| Advantages of Diversification | Impact |
|---|---|
| Risk Management | Minimises reliance on one market |
| Liquidity | Easier access to cash when needed |
| Income Streams | Multiple avenues for earning returns |
| Tax Benefits | Includes mortgage interest deductions and depreciation [3] |
"Financial decisions are often emotional. If being debt-free helps you sleep better at night, that's a valid and valuable reason to pay off your loan." [3]
Making Your Decision
Main Points Review
Before deciding to sell, take a close look at key market indicators. According to CoreLogic NZ, property values dropped by 0.4% in November 2024. However, sales volumes are projected to increase by 10–15% in 2025, with national property values expected to rise by around 5% [11].
- Gross rental yields improved from 2.8% in late 2021 to 3.9% in November 2024 [11].
- Christchurch property prices experienced an average annual growth rate of 4.64% between March 2005 and March 2025 [4].
These figures provide a clear picture of current market conditions and can help guide your next steps.
"Lower mortgage rates will support sales activity and help stabilise property values, but affordability constraints, elevated listings, and a soft labour market will remain key challenges"
- Kelvin Davidson, CoreLogic NZ Chief Property Economist [11]
These insights are critical for making informed decisions.
Getting Help
Considering these metrics, it’s important to seek expert advice tailored to Christchurch’s property market. Local property specialists can offer valuable services, such as:
| Service | What It Helps With |
|---|---|
| Market Analysis | Provides suburb-specific valuations to understand local trends. |
| Financial Assessment | Helps weigh rental returns against potential mortgage savings. |
| Investment Strategy | Ensures your decisions align with long-term wealth goals. |
| Tax Implications | Clarifies the impact of taxes when selling your property. |
"Align your strategy with your goals - whether prioritising rental cashflow or capital gains" [14].
One key change to note: starting 1 April 2025, you’ll be able to deduct 100% of loan interest from your rental income [14]. It might also be a good idea to request a free property appraisal to get a clear understanding of your property’s current market position before making any final decisions.
FAQs
What tax considerations should I be aware of when selling an investment property in Christchurch?
When selling an investment property in Christchurch, you may need to pay income tax on any profit, depending on factors like your original intent when purchasing, how long you’ve owned the property, and whether you’re considered a property dealer.
The bright-line test is a key rule to consider. If you sell a property within two years of purchasing it (for properties sold on or after 1 July 2024), any profit is typically taxable, unless specific exclusions or rollover relief apply. Even if the bright-line test doesn’t apply, tax may still be owed if you bought the property with the intention of selling it or have a history of frequent property transactions.
It’s always a good idea to consult a tax professional to understand your specific obligations and how they align with your financial goals.
How do rising interest rates in New Zealand influence whether I should sell or keep my property?
Interest rates in New Zealand are closely tied to the Reserve Bank of New Zealand's (RBNZ) Official Cash Rate (OCR), which is adjusted to manage inflation and economic stability. When the OCR rises, mortgage rates typically increase, making home loans more expensive. This can reduce buyer demand and potentially lower property prices.
If you're considering selling your investment property to pay off your mortgage, it’s important to weigh the impact of higher interest costs against the potential rental income and long-term property value growth. Rising rates may also affect your ability to reinvest in the future, so aligning your decision with your financial goals is key. Consulting a financial adviser or property expert can help you make the best choice for your situation.
Is it better to keep my investment property or sell it to pay off my mortgage?
Deciding whether to keep your investment property or sell it to pay off your mortgage depends on your financial goals and circumstances. Holding onto the property can offer long-term benefits like capital growth, rental income, and diversification. Over time, property values in New Zealand, particularly in Christchurch, often appreciate, potentially increasing your wealth.
On the other hand, selling the property to pay off your mortgage can provide immediate financial relief and reduce interest payments. However, it may limit your ability to build wealth through property investment. Carefully consider factors such as current market conditions, your property's potential for growth, and how either choice aligns with your long-term goals. If unsure, consulting a financial expert can help you make an informed decision tailored to your needs.