Property Investment Can Make Sense When Interest Rates Are High

Interest rates are a key part of any property investment decision, but there is still scope for growth even when rates are high.

There’s no doubt that, at the time of writing, everyone in New Zealand has been impacted by the high inflation rates of recent times.

For many, inflation is something they’ve heard of but don’t truly understand in terms of how it impacts their investments. So, before we dive into strategy, let’s clarify what inflation really is.

Inflation and Interest Rates: What’s the Connection?

Generally speaking, higher interest rates are a central bank’s response to rising inflation.

When inflation spikes, the price of goods and services increases, and the real value of money decreases. In plain terms, your money buys less.

The most obvious modern-day example? The cost of living. Groceries, power bills, petrol - you name it. As inflation rises, these everyday costs go up, chipping away at your disposable income.

To counter this, the Reserve Bank lifts interest rates to slow spending and borrowing, which, in turn, can cool inflation. But for property investors, this throws up a different set of challenges.

The Investor Response

When interest rates rise, many individuals become skittish. Some rush to put their money into savings accounts or term deposits to secure a fixed return.

On the surface, this makes sense. Term deposits might offer 4-6% returns during high-rate environments. That’s the nominal return.

But here’s the kicker: inflation is the silent killer.

Why the 'Real Rate of Return' Is What Really Matters

Let’s say inflation is sitting at 7%.

You put your money in a term deposit earning 4%. While it might feel like you’re making money, you’re actually going backwards. That 4% nominal return becomes a real return of -3% once you adjust for inflation. And that’s before tax.

So while your balance might be growing on paper, your purchasing power is shrinking in the real world.

So, What Should You Invest In?

During high inflation and interest rate periods, you want investments that outpace or at least match inflation.

This is where property, done strategically, can shine.

Property: A Natural Hedge Against Inflation

Despite rising interest rates, property remains one of the best investments for the long term. Why? Because it naturally combats the effects of inflation in several key ways:

• Rising Home Values: Over time, property prices trend upwards. Even if there are short-term dips, the long game often leads to significant appreciation
  

• Mortgage Leverage Works in Your Favour: As inflation pushes up home prices, your mortgage (a fixed debt) becomes a smaller portion of the property’s value. This builds equity without you lifting a finger
  

• Rental Increases: High inflation drives up rents. This can increase your yield and help cover the cost of higher interest repayments
  

• Tangible Assets Retain Value: Property is a physical asset. Tangible investments tend to hold their value better during inflationary periods than paper-based assets or cash
  

So, rather than fleeing from property due to rising interest rates, savvy investors understand that real estate often thrives in these environments.

High Interest Rates Aren’t Forever

Here’s another point that often gets missed: interest rates are cyclical. They go up, and they come down. Locking in a property purchase during a high-rate cycle may mean short-term pain, but it can also mean long-term gain if the market shifts in your favour.

And if you’re locking in a fixed interest rate today, you’re giving yourself certainty and protecting your cash flow against future volatility.

What We Do

We help Kiwis build wealth through smart, strategic property investment.

Our advisors take the time to understand your personal situation, your financial goals, and your appetite for risk. Then we help you find the right property investment to suit your unique needs.

Our 3-Step Process

1. Discovery Meeting: We get to know you, your goals, and you learn about us
   

2. Strategy Meeting: We model your retirement plan, teach key investment concepts, and outline investment pathways
   

3. Asset Selection Meeting: We fine-tune investment options based on your goals and what we’ve learned together
   

Who We Help

Whether you’re a first-time investor or someone looking to expand an existing portfolio, we provide expert guidance backed by research and experience. If you’re unsure about the market or feeling overwhelmed by the options, we can help you cut through the noise.

Talk to us today.

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How Can We Help You?

We help Kiwis build wealth through property investment. Our advisors will take the time to understand your individual needs and recommend suitable investment properties to help you build wealth and set up your retirement.

What Does This Look Like?

We use a 3-step process:

1. We start with a Discovery Meeting where we learn about you, your goals, etc., and you learn more about us.

2. This is followed by a Strategy Meeting where we model your retirement plan, understand key investment concepts, and briefly touch on some investment choices.

3. Finally, an Asset Selection Meeting where we discuss investment options in more detail and make any recommended adjustments based on what we now know about you.

Who Are We Right For?

We help people make smart investment choices and set up their futures. From first-time investors to experienced investors, we can cater to a wide range of people and help set up their futures through research-based property investment.

How Much Does It Cost?

Our advice is free to you! If you choose to invest, we’re paid by the property developer. This developer-paid model allows us to provide no-obligation property investment advice in New Zealand, without charging clients directly.

What Do We Do, And What Don't We Do?

What We Do

We offer end-to-end New Zealand property investment advice, helping Kiwi investors grow wealth through smart, data-led decisions. Our focus is on quality new builds in strong locations, tailored to your goals, guided by a team that knows the NZ market inside out.What We Don’t Do

We don’t do KiwiSaver, shares, cryptocurrency, or broad financial planning. Thrive is not a generalist firm. We specialise in property investment in New Zealand because that’s where we deliver the most value. By staying focused, we cut through the noise and help our clients make confident, well-informed property investment decisions.

How Do I Start?

Start the process now by booking a time to talk with our advisor by clicking here.