PHOTO: ABC Business sales says investing in a business provides potential for pre-tax returns six-to-seven times that of returns from property investment. Photo credit: Getty.
By investing money into business rather than property, people can make more money and help grow the economy, a business brokerage says.
Following the onset of COVID-19, record-low interest rates, currently just over 2 percent have made it cheap to borrow, fueling an active property market. REINZ statistics show the national median house price is now $725,000, up 19.8 percent year-on-year. Meanwhile in September, unemployment increased to 5.3 percent and GDP fell 12.2 percent.
ABC business sales managing director Chris Small says there’s currently a disproportionate amount of money invested in property. Having some of that money put behind New Zealand small-to-medium businesses would increase employment opportunities and productivity – and could provide investors with pre-tax returns up to seven times higher.
In the year to October 2020, the average price of New Zealand businesses sold by the company in the $0 to $5 million price-range was $653,834 – $71,000 less than the median property price.
Small said his company prices businesses it sells based on a multiple of profit, usually three times. For example, a small business costing $645,000 might return a before-tax profit of $215,000 per year.
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