Sales data shows that it is cheaper to buy a small business than a house

Young people excluded from the housing market are encouraged to save for their first business.

Sales data from the small and medium-sized business (SME) broker, ABC Business Sales, shows that the median price of a small business is $ 653,000, compared to a home that is $ 725,000.

He indicated that the average annual return for a business was six times that of a home, $ 215,000 compared to $ 35,000.

ABC Managing Director Chris Small said that young people were overlooking buying businesses due to the strong culture around home ownership in New Zealand.

He acknowledged that owning a business was not as simple as owning a property, but said the risk is worth the reward.

“The commercial returns are six times that of a residential property, so the risks are six times greater? Absolutely not.”

“[There] There are many professional business advisers, whether they are accountants, lawyers, family members, who can help people navigate business ownership and the sooner you get involved the better you get. “

He said there were different requirements to get a business loan because of the high risks compared to residential property, such as a 50 percent deposit, having a business plan, and a blanket guarantee agreement, which is like a mortgage.

Those requirements don’t necessarily mean that business ownership is only available to a select few, he said.

“The median home price in Auckland is $ 1 million, which means if you want to borrow 80% from the bank, you’ll need $ 200,000, the median commercial price is $ 650,000, so 50% it’s roughly $ 300,000, so you’re not miles away. “

Diverting money from homes to productive investments would be better for the New Zealand economy, he said.

Slower SME sales

The data also found that fewer small businesses were sold this year compared to last, despite higher demand and higher prices.

Sales for the year through October fell nearly 12 percent from the prior year to 323.

However, the average price for an SME increased 4 percent to $ 653,000 and Internet traffic on the ABC website increased 20 percent to approximately 20,644 thousand visitors per month.

Small attributed the drop in the charts to misconceptions by business owners about the strength of the market.