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Westpac economists see house prices falling after Budget cuts 'fundamental value of housing'
Westpac economists see house prices falling
Westpac's economists have forecast house prices have further to fall and have estimated the tax changes announced in the May 20 Budget had reduced the fundamental value of property.
Brendan O'Donovan and Dominick Stephens published a research note titled 'House prices: further to fall' on Friday that pointed out the housing market had slowed and the market would adjust to the budget changes by reducing house prices, increasing rents by 7% more than without the tax changes and increasing home ownership rates.
"Interest rates will rise further, tax changes are now an unfavourable reality for property prices, and population growth is still slowing," they said.
"So we are forecasting modest house price declines, in the order of 2% per annum, for 2010 and 2011," they said.
"We expect lower-end property prices will be hit hardest by the reduction in income tax. Landlords will probably prove more sensitive to tax, and they are most active in the cheaper market segments. Furthermore, the potential buyers of top-end properties will get the biggest after-tax income boosts, so prices in that bracket should outperform."
Here is the full report below and in PDF form here.
House prices: further to fall
Related Topics
The state of play - past and predicted
It has been a slow year for the housing market. Sales have been subdued all year. Inevitably, the time taken to sell a house has lengthened. The REINZ's House Price Index indicates that prices are now falling, at a gentle pace. And the state of house sales is a solid indication that prices will continue declining through to about September.
As we predicted in our last housing update, the 2009 market resurgence turned out to be a "flash in the pan."
Bugging the market over 2010 have been rising interest rates, impending tax changes, and slowing population growth. The positive vibe of an improving economy has not been enough to counterbalance these negatives. We foresee more of the same.
Interest rates will rise further, tax changes are now an unfavourable reality for property prices, and population growth is still slowing.
So we are forecasting modest house price declines, in the order of 2% per annum, for 2010 and 2011. We expect house sales will pick up briefly as property investors reorganise their affairs in light of the new tax reality.
But beyond the next few months, we anticipate a long period of fairly subdued house sales. People are less inclined to upgrade their house, or get into property, when prices are flat or falling.
House price overvaluation
In late-2007 we noted that houses were grossly overvalued, and predicted house prices would be "in five years' time similar to today"
Almost four years on, prices are 3% lower than they were back then. Over the same period inflation has been 8.8%, so the real house price decline has been almost 12%. We are "almost there" in terms of the adjustment necessary to correct the mid-2000s house price overvaluation.
Based on today's fundamentals, we'd say houses are only slightly overvalued. However, impending tax changes will reduce the fundamental value of houses, creating a renewed reason to expect ongoing price weakness.
Tax changes and house prices
The cut to income tax will reduce the tax-shelter value of property ownership. The link between income tax and house prices is obtuse, so in the appendix we've provided two practical examples of how tax cuts will reduce the incentive to own property. The link exists because New Zealand's tax system allows property owners to avoid income tax while enjoying tax-free capital gains.
Landlords receive tax rebates for cash losses on their properties, but their capital gains are usually untaxed. The recent tax cut will make landlords' annual rebates smaller, thus increasing the cost of owning an investment property. Freehold owner occupiers avoid income tax in the sense that any other investment would incur income tax on the flow of benefits, while owner occupied housing does not.
The tax cut will improve the return on alternative investments relative to buying a bigger/better house. Other tax changes have smaller implications for house prices.
Much has been made of the removal of depreciation allowances, but that's actually a minnow. It will seriously harm cash flow for a few highly-leveraged property investors, but it will only slightly reduce the overall attractiveness of property investment by removing what was, in effect, an interest free loan (investors were required to pay back any depreciation claims upon sale, had the property not actually depreciated).
The GST hike is positive for prices on two fronts - it drives up the price of building new houses, and it makes housing (which is exempt from GST) a more preferred form of consumption. We estimate that house price inflation over the next few years will be about 10% less than it would have been if the tax system had remained unchanged.
The Treasury's estimate of the price impact was more modest, at 2%.
With landlords now receiving a smaller tax subsidy, the yield on rental properties will have to rise.
Our calculations suggest rents will end up about 7% higher than they would have been had the tax system remained unchanged.
Finally, higher rents and lower house prices will tend to increase the rate of home ownership, relative to what would have occurred in the absence of tax change.
It will take years for these changes to work through the market. Most likely, we will experience years of higher rent growth and weak house prices, rather than a big-bang adjustment as soon as tax cuts are implemented.
We expect lower-end property prices will be hit hardest by the reduction in income tax. Landlords will probably prove more sensitive to tax, and they are most active in the cheaper market segments. Furthermore, the potential buyers of top-end properties will get the biggest after-tax income boosts, so prices in that bracket should outperform.
We expect an element of "price dispersion" in the market over the next few years, similar to the experience of the 1990s when tax changes were unfavourable to landlords and favourable to high income earners. The opposite (price compression) occurred in the 2000s, after the introduction of the 39 cent income tax rate enhanced the incentive to buy rental property and simultaneously reduced after-tax incomes of top-end wage and salary earners.
Interest rates
The 2009 boost to the housing market may have been partly caused by buyers rushing in while mortgage rates were low. Now that floating rates are on a rising trend, buyers seem more reluctant. We expect floating mortgage rates to steadily rise to a "new normal", higher than the average that prevailed in the 2000s. Bank funding costs are much higher than they were last decade, and the Reserve Bank cannot use the OCR to shelter us from that forever.
Higher average mortgage rates over the coming years will curtail affordability and reduce demand for housing - yet another reason to anticipate subdued prices.
Economy
As we've said elsewhere, the NZ economy is well into the recovery phase that normally follows recession. Unemployment is falling, and job security is much improved. The situation is expected to improve further over the next couple of years as wage growth eventually accelerates from its current snail's pace. Better job prospects should encourage more youngsters to fly the coop and enter the rental market.
Supply/demand balance
The final reason to expect subdued house prices over the next few years was covered in last week's bulletin on housing supply/demand balance. The 2009 price spike may have been partly related to an emerging housing shortage, as population growth was high and house building was low. By our reckoning the housing shortage is now stabilising and the situation will begin to normalise next year.
This implies that the "shortage premium" will wane over the next few years, further suppressing price growth.
233 Comments
Hang about! Wasn't Brendan
Hang about! Wasn't Brendan telling us last week that we needed another 10,ooo houses, or else...!?
Nicholas, Yep. Here's the
Nicholas,
Yep. Here's the story. http://www.interest.co.nz/news/westpac-sees-nz-short-10000-houses-foreca...
Possible though to have shortages and falling prices...
All it takes is weak demand and a change in the tax environment...
cheers
bernard
Thx, Big B. Looks like we
Thx, Big B. Looks like we could have an increasing household dwelling ratio increase after all!
LOL. No doubt assorted
LOL. No doubt assorted members of JAPS (Just Another Property Spruiker) will be along shortly to cry foul.
"2% p.a. for a couple of
"2% p.a. for a couple of years? Nuthin'! That all gets wrapped up in the doublin' of prices over the next 10 years". How's that, AH?
Not rabid enough Nicholas. If
Not rabid enough Nicholas.
If the ultimate cheerleaders of the NZ housing market (the high street banks) are now predicting falls you can multiply their figures by any factor you like to arrive at the true picture.
Whats with just 4%? House
Whats with just 4%? House prices can move that much in a month. 4% is just noise. If your going to make a call at least make it a decent one.
Yes, but if in 2 years time
Yes, but if in 2 years time they are down 4% that is certainly not noise, even if they rebounded by 4% the following month. Overall that would still be 2 years of 0% (or negative) gain
Yeah and lets not forget to
Yeah and lets not forget to add on inflation for the real loss.
Annon at 2.10p.m.. Garbage
Annon at 2.10p.m.. Garbage again.
"With landlords now receiving
"With landlords now receiving a smaller tax subsidy, the yield on rental properties will have to rise.
Our calculations suggest rents will end up about 7% higher than they would have been had the tax system remained unchanged."
The rent will have to rise...surely this is related to ability to pay otherwise why would the PI experts be deliberately undercharging already?
Rent wont go anywhere. A
Rent wont go anywhere. A function of rent increases can only occur if people have more money in there pocket at the end of the working week.
As the new tax system is neutral for low to middle earners I wouldn't expect any movement from my landlord.
It's still a case of find a tenant with out a criminal record and a steady job and hold onto them through thick and thin.
Isn't it hilarious that after
Isn't it hilarious that after all their comments about renters being "scum" and "losers", etc, that the PIs are praying for an excuse to raise rents, even though this will only make it even harder for them to find tenants who are less "scummy" or "loserish" than most.
Apparently PIs do not understand that where residential property prices are collapsing, tenants will either move back home with family, or move in with friends, to save money, or they'll buy one of the many cheap houses now available to them.
Weaklings who have devoted their lives to spending money they don't have and creating debt they can never repay do not understand that sensible and disciplined people are the ones now in a position to own property. The weaklings will be selling it, cheap. Well, their banks will be selling it cheap.
Wonder when it'll dawn on
Wonder when it'll dawn on them how very, very dependent they are on the whims of the paying customers that they're so contemptuous of. No competent business person would be so stupid and unprofessional.
Yes....rents wont
Yes....rents wont rise....IMHO not across the board......especially in these tight economic times. From the looks of it many PIs invest in the lower price brackets, just the brackets that hold the less well paid who are the most vunerable to downturns....and we are in a super down turn.....
So the alternative to rents rising 7% is for mortgages to drop 7% as the mortgage will be smaller as the property cost less....so those who cant get more sell at a loss of say 7~10%....but i think its going to be bigger...maybe as much as 50% if we see a depression.....
regards
This guy should write essay
This guy should write essay on how to sound vaguely intelligent while saying nothing.
Westpac are just messin' with
Westpac are just messin' with us now.
But really, I don't see why a shortage of space (if such a thing actually exists, and that's debateable) couldn't co-exist with decreased prices. There's a third leg to that stool - incomes and availability of credit.
check this out - we aren't
check this out - we aren't too bad in properties bubble...
Global house prices. Year to March 2010 (country, percentage change)
1. Hong Kong +27.1
2. Singapore +23.9
3. Taiwan +18.5
4. Australia +16.6
5. Israel +12
6. Finland +11
7. Sweden +9.6
8. China +8.2
9. Norway +7.6
10. Britain +5.4
16. New Zealand +1.5
27. United States -5.3
Source: www.globalpropertyguide.com.
So our price increases have
So our price increases have slowed, just like the States, and we know what the next step was there; as can be seen from the numbers.
Couldn't that be taken more
Couldn't that be taken more as an indication of which stage in the bubble cycle each nation has reached? Ie, US has popped and is speeding downhill, NZ has slowed right down, and Taiwan and Australia are still in the crazy expansion phase.
Typical of HIH
Typical of HIH (hike-it-Hickey) hide the news about 5 year fixed rates being slashed amongst yesterday's news and roll out another worthless bank economist prediction.
I liked Greenspan's comment on CNBC last night, that he knew every economist who was right all the time personally (of course jokingly).
Interesting on the interest rates if you chose (madly) to fix for five years H2 2009 at 8.95% instead of fixing at 1 year for 5.5% then 4 years today at 7.55%, you would have cost yourself $50,500 extra interest in just the first 5 years of a $400,000 loan.
In fact you if you'd fixed for 6months at the sweet spot for long term rates in Feb/Mar 2009 at 5% then renewed for 1 year at 5.5%, and now taken a 3 year at 7.25% then assuming the 6 month is less than 8% in 3 years time, you would only be $6,300 (on a $400k mortgage) worse off than those who picked the sweet spot and fixed for 5 years at 6.5%.
Quite a turnaround, relief might wash across the real estate market?
With the benefit of hindsight
With the benefit of hindsight (and clairvoyance abilities) a lot of people would be very rich, or much richer, indeed. Anyone knows if I can buy a crystal ball on Trademe? Don't care so much about property prices but something predicting stock value on the Paris share market would be very helpful.
It is easy in hindsight to
It is easy in hindsight to pick the best rates isn't it?
4 years at 7.55% doesn't sound to great in a flat housing market though. Thats roughly 150k in interest isn't it? Do you expect yields to cover that?
Sounds great to me, if you
Sounds great to me, if you can pick a high yielding deal. Considering you can get 8 or 9% gross yielding properties off the shelf at the moment, if you can lock in at the mid 7s long term and wait for the inevitable inflation you won't lose.
Categorical, this cut in long term rates makes today the perfect market entry point - seriously stressed vendors who have burnt their cash reserves wanting out at any price, coupled with a good long term fixing opportunity. The market may be flat for the next 12-24 months, but get in early for the bargains, as when the market starts to recover it'll be too late to grab those deals of a lifetime.
Now is the time to buy quality at a hefty discount.
"get in early for the
"get in early for the bargains, as when the market starts to recover it'll be too late to grab those deals of a lifetime."
i've never heard anyone anywhere talk in these terms unless they're a real estate agent. you might as well be saying this whilst standing in the conference room of a slightly shabby hotel, near an airport, wearing a cheap shirt and tie, a blue-tooth ear-piece and clutching an a4 folder full of vacuous, vaguely aspirational platitudes as you scan and count who out of the small, slightly sad and desperate crowd has the recently photocopied bullet point sales brochure in their hands. i mean seriously - aha alan partridge!
LOL. Wonderul repost and why
LOL. Wonderul repost and why I read the comments section of this site.
Where does HitH say the hikes
Where does HitH say the hikes will be sharp? and hefty?
From what I recall its softly and gently....
2 years slashed, 5 now? interesting that they are coming down, says a lot for what the banks are really thinking....
Greenspan has been proven to be a politically driven idiot....if there is one person you can lay the responsibility for this recession/depression on, its him....so much for his Rand ideals...
"and now taken a 3 year at 7.25%".....seems to high still....but at least you are thinking unlike some who just knee jerk fix....
regards
Shouldn't the title of this
Shouldn't the title of this post be:
"Westpac economists see Bernard's haircut - predict a recession (hairline)"?
Lol, the combover has to go Bernard, you look like a creepy bathroom dweller.
Anonymous Many thanks. Yes I
Anonymous
Many thanks. Yes I need a haircut.
cheers
Bernard
"In late-2007 we noted that
"In late-2007 we noted that houses were grossly overvalued, and predicted house prices would be "in five years' time similar to today"
Almost four years on, prices are 3% lower than they were back then."
It's not surprising that their forecasts are crap. They can't even take 2007 from 2010.
mank.2007 to 2010 is four
mank.2007 to 2010 is four years. You need to go back to school.
2007 2008 2009 2010.
it's you who needs to go back
it's you who needs to go back to school.
yes, 2007-2010 spans four years, but four years back from where we are now is actually mid-2006, not late 2007
All you experts. A 2% drop
All you experts. A 2% drop for the next 2 years. Sounds great. Rent increases of 7% for all of you bloggers that think cash is king. PI's will be better off if not highly geared. I am able to be on this site solely due to my property investment income. Thank you Nicholas, Wally, R.j. and various Anons. No doubt you will comeback with negativity but you live with it. Try to be happier. Cheers
How is a drop in prices, of
How is a drop in prices, of anything, a negative view? Do you jump up and down when petrol goes up? or your rates? or your pwer bill?
Price falls in property, as they continue to filter though, are fabulously positive; both personally ( general term) and nationally.
Oh. come on, The Man! Your
Oh. come on, The Man! Your slowing up. You're supposed to come back and say " Yes, but how do you feel about your share prices dropping in price"....
To which I say, "Voila!". Attitude is very much an result of perspective. You own something (ie:property) ergo 'up' is positive. I don't so 'down' is positive. Same with any asset. See? Given what's happening all over the world, I'm actually a very happy, chappy.
You may as well try to
You may as well try to explain that to the cat.
7% of current rent, not house
7% of current rent, not house value... better off?
Good news I'm looking to go
Good news I'm looking to go shopping soon...
Oh dear me the bragging man
Oh dear me the bragging man just cannot stop can he...for the record boy..landlords with little debt will do bloody well out of this recession because they will get the chance to buy up the rubbish dumped by the overgeared and the accidental landlords...but the recession has a long long way to run and property prices a long way to fall. I'm happy as with copper gold silver and quality stocks plus a bit of fx on the side. I don't have to deal with tenants. Each to their own. Good luck to you. Do try to stop bragging.
Wally. Certainly not
Wally. Certainly not bragging. Just trying to point out to the public that you knockers of property are misleading others with your false claims. Forex is extremely risky Wally you should know that. As for minerals well not sure but with bricks and mortar you get a rental return plus guaranteed capital growth into the future guaranteed.
Wally I am sure you are a nice bloke but you need to get more positive about things cos it will drag you down.
guaranteed capital growth
guaranteed capital growth into the future guaranteed. He is really showing now he is on drugs and by the look of his grammar not very well educated. That is why he is in property and not something that needs a few brains like fx and commodities.
Anon. Use a name and get a
Anon. Use a name and get a brain yourself.
@ The Man 3.06pm "plus
@ The Man 3.06pm
"plus guaranteed capital growth into the future guaranteed"
Have you ever read an overseas newspaper or done some basic economics or even know what is going on outside the "world of property" ?
You sound like the misinformed son of a crazed real estate agent ......where is the money going to come from for capital gain? There's one question you could answer ... or don't you have an answer for that one.
The more you talk "the man", the more ignorant you sound.
Forex is no more risky than
Forex is no more risky than any other investment.If something is overvalued,(NZD)I sell,if some currency is undervalued I buy.If you understand your investment market The Man,there should be little risk .What you do not understand is my name.
SA. So Bank's overseas
SA. So Bank's overseas haven't gone broke from Forex dealings. Yeah right
Is that a Tui's reply.Could
Is that a Tui's reply.Could The Man give the list of banks that have 'gone broke'from forex dealings, then put it next to banks that have gone broke or about to go broke from lending to property sector.
It's always more posible for
It's always more posible for banks to go broke from property loans than forex dealings because banks do so much more lending to the property sector than the forex sector. At times, some banks will get it wrong, lend too much, and bust themselves.
But in NZ'ed property has rightly been seen as the safest of all sectors to lend to. Even in the worst recession since the depression banks still lend to property investors.
And bank depositors don't mind this lending because they keep depositing money in those NZ'ed banks.
"In late-2007 (Westpac) noted
"In late-2007 (Westpac) noted that houses were grossly overvalued, ...Almost four years on, prices are 3% lower than they were back then. Over the same period inflation has been 8.8%, so the real house price decline has been almost 12%..."
Late 2007 + 4 = 2011, not 2010 doesn't it? Is there a year of Westpac property drops to come they have missed out of their calculation?
Into the fourth year. Dah
Into the fourth year. Dah 2007 2008 2009 2010
try again, The
try again, The Man.
2010-4=????
Perhaps he doesn't have the
Perhaps he doesn't have the normal number of fingers to count on. We should be kind.
try it this way if you
try it this way
if you borrowed $1m for 4 years, would you expect to pay it back in 2013?
It didn't say 48 months which
It didn't say 48 months which is 4 years.In finance terms 07 08 09 10 is classed as four financial years!!!!!!
I feel sorry for all those
I feel sorry for all those who had opportunity to buy house during recession last couple of years, but instead waited for big crash, and missed out again...but at least they have this site to keep living in illusion
Poor losers. Try to tell them
Poor losers. Try to tell them this but they don't listen or Bank's won't lend to them.
We should reserve our
We should reserve our sympathies for those who do not comprehend that the recession has barely even begun.
What rubbish you speak. Those
What rubbish you speak. Those who have wait ed so far should continue to wait as they are going to be paying a lot less for properties in the future than you would now. They should continue to wait. Do not buy in a dropping market. You are only rescuing those under financial stress if you do.
Not much of a rescue,
Not much of a rescue, considering they're still going to be financially knackered. Sure, the distressed seller will get more than if you'd bought when the market had fallen further, but they'll still be so far out of pocket that bankruptcy will be mandatory.
NB: Sorry all. Didn't see
NB: Sorry all. Didn't see that others had picked up on Westpac's valuable number cruching before me!
And on the other channel Tony
And on the other channel Tony Alexander is saying (and has been for months) mild (but real)increases in prices starting from Aug/Sept.
which way do we turn...? a real PI will run on intuition, after listening to all views and being in touch with the market place.
A prediction that house
A prediction that house prices will fall 2% per year is well within the margin of error. Indeed I have consistently predicted over the last 18 months that the market will stay flat for some time which is fine by me. Where are all the doom merchants who saw massive price falls? For the last 18 months the head line stealers have played the same old worn out record predicting huge price crashes. Every single one of them of them have proven to be spectacularly wrong.
And what with the prediction that rents will rise? Read my May article on this very matter. You saw it right here first folks.
Stick to Anon. OllyN. I'd
Stick to Anon. OllyN. I'd enjoy a good debate with you this weekend, but name hijacking has taken away any commenting validity. Cheers.
Bang on OllyN. I welcome a
Bang on OllyN.
I welcome a flat patch in prices, as it gives an opportunity to purchase and it will see rents rise.
And as a long-term investor I can't be unhappy about that can I.
Flat patch! Boy you guys kid
Flat patch! Boy you guys kid yourselves. 5 to 10 years of reduction in house values in NZ and inflation on top. That is the best scenario. If the world economy has the odd sneeze or cold it will be worse. I cannot believe how you can look in the mirror and come out with stuff that goes against all the economic
news out there. There is not one thing helping property at the moment but many negative factors against it.
Haven't the banks just
Haven't the banks just drastically dropped the long term fixed rates in order to make it easier to sell the next batch of mortgagee sales they are about to release on the bargain hunters?
Is there an inventory of mortgagee sale properties being stockpiled by the banks waiting for spring?
the education system has
the education system has failed us and delivered us people like The Man!
Four years from late 2007 is late 2011
ie.
November 2007 - November 2008 = 1 year
November 2008 - November 2009 = 1 year
November 2009 - November 2010 = 1 year
November 2010 - November 2011 = 1 year
So we are about 2.5 years on from late 2007!
I agree with Westpac's prediction of a 4% drop from here, though I see the timing differently. I see 4% drop by early 2011, then stability through 2011
by the end of 2011 that will mean real house price drops since 2007 of 20%.
I guess the Man is one of those guys who said property never drops significantly....
A real drop of 20% is pretty damn significant in my books
Matt. You are a scholar.
Matt. You are a scholar. years 2007 to 2010 is into the 4th year.
2007 2008 2009 2010
Matt. Have you got any
Matt. Have you got any qualifications to comment on housing? What expertise? Have you owned property?Did you lose money?
why don,t you do lots of
why don,t you do lots of people a favor including your long suffering family and pop down to the doctor on monday and see if he can help you with your condition
Have you? No? What a
Have you?
No?
What a surprise.
Anon good nurse. Plenty. Life
Anon good nurse. Plenty. Life skills. Banking, Real Estate and Property Investing with double digit no. of properties and background and common sense.
No, I think they were asking
No, I think they were asking about real quals and experience, not imaginary ones.
I see Tony Alexander was name
I see Tony Alexander was name calling today. He described people predicting 40% falls as "weirdos." (not very professional commentary in my books)
I guess that means Bernard isn't a weirdo because he was predicting 30%....
Tony Alexander was the guy 10
Tony Alexander was the guy 10 years ago that he expected the world to only fund NZ for another 15 years and then there would be a rude awakening. Augie Auer the other speaker the Bank sponsored for that seminar was far more interesting. Mind you he could still be right
Then Tony caught house fever
Then Tony caught house fever and reality went out the window.
the man, troll, small kev et
the man, troll, small kev et al ...... you all sound very much like the sharemarket spruikers of the mid 80's telling all and sundry how good these shares are to buy etc and get in now before it's too late ! .... and we all know what happened to them and before you say it "BUT PROPERTY IS DIFFERENT", that is exactly what they were saying about the sharemarket then to.
My theory is you are all really sh*t scared of this "property bubble" deflating/bursting and you are hanging on to any "thread of hope" you can muster from the media, bank managers, RE opinion etc, therefore your extremely positive candor about the current state of the property market.
I'm so glad I bought way before this "bubble" and have diversified... but that's a word you property investors wouldn't understand. OK you are probably laughing by now, saying what a load of BS .. well here is one word you better understand .... DEFLATION !
Have a nice day in Fantasyland :)
Scepticism. Love your
Scepticism. Love your positive name!! Love to have you in the trenchs. Diversified? Into what Mr Scepticism? Gold, equities?Tell us Property Investors the good oil!
Just simply a balance of
Just simply a balance of cash, property and equities .... not necessarily ALL in any one basket and for me, no debt at all in this current economic climate ...but 'the man' if property is that fantastic as you say it is, why would you want to know anything about any other investments ??? I thought you were 'the man' and on to the best thing since sliced bread :)
Scepticism 101.Thanks for
Scepticism 101.Thanks for replying. 1.Cash I can get at any time from the Bank cos of equity position and cashflow. 2. Property good to see. Safeest by far as you can always get a return and always available for sale if you need to. 3. Equities. Had them and wouldn't recommend. You have no control over what the Directors etc. do. No I don't want to know about others as I have studied them all over the years. Property gives me the control not someone else.
I just get sick and tired of people on this forum that think they are the saviour of this country and continue to knock property.
I am sure many people will get burnt with property cos they did pay too much. Just as they will in equities and other investments.
If people have good equity and cash flow positive then there is no better investment than property it has been proven for decades.Cheers!!!
"I just get sick and tired of
"I just get sick and tired of people on this forum that think they are the saviour of this country and continue to knock property" and then they go on to say that they would buy property at the right price - which no one else is allowed to do or could have done ever.
Why should we be as stupid as
Why should we be as stupid as you and buy at the peak of a bubble?
We'll buy a home when prices have crashed back to Earth and you and you're off being bankrupted somewhere.
Houses really *are* unproductive, which is why we laugh at the fools who go massively into debt in order to buy "investment" property.
However, buying a home - to live in, to raise a family in - makes perfect sense if you can afford it, and many more will soon be able to once the greedy BBers are broke and their multiple properties have been mortgageed for whatever the bank can get for them.
For that I guess you really can say we "owe you". Cheers!
My feedback is ..... The good
My feedback is ..... The good thing about Tony Alexander is that he does a weekly report. Did you catch that weekly bit?
Not a day after day barrage of opinions like here. Just the one report once a week.
Its actually confusing being on here most of the time as you are all having conversations that really you should have on some type of IM platform.
Spare a thought for those who havent been around since then! I am keen to come here to read some of the articles for educational reasons but am really put off by some of the posts from seemingly aggressive/frustrated name callers.
Set an example gentleman?
Matt in Auck @ 6.03pm I see
Matt in Auck @ 6.03pm
I see Bill English isn't dismissing Bernards original 30% drop prediction as at all weird. He is almost, kind of, hinting he might just agree - well, in that bob each way sort of shuffle that constitutes taking a position for a pollie.
Would a 30% dropee be classified by oracle Tony as a three quarter weirdo, or is it 'youre in or youre out' - 40% it has to be if you want to get a mention from the great man himself?
That's known in the trade as
That's known in the trade as a 'non-denial denial'.
Hasn't BH's preduction
Hasn't BH's preduction lapsed? I thought it was supposed to happen by 2009.
"In late-2007 we noted that
"In late-2007 we noted that houses were grossly overvalued....
Almost four years on, prices are 3% lower than they were back then."
I don't know about the rest of you but I don't trust anyone who can't count ,it's three years since late 2007.
Anyway, I find it strange that the bank doesn't highlight the lack of cheap and easy credit as a reason for falling prices. Perhaps they don't want to be blamed for it and are looking for other reasons outside their control. The banks were responsible for this bubble but they don't want to take any of the blame.
Dickhead!!
Dickhead!!
As a long-term PI Troll, I
As a long-term PI Troll, I find the Wespac Report on house prices very encouraging.
Rising rents (more money for coffees in the morning) and slightly cheaper houses to buy and keep, at higher yields.
The future is so bright I have to wear shades. Break out the mallowpuffs.
You won't know when to buy
You won't know when to buy the next one RPT as the market will be going down so steadily(at the best) and for so long you will be scared that you will be paying too much. And then in 5 to 10 years time you will look at your supposed portfolio and add it up and think I am worth nothing near what I THOUGHT I was worth in 2010. That is if the bank has not forced you to sell down to keep them happy in terms of debt/equity ratios. You should sell some now if you can that is.
Look, ex agent I've got a
Look, ex agent I've got a better idea.
You invest your $250000 plus in a bank term deposit. The bank will be keen to lend it to PIs so...I can go along to that bank and borrow $250000 plus and invest in another property.
We are both happy. The bank is happy. My tenants are happy.
Mutual gains from voluntary ecchange.
Nice try RPT. Put a nought on
Nice try RPT. Put a nought on it and multiply it. You would not be anywhere near my league. Cash is king in a dropping market. If I buy my first few might be a bit dear as it is hard to pick the bottom of any market but overall I will be far better off because I sold at the top and just off it in 2008 and am watching those prices fall back. I might not buy off you as I suspect you will be selling before the bottom. There are so many houses on the market and so many more to come on yet,it will be hard to chose which to buy. That is if I buy at all. I don't need to as the interest and dividends are sufficient for my grat lifestyle with no debt or worries.
Tosser!!!
Tosser!!!
Yet you seem so concerned
Yet you seem so concerned with what the lesser mortals are blogging about on some insignificant website and what they are doinf with their money - which tells me you are full of it. Nice try though. You obviously can only feel good about yourself by critising others. Sad, but understandable and quite a common condition in the age of the internet forum. Take a breath and repeat 10 times - "It's ok for other people to have opinions and be happy in with their lot in life"
Anon at 7.27. Yes I am full
Anon at 7.27. Yes I am full of it. I can afford to be. Cash is King. What are you going to do with the cash. Put it under the mattress or invest it at 5% less tax bear in mind inflation so you are losing money and not getting any return on your money. How do you think Bank's make money. Not by keeping it in the vault.
So you think that if you keep
So you think that if you keep repeating the crap about low interest rates everyone will start taking it seriously?
Banks pay excellent interest rates to people with a lot of money saved with them.
It's only dumbarses kids like you who couldn't scrape together enough to buy a small bag of rice who earn the base rates.
Anon at 7.37. What are these
Anon at 7.37. What are these excellent rates you talk about. What rate are you talking? I don't invest in Bank's at the moment. My rentals give returns of 7 to 11 % p.a. plus capital gain guaranteed on my properties.
"I don't invest in Bank's at
"I don't invest in Bank's at the moment.".
Therefore you have absolutely no idea what you're blabbering on about. We all knew that. But pick up the 'phone when your mum's finally finished yakking to your aunty and call a bank - any bank - and ask them what the rate is for savings of, say, $500,000. And bear in mind that the figure they quote is not the one they'll actually pay somebody who knows how to negotiate. (As opposed to a schoolboy such as yourself.)
"My rentals give returns of 7 to 11 % p.a. plus capital gain guaranteed on my properties."
By your "rentals", are you referring to the little plastic house and motel pieces that came with the Monopoly board game in your bedroom closet? Because it's patently obvious that you're just another adolescent troll, with no experience with, or knowledge of, finance of any kind beyond pocket money.
It's not even a nice try.
We try to do that with up to
We try to do that with up to $100M at work every week or so and they don't seem overly interested in giving us much over OCR.
Heh. Yeah, right. $100M and
Heh.
Yeah, right.
$100M and they won't negotiate, whereas they give me a good rate for $1.25M.
Pull the other one mate, the bells are seizing up and could use some exercise!
When BH finally blocks the IP address of the spammer child calling himself The Man/Rich PI Troll/et al, it's going to get awfully quiet in here, since only us grown-ups will be left.
LOL!
"$100M and they won't
"$100M and they won't negotiate, whereas they give me a good rate for $1.25M"
But that would be because banks treat coporate depositors differently and given that they are lending us money at BKBM + 50bps and we are flush with cash at the mo so they probably don't want to turn around and pay us a margin on top of what they have just lent us.
That's fairly standard practice. I would have thought a big shot with $1.25m would be familiar with that. Anyway - looks like there is some value in 2 & 3 year borrower swaps at present - you should look into it. Maybe take out a knock out swap or three - they seem to be in fashion at the moment.
Who the hell was talking
Who the hell was talking about corporate depositors?
We're discussing personal accounts, and with a personal account with lots of savings you get to negotiate a much higher interest rate than somebody with little or no savings.
There are people posting here who have more than 2 million in personal savings and you can be damn sure that they aren't on a pitiful 5%!
You guys who have never done anything but waste your money on houses know nothing about anything except blowing your money on houses, which is why you still think that all personal savings accounts earn only 5% or less, even the accounts with millions in them.
Of course believing that comforts you, because the idea that not everyone is now facing ruin for sinking everything they had into a dying market is not pleasant. That some people weren't dumb enough to BORROW! BORROW! BORROW! BUY! BUY! BUY! and instead save and earn pisses you off, because you're deeply in debt and you're finally discovering that your "assets" are nothing but the liabilities they always were.
Sucks to be you.
"Who the hell was talking
"Who the hell was talking about corporate depositors?"
Ummm I was when i said "We try to do that with up to $100M at work". Work as in place of work - $100M as in a lot of money every couple of weeks meaning a reasonably large company meaning corporate.
To be fair I was trying to be funny and thought you would have picked up on it - corporate finance humour not your thing I guess. But following on from your post - would it be possible to borrow a couple of mil against some unencumbered properties then deposit it at one of your great rates and skim the cream off the top?
No need to get nasty either - I'm happy that you appear to have a bit of cash in your pocket. You don't need to be threatended by me and my mortgage free home. That was my choice. If I had rented and not brought I might have been able to save $300K between 22 and 30. From now on I should be able to save $20-30K PA and probably $80-100K once the mrs goes back to work.
Anon at 8.26 p.m. We are not
Anon at 8.26 p.m. We are not the same person. Wise guy what are these great rates you are getting. Come on I have worked in a Bank previously and I do know what I am talking about. Some of the crap that you are talking is bewildering. Also gives a name so we can adress you. Or do you prefer to hide.
There's nothing wrong with
There's nothing wrong with narcissists that reasoning with them won't aggravate
Anon at 7.49 p.m. I'm
Anon at 7.49 p.m. I'm middleaged you fool!!
Anon at 7.49p.m. Tell me what
Anon at 7.49p.m. Tell me what these high interest rates you can get are??
The Man | 03 Jul 10, 7:34pm
The Man | 03 Jul 10, 7:34pm - I was replying to the other anon not you.
Oi Anonymous. The Man and
Oi Anonymous. The Man and Rich PI Troll are NOT the same people.
We share an enthusiasm for property, he obviously knows what he is doing and his comments are always consistent.
Good on him.
You and the man are so
You and the man are so entheusiastic you are blinded by that entheusiasm. Investing has to be accompanied by flexibility and the ability to make decisions and stick with the. Any fool could see that in 2207 the market changed and in the last two months and in particular the the last week things have got really bad for property. Anyone who had any brains and any ability sold their portfolio when it peaked and will eventually buy off those who failed to read the signs. I can see that if I buy into the PI market again it will be some years off. As I said I might buy one or two a bit early but when you have locked in a lof of capital gain when you sold who cares. Don't lie to yourselves. You are in for capital gain like everyone. You failed to take advantage of a big opportunity which is getting worse by the day for you. I talk a lot to my ex colleagues. They say it is extremely hard out there in the real estate market at present and getting harder. They are also getting worried about a growing trend evidenced by monthly statistics which worries buyers and in particular what QV might be coming out with next week.
Ran into an old friends at
Ran into an old friends at the airport a few weeks ago. R/E agent; actually, one of the principals of a top performing firm in a hot spot.
"How's (the firm) going", I asked.
"Oh, I sold up in '07" he said. "It was the time to get out"
As someone else pointed out
As someone else pointed out yesterday ex agent, your costs involved in selling and buying property investments are huge. I just keep them, never sell and save a fortune in estate agent, lawyer etc fees.
Capital gain comes to me because I keep property over a long time. I'm not trying to time the market like you.
I box clever in the market, minimise operating cost, maximise tenant satisfaction.
It's kept me eating mallowpuffs for morning tea for years and will continue to do so forever.
ex agent. How long were you
ex agent. How long were you an agent before you found out you were not cut out for it? You are a disgrace to the profession. Your boss was wise to get rid of you.
by OllyN | 02 Jul 10,
by OllyN | 02 Jul 10, 4:59pm
"Indeed I have consistently predicted over the last 18 months that the market will stay flat for some time which is fine by me. Where are all the doom merchants who saw massive price falls? For the last 18 months the head line stealers have played the same old worn out record predicting huge price crashes. Every single one of them of them have proven to be spectacularly wrong."
Isnt it funny how the details of the predictions and the time frames have all been forgotten...just rem the headlines...short memories huh....or selective memories huh.
2007 it was the fundamentals the doomsayer said the market was over inflated at that point in time.
Without Government tweaking to enable a slow 'crash' rather than an over nighter....
Recovery/growth would not take place until 2015 (???) I think it was.
During that time, the long term ave (30/40yr) slow rise and the gentle drop to that level, they will eventually meet...then growth will slowly take place. Sure there will be zig zags during the rectification, but over all down till the 2 points meet.
"Every single one of them of them have proven to be spectacularly wrong."
Yeah right, the fat lady hasnt finished singing yet.
It has just started this year
It has just started this year Steps. And in particular the last two weeks. The market is on the verge of really letting go. I talk to my ex colleagues all over the country and it has never been so slow and tough for them. Banks and mortgage brokers say the same and lawyers are starting to restructure their staff, even in Auckland. The only ones who will be saying the opposite are the agents and pi's have to tough it out mentally as they would collapse otherwise. Afterall its their income for agents and capital gain for PI's. The latter kid themselves when they say they are into property for income but that can not be true when you look at the return on capital. They are in it for capital gain and when they sell them they are hoping to get as much capital as possible for retirement. Any one with any sense and brains sold down all or some of their rentals in 2007/2008 and locked in the returns to date. Those who did not and need to had better start now. Mortgagee sales are still strong and those statistics do not cover the sales where the bank has told people to get some property sold before the bank does implement the mortgagee sale. I saw a lot of that happening last year. The news is just going to get worse by the month. I wonder what QV will say next week?
"THERE'S NEVER BEEN A BETTER
"THERE'S NEVER BEEN A BETTER TIME TO BUY!"
or maybe in lower case,
"there's never been a better time to buy?"
No point trying to time the
No point trying to time the market ex agent
The long-term investor will always beat the short-term trader.
And that's why everyone
And that's why everyone laughs at you.
The long-term investor who borrows big to buy in at the top of the market won't outlast anyone when that market collapses.
There were many long-term investors throwing themselves out windows when the Great Depression began.
If you're suddenly wiped-out and without an income while owing far more than you can ever repay it makes no difference what your original intentions may have been.
It's fine to say that those who bought in before the bubble inflated and are without debt will manage to survive, but there are so many others who bought in after the bubble inflated and who went into debt in order to do so, and they probably won't survive without some kind of assistance.
When that expensive property you bought is now no longer worth half what you paid for it, but you're still stuck with the mortgage you signed-up for, and maybe you've been made redundant to boot, then you have no long-term future to speak of.
Funny stuff.
Funny stuff.
As always you are dreaming
As always you are dreaming RPT. Since 2007/2008 the portfolio I sold is down in value somewhere between 1 to 2 million depending on where values were then and what they might be now. Several already sold at a loss. This would probably buy me say 5 $300k rentals now that cost me nothing as against keeping the old portfolio. And the market is still dropping. Westpac says 4% over the next two years and I presume inflation on top. Another few hundred thousand in my favour.So I won't be buying for two years at least. Another free rental. But I suspect I wont't be buying for years as the market fallout has years to run. You just keep hold of those rentals and watch those values continue to drop. No brains and no balls.
The man I got out of RE because I did not need the income and I did not want to sell houses to people when I knew values were going to drop for some years. I have been proved right. 2008 was a good time to leave it. Hundreds are leaving now. That must mean the industry is going grat guns. Yeh right. Idiot.
Children please..while you
Children please..while you are throwing tantrums, an 80 year old man has been dragged before the court for flogging a bit of moonshine...can't you invest your time in a bit of enterprise as he did...look at his achievement..he created work for the policewoman..more for the judge..has to buy new gear because the coppers stole his..and you lot do nout..the old coot deserved a pat on the back but got a boot up the bum...
C'mon Wally, I do plenty of
C'mon Wally, I do plenty of work-creating when I invest in property. I keep painters, builders, handymen, floorers, roofers, property managers, estate agents, accountants, lawyers etc etc etc busy.
So give us PIs a pat on the back like we deserve!
Pat on the back!...nah...boot
Pat on the back!...nah...boot up the bum yes.
Actually, you don't. Your
Actually, you don't. Your tenants do. And if their rents fall short of the mark, the tax payer does. If that still isn't enough, what loss you make becomes a further drag on the conomy.
Eh? Tenants don't do work on
Eh?
Tenants don't do work on my properties. I do.
And it's all part of the valuable service I provide as a property investor. One third of Kiwis require the service ie residential leasings, that the likes of me provide.
The government is right to assist us.
Hey kid, do you plan out your
Hey kid, do you plan out your posts here while daydreaming in your high school classes, or do you just write down the first piece of twaddle that enters your otherwise empty mind?
Seems I made a good point
Seems I made a good point there! You have had to resort to personal abuse...again.
Anon at 4.40 Give us a name
Anon at 4.40 Give us a name so we know which one we are talking to. It is clowns like you that is making it easier for genuine property investors to make money with your negativity. Genuine investors get good returns and the capital gains are an offshoot. There can be flat patchs with property but the drops being talked about by you negatives will never happen guaranteed. I know you believe we are right but you won't admit it cos you have missed the boat and are forced to rent. Don't hold your breath expecting big drops because you will be dead.
Anon at 4.40 is the evil one.
Anon at 4.40 is the evil one.
"Mortgagee sales still close
"Mortgagee sales still close to record highs"
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10656452
Oooo, look! The figures are
Oooo, look! The figures are down from last year.
"246 registered mortgagee sales in April, compared with 250 for the same month a year ago."
So having accelarated to 250, we continue to cruise at 246. Is there a speed limiter on this figure like all good German cars, or is it an Italian jobbie that can keep going, till it explodes!
Wally. What time was yours
Wally. What time was yours again?
All things considered the
All things considered the significant thing about the mortgagee sales number is how few there are. In most cases the banks recover most or all of the mortgage advance and will chase the mortgagor for the balance. Even back in '08 with floating rates over 10%, the market dead in the water and dread all about the numbers were not startlingly high.
"All things considered the
"All things considered the significant thing about the mortgagee sales number is how few there are."
No, it's about how relatively few there are NOW. But there are many more to come.
And the fact that there are any mortgagee sales at all, after all these years of us being told that "you can't lose with property!", says a great deal. Such as that the residentail property bubble was inflated entirely by methane.
Fuck off you twat!
Fuck off you twat!
your 5 00pm---You have had to
your 5 00pm---You have had to resort to personal abuse---again
your 6.08---hardly a term of endearment is it.
the man + you can see the doctor tomorrow at the same time.
save on consultion fee,s
you are ticking more box,s than a $25 gold lotto quick pick
here,s another trait
Arrogance - A narcissist who is feeling deflated may reinflate by diminishing, debasing, or degrading somebody else.
This is incorrect and not
This is incorrect and not posted by me,Rich Property Troll.
At 6:08pm I was watching the Magic deal to The Swift.
I wish to disassociate myself from this abuse.
I might add that anyone can
I might add that anyone can tell this is not me because the post is not enlivened by my usual witty, happy approach to investing, a trait shared by all long-term property investors.
Anon at 3.30. You are an
Anon at 3.30. You are an absolute moron that has not got a clue about investing. Give us your best investment strategy you can to provide for your future, I am waiting Mr Know it!!
Just because you cannot
Just because you cannot imagine any investment beyond residential property doesn't mean that residential property is not a bad investment.
The limitation is simply your lack of experience and knowledge.
There is absolutely no disputing that there has been a major residential property bubble in effect since around 2003, and all the indicators suggest that bubble has finally burst, in accordance with the economic fundamentals.
You take any discussion of that as a personal insult, since residential property is the only thing you seem to care about.
Residential property seems to
Residential property seems to be all anyone cares about. Maybe those against it should just get on with what they are doing. It shouldn't really matter to them if PI's prosper or go broke.
The problem is that the NZ
The problem is that the NZ economy has to a certain extent been severely hamstrung by residential property "investment".
Houses simply aren't productive and are a waste of capital, which could otherwise be applied to something useful.
If that weren't the case then you would not be seeing the complaints and debate at sites such ass this, and you would not hear the Minister of Finance stating for the record that he and his government believes that residential property is overpriced and out of line with the fundamentals.
And of course there is the deep-seated feelings of resentment which have been generated as a result of the Baby Boom generation's monopolisation of the residential property market, forcing up prices dramatically, and effectively locking-out other generations from the prospect of home-ownership.
All of these issues must be addressed seriously and honestly before any real progress can be made into transforming the almost dead NZ economy into one that is healthy and productive.
But no one has been buying
But no one has been buying property on any significant scale for the last 3 years therefore they must be putting their money into productive investments. Reducing the price of property will just tempt more people to take their money out of productive investment and lock it up in property.
No, people have not been
No, people have not been buying property because they can no longer get the necessary funds to do so. Instead they've been paying down debt. Or at least one hopes so.
Property bulls are telling themselves that all it will take to kick off another bubble is for people to start thinking "positive" again, when in fact it's only incautious bank lending which can achieve such a thing.
And as has been explained previously, it would be disastrous for individuals and the economy should that happen, because all it will do is delay the necessary correction further, increasing the impact when it eventually occurs.
The nation cannot continue doing what it has been doing without repercussions. The debts must eventually be repaid.
You are right. But do you
You are right.
But do you notice how the negatives NEVER tell us what they invest in.
I invest long-term in property.
I guess all the negatives can think of is put the money in a term deposit.
Very skillfull that is. And productive.
Cash when things are going
Cash when things are going down like property is at present then buy off you and your mates when you are selling under pressure because you did not have the brains or balls to sell when the market peaked. Simple really. It is always about timing. As said earlier what I have saved will already buy me 5 $300k houses. Beat that when your values are going down by the day and my money is earning 6% and waiting to pounce. But that is years away.
Your comments about buying ex
Your comments about buying ex ammounts of properties at a certain point are fine but...you ignore trading costs of thousands of dollars as you trade in and out, in and out of the properties.
To use your example, buying 5 properties, then selling them, then buying them again when things "look good again" costs thousands in lawyers, agents, bank mortgage fees etc etc.
And don't forget to pay your tax!
All the profits you supposedly make in trading are gobbled up in fees.
Meanwhile, I sit with my existing properties, the market goes soft, comes up again and I still sit with my existing properties as you rejoin the same market I am in.
It makes no sense to hop in and out of the market ex agent. You are busy as hell trading while I sit around eating mallowpuffs for morning tea and incurring no trading fees.
You don't seem to appreciate boxing clever in a long-term market instead of helter-skelter share market type trading.
Clever investors do not need to trade to make money. And all the really rich people in the world are investors, not traders.
Can you only get 6% ex agent?
Can you only get 6% ex agent? That is a terrible return when one thinks of the inflation and tax that will kick hell out of it.
Still, look on the bright side: your deposited money makes for good borrowed funds when the bank looks to lend to property investors.
So you as depositor are happy, the bank is happy and I as investor am happy.
6% and riseing RPT as your
6% and riseing RPT as your rates rise on yur mortgages. I am ready to buy again but will wait for the bottom to get here which is years away. Don't have to work in my early 50's and don't even though my MBA is in demand. No tenants, no costs and no capital losses as the market thumps. I have never been so happy in all my life and just enjoy reading how you and the man react to some reality. I can sense some fear coming into both your comments. I suspect you are just a couple of hack RE agents with no assets at all just trying to keep the market intact.
Not sure how long people will
Not sure how long people will want to take the risk to buy at mortgagee sales http://www.stuff.co.nz/national/3872441/Mortgagee-sale-home-stripped. That's scary.
The outcome Elley will be
The outcome Elley will be even lower mortgagee prices...the word will go round quickly...lower mortgagee prices means banks must count on far greater risk of capital loss..which in turn will mean they are stupid if they do not reduce the % loaned out on what they see as a worst case value...which leads on into a further drop in demand for mortgages and for property...and on into lower prices and more mortgagee sales and more stripped properties and down she goes.....
There are really only two
There are really only two realistic options for the market.
- One is that things limp along for a while and then picks up again, possibly a new balloon phase is triggered as banks loosen the purse strings and the RE industry pulls itself up off the floor, and prices once again go silly high.
The result of that of course will be a far bigger correction further down the track, one which will be the Great Depression event for property, and one from which it won't recover for decades, instead of years. If Kiwis were spineless enough to swear-off shares for life after the moderate sharemarket collapse of 1987, how do you think they'll react after property crashes in a much bigger way?
- The other possible course for the local property market is that it crashes very soon. That will cull out the deadwood PIs and speculators for a few years, perhaps a decade or so, before the market flattens for a while then eventually begins to slowly recover.
In that case there'll be some pain for the country and a lot of agony for the PIs and specs as they crash and burn, but ultimately it will be for the best, releasing the pressure which could have built up into a Case One scenario.
Hopefully what we are seeing now is the prelude to the second situation, and only a relative few - PIs, speculators and RE industry parasites - will die a horrible death, while the rest of us just carry on business as usual.
I couldn't agree more with
I couldn't agree more with you.
240 mortgagee sales per month
240 mortgagee sales per month is not even half a percent of all sales that take place each month - there were probably 30 or 40 per month even pre 2008 so what's the big deal. Move on.
Probably see a surge in house sales now that banks are offering long term fixed rates below the 10 year average.
"Probably see a surge in
"Probably see a surge in house sales now that banks are offering long term fixed rates below the 10 year average."
You do a lot of drugs, right?
It's not the number CB it's
It's not the number CB it's the result.
Bank will lend on 'what did the last comparpable property sell for'. They don't care if it was a mortgagee sale or not. Just what the market said the price was.
All houses in an area get infected with a mortgagee sale, not just the hosue in question. Ripples in a pond etc.
Example: That apartment in
Example:
That apartment in Takapuna that just sold at mortgagee sale for $5.2m; it was $11.2m.
Those that bought in the teir below, originally, at say $5m, $6m, $8m. What do you think their chances are of selling at purchase price, now the latest sale is 55% below primary issue?
And we're always told that
And we're always told that the "high end" of the market is still holding it's value and that only the bottom end is struggling.
My observation of the last 6
My observation of the last 6 months or so, is that 'the high end' is getting out of excess proeprty. That's why we should expect the median selling price stats. to rise for a few more months yet.
eg: http://www.guide2.co.nz/money/news/business/wanganui-property-portfolio-...
"And we're always told that
"And we're always told that the "high end" of the market is still holding it's value and that only the bottom end is struggling."
Who is "always told", pray tell? And by whom?
Just about anybody interested
Just about anybody interested in this subject has been told by real estate people (or have read their words in various places) that the top end of the RE market is holding its end, or indeed edging ever higher.
"A year and a half ago,
"A year and a half ago, Ireland endured nothing less than an economic implosion. After a decade of rampant borrowing and spending, the Celtic Tiger was shot between the eyes. The country's runaway housing market and related construction boom turned to bust. ... Faced with this, the Irish rolled up their sleeves and imposed a fiscal squeeze ..through a combination of pay and public spending cuts going beyond those now proposed in the UK...It has been painful.. but it's working... confidence is returning and credit is now slowly starting to flow, allowing the Irish economy to expand once more....Ireland began getting its house in order a while back and has now been rewarded with growth. That's why the Emerald Isle's green shoots should encourage others setting out on the path of fiscal retrenchment ... Ireland shows that if you knuckle down, take the medicine .. then recovery can be relatively swift...Had Ireland kept spending as before, its deficit would have spun completely out of control – with default causing economic chaos. Fiscal austerity is tough. Reality hurts."
http://www.telegraph.co.uk/finance/comment/7870200/Servicing-our-debt-is...
Amalgam you just nailed
Amalgam you just nailed it.
'by amalgam | 04 Jul 10, 12:12pm
There are really only two realistic options for the market.
- One is that things limp along for a while and then picks up again, possibly a new balloon phase is triggered as banks loosen the purse strings and the RE industry pulls itself up off the floor, and prices once again go silly high.
The result of that of course will be a far bigger correction further down the track, one which will be the Great Depression event for property, and one from which it won't recover for decades, instead of years. If Kiwis were spineless enough to swear-off shares for life after the moderate sharemarket collapse of 1987, how do you think they'll react after property crashes in a much bigger way?
- The other possible course for the local property market is that it crashes very soon. That will cull out the deadwood PIs and speculators for a few years, perhaps a decade or so, before the market flattens for a while then eventually begins to slowly recover.
In that case there'll be some pain for the country and a lot of agony for the PIs and specs as they crash and burn, but ultimately it will be for the best, releasing the pressure which could have built up into a Case One scenario.
Hopefully what we are seeing now is the prelude to the second situation, and only a relative few - PIs, speculators and RE industry parasites - will die a horrible death, while the rest of us just carry on business as usual.'
I agree, it's a pretty
I agree, it's a pretty accurate summation of the situation.
Amalgam - I think there is a
Amalgam -
I think there is a further scenario you have missed, by far the the most likely in my view...
that is that things dip a little further then stagnate for a year or two, then start growing again slowly
The only way that can happen
The only way that can happen without a bigger crash later is if average incomes increase significantly in the near future.
If bank's make the funny-munny loans available again but borrowers do not begin earning more in order to be able to service the debt, the current situation will be repeated and perpetuated.
Right now, debt exceeds the ability of the debtors to service it.
Banks aren't loaning they way they used to, and it's becoming much harder to get money from them.
Property prices are falling, but not enough yet to make them affordable to average income earners.
The price of everything else is on the way up: food, fuel, electricity, etc.
Unless banks begin another round of idiotic lending, there is absolutely nothing to trigger another bubble, because without that lending people simply cannot pay for houses, and won't be able to for some time. Not until those prices are approximately half what they are now, or around the late '90s/early 2000s range.
So it's either crash hard now and settle for a few years, or crash *much* harder later and then settle for decades, perhaps even generations.
Yes, that is the heart of it,
Yes, that is the heart of it, the debts and the incomes! Mortgagees got into this mess by borrowing more than they could afford. Maybe when house price have crashed down or if incomes go way up then houses can be bought safely again. But if prices don't come down much and incomes does not increase much and the cost of living keeps on going up and up how are people supposed to buy houses? Plus if those banks start giving away the big mortgages with out the deposit requirement then you have a worse equation, that is high house price plus low incomes plus high col plus high debt!!! How can that NOT become a disaster?
Anonymous - The mortgagee is
Anonymous - The mortgagee is the person who lent the money, not the one who borrowed it.
Vera Fayed. You are wasting
Vera Fayed. You are wasting your time discussing anything with the moron. He knows nothing!!
Nevertheless his/her point is
Nevertheless his/her point is well made and correct.
Anonymost. Surely to have
Anonymost. Surely to have borrowed the money they would've had to be within the Bank's servicing criteria. If they can't afford the rental then they must be spending on other things. Bank's have tightened up as we know which is good. Opportunities though.
That was the problem: banks
That was the problem: banks relaxed their lending criteria to an almost fatal degree.
That's the reason for the bubble: Without their unchecked lending, the bubble could not have occurred.
"Is anyone still paying any
"Is anyone still paying any attention to the drips who said prices would collapse 40%? Actually yes, which just goes to show that history will repeat itself. Meaning, at some stage the weirdos coming out of the woodwork will no longer be the sky is falling crowd but the golden summer never ending bunch (odds on them being the same product pushers?) and folk will jump into the cyclically rising housing market again."
A quote from Tony Alexander 1 July 2010. Mildly amusing. (Hike-it Hickey being his favourite non-economist "economist".
Love the drip, weirdo references. Good work TA.
Unless the market slumps so
Unless the market slumps so severely that NZers come to regard the property market in the same way they do the share market.
It's not at all far-fetched when you look into the fundamentals.
First you have very high house prices.
Then you have low incomes which are unchanged since before the property bubble when you factor in the CoL, etc.
On top of that you have high debt levels. Very very high debt levels across the board.
This is what 'perfect storms' are made of.
The only way for the property market to revert back to how it was between 2003-2008 is if the mortgage money starts to flow again.
If it does and a lot of silly people take the bait then yes, we could see the property market take off again.
But how long can that last?
The answer? Not very long at all, because they same adverse conditions still exist, even if banks are loaning big again.
If the banks don't loan the money, then the best the property market can hope to do is not collapse, because with current prices outstripping incomes by a wide margin, and crazy loans not available, how many houses will be sold? (Answer --- very few!)
When you examine the fundamentals they are leaning heavily towards a property slump although it may not be a 'perfect storm' kind of slump, more of a necessary and sensible correction' type.
The fundamentals tell us that incomes are too low to support the cost of buying a house at their present price points, and debt is already at a dangerously high level.
Add to that the constantly rising cost of living and it's fair to say that either house prices fall or houses stop selling.
But what about those people with high debt who must sell just to survive?
Well they won't get their current asking price, I don't think anyone can honestly dispute that.
If they sell at a price that most can afford without crippling themselves with unpayable debt, then the seller will surely have lost a great deal in the transaction.
No matter how this plays out there is going to be substantial pain for those who borrowed a lot to pay high prices.
It's amazing that some of
It's amazing that some of those who didn't get into property seem to begrudge those who did and especially those that made a bit of coin doing it. It boarders on obsession. It's like they can't feel good about themselves unless they pull someone else to bits. It comes across as almost bigotry. I wounder if we can add propertyism to the dictionary.
Propertyism (noun) - 1) hostile or oppressive behaviour towards people because they either own or have owned property.
2) the belief that people who have or do own property are inferior to those that don't.
After thought - Rentalism
After thought - Rentalism could also be added.
Anon at 8.18pm. Couldn't have
Anon at 8.18pm. Couldn't have said it much better. The negatives are born that way and will always have a chip on their shoulder. Anyone has the opportunity to improve their lot but many in this country expect others to look after them. They will always be jealous of others and yet do nothing for themselves. They are hoping the property market to crash and for some investors highly geared will lose money if the fundamentals aren't right. However the negatives will also either end up have to pay more for the property they are renting or be forced out by the owner selling the property, so look out Nicholas!!!
Nicolas is fairly tame
Nicolas is fairly tame compared to some of the newer posters. The other anon (my evil twin) froths at the mouth anytime anyone mentions the P word or even hint that they mave a have made a couple of dollars during the boom/bubble.
Um, the "negatives"? Do you
Um, the "negatives"? Do you mean the people discussing the fact that every and all fundamental economic indicators suggest that the recent residential property bubble has burst and that the market can expect to experience a period of retrenchment?
That's not being negative, it's simply telling it like it is.
Do you believe that if everyone is always "positive" that we can somehow magically keep a market inflated beyond it's ability to support itself? You obviously need to experience the complete cycle, rather than only the upward leg of it.
Anonymost. The facts? True
Anonymost. The facts? True investors purchase property with the fundamentals being right. If people have purchased property with fundamentals wrong, being negatively geared and paid too much for it then they will be better off out of the real estate investment market. If you are a knowledgeable and wise investor after rental returns higher and much safer than other investments then property is king. I keep hearing about property investors losing money etc. then they would be better getting small interest off deposits in the Bank. They won't make money but they may sleep better. I am a hands on investor that buys well, does own maintenance in most cases and I know what I am doing. If I go broke then the whole country is bankrupt as well and needs to be closed down.
It's one thing to have
It's one thing to have purchased and paid for property before a bubble such as the recent one inflates (and inevitably bursts), but quite another when much of the population borrowed and bought after that time.
There are many people, myself included, who own property and owe nothing, are entirely debt-free and have other investments, capital and equity. We have the luxury of sitting this out.
Unfortunately we are not in the majority. Most property owners, investors and speculators have debts, often crushing debts, and were relying upon increasing valuations and a ready supply of buyers to keep the game alive.
But the market has changed from bull to bear, and those with debt are now fully exposed.
We are the lucky ones. We aren't in any immediate danger. But many more are facing some very tough decisions and times ahead as the market corrects itself.
So enough with the flaming and bashing of those who are merely discussing the current situation. It makes you look ignorant and childish.
Anonymost. Thank you for the
Anonymost. Thank you for the flattery. The point I continue to make but many on this site don't want to comprehend is that property bought correctly is safer and more rewarding than other investments, and this has been proven for decades. Most of the negatives on this site simply have never owned their own homes let alone an investment property because they have not saved or the Ban'ks will not lend to them due to risk. There is a total self seeded jealousy with them and they don't like to see other people being successful. The old "Tall Poppy" syndrome. We see it all the time. Alan Hubbard is a classic example
The Man/Rich PI Troll, where
The Man/Rich PI Troll, where in my post did I flatter you? Rest assured I never would.
And nowhere have I said that some people cannot profit from property ownership. I own property.
The difference between people such as myself and the majority of property owners is that we're not over extended or exposed due to debt.
Most people are still owned by their mortgage. Rubbing salt into that wound is the fact that they are witnessing the rapid devaluation of the property they went into debt to own.
You cannot and will not face the reality which is that residential property is now on a downturn.
Anonymost, please be aware
Anonymost, please be aware that I, Rich PI Troll ( and named that for good reason) and The Man are two different people.
For my part, I believe that in property is a hell of a good investment and would urge you to buy as soon as you can organise yourself to.
All the best with your properties.
you are stuffed
you are stuffed
In no way. The properties I
In no way. The properties I own are securely mortgaged at low debt/ equity ratios with reliable tenants paying good market rents.
I have no reason to panic like many share investors. Instead I look for opportunities to add to my portfolio in a considered manner.
The future is so bright I have to wear shades and wide-brimmed hats.
The Man you go on so often
The Man you go on so often about how well you have bought. You are so arrogant. When you bought you put a stick in the sand and said on that date that was what the property was worth. No such thing as a bargain. That was the market price. QV, the valuers and us agents knew what you paid for it and now all the houses around you of a similar type are worth that much that day. Then in this market which can only be described as a buyers market someone pays less for a similar property to yours in your area. Yours is now worth less and less and less and less as that happens over the next two years at least according to Westpac. But of course the man knows more than them. He has a masters in economics with first class honours. Then he will say he is getting a great return. He is not in it for the return. He is in it for what he constantly reminds us of. Guaranteed capital gain. When he retires like most PI's he will sell them off or sell them off one by one to have some money in the bank from which he can pay for his retirement. Trouble is they will be doing this more and more as the baby boomers retire. What will happen is this. He will wish that he sold them all off in 2007 and 2008 when the market peaked. He did not do that however as he did not have the brains or the balls or the insight. Maybe he had fixed interest rates and the penalties were too high. I certainly met a few of those back in the late 2000's.
Ex agent. I can certainly see
Ex agent. I can certainly see why you are an ex. I am beating my head against a brick wall talking to you negatives, so I guess you all win. No I am in the property market for rental returns. The capital gains will come but don't rely on them. I am not paying market value for the properties but I am not going to disclose to you ex agent how I am not. The properties will not be sold because they will provide the income for my children. You see ex. agent I am not a selfish old coot like yourself. I have never had to pay penalties on fixed rate loans ever as properties are always positively geared and don't sell.
You sound like a bitter and twisted ex. agent who couldn't make a go of it and now want to knock the property market and everything to do with it. Did you have a bad experience?
It was a great experience
It was a great experience actually. It made me a great income as I sold commercial real estate. I built up a large residential and commercial portfolio but sold it in 2007/2008. The MBA helped there. Having some knowledge of markets made me appreciate it was all going to fall apart eventually. People coming in were propping up thise getting out. Just one big ponzi. I am no where near retirement age but am retired with heaps of cash in the bank as I sold it all in 2007/2008. That has been a great experience and getting better by the day as residential and farming values in particular continue to drop from their highs. I am sorry if you find that negative. I in fact find it positive. I have beaten the market and in a huge way. You obviously have failed to read the market and because you and RPT are not that bright and failed to read the market you both in fact are going to have a very bad experience called huge reduction in wealth. I believe you suspect that is happening but don't want to admit it to yourselves so you attack anyone who thinks differently from you. If you knew me you would think what a lucky and contented person. I am of that disposition because I do not blindly follow trends and I read and talk to people who are different from me. I then make a decision and follow it. by the way I left the RE industry because I did not need to work ever again unless I got bored and because it was getting very hard to sell a product that was over inflated in price and people were going to lose some capital and most of them were borrowing a lot to buy it. I no longer wanted to be part of an industry that is full of liars and people with no conscience. You sound like you would do well in the RE industry. You really believe in it even when it is heading south and for many years.
You confirm your stupidity when you say you are not buying them at market price. If you are not stealing them off little old ladies without paying for them they can only be the market price. You are buying on a market. What other way can you buy them. Through an agent or direct of the vendor at arms length. Unless you are ripping off some unsuspecting souls. Now that is another story. A lot of pi's have done that and agents of course. One big ponzi scheme and greed. Now fear. I could write a book about how greedy some pi's agents have been over the last eight years. Thank heavens they are now being better regulated, the agents that is. The pi's are being regulated by the dropping market which will accelerate in its heading south over the next few months.
Thanks for your reply . Very
Thanks for your reply . Very enlightening. I am not going to comment though because I am beating my head against a brick wall talking to many here. It has been very educational though and has given me an insight into what a lot of people think in this country. All the negative people may well be correct and we will be in for tough times if everyone's attitude is as bad as many we have on this site. I am pleased that you have been successful and wish you the best. Apologies to you if you have taken offence to anything I have said. It has been a very frustrating experience and I hope everyone is not thinking along the lines of many here.
Put you in your place didn't
Put you in your place didn't he bragging man!. You say "All the negative people may well be correct and we will be in for tough times if everyone's attitude is as bad as many we have on this site"...and show just how little you understamnd about economics and markets. Tough times do indeed have much to do with attitudes..if you think about what happened across the western world with many years of cheap credit, we had an attitude problem didn't we..too many thought the way to wealth was to trade property using cheap credit. You are silly to blame people who understand economics, for the market turning down. It is just a matter of the debts being too high for the system to cope.
The downside is either a cliff edge collapse as in Latvia, or Iceland, or a very very long period of dropping values and ongoing losses.
So what's the options Wally?
So what's the options Wally? Do nothing like you or keep positive and busy in the economy like thousands of good hard-working kiwis.
Can't just be like you and think everything is going to hell in a handcart. Got to keep busy in whatever business one does and make the best of things until the world's economy starts humming again.
Yes, those type of people provide services and jobs for others.
They are the ones to admire and encourage and who will, ultimately earn the riches.
That's sanctimonious drivel
That's sanctimonious drivel from you Troll...never said everything was going to hell in any sort of cart...said the property sector was in for a bloody good correction...get the difference?...and until that correction is done and dusted, there can be no investment in wealth generation because of a system that protects the loans made by banks at the expense of the country. The banks do not have to worry about losses because the stupid govt is determined to keep them fat and profitable. So the govt agenda includes spewing out BS and spin about a happy future for all while making dam sure the property bubble does not collapse but goes away slowly....the slowly involves two decades Troll...twenty bloody years!
ex agent, not everyone
ex agent, not everyone operates in the property market like you think they do.
Many people buy property and keep it. It is, in my experienced opinion, the best way to operate in property. The long-term investor, like The Man, will always beat the short-term investor, like you.
Coupled with a positive attitude, The Man will be way ahead of you after a few years.
No wonder you are bitter. Are you old? Old people who are poor get bitter and you are bitter.
Well spoken The Man. The
Well spoken The Man.
The jealous ones will always do nothing to help themselves. They spend their time complaining instead of doing things.
Rich PI Troll. It is
Rich PI Troll. It is flipping frustrating trying to explain things to some of these people. I am sure I am wasting my time but it shouldn't really concern me. However, it has been a real eye opener reading some of the garbage and negativity that they write. I feel it is total jealousy for property investors. I consider myself a good landlord and my tenants acknowledge that, I might even be a little too soft at times.
It isn't surprising that some people doubt what I write is true but jealousy again and the Tall Poppy Syndrome I suppose.
My wife has told me not to waste my time on here because it is dealing with the negative and people who are losers, but i think it is possibly people who have lost their way in life. They get some sort of comfort being associated with other negative type people.
Not you though and all the best!!
Hello The Man. You are
Hello The Man. You are correct in all you say.
I have only just recently found this website. I'd heard of Bernard Hickey and wondered why he was so upset about Property Investing. Like you though, I can't believe how down some of these people are here.
To be a PI, long-term, takes lots of money management skills. All economic activity is of worth to the country and good on anybody who has a go at anything and tries to create something for themselves and their family.
But goodness me, this lot don't seem to like anything. When I first got on here and made an honest comment about the benefit of property I was howled at by someone and told I was a Troll so decided to adopt that name, just to take the mickey out of them.
I have invested in property for nearly 25 years now. The longer I have owned the houses the better they have been as investments and I would never sell them, even if the next few months looks a bit murky.
Sometimes I think I waste my time here also, but at the end of the day I figure maybe the fun thing is to just wind up these losers and take the mickey out of them.
Like you, what I write is always true and I wish you the best to.
Keep going with your investing, keep positive, you are far better of in your life because you have something good to go for.
All the best to you also, stick with this site and we can "bash em up" together. The mallowpuffs are great; they eat the arrowroot buscuits!
Regards
Rich Property Troll!!!
PS: now watch them start belittling me/us now after this exchange.
Rich Property Troll. Thanks
Rich Property Troll. Thanks for that. Yes I am sure they will be at us. I have only started reading on this site but looked it up after seeing Bernard on TV all the time with total negativity about everything. He honestly has got a lot of like thinking deciples which is a bit scary.
I am on the site because it is quite enlightening although can be depressing if you took on board what they all say.
I perhaps have been personal "Tongue in cheek" at times only after some personal attacks on myself which I find rather funny coming after some of their comments.
It seems the negatives are allowed to say anything to us but we can't retaliate.
Never mind, I can cope. If I can put up with plenty of tenants I can put up with these negatives.
Cheers
I think you guys are
I think you guys are misreading some of the posters and their "negativity". Based on what I've seen over the last couple of years, some are young(ish), smart, successful but not home-owners. They can't understand how house prices can be so high compared to rents. Its very hard to make an economic model justifying sub 5% yields on residential property.
Either way, you both have made comments in this blog implying that you think prices are too high (The Man - you only buy well, ie, buy at a discount <--> you think prices are too high. RPI Troll - you think markets are going to be choppy). People are arguing against you because they think prices are too high today. Very few would say that investment property was a bad purchase 5-10 years ago, but that's irrelevant.
Simple question - what's the running yield on your properties based on valuation? Alternative question, would you buy your portfolio for its current market value? If yes (they are the same question, essentially), why?
Um..."Rich PI Troll" and "The
Um..."Rich PI Troll" and "The Man" (and a couple others) are the same person.
Rubbish. But they are
Rubbish. But they are intelligent!!
This 'Rich PI Troll', 'The
This 'Rich PI Troll', 'The Man' and some other user names all suddenly began posting here on the same day.
All post at the same time, all post the same way at the same time, and all post the same things the same way at the same time.
It is one kid posting all that rubbish under different names and it's obvious he still lives at home with his mum and dad and has no idea what he's on about.
Anonymous thank you for
Anonymous thank you for hitting the nail on the head. I think just one old RE Agent hack is trying to keep the market up and intact. I have never read such tripe in all my life. His or her multiple comments go against all the basic principles of economics and markets. When he or she talks about not being worried about capital gain I have to laugh. That is all they are in it for and that is why they have bought so many. Greed and greed has made them keep them and not sell on the high which is so basic. Some did and are very happy sitting on the sidelines with their cash earning rates that will increase as mortgage rates increase. Now is the time to be in cash and maybe some good blue chip shares that pay some consistant dividends.
We're stuck with him for a
We're stuck with him for a while now, because it's the school holidays.
Anonymous I am flattered you
Anonymous I am flattered you think I am young. Must be my writing... with verve, enjoyment, happiness and eternal optimism about the future.
I notice as people get older they generally get gloomier in their outlook.
Get your money into cash ex
Get your money into cash ex agent. Tell me which bank...I will get in there and borrow it from them and buy property.
You, me, the bank and my tenant will all be happy.
No they are not.
No they are not.
Yeah, you are. Hope you're
Yeah, you are. Hope you're enjoying the school hols.
I am actually. I have more
I am actually. I have more time to count the rent money in my accounts and eat mallowpuffs.
Enjoying your arrowroot biscuits?
Good comment IanC. Going out
Good comment IanC. Going out but will comment later.
IanC I think you are right to
IanC I think you are right to some degree and I for one agree property is expensive especially in parts of Auckland. Over the last 3 years my rental yields (gross) have increased from 5% to now 8% by reducing chunks of mortgages and increasing all my rents from $300 to $350. Starting out it has been impossible to find 8% yielding properties however in a falling market values will reduce and yields will increase more and rents will increase with GST I believe. I am buy and hold in certain strong rental areas of Auckland. Over the past 18 months my area on trademe has never had >20 houses to rental any time and rents have increased from $300 to $350 on average. Saying that I will be holding off buying until the next cycle in 2013-14 (unless I find a cash-flow positive gem), buy then at least one of my rental properties will be mortgage free.
regards
29 yo - I'm not sure how you
29 yo - I'm not sure how you got your gross yields from 5% to 8% on a $300 --> $350 rent increase (unless prices fell ~20%)?
Either way, I think I know where you're going with the comment --> that you have seen increases in yields on purchase price. A key driver of this is possibly a lack of growth in capital value. How many investors (or new home owners!) would buy today knowing that they might get a modest increase in rent and little or no capital gain, but on negative cashflow?
The core of Westpac's analysis is that first home buyers compete with investors, and the "investor price" is therefore the value (assumed to be the marginal investor). Like I said, 5% (or even 6%) yields require some pretty heroic assumptions on future rent growth, or long periods of substandard returns (which need super-growth in capital values ... making it even harder to get to the yields for future buyers). Sorry if that's a little esoteric - it makes sense to me...
Makes sense IanC, increased
Makes sense IanC, increased my yields by rents going up and by reducing mortgages in regular 10K clumps, regards
IanC. Well reasoned
IanC. Well reasoned comments.
I too believe house prices are too high RELATIVE TO RENTS. Have been for some years now. I think it's because prices ran up and yields didn't need to rise so much to make property profitable. Money was cheap and yields fell. Note that I say too high relative to rents, not too high nominally. I do not think prices too high nominally.
I have invested in property for 25 years now, never sold anything. In the last 8 years most of my money has been made in capital value increases. Rents have risen significantly, but not to the same percentages as capital values. In the 1990s I made a higher % of my returns in rents.
House prices have stopped rising aggresively now, so to make money in property, as a long-term investor, I need higher rents.
I believe those higher rents will come along. The property equation will change from making money in increasing capital values to making money in higher yields.
As a long-term investor I am more than happy with that scenario.
In the 1980s I was buying property at yields of 8% gross, today I would buy that same property at a yield of 5.5% gross.
In the 1990s I was buying property at yields of 10% plus gross, today I would buy that same property at about 6% gross.
The housing market changes slowly but I believe the higher yields will return and not by falling values in the long run but by rising rents.
You say property purchased years ago is irrelevant. Not true for me. As a long term investor those properties I purchased all those years ago return massive yields, over 20% on purchase price. Why would I ever sell a property?
My comments are always predicated on being and having a long-term view. I couldn't trade my way out out a paper bag and being a trader fills me with doubt, but holding long-term makes me feel secure in my investing and has resulted in strong cash flows to secure my investments.
Would I buy today. Absolutely yes, and then, once again, operate for the long-term as I always have. The current low-yield property market will change.
I was buying in the 1990s and people were telling me you are mad, house prices are way over priced. Those same houses have very nearly tripled in value today (even in a soft market). Proves to me the benefit of time.
By the way, I reckon people who rent today are clever as rents are so cheap relative to the value of houses as I think I showed above. It's just that, in my long-term view, eventually the equation will swing around to benefit me as an owner.
And lastly, I encourage anyone who has a go in business, no matter what the industry. Property has as much validity as chicken farming and selling books. But, certain people on this site don't like lots of things. Well, the country is better off for the go-getters I say and not for the "sky is falling in" brigade. I think people should have a crack at what they "feel" is exciting and interests them. Property does it for me.
Best of luck to you.
"...rents are so cheap
"...rents are so cheap relative to the value of houses as I think I showed above."
HAHAHAHAHAAAAAAAAAAAAAAAAAAAAA!
You mean as we have been telling idiots such as your for YEARS?
What a bloody drongo. You probably consider lotto tickets and scratch cards to be "investments".
Gee Anonymous, I've got
Gee Anonymous, I've got properties pouring thousands more into my
bank accounts than when I bought them and you call me a drongo.
Small case of envy there I would say.
Interesting - so it appears
Interesting - so it appears all we disagree about is whether rents will rise (my view - not without lower quartile incomes rising, which they won't and never have).
"By the way, I reckon people who rent today are clever as rents are so cheap relative to the value of houses as I think I showed above. It's just that, in my long-term view, eventually the equation will swing around to benefit me as an owner."
That's a pretty key observation - this is pretty easily cured by prices falling - the same reason the problem has arisen. Why are prices only rising so sacrosant?
My personal opinion - you need to think through what a 5% yield means **in the context of lower than expected capital gains**. If it means a period of higher than previous (and historically justified) rent increases accompanied by low or no capital growth, I acknowledge this is very possible but what then?
- Do yields fall again through subsequent capital growth (back to the same problem)? Is this really a risk that the return justifies?
- Or do returns then plateau (both rent increases and capital value increases)? Is this really a return that the risk justifies?
Sorry I missed a point I
Sorry I missed a point I wanted to respond to - how good (or bad) your investments were in the past is not relevant for a discussion on whether the prices today are right.
I wasn't implying you should sell properties - arguably there is a time to do so, maybe that time is now or back in 2007, but you're not in the business of trading so I see little upside in it. Perhaps you should think about whether having a large exposure to a single sector (they're not all in the same city are they?) is an appropriate risk management strategy. I personally wouldn't want my entire net wealth linked to the performance of the NZ (or a specific city or town's) economy, but that's just me.
Here's your answer:
Here's your answer: http://www.landlords.co.nz/read-article.php?article_id=3765
Thanks IanC. My properties
Thanks IanC.
My properties are spread over the northern half of the North Island.
Appreciate your diversification case, but I am happy to have all my eggs in the property basket, and watch that basket closely.
Good to see someone who appreciates the strategy of not having to sell.
You are both so desparate you
You are both so desparate you have to pat each other on the back to feel good. I hope you are looking forward to all the good news to come out this week including QV's June report. You both should have at least sold down something but when you don't have the instinct and the brains I am not suprised you didn't. I believe values will go back close to the 2002/2003 levels. Especially when you take into account the inevitable inflation to come in the economy. Just hold onto your properties and watch your wealth disappear. If you in fact have any at all.
ex. agent. Thanks for your
ex. agent. Thanks for your support much appreciated. Don't need anyones support except yours. Why do we need to sell anything? Equity just fine and QV's report will be interesting. Sales no.s will be down but that is good news for true investors. Don't care if values drop as that it is not what we buy for it is returns. capital gain is a side issue. Opportunities will be plentiful if what you say happens. Wealth will never disappear as you say it is not till we sell that we know property value. Not selling but all property purchased has value currently lot higher than when purchased. I also have commercial property which is well tenanted
and great return. Very happy indeed. Appreciate your input.
Don't care if values drop.
Don't care if values drop. What a load of rubbish. You cannot be a human being if you think like that. PI's are all about capital gain as the return does not justify their positions. You should be an agent as you cannot even be honest with yourself The Man.
Ex agent must have been one
Ex agent must have been one of those "easy money" house wives who had no trouble selling in the boom put couldn't cut it when the times got tough! Probably doesn't even own a home or if he/she does then maybe has a 100% mortgage at some crazy rate like 9.2% fixed LOL!
Anonymous at 10.19 No I am
Anonymous at 10.19 No I am sure it is a bloke but he is now a house husband and has sent his wife back out to work because he couldn't cut it in the workforce.
you sure they didn,t use you
you sure they didn,t use you as a case study?
and since your 3 identity's are here see how many traits you are displaying
A narcissist displays most, sometimes all, of the following traits:
An obvious self-focus in interpersonal exchanges
Problems in sustaining satisfying relationships
A lack of psychological awareness
Difficulty with empathy
Problems distinguishing the self from others
Hypersensitivity to any slights or imagined insults
Vulnerability to shame rather than guilt
Haughty body language
Flatters people who admire and affirm him
Detests those who do not admire him
Uses other people without considering the cost of that for them
Pretends to be more important than he is
Brags (subtly but persistently) and exaggerates his achievements
Claims to be an 'expert' about most things
Cannot view the world from the perspective of another person
Denies remorse and gratitude
Spot the narky. Original
Spot the narky. Original name!! what 3 identities? Yeah a lot of those things are me indeed. Thanks for that.
Having done some small
Having done some small investments in the property market here for the last few years I do agree that property investments are returning less and quite a few of us may quit. I have just recently bailed out and feel that in the current market it may be better to park funds in the banks for the next couple of years till the property property market corrects itself.
Bernard, maybe you should discuss about investments in the productive sector, so that few of us who have/want to exit the property market can look at the various other investment options available
Just cash up and have the
Just cash up and have the proceeds ready for the next upturn. Just like the sharemarket. You will have to be patient though as the next upturn is years away.
So there is going to be an
So there is going to be an upturn. Thats good. So when the upturn comes we will benefit again as we will still have the properties. Thanks for the good news it has been long coming from you.
The End is Nigh:
The End is Nigh: http://www.landlords.co.nz/read-article.php?article_id=3765
"In Auckland there were 95
"In Auckland there were 95 mortgagee sales, up from 58 the month before".....hellooo recession where have you been...paying Auckland a visit are we?
Yes. I agree with you
Yes. I agree with you BailedOut. With all the changes happening in the property market, some of us small time investors are caught between choosing between the fire and the frying pan.
As long as the losses are not much I plan to do the same as you.
Wally there are over 200
Wally there are over 200 separate suburbs in Auckland. 95 mortgagee sales is not even one every second suburb. The number shows that 2 years into the GFC only a tiny fraction of homeowners are losing their homes.
Shouldn't you be more concerned with the price of copper. Down from $3.68 to $2.93 in a month. 20% in a month. Now that's a bubble burst. The last copper bubble peaked at over $4 and in no time had fizzled down to just over a dollar. Not all that long ago either.