In this section
The comment stream
Recent comments
- 1 of 25873
- ››
Editors choice
- 1 of 365
- ››
The news stream
Latest news
Most commented
- To the NZ media: an F 49
- 'Be brave & tackle home ownership tax status' 48
- A damn good idea 37
- Monday's Top 10 with NZ Mint 37
- Curbs on foreign housing investment? 31
- Auckland's housing Hail Mary pass 24
- Key sees haircuts for Solid Energy's banks 22
- Let's get rid of property CVs 20
- 90 seconds at 9 am: Trade tension 13
- Special housing legislation flawed 12
Most viewed
Olly Newland explains why he thinks there's never been a better time to buy property
By Olly Newland
2010 Budget Day has come and gone and the world has not come to an end.
Finance minister Bill English spelt out how he was going to deal to 'property speculators' and frankly I found it hard to suppress a yawn. I must confess that I was somewhat irritated however to hear him snarling about 'speculators'.
Didn't we leave that all behind in the 1970s when the Kirk/Rowling Labour Government clamped down on 'speculators' with punitive taxes ... and pushed up prices by over 50% as a consequence?
The removal of depreciation on both residential and commercial property while reducing personal and company tax means a re-shuffling of the deck chairs and very little else. Any professional who has passed Accountancy Stage One will find another means to reduce tax legally -- of that I am sure.
So what's all the gnashing of teeth all about? Be content if you have to pay tax and GST, I say. It means that you are making a profit.
For years I have taught that investors should be in the market to make profits, not losses. Too often I have had people come to me seeking advice who have bought rubbish properties just to create a loss. (It beggars belief that anyone can think in this manner but there you have it. They believe what they're told by the get-rich quick spruikers.)
I used to cringe when I read or saw adverts that said 'Let the tax man pay off your property.' How dumb is that? Just asking for trouble.
Related Topics
Of course there will be consequences. Bill (call me 'Slasher') English says Treasury has admitted that rents may rise by 'one or two percent' as a result of the new rules. Well I've got news for Bill and all the Noddies in Treasury: Rents will rise all right -- but more like 15 - 20% over the next two to three years would be closer to the mark in my estimation.
Have they forgotten the effects of the GST increases on costs? And what about the Carbon ETS due to hit all our pockets in a month or two? Rates, fuel, electricity, insurance, timber, concrete, steel, you name it -- all will be going up in price ... and adding fuel to inflation.
The government already admits that these extra costs will result in a 6% inflation factor. It goes without saying that if they admit that much you can be sure it will be higher.
As usual, it's the poor who will get walloped first as they have no means of passing costs on -- so inevitably, a wage push will follow... then inflation, then higher interest rates, then the wage/price spiral starts all over again.
But that's good in a way, because the opposite of inflation is deflation and deflation would have us all end up walking in ever decreasing circles in Zombieland for ever.
Inflation is good for property, as we know. I have lived long enough to see the trends quite clearly.
The Inflation Factor
Never mind the statistics -- here are the facts as I personally experienced them.
My parents bought their first home in the late 1930s for $800.
I bought my first investment property in 1959 for $600 and sold it 6 months later for $1,200.
I bought my first house in Astley Ave New Lynn in early 1960 for $6,000 and sold it 12 months later for $8,000.
All through the 1960's I was buying and selling Auckland houses for around $8,000 - $10,000.
In the 1970s I was doing the same for around $18,000 - $20,000
In the 1980s these same houses had reached $150,000 and in the 1990s $250,000.
These days you have to pay $350,000 for something half decent in the main centres (unless you buy in the slums or the wop-wops) and if that figure wobbles 5% or 10% either way -- so what?
In a few years some will be looking back in wonder at the bargains that they missed out on.
The same story with commercial property. My first commercial property was 27 Rutland Street Auckland in 1969 and cost $25,000. Its CV today is $2.3 million. (What a shame I sold it!)
Another one to prove the point:
In the 1970s I owned 32 Lorne Street, Central Auckland, which I bought for $250,000 (and you can see pictured on the back on one of my first books The Property Boom 1981). The CV today is $3.75 million and it still bears my name: 'Newland House' and reminds me every time I see it how amazing compounding inflation can be.
And one more just for luck. In 1974 I bought an industrial building at 10 McColl St Newmarket for $150,000. CV Today: $1.135M
I could repeat these examples a 100 times more but you have got the point I am sure.
The lesson is clear: Who needs tax breaks with capital growth like that?
In my opinion, times have never been better to get that elusive bargain you have been waiting for.
While the much of the country sleeps waiting for the 'gummint' to give more handouts, the rest of us are out there shaking the trees.
To the victor the spoils.
The Do's and Don'ts now the market has changed
1. Buying houses and leasing them to the Government
This was always a marginal exercise but there is now no point to it at all. The returns were measly -- around 3%-4% at best, as owner you were still liable for general repairs and maintenance, rates insurance etc ... and the only advantages were rent 52 weeks the year guaranteed and a promise to pay for any major damage.
Now that depreciation is on the way out there is nothing to recommend this form of investment any more. If were thinking about buying such a property, don't. If you are stuck with one already, sell it if you can before the market wakes up to the fact that this sort of investment is useless. The Government will have to supply housing for the needy on its own. Another unintended consequence.
2. Room-by-room letting
This was another suspect method of cranking up rents favoured by spruikers, as well as legitimate property managers. Now that depreciation has gone there is an elephant in the room. More income, but massively more management and now without deprecation (which surely should apply to THIS sort of property!) they will become the investor's nightmare Mk II.
Carefully check this form of investment so far as possible. As time goes by, these room-by-room houses may fall out of favour, not only for the reasons given, but because such a property will only be worth what it is as an empty house. Too many of these room-by-room properties have had their values hydrauliked using the income to justify a higher price. If you want to have the benefits of room by room, then buy in central locations, supply good amenities to the tenants and be prepared to work very very hard.
These types of properties are very vulnerable to market forces and could suffer a decline in value. Only professional managers should attempt these. If managed properly they can be a gold mine. If not, a grave yard.
3. Little boxes in 'Nappy Valleys'
Another marginal investment are the little jerry-built boxes sited on pocket handkerchief sections by the thousands in the poorer areas of the main centres or in small towns and villages. For example large parts of South Auckland, and West Auckland as well as many small townships (e.g. Huntly, Wanganui, Rotorua, Wainuiomata) have large swathes of these little boxes.
As shelter for the working classes they are fine. As investments they are a disaster. I have lost count of the number of clients I have had who have been tucked into these by robber-baron spruikers masquerading as 'educators' who now face negative cash flow on a huge scale and repair bills to the sky. The values of these will nosedive along with income. Stay well away.
If you want to invest in residential property, then stick to small inner city apartments, (now under priced) so long as they are over 50 sq metres, have at least one separate bedroom and a car park, are freehold and on the Northern (warm) side of the building. The returns can be great, maintenance minimum, and long term prospects good.
Alternatively, buy regular houses, units or town houses in leafy suburbs, where there are no gangs, tinny houses, dogs roaming in the streets, beer bottles at every door, boy racers, graffiti, cars on blocks, or piles of rubbish on the streets.
They may pay little at first but like Edmonds Baking Powder -- sure to rise.
Olly Newland
June 2010
www.ollynewland.co.nz
© 2010 Olly Newland. Used with permission.
84 Comments
Wait until next year when the
Wait until next year when the next wave of tax changes comes in , regarding property.
"If you want to invest in
"If you want to invest in residential property, then stick to small inner city apartments, ( and all the words in between here and....)no gangs, tinny houses, dogs roaming in the streets, beer bottles at every door, boy racers, graffiti, cars on blocks, or piles of rubbish on the streets."
So most of New Zealand's property is not "a buy", then Olly? Pity the poor suckers, that you describe earlier in your piece, that have 'the rubbishy stuff". What do they do with their property? Hold it? Sell it? Hmmmm..... Contagion will be the killer of this market. The house next door to you is sold at mortgagee sale, and yours is infected with the price. Good luck, New Zealand property buyers! You're going to need it!
Yeah pretty freaky stuff from
Yeah pretty freaky stuff from Oily!
NZ is basically just one enormous suburb, filled as suburbs are with detached housing, not apartments of the type he favours...ergo almost everything which passes for non commercial property in NZ is not worth investing in...according to Oily.
What an about-face, huh?!
Poor downtrodden property
Poor downtrodden property investors. After all these years of titanic struggle, and paying so much more than their fair share, they finally get a helping hand from an otherwise cruel, cold and heartless world.
What have you bought in the
What have you bought in the last two years Olly..
.. .. Before a tsunami of
..
.. Before a tsunami of lounge-chair critics sail in to correct Uncle Olly ( can I call you " uncle " ? ...... Need a new and worthy nephew .... ? ) : A principle tenet of his investing procedure it to make an immediate cashflow profit from a property ......... Not to seek taxation loopholes / structured losses / yadda yadda .
.. At the moment that you purchase the property , does it plop some pennies of taxable profit into your pocket ?
What a xxxxx xxxxx xxxxxxx
What a xxxxx xxxxx xxxxxxx you can be.
===================
Sorry, but personal abuse is not acceptable here.
David Chaston
.. .. I am man enough to use
..
.. I am man enough to use my real name , and to stand by my opinions .
..Who are you ?
I'm a little xxx-xxxx
I'm a little xxx-xxxx xxxxxxxxx, that's who!
Aren't we lucky to have verified usernames?
.. ..Bernard : Can we do
..
..Bernard : Can we do something about this abuse ? A jokes a joke , but this is not funny .
Good grief, man up.
Good grief, man up.
about time users had to log
about time users had to log on here to comment.
This government is
This government is incompetent. Not only did they not bag property investors, they've scored an own goal by taking out ma and pa farmer, and all the little'uns.
Below is my (still clumsy) draft of a submission regarding the budget day ill-conceived attack on LAQC's. I've still got to add the bad language that will be befitting of it. (And I've not checked for typos or grammar]. Actually, it's mainly written for the MP's ...
Bernard, I'd love you to chase up some of these issues given you were so in favour of going after LAQC's.
I've been looking a the implications of the budget changes for LAQC's, well summarised on the Taxypolicy site and here:
http://www.netprophet.co.nz/news/main-news/nzica-laqc-proposals-question...
I have quite a number of LAQC's on my books, the irony is not one of them is a rental property company. The most nightmarish part of the new rules will be these:
There will be a deemed disposition and reacquisition at market value of the company's assets when the company ceases to be a QC. The shareholder will therefore be required to account for tax on the disposal of their share of the QC's property. On liquidation of a QC a shareholder of a QC will be treated as having disposed of and reacquired all of their interest in the company at market value. The QC will be required to file an IR 7 partnership income tax return.
It's so farcical. Many of the clients I have in LAQC's were incorporated into this structure just to avoid this problem of the partnership (especially for ma and pa farming couples, and especially to avoid a big tax bill on the death of a spouse in a farming partnership when all livestock were revalued; livestock being the biggest of the problems here, then depreciation recovered). Further, in many instances the farms were not making enough profit in some years to cover owner drawings, so LAQC's were a perfect solution to FBT payable on overdrawn shareholder current accounts. All that is gone now and we are back to all the problems that existed pre the QC regime (for which the QC and LAQC regime were instituted in the first instance).
I will try and elect out of most client LAQC's before the advent of the new rules which start 1 April 2011. In this way I will revert the LAQC's to standard companies, with none of the taxation penalties that will be implemented by the new horror rules, while straddling affected clients in all business types with the problems of non-QC companies.
But there are some very large problems even in doing this.
For those where electing out of the regime now will mean losing imputation credits (because they will go back to any pre-breach balance of the normal company rules), I shall first have to distribute dividends to clear out imputation accounts (and - especially tainted - capital reserves).... only there is a problem here. An LAQC election revocation goes back to the start of the tax year,this means all such companies will be caught out by timing. Ie, if I distribute dividends over this year, then I can't elect out until the next financial year, but that will see every company caught out on the new idiot and very costly rules. That will be financially untenable for many existing LAQC and QC's. Considering the tax cost the previous (in many instances) partnerships undertook to incorporate in the first instance, it is now unconceivable that they revert back to partnerships with all the same problems back, and the cost all over again on the death of a spouse (again, I'm talking the old, clumsy farming partnership), and on farm succession issues - this is a nightmare, and an outright disaster. At least there should be a five year lead in to the transition so that existing LAQC's have the opportunity to suitably prepare for such a radical change.
This also means there is no way out from a non-QC company's problems with tainted capital gains. It is unacceptable that a government do away with LAQCs and QC's while not addressing the myriad of injustices surrounding tainted capital gains.
I wonder if the government realise that in this supposed attack on property, the sector that is going to be worse hit, I suspect, will be dairy, and then the farm sector in general. Further, given the tainted capital gains problem, and the fact many 'good' dairy landowers help their sharemilkers into farm properties (ie, up the ladder), and for that matter into herds (given that the tainted capital gains issue also captures gains under the Herd Scheme) by entering into new companies with them to allow the financing of the farm normally purchased from the existing landowner, then this attack on LAQC's will now represent a big impediment to sharemilkers being able to improve themselves.
I won't give you my continuing opinion on ill-informed politicians, ill-conceived ad-hoc policy making, and an idiot public supported by moronic mainstream economists and media baying for the destruction of a truly important business structure used across all business sectors, in order to attack just the single sector.
For this government to have achieved its policy objectives, all it needed to do was ring fence domestic property rental losses no matter what the structure they were generated in. Instead, it has instituted this unjust, costly, bureaucratic and compliance nightmare on all sectors. The stupidity of it is nothing short of stunning. The injustices caused by this utterly shameful. And the sector that will be amongst the highest inconvenienced will be the rural sector. With this attack on QC and LAQC's, and the coming pointless ETS, it can only be assumed that National believes it has now won-over the state and beneficiary sectors - the only sectors they seem intent on growing - and they no longer need the farmer vote.
The National Party, the New Labour.
[Do HTML tags no longer work
[Do HTML tags no longer work in here?]
No.
No.
"here are the facts as I
"here are the facts as I personally experienced them."
That's just it, and I think you repeat yourself again and again with your personal experience and that's a flawed view point IMHO on 2 aspects,
1) this period of your experience is end of the 1930s to today and not end of first Great Depression to end of second which is 10~20 years off yet...
As an example Ive owned a house 14 years its worth 2.5 times more, so you cant cherry pick your dates and use that to support your argument(s).
2) Its a common failing for ppl to use past experiences to foretell the future, this is not accurate...for instance there are some huge fundamentals that have changed in the last 5 years, a) is Peak Oil, never have we been limited in our energy needs until today, ie over the period of your experience this event never occured...its a game changer and its now going to impact out future hugely...b) Debt, our debt mountain is huge, that has to be paid back, no ifs, no buts.....c) AGW, we will have to live sustainably, no choice...
These three point to many years of austerity, so investment in housing looks a bad bet....
In fact if you look at any investment strategy/area there are cycles, the wise man knows when to jump between them...except today.....everything looks bad...so cash...highly liquid, highly mobile ie rent and have 2 or more passports...owning 10, 20 houses? no way....look out for the 40% drop...
regards
Unless we humans are able to
Unless we humans are able to access cheap nuclear fusion power and that is going to be extremely challenging, then Peak Oil IS without doubt going to be a gargantuan shaper of future lifestyles. The current fiasco in the Gulf is also helping to bring that future ever closer. The present enormous losses aside, it will surely increase the safety measure costs in all future marine oil developments etc.
As a modestly comfortable, retired old fart I have downsized to a small easily maintained house that I have fully insulated, double glazed, and solar powered. There is a fallback wood burning stove (I grow all my own wood) and I have enough land to run a little stock and grow much of my own fruit and veggies (if needed).
I saw what was required to survive in England during the second world war. There will be trends towards these same practises as you profligate younger ones finally get the real message.
@MH: Html tags, appears
@MH: Html tags, appears not
regards
"In the 1970s I owned 32
"In the 1970s I owned 32 Lorne Street, Central Auckland, which I bought for $250,000 ........... The CV today is $3.75 million"
Just imagine how much in capital gains tax the IRD could have collected. Come on Bill if you don't want to borrow $250mil a week, capital gains tax is better than GST and ETS.
But if he does that, how will
But if he does that, how will Dirty Little Billy be able to look Oily Newland in the face ever again over lunch at the country club?
No, they are far better off leaving the lucrative status quo undisturbed.
Exactly, Mark Hubbard. "For
Exactly, Mark Hubbard.
"For this government to have achieved its policy objectives, all it needed to do was ring fence domestic property rental losses no matter what the structure they were generated in."
And you know what?....It's coming.....
No it isn't. Not in this
No it isn't. Not in this life.
I wish but NO, Key via his
I wish but NO, Key via his 'blind trust' has property investments which is why he was not about to ruin his own backyard via a land tax or CGT. Nic, they won't do it because THEY are doing it!
The solution would have been
The solution would have been to ring fence losses to render LAQCs, Partnerships and owning property in your own-name useless.
Prblem with ring fencing is
Prblem with ring fencing is it only punishes PAYE earners. You can't ring fence companies (unless you want to tax companies on gross profit) so any PAYE earner that could would just become a company.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Imagine you are a politician in NZ, perhaps even in government.
You possess a significant investment property portfolio, representing a very sizable proportion of your total financial assets and worth.
Your friends and associates within business can say the same, and they are to a very large extent responsible for getting you where you are today.
On top of that, investment property forms the greatest part of the assets of the the majority of those outside that sphere who voted for you/your fellow party members.
The market is not quite as lucrative as it once was, now that the pool of pyramid scheme players has almost emptied, so selling-off some or all of your property holdings is not desirable.
A minority has been clamouring for some forms of checks and balances on the out-of-control property market.
What do you do?
Do you end the property gravy train?
Or do you carry on, business as usual, hoping the game will pick up a bit so that you can sell-out at a profit to some sucker or other before it all comes crashing down around your ears.
Go away and think about it for a while. I'll wait here.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Here is a link to a really
Here is a link to a really great article written by Warren Buffett.
Offers a good contrast to the depth of Ollys' writing..
http://www.tilsonfunds.com/MrBuffettStockMarket.pdf
Warren talks about one of the 2 important variables of investment... Interest rates.
"Everytime the risk free rate of return moves by 1 basis point, the value of every investment in the country changes.."
The whole article is worth studying.
Olly says inflation is good for property.
WEll.. what about increasing interest rates...????
My guess is that increases in interest rates would have a VERY negative impact on Real Estate.
Long term interest rates are headed higher... in my opinion.
Olly is right about the imact of inflation on real estate.
BUT the close cousin of inflation is interest rates.
At some point there is a shift in the markets beliefs about inflation... Velocity of money increases... Central banks are forced to dramatically increse interest rates...????
SO... as markets adjust to changing interest rates in an inflationary climate.... what will property prices do...????
Warren Buffett also talks about another variable...Corporate earnings.
Propertys' equivalent to that, I suppose, is household income.
Over the time span Olly comments on we have gone from a single income household in a strong wage bargining enviroment ( Unions )to a double income household... and with Globalization, a weak growth in wage rates...
Where is the future growth in household incomes going to come from.?????
Will households be able to absorb higher rents...????... in the face of rising prices..
Olly makes it seem simple and easy... At some point it may be... but right now I think there is a lot of risk in leveraging up and buying real estate... at current prices..in very uncertain times.
BUT ... I'm no expert .
The game of the rich aye, and
The game of the rich aye, and the government is always on the same side as well so go figure. Nothing will change.
The property manager just put the rent up on one of the rentals by $20 a week, the tenants didnt say a thing.
Will they say goodbye to him
Will they say goodbye to him though, or just lock up and leave quietly one night?
My rent went up from $275pw
My rent went up from $275pw to $300pw about 1 month before the budget.
Still a *lot* cheaper than a
Still a *lot* cheaper than a mortgage. Think of the money you're saving overall, while your landlord struggles to keep up with the interest on his mortgages, let alone the principal.
Hmmmm for another $200pw I
Hmmmm for another $200pw I could have my own $350k 2 bedroom 90sqm townhouse, less $150pw from a flatmate... reading, watching & waiting.... however the longer I wait the harder it becomes, or will it? Crystal ball anyone? And if you do have one, is it any better than anyone elses?
Usual bollocks from
Usual bollocks from Newland.
As Steven states, can't necessarily rely on the past to foretell the future.
So, right,I can picture Mr Sato in Tokyo in 1990, saying to his missus:
"All right love, prices have dropped 15%, but things are going to pick up soon. Look how much our investments appreicated from 1980 to now! Its just a matter of time for prices to boom again!"
Fact is prices went almost nowhere over the last 20 years. I'm not for a moment suggesting comparing Japan with NZ is comparing apples with apples, but there are some parallels
A 15-20% increase in rents over the next 2 years? Bollocks!
Maybe 5-10% max.
And how can one argue that wages are likely to rise significantly over the next year or so when the labour market remains tight?
Newland argues that an inflationary environment will push up rents. Yeah, it will to a degree. But it will also have a limiting effect on rent increases as renters won't be able to afford big increases because they are forking out more for everything else. People will tend to share flats more or stay with ma and pa rather than pay an extra 10%.
It was a good stimulus to debate though Olly
Oily is full of it; always
Oily is full of it; always has been, always will be.
There are a lot of similarities between the NZ and Japanese property games.
Both grossly overvalued, and flooded with suckers willing to pay any amount to get into it.
Then they had their colossal bust, and now ours is on the way.
Unlike the Japanese, Kiwis have never been paid anything even close to fair income, and there is no reason to believe that's likely to change in the foreseeable future (just ask all the Kiwis in Oz), so we're doubly hamstrung.
The other thing, 5-10% rent
The other thing, 5-10% rent increases should be viewed in the context of very flat rents over the last few years.
correct me if I am wrong - wasn't this guy Newland predicting a big property bust just a few years ago in one of his books????
"correct me if I am wrong -
"correct me if I am wrong - wasn't this guy Newland predicting a big property bust just a few years ago in one of his books????"
My guess? He thought then that he wouldn't still have the debts he's saddled with now, so is desperately trying to talk the market back up again.
"Too often I have had people
"Too often I have had people come to me seeking advice who have bought rubbish properties just to create a loss."
What if your a low life Olly who's trying to avoid paying 'child support'? I know a few in that situation and NOW so does the IRD!
"What if your a low life Oily
"What if your a low life Oily who's trying to avoid paying 'child support'? I know a few in that situation and NOW so does the IRD!"
Don't worry, this government protects poor, hard-done-by property investors from greedy, grasping mums and kids.
"Rents will rise all right --
"Rents will rise all right -- but more like 15 - 20% over the next two to three years would be closer to the mark in my estimation."
LOL, yeah right! Loads of people in for a wage increase then I guess? Your dreaming Olly
"Inflation is good for
"Inflation is good for property, as we know. I have lived long enough to see the trends quite clearly."
All those living costs increase for everyone. If your REALLY knew anything 'economics' Olly you would know INFLATION is a killer for everyone. No one is exempt from it's effects of killing your currency and buying power.
As with property you win nothing because if yours goes up in value then more than likely so did everyone else's. It's called a 'ponzi' effect. You gain NOTHING!
According to 'expert' Olly
According to 'expert' Olly the economy is really going to take off! Yee haa, shame he's yet another deluded fool who can't see the "forest of debt for the trees" putting a hold on everything for a decade or more.
This guy reminds me of all
This guy reminds me of all those fools 2 years ago who said "what recession?" "if we all keep spending (money we don't have) there won't be a recession"!
LOL, 'head in the sand' folk everywhere these days
never trust a bloke who wears
never trust a bloke who wears those shady spectacles
Rents going up 10-20% in the
Rents going up 10-20% in the next 1-2 years??? Only if incomes go up by the same amount. Otherwise, dream on...
exactly
exactly
The OCR has fallen 70% in the
The OCR has fallen 70% in the last 2 years, from 8.25% to 2.5%. If rents are cost-input related, then why didn't rents fall AT ALL with the drop in interest rate cost? Answer: As you correctly say. Rents are income dependent, not input cost dependent.
I'm not sure why Bernard
I'm not sure why Bernard publishes this trite, other than to amuse us all
agreed
agreed
Olly Newland is a geriatric
Olly Newland is a geriatric investor who destroyed many tens of millions of dollars of wealth with Landmark Corporations in the late 1980s. He should retire and leave us all in peace.
Newland needs to stop wearing those creepy looking sunglasses on inside, and hassling our own homes (in Rotorua, South Auckland, West Auckland etc). A work colleage told me Newland doesn't invest in residential property any more.
Sounded like an ego trip to me reeling off all those property deals he did. I think Newland should show integrity and reimburse everyone one of those shareholders in his atrociously run and failed property development and management company.
just as politicians can be
just as politicians can be depended on to make the right decisions for themselves so can Olly Newland be depended on to offer the opinion that will benefit himself.he didnt get a knighthood though and cant be all bad.
"he didnt get a knighthood
"he didnt get a knighthood though and cant be all bad."
He must have missed a palm while out greasing.
In the 70's New Zealand was
In the 70's New Zealand was insulated and Unions had leverage to impose wage catch ups on the employers.
With globalization and wage arbitrage across countries the norm, I wonder at the ability of the working classes to impose wage increases these days...
Judging by the number of
Judging by the number of people still willing to vote for the National party, it seems not too many people in NZ are all that concerned with their low incomes and lack of other benefits. Not all sheep have four legs.
all you jealous property
all you jealous property deniers should read Tony Alexander's latest report:
http://www.bnz.co.nz/binaries/w270510.pdf
this economic EXPERT is pretty upbeat about property and in response to a survey that suggested 50% of landlords weren't going to raise rents suggested they had a great opporunity to do so, confirming Olly's views
Ah, Tony Alexander...an
Ah, Tony Alexander...an independent, non-partisan, unvested interest you can trust.
Not.
LOL! Two thumbs up for that
LOL!
Two thumbs up for that one!
Put it this way, before the
Put it this way, before the budget landlords and property managers had no good reason to put the rent up.
This budget provides a good opportunity for landlords and property managers to up the rent “TOGETHER”.
Tenants seems to accept this better this way.
The government is on the property side, business borrowing is linked strongly to properties and bank dont lend against businesses values.
If property goes down, the whole country goes down, so they have to keep it going.
The government wanted the rent to go up, and they have achieved it.
So what happens when
So what happens when landlords decide this is the perfect excuse to raise rents only to discover that the budget has left their tenants worse off and so unable to afford the rent increase?
That's probably the point
That's probably the point where the landlord spends six months losing money while trying to evict them for non-payment.
Many property doomsters have
Many property doomsters have disappeared from this website, things definitely have changed.
New website, people move on, things move on...
I thought Olly had some good
I thought Olly had some good insights to share especially about housing NZ leases,like the landlords.co.nz site, better to listen to somebody who has put their money where their mouth is than two bob millionaires.I suppose with inflation they are 2K millionaires now.
exactly Small Kev, noticeable
exactly Small Kev, noticeable change
the doomsters realise that the limited changes brought about by the Budget will have very little impact
Supply is constrained, prices will rise as our population grows
If you look at the growth of
If you look at the growth of cities outside NZ you will see that the price doesn't grow with the population numbers. In NZ it is only the artificial strangulation of land supply that has lead to the 6 1/2 wage multiple to buy a house. As we have had this policy for some years - it is likely that this value is already loaded into current prices and more likely to come down than to increase.
basically, what Olly is now
basically, what Olly is now doing is trying to save his Olly brand as the go to man for TV soundbites, seminars on property and preaching to the sheeple who still may be misguided enough to think prop.investment is still a good look.
not only are the LACQ's snookered and the depreciation tax but the more important one is now the inability to depreciate the chattels and fixtures in your rental investment..and they really do depreciate.
pack up your old kitbag Olly and go and slumber with Uncle Sir Bob J.
"Inability to depreciate
"Inability to depreciate chattels and fixtures" is half-correct at best.
Under IRD new standards for deciding what is an asset and what isn't, all it does is mean that some improvements that were previously capitalised and depreciated can now be claimed in one year as Repairs & Maintenance.
All distinctly seperate assets are still depreciable, down to carpet and cupboards.
LAQC changes barely affect PI's: all it means is that they won't be able to use the company tax rate when/if their investment turns a profit.
Also, all the PI's (which is quite a few by the way) I've spoken to since the budget think they've got off lightly and several are looking at buying more properties while the market is stagnant and before rents start going up in earnest.
Check your facts.
Can't see how a panic exiting of property investment is going to happen to be quite honest.
(1) How many of the "staunch
(1) How many of the "staunch property deniers" writing here would like to become property investors if they could? - I guess quite a few. How else could one explain their bizarre obsession with the subject of property investment? So, stop dreaming of 40% "crashes", follow the good advice from Olly and get your own investment going! And the sooner you do it, the better.
(2) And on another point. I'm not sure if "inflation is good for property", but property is a one of only few tools to protect one's worth against inflation.
My guess is that most of them
My guess is that most of them would just like to be able to afford their own home. Or their kids to be able to. Unfortunately the PIs have made that an unattainable dream for all those who don't already own property.
Having said that, it appears that many of the anti-PI crowd are home owners, but they just don't support the greed and selfishness of PIs.
Either way it's the PIs who come out stinking of raw sewage.
"unfortunately the PIs have
"unfortunately the PIs have made that an unattainable dream for all those who don't already own property"
Where does this thing that PI's make property ownership unattainable for others come from? It seems to be mostly from anecdotes about someone having been outbidded at an auction by someone they thought looked like a property investor.
There is actually some research on changing housing tenure by Housing NZ's CHRANZ.
If Olly is such a great
If Olly is such a great investor why was he selling his properties when they were going to inflate in value so much?
As other people have mentioned - you can only afford to pay what you can afford to borrow and my employer laughs each time I mention a rise in my base pay cheque - so fat chance of paying more for rent in the immediate future.
Also, Olly looks at inflation from a historical point of view, today. I can for-instance open seek.com.au and see that in Aussie I would be paid 30% more for doing the same job. If housing and food costs don't add up there is a whole world to explore.
Hey guys Can someone out
Hey guys
Can someone out there actually explain the economic effect of inflation on house prices rather than examples from Olly....in laymans terms please
Regards
There is quite a bit of
There is quite a bit of misinformation about inflation.
Inflation is caused by increases in the Money Supply. Increases in the Money Supply can result in a rise in general Prices... or a rise in asset prices... or it can manifest in varied ways.
There is a problem in how we measure inflation... We use the CPI but in the global world increases in aggregate demand as a result of money supply growth no longer result in increasing consumer prices... as they did in the past.
In theory if we double the money supply ... we halve the value of all existing money. ( in 2007 money supply increased nby 15% )
BUT it does NOT work out like that... because the newly created money ( credit ) is not evenly distributed. It is the people who first get hold of the new money who are the major beneficiaries.
The losers are the ones who don't get any or little of the new money.... (basically their savings ( money they hold ) simply loses value.)
(There are a FEW major winners and many losers.)
In terms of Real Estate.... the more you borrow the more you benefit from the inflationary impact of increasing money supply. ( the money u borrow devalues in real terms but the Real Estate increases in value in Nominal terms and stays the same in real Terms )...
Inflation ( money supply growth ) becomes a transfer of wealth from Savers to borrowers ( in a general sense).
High Inflation ( money supply growing faster than GDP ) is a very destructive force. It distorts the information that price transmits in markets... leads to malinvestments, mispricing of risk, distorted aggregate demand, bubbles... etc ..etc
If u compare a graph of house prices over the last 30 yrs with Money supply growth... u would see a correlation.
People compare house prices with the CPI to see if house prices are over valued .. but that is a wrong thing to do.
Another great comparison would be wage and salary growth compared to money supply growth.. ( my guess is that executive salaries would follow money supply growth but everyone elses' would lag... badly ! )
An example of the inflationary impact of inflation on house prices is to go back to the 1970s'.... House prices held up in nominal terms but in real terms declined by over 40% in value.. By 1980 house prices were selling at about 40% BELOW replacement cost.. ( buiding cost inflation ) Truly a great time to buy.
ALSO shows that property can decline in inflationary periods. (1980 was a good time to buy... 1976 was not)
BUT it is not like that today.... Real estate is a more leveraged market than back then. The Banks exposure to real estate is far higher than before.... and last time I looked Money Supply was actually declining.
Is now a good time to buy Real Estate, as an investment..????? I don't think so...BUT I'm no expert.
Olly says there is a Shortage of houses.. At the least , that will limit any downside in prices... but is it enough to expect another boom in house prices..???
The Global economy is still in very uncertain times... but I do think there are some trends emerging..
cheers Roelof
Best post on here for ages -
Best post on here for ages - Nice work Roelof.
There is NO SHORTAGE of
There is NO SHORTAGE of housing in New Zealand, Roelof, just an unequal distribution of ownership. Last night we all went to bed somewhere, and immigration, as evidenced by recent statistic, is likely to fall. Allied to increasing dwelling constructioon consents, the excess of 'investment property' is likey to increase from here on in.
According to Statistics NZ
According to Statistics NZ there is a severe and growing shortage of housing in Auckland - so much so that the government has legislated to try to force Auckland Councils to do something about it.
I repeat: THER IS NO SHORTAGE
I repeat: THER IS NO SHORTAGE OF HOUSING IN NEW ZEALND ! People arn'e sleeping on the streets ( thank, God), and there are thousands of properties for sale; nearly a whole years worth on inventory on the market if I beleieve the latest writings. Some poepl have one house; some two; many five and a few 100+. A lower nominal price for housing in this country WILL see a greater dispession of property ownership.
Sure there may not be a
Sure there may not be a shortage of housing at the beach or other places that people don't need to live, but there is a shortage of housing in Auckland. How else do you explain the escalating price of Auckland housing (unaffected even by the second great depression), the Statistic New Zealand figures clearly showing that even in the boom dwelling construction was not matching population growth and the purpose of Plan Change 175 / Local Government (Auckland) Amendment Act 2004?
There is no housing shortage
There is no housing shortage in Auckland either! FOMO increased propety prices in Auckland. Go out any weekend. There are thousands of propeties for sale. No shortage there. And as for renting one? There are thousands of apartments for rent as well. And what's more, the availability of choice is going to really get better as we go into a panicy Springtime of selling.
Right now - Trademe -
Right now - Trademe - Auckland City. 3800 dwellings for sale. There around 200,000 dwellings in Auckland City so that is 1.9% for sale (usually closer to 4%). Take out the apartments and there 1850 houses/townhouses for sale, something like 1%.
Sorry, but I tend to believe statistics rather than shouting.
"There's never been a better
"There's never been a better time to buy"( Harcourts Queenstown Lakes.2008) underpinned by strong investor confidence in both Kawerau Falls/ Jacks Point projects .Can Mr Newland explain how property prices will never fall?Property websites currently have latest tranche of highly desirable Jacks Point sections via administrators at an appreciably lower price than originally marketed and purchased by many 'astute' investors.Additionally the real estate statistics from 2007 for this area do not agree with Mr Newland. I currently am in the UK having sold our family home in February and exited the NZDollar.Trips to Ireland and around the UK simply confirm my gut feeling that at the moment the NZ housing market and economy holds too many downside risks.These risks are both local and international. If I am wrong then I will undoubtedly and happily so have to rent from someone more wise than myself .Since my departure the only unexpected economic news to the upside was the unemployment data, yet this certainly did not tally with the latest business confidence stats?I now await Mr Bollards rate decision,a rise although unnecessary but expected by overseas markets will certainly add to the downside of the housing market, a hold will see the NZD fragile.
Hmm... Yes, NZ is on a
Hmm... Yes, NZ is on a fragile road to recovery, but at least we are slowly digging ourselves out. Can't say the same for UK, Ireland and other parts of Euro zone where the worse is yet to come. So you have sold up in NZ and moved to a place where economic turmoil is even worse, and you are happy about this? Good on ya, but don't ditch your NZ passport just yet. ;-)
Dear Hardworker, we sold our
Dear Hardworker, we sold our family home , and are travelling europe with three children in a motorhome with our starting point the UK. I retain two properties(not rented) in New Zealand , both of which have QV above what I believe is fair value.However importantly we have no debt,and this will be more the issue for kiwis in the next 5-10 years. As a nation with I believe 70% of our wealth tied up in real estate, we are simply too undiversified(less so than a number of european nations) to withstand further economic turmoil.In Europe it is simply payback time now, for New Zealand we too both individually and nationally have borrowed beyond our means.For those who say it wont happen in New Zealand , I simply take a contrarian view.
Somehow reading the article I
Somehow reading the article I get the impression that property prices are independent of the economy. Maybe because property is the economy.
I think it is quite
I think it is quite reasonable to include some property in your portfolio and yes now is as good as time as any (unless someone has the definitive answer on picking the bottom and picking the top of the market).
However, be sensible and balance it up with other investments - cash, shares, commodities, KiwiSaver, etc.
Great insights shared by
Great insights shared by Olly. We should be praising him for sharing his wisdom from years of experience. Another great read! Thanks olly.