Bernard - yes, they will quite rightly start hiking from 10th June, and yes, it will be a modest rise to start with. The only reason that I can't agree with the rest of your article is that a couple of years down the track, when fixed rates are higher than they are today, there are real risks of a much more substabtial rise in interest rates.

It involves the sovereign debt issues globally. The public sector will continue to crowd out the private sector for debt as sovereign debt levels are at, or dangerously close to, levels that are irretrievable and as such will only worsen. That inevitably leads to a renewal of money printing, lower currenies, higher imported inflation, and then much higher short-term rates.

Its happened that way for decades, indeed hundreds of years, and the only determinate of who it happens to is who badly mis-manages their economies...today read, southern europe,UK, Japan, US etc. When it manifests itself completely in the country with the reserve currency and benchmark bond for the world, we all get it....I'm not taking that risk myself, others can who don't understand it

Leave the OCR alone (until the carry sources lift theirs) and avoid the exchange rate kicker - put the anti-inflation load on the macroprudential measures. Make them bite. Give our trade exposed sector a chance to recover provide jobs and maybe trade our way out of the hole we are in.

Rangerman - NZMEA we have called for quick and decisive increases of the OCR in the past, it's about timing, see here:

http://www.realeconomy.co.nz/87-past_press_release.aspx

6 June 2007. 'Grasp the OCR nettle or face more restructuring.'

“The RBNZ had an opportunity to lift the OCR in late 2005 when conditions warranted such action, but it timidly held rates instead of quickly and meaningfully raising them. As a result, exporters continue to suffer chronic pain almost two years later. In the absence of independent thinking or any visible monetary and fiscal coherence, we still seem to need some acute pain or suffer the fate of the boiled frog. Instead of waving the big stick and observing little restraint from Government or the consumer, New Zealand needs a dose of the only medicine available - but grasp the nettle and do it”.

But now is not such a time, especially when RBNZ could do more with cfr/'the ratios', if the PI lobby, the banks and FF would let them, it seems, see:

http://www.interest.co.nz/comment/reply/49656/547880

and see the comment below that one from an 'Anonymous'.

I'm still left wondering what/who could have held RBNZ from hiking the OCR back in late 2005, in much the same way, it appears FF have been as successful in slowing RBNZ's implementation of cfr/'the ratios'?

Maybe there would be less clamour for an OCR hike now, if well connected lobby groups like FF had less influence over our independent reserve bank?

Cheers, Les.
www.mea.org.nz

Les

I remember that tme so well, a major cock up by the RBNZ. However, I certainly couldn't remember as well what the reasons were for his long hesitation and assumed it was vested interests, it normally is - your posting certainly proves that it wasn't the manufactures, so it remains a complete mystery to me too.

That said, I do favour a modest rise now as things are plainly not as dark as they were, not fantastic, clearly tentative, but not disasterous - we have inflation expectations at 2.8%, and every forecast for the next couple of years around 2.5 - 2.6% ie. very little room for mistakes or misjudgements which are very likely in this glbal environment. A mistake/misjudgement would involve real tightening which is the last thing we need, whereas a modest move in bank bill rates back to say 5.50ish relieves some pressure on possible furtehr inflation, and gives the RBNZ room to cut and stimulate if required later

Les I hear you but I have to admit I'm not a big fan of the RBNZ using the core funding ratio as a monetary tool. I have no problem with the way they've used them to date, because our banks core funding ratios were too low, and the banks agreed with that, but to manage monetary policy and influence the economy I think is the job of the OCR

Ultimately both push interest rates either higher or lower, but I prefer the transperancy and signals that the OCR provides over a CFR which should be viewed for a different purpose

Why is NO ONE hitting Bollard up as too HOW he can justify an inflation and OCR differential of nearly 3.5%?

Forget mortgages for a minute, Who wants to 'save' in a term deposit if the interest earned is LESS than inflation even BEFORE the RWT is taking out?

It's time for Bollard to face the music! FIRE HIS ass

Savers subsidising borrowers because supply of money is internationl, just like the price I pay for milk.

If you really believe the gold story, steve, then SELL ALL YOUR PROPERTIES NOW and put the procedds into gold. You can't have it both ways? If gold goes 'to the moon' it will because other assets ie: property are worthless to a great er or lesser degree.It will be because the global financial system has ground to a halt. What will property owners do then to pay the skyrocketing interest rate bills that will accompany hyperinflation? You can see yourself how a having of interets rates has effected your servicing capacity. What if rates go to, let's say a conservative, 25% with a similar rise in gold to $300k per oz ?.
Interesting times ahead. Get rid of any and all debt, and be ready.

I have my gold and Aussie gold stocks as a hedge ... I wouldn't put all my eggs in the gold basket but I think its prudent to have perhaps 10% of an investment portfolio directly correlated to physical or gold related equities.

Gold was $1195oz when I went to bed last night ... the Hungarian news came out ... the Dow Jones dropped 3% ... Oil dropped $3bbl and when I woke up this morning gold was $1221oz ... what a fantastic safety net !! Everyone should have some.

People will always need a place to live and so rents in NZ will be pretty stable with a slow steady drift higher. Unless house building costs drop below $1000/sqm I can't see how house prices can fall to far so if I can get good tenants to pay off my $1.3m of debt over the next 10/15 years I am happy to hold.

I can't see a scenario where interest rates go to 25% ... if hyper-inflation hits then maybe, but if that comes to pass asset prices will go thru the roof and inflation kills the value of debt faster than I could pay it back so that doesn't worry either.

With all due repsct, steve, Aussie stocks and correlated investments are just paper. You know; that stuff you dislike, fiat thingys. Come the day of reckoning, and that paper will be about as valuable as Allied Farmers scrip.
And re Hungary: Well wouldn't you have expected gold to rise by what the Dow lost, 3.5%? So that should be from $1195 to $1237?
Now 'that's not much' difference I hear you say. But think about this. In 1980, the last time we had a 'buy gold as a hedge" thing, it sold at it's peak at us$837 per oz. So in 30 years, gold's hedging value has gone up $384, less than 1% p.a. over that all of time.
As with all assets, steve, it's about buying AND SELLING - ideally at the right time. Cheers.

..
.. Bugger . That was meant to be in the reply section . Shag it Brenard , this new webseti neesd an etid fuctinon .

..
.. Smart investors are deleveraging ! Why did the Dow plop 3 % down overnight - Hungary - that pissant little economy ? Deleveraging ! Smart investors are reducing their debt levels ( precisely the opposite of Western governments , worldwide )... ...... Ergo , no long term inflation risks . Uncertainty , risk aversion , is propping gold up .

.. Ellersians selling ..... are smart . Them wot charge in there to buy , un-smart !

That would be a disaster; for all of us, and Merkel's worst nightmare. I wouldn't know whether to go port or starboard for the lifeboat....and I'm not sure clutching Auusie small caps. would keep me afloat.

Nicholas - agreed, in some countries there is disinflation at the moment and concerns of eventual deflation e.g. the USA. But not the likes of the UK at CPI 3.8% and RPI 5%

However, the inflation view is based upon what you think the govt or central banks reaction to that will be ? Will Obama go with austerity or print money ? You are giving them too much credit if yoiu think its the latter, nd that the largest debtor nation in the world won't desperately try to create inflation

We may be talkign the same thing just different tinings and magnitude...I'm saying modest disflation, maybe deflation, then much inflation, then deflationary collapse...but we're talking 5 years plus here which is more my investment time horizon

Wonderful news on the tv at 5pm...Rudd looks like he will lose his own seat in Queensland! haaaaaaahahahaa. Obama is pushing stimulus two. The ECB has called for the printing press to solve the credit crisis. Bolly will chicken out and freeze up blaiming uncertainty in Europe. Pna will report on ore extension and if wee Wally is a lucky sod they will tell us all about finding a heap of copper and gold at a place called BanPhonxai. In the midst of chaos and crap..there ois always hope and good laugh. Bye Kev!

And now for a Saturday night special..take one double Rum and Coke and read this:

http://www.marketoracle.co.uk/Article19995.html

Wow..gold could maybe blast into the stratosphere once that lot starts. Are we talking $3000 an ounce...could be.

According to Brett Arends from Wall Street Journal gold is next bubble to burst, but not just yet. He reckons another 12-18 months, which might trigger another global crisis...

Name me any market that doesn't do that at some time Alen; equities, bonds, commodities, property etc. If he can guarantee a massive 12 - 18 months, I'm topping up even more :-)

I don't think Bollard will raise the rates next week.
He would give more time for the recovery to be established firmly, before trying to attack the inflation. It also makes more sense not to have a high NZ as exporters are just now beginning to see the silver lining.

Ken Fisher was VERY wrong in 08. His clients still haven't recovered. His timing was terrible. He gets paid whether they make money or not. He make his money from fees.
Right now it's all about preserving purchasing power... I will be following the gold to house price ratio very closely. The biggest lesson of history is that we learn nothing from history, so it repeats. We've seen this all before. There are only 2 option for sovereign nations- default or hyperinflate. My fear is that both will ultimately lead to war. Do you want to own property in this environment? It's a good time to rent...for a while. Anybody who believes that rents are going up because of the recent tax changes is fooling themselves. It's a good time to sell property while there is still a market. We should revisit this conversation in a couple of years to see is /was correct. Rents and house prices do go down. It's supply and demand. People who can't afford rent move in with mum and dad. Who will rent the house they vacate? Jobs, jobs, jobs. If you don't have a job, you can't pay rent, so what are your options? The inventory of unsold homes will grow, so rents go down. As a reprieve, I think a few years from now, people will be surprised by the strength of the AUD and NZD, because they represent the best horse in the glue factory. Short term trend is down, but long term is actually quite strong. Just wait till the Yuan is allowed to float. Oh boy...

Somebody gave a link to Jim Willie at marketoracle. I think that guy has a pretty good finger on the pulse of things. He moved out of the US in 07, along with a lot of other financial digest writers as of late. AS the USD loses its standing as the world's reserve currency, it will be pretty tough going for a few years.

PH,

You assumption that the debt can't be repaid in "10-15" years is based on a 5% yield. That is far too low as I am up around 7% ... and increasing year by year as rent increases kick in. The compounding effects on a P&I mortgage over time are pretty compelling as well. I would be disappointed if i couldn't have them all done and dusted and debt free within 10 years.

Greedy people like Steve have artificially forced up the prices of housing of New Zealand. People do not need thirty rentals, one hundred rentals let alone the nine he says he owns. One can only assume a lot of these people have very average incomes and need to try and supplement their lifestyle by putting together some pretty substantial portfolios of property. It worked as property values rose. They are now dropping and will continue to drop for many years. Immigration is dropping off, interest rates will rise, baby boomers are retiring more and more and selling off their assets,incomes are rising for some but very slowly and the cost of living is definitely rising. Go anywhere in NZ and you will see an ever increasing number of properties on the market and no buyers unless they can steal a buy. Steve you should sell them all now and just keep your house or you might even lose that also. Stop being greedy and get rid of some debt before it eats up all your gains. And before you criticise me I am a professional with a nice home in the country debt free, one rental, one commercial property and a substantial amount of shares. The difference between you and me is the bank cannot dictate when and how I sell my assets as I have virtually no debt other than debt that can be easily serviced by rent from the two rentals. I have not been greedy.

Nicholas - I guess it all comes down to whether you belive that these G20 countries will make CREDITABLE efforts to reduce their debt levels. Some may, most probably won't, and the one most unlikey to do so is the biggest one and the one that will dictate the gold price accordingly

Boy ... there are still "reds in the beds" ...

Warren Buffett ... "its only when the tide goes out that you find out whose swimming naked"

I'm not sure what you are referring to Steve, but if it's my comment, well here's one from a chap, Mohamed El-Erian, who runs the biggest funds management business on the planet.

"the Group (G20, last night NZ time) has gone from strongly supporting growth stimulus to recognizing two critical issues: the approach has not succeeded..and that ... damage is being strongly felt in the form of increasingly unsustainable deficits and debts....I fear that all this may continue to catch off guard ..mindsets that have difficulties recognizing regime shifts, preferring instead the illusionary comfort of the more familiar cyclical frameworks.."

http://ftalphaville.ft.com/blog/2010/06/05/252661/guest-post-el-erian-on...

Steve I notice you have not replied to my comment that greedy people like you who have bought more properties than they will ever need have artificially driven up prices all over the world and out of the reach of the people you say you are helping by renting your houses to them. I think they would rather own one than rent one off the greedy multiple owners. You cannot answer my comment because you are guilty as charged. You do not need so many houses. You have denied people who have less than you to a lifetime of renting unless the bubble bursts. As I said property prices will drop steadily from here as interest rates rise and people immigrate to Australia for a start.The bubble will deflate steadily over a decade or so and along with inflation property values will get back to a level where the less fortunate and the young will be able to buy them. Steve I recommend you sell some of them down now. You cannot put a value on anything these days until you actually sell it and that includes houses, farms ,commercial properties and alike.

People do not make a choice to rent Steve. They simply cannot afford to buy a home because people like you have pushed up the price of them beyond the price of the average person and when that happens you need to reduce your portfolio before the stampede occurs. No investment is 100% safe. Look at housing in Japan the USA and europe. Prices have come down a lot. We are just entering that cycle. Anyone can see that by driving around any part of NZ. Realestate.co.nz remarked last week that vendors were starting to blink and reduce their price expectations. As interest rates rise that fear will only increase. Those who predict a 30 to 40% fall in housing values over a period of time will probably be vindicated. Who is going to be left here to keep it going. Who will be able to afford to buy them when the baby boomers sell their property portfolio down when they retire?

'Big residential property parcel in receiver's hands'

'Seven properties owned by a Hamilton mother and son have been placed on the market in what is New Zealand's largest receivership sale of residential property...Debts are now believed to total $73.6m.'

http://www.stuff.co.nz/the-press/business/3782406/Big-residential-proper...

Auckland appears "steady-ish" but much of the country seems on the precipice of some significant price drops
Some internet browsing has revealed some big drops in asking prices in some of the regional centres and holiday areas
Wellington seems flat at best, probably down. The market there will be subdued for years as the bureaucracy is gradually shrunk back to where it should be.
So in my view we'll see average falls across NZ of about 7-8% this year. Auckland will be down 3% or so, but some of the regional areas will be down by 10%+

Gordon - get off Steve. You talk a load of cr@p. Go and build your own home if the ones you want are gone, certainly building new houses should not be affected by property investors? We operate in a free market here. Its like you complaining Gold investors are greedy as well pushing up Gold prices and you can't afford a wedding ring. Get real mate.

Real Estate, following the "love-hate" cycle, is going from being the most loved investment to being the most hated. Then it will start all over again, as the pendulum swings the other way. It's happening now, and the snowball is just starting to roll from the highest peak of the mountain, ultimately pushing prices below the inflation level. Give it a few years for real estate generally to be really hated once again. It's happened before.

People will start to liken owning a piece of property as having a millstone around their neck. After all "mortgage" comes from "Mort," which is French for "death."

Of course, if your property is paid-off, you could be buying some more property in coming years from bankrupt property speculators. It's happening now in the US. However, it's like catching a falling knife because nobody knows when the bottom of prices will actually be found. They just keep going lower. Again, it's all about jobs. For example, you can buy a house in Detroit, Michigan for less than $1000. How many do you want? Trouble is, do you want to pay to maintain that house? When will the jobs come back to Detroit? You could be waiting a very long time. During that time, your property will be getting vandalized by unemployed thugs with nothing better to do with their time.

You don't want that burden of ownership... You think you are buying cheap only to watch the prices go down another 10%.

As for 80/20 loans? How does that help you when your property drops 30%? Now you are working for the bank, not yourself. That's what's happening to my father right now in California. That equity is GONE, and isn't coming back. And the sad part is that he had a 50/50 loan, taken out at the peak of the market. The buyers have DISAPPEARED. The market doesn't care what any of us think. The bottom could be anywhere.

Seeing the writing on the wall, watching my tenants losing their jobs left and right, I sold my last property for a little bit more than the loan amount to a couple of guys who thought they were buying at the bottom of the market. That was last year in Texas. I wanted out at all costs, because if the trend continued, the bank was going to own my property anyway. The new owners are probably in a mortgagee sale status as I type this.

A very popular theme right now in the US is "strategic default." People who could afford their mortgage payments are giving their homes back to the bank and renting. It's cheaper. These are people who have watched their equity evaporate, even though they had an 80/20 loan, the property market dropped their house value to less than the amount due on the mortgage. Why would they want to keep making payments? If they sold their house, they wouldn't be able to pay the loan or the realtor. So they just mail in the keys to the bank. The banks call it "jingle mail." The banks have so many houses now that they are just letting people live in their old homes. Some have been living in their homes rent-free for over a year now. It's a clusterf-ck.

This has all happened before. Only a couple of times in the last 100 years has real estate surpassed the rate of inflation. Now prices are going the other way. It's historical. Homes will be affordable again soon enough, but even then nobody will want them. Who wants to commit to a mortgage when they are uncertain of their job status?

And that's the rub of it... no matter how deep your head is shoved into the sand.no matter how gullible you are in believing the govt spin and the rubbish from the Ministry of Truth...the fact is the future promises to be one of poor growth if any with high 'un' and underemployment together with low incomes falling real wages and benefit cuts. An environment that will be long lasting and through which property values will decline. A time of high taxation, rising cost of power and energy and the councils continuing to increase rates because they are in on the socialist Keynesian stimulus splurging as well. It is the era of the saver and of waiting for sales and buying only what you need.

Bill English had lunch with a group of real estate agents at the Skyline in Queenstown last Friday.

As long as I offer a good product , ie warm, well maintained, well located property I think I will always have demand , ie tenants. If property values do fall over the next few years I don't really care that much as I have an income ( rent ) that exceeds my expenses ( interest , rates , insurance , R&M ). If property values are falling then interest rates will stay low which is a great cushion , if inflation picks up and borrowing costs increase then it is highly likely the properties will be increasing in value .. again, not a bad scenario either ( and rents will be going up to help as well ). Well capitalised property investors who are in for the long haul are in a great position to chose when they enter and when they exit. I agree that if you are over-leveraged then the bank may hold your destiny in their hands which is not a good place to be. The majority of the big 4 Aussie banks loans are in the residential property market, Kiwibank is almost 100% in that market. They aren't going to pull the plug on well capitalised borrowers who maintain impeccible repayment records, that would be their main source of profit up in smoke ... it won't happen.

I will look to add to my portfolio over the next few years , I have no interest in selling.

"If property values are falling then interest rates will stay low which is a great cushion.."..wrong steve..very wrong!

You are not looking at the macro picture..!

Your credit costs will be determined by the worldwide fight for deposits as banks battle to remain alive. Bollard's ocr game is fluff in the gale. The banks have to compete for my cash along with other foreign higher paying entities. They might get the mum and pop penny accounts but when it comes to the big loot...it's a different matter. So they MUST raise deposit rates to get my loot. That means they MUST charge you more for the credit.

" if inflation picks up and borrowing costs increase then it is highly likely the properties will be increasing in value "...
again you are wrong...I have explained why credit will cost more..now you have to see what impact that has on property...it discourages people from borrowing..ie there will be less demand for property and that means pressure pushing down values.

"And there are many other people just like you who think they are helping their tenants when in fact they are making it harder."

No, they only claim to think they are helping anybody but themselves.

Look, these pigs and their greed have done a huge amount of damage to the economy, and they know it. Some may even have sneaking feelings of guilt, but most of them do not. They are selfish in the extreme. Right now we're at the part of the boom and bust cycle right before the bust. Anybody living on credit cards and overdrafts is about to go to the wall. Hideously overextended property investors who are kidding themselves that something will rescue them (rich Asian immigrants?) know that they are in deep shite, but will never admit it, not even to themselves. So they go on making sickly and pathetic justifications for their greed, while preparing to blame everyone else when their house of cards collapses.

No savings, lots of debt? Credit cards maxed out? Heaps of skite toys on HP? Running a mega overdraft? Constantly wheedling 'just this once' concessions from the bank loan manager to stave off disaster? Well I have some bad news, I'm afraid...

I like the story of the guy who sold one of his investment propertys to get some cash out. Good L/V ratio on that one, and he was told by the bank, the small print, that the money that he had made on the sale had to go to reduce the other properties mortgages that he still had. Poor bugger sold the one with good equity, and still couldn't raise any cash from the sale.

I suspect both the property bulls and the property doomsday types are both wrong. My name "Property is stuffed" would suggest I am a doomdayist - yet I am not.

Personally, I think we'll see some drops this year, then its going to be a few years of flattish / slightly rising prices

I say Property is Stuffed more as an investment - rents may increases 5-10% over the next couple of years, but that won't be nearly enough to create acceptable yields, especially as interest rates, Council rates, general cost of living costs etc go up up up.

As I will never totally discount one particular form of investment (including property, although I am close to total dismissal) I would appreciate if Murray and the likes could point me to some properties on the market today that could return 6-7% plus yields. And I don't want crappy shoebox apartment examples, that are likely to lose value. I want good quality houses or townhouses / flats, that are likely to hold their value,if not appreciate.

Think of me helping the vendor's out Gordon. There are heaps of properties for sale , don't blame me for pushing values higher. I very rarely buy a property that hasn't been on the market for at least 90 days .... if anything I have pushed values lower by setting a new benchmark for the street !!

I do read the fine print , I've never missed a mortgage payment in 13 years , I habitually over-pay my mortgage. Westpac and the ANZ have both offered to lend me more money in recent weeks. I will take them up on there offer over the rest of the year.

I'm not saying property is the only way to get ahead but for me it is the best way. Buying shares in Feltex or depositing my money with Bridgecorp just didn't/doesn't appeal ... thankfully.

You do not get my point Steve which I am not suprised at as it does not take a brain surgeon to buy property and more than you need. It is not the price you pay for them but rather the fact that you buy more than you need which is just plain greed. I note you have not responded to my questions as to why you need so many and when you think you will have enough. I would not be keen to answer such questions either as it will only make you acknowledge you have given in to greed. There are thousands like you in NZ, in fact all over the world who have succumbed to greed and collectively you have pushed up prices beyond the level of sensible fundamentals and so the young and less well paid are finding it very difficult to buy their first home and that is going to be your problem from herein. Who is going to buy them off you or your estates when you die.

The Chinese?

..
.. Residential property behaves similarly to gold . Maybe 'cos folk esteem it so much . Yet it yields so little in cashflow compared to other investments .

.. It has massive bull runs . Followed by years of drifting or declining prices .

.. Unless you leverage up enormously , residential property is a mug's investment .

.. Anyone buying houses today as an investment needs a padded cell and real-estate-addiction therapy !

I hope to have 20 Gordon by the end of 2015 ... in 15 years time I will have a passive income of around $2500pw. No doubt I will pay lots of tax which is fine and you can have a hip operation "on me" or whatever you fancy at the local hospital. Thankfully the glass is always half full for positive thinkers like me not half empty for a lot of people ...

I'm off now, this web-site is full of to many negative people for my liking ... and it only took less than 24 hours to bring em out of the woodwork.

The interest.co.nz website is useful though as it allows me to maintain my borrowing at the lowest cost as I can easily compare what rates the banks are lending at.

Good luck with your substantial share portfolio ... I hope its not full of Telecom NZ shares though ... ouch !

It's all about the debt. A rolling loan gathers no loss. If the debt can be rolled over, and the prices kept high, then people can "manage." Hey, it worked well in the United States, didn't it?

This market will follow the Australian market. In the US, there is a chart called the "Case-Schiller index" http://www.arizonarealestatenotebook.com/wp-content/uploads/2008/03/2008...

and here http://duende.uoregon.edu/~hsu/blogfiles/shiller06.gif

Have a look at the spike in the US, and then have a look at the spikes in Australia.

http://www.thebull.com.au/images/keen/chart7.jpg

Then ask yourself "are we no different?"

Here's a good way to see history repeat... The US is in the "return to normal" phase- capitulation hasn't happened yet, but will, like all things http://www.moneyweek.com/investments/property/~/media/733B1CBD37D84E7DAE...

Why wouldn't English follow the same policy as the US? What are his options? Raise interest rates? HA HA HA. Sure! As if making housing more expensive is the answer! Hello lower prices and lost equity! I will be very surprised if rates do go up on June 10. Steve, if you wanted to get a loan, I'd do it soon... with Westpac, anyway. They have half their portfolio exposed to Australia real estate, when the average of other banks is 16%. Have a look at debtdeflation.com If it happened in the world's largest economy, it can certainly happen here. Credit can evaporate overnight, and the banks can start calling loans due, and stop lending at the same time. I know of someone here who is about to lose their commercial property because the bank called in their loan, EVEN THOUGH THEY WERE PAYING ON TIME. The only safe way is to have no debt, whatsoever. Steve, I am not being negative. I have probably owned a lot more property than you have. These are dangerous times. You cannot draw a trend line and suggest what has happened in the past will happen in the future.

"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."
Mark Twain

"Sacred cows make the best mince." Mark Twain

Steve, you remind me of someone named "Jeff" on the San Diego investors bulletin board. He was so certain of his trend analysis, that he leveraged his house and bought 12 houses in 2004-2005. All was great until he could no longer cover the negative cash flow, and the value of SOME of his homes dropped below their respective loan amounts. But he held on, "waiting for it to come back." It only got WORSE. Out of his so-called "portfolio" he bought a couple of houses in Cape Coral, Florida, which is now the poster child for how bad things can get. Google it, if you haven't already heard about the place.

I'm not being negative here. I have made a lot and lost a lot in real estate, and it will always have a place in my portfolio. I just won't be adding much for a while. Let fast forward a couple of years, hope for the best, and that to me looks like NOT having a war in the foreseeable future to balance the debts.

I would get used to headlines like this from Goldman Sach's: "Despite normalization of valuations, we expect excess supply, high delinquencies and the fading boost from housing policies to push down house prices somewhat further in 2010 and 2011."

This is probably the best estimate of where the bottom hits- about a 40% "peak to trough" correction before it is all over...assuming we DON'T have a world war. If we can avoid war, then the chart should follow something like this... but will everything be priced in dollars? Or some new currency?

http://www.irvinehousingblog.com/images/uploads/august2008/IHB%20Post%20...

NZ market will probably follow Japan's market psychology. The best time to buy again will probably be about 10-20 years. Until then you will be working for the banks, helping them restore their balance sheets by making on-time interest payments. Never a better time to buy!...but have you found the bottom yet? http://www.ushousingupdate.com/japan%20housing%20crash%20vs%20us%20big.png

"have no debt, whatsoever"...that should be taught to the tiny tots..where's Tolley when we need her?
Oh I forgot..the tots have all the debts Bill is running up to pay down during their low paid lives..not to mention my pension!
idiot..be quiet.

Steve your guilt has got to you. Why not stay and debate. You do not need 9 to live. You certainly do not need 20. You are plain downright greedy. Nothing more, nothing less. You are stuffing it up for yours and my kids and your tenants. Why not just be content with what you need. be careful. Your greed might bite you in the bum as they say and biting off more than you chew might put you under stress. I do not think though you will achieve 20. Higher interest rates than you are used to will arrive and you will end up with less than the 9 you have now as I said earlier you are not worth anything until the asset is sold and the money is in the bank.at some stage in the next decade or so you will realise that you need to stop the bleeding in terms of capital worth as asset values in general continue to drop. Greed is the root of all evil and boy have we seen it in the early to mid 2000's.

Hi Gordon,

I just sold 20,000 Silver Lake Resources shares at 1.795 on the ASX. That will be the deposit on my next purchase. Sorry to disappoint you. Number 10 is in my sights.

Hi Noddy,

I still have a few left but they have had such a phenominal run over the last few weeks I thought I would take a bit of profit. Great prospects ahead but at 179.5 I am happy to let a few go.

Steve - whether it proves the right strategy or not, his comment said alot about your detractor

Steve - whether your approach proves to be right or wrong, his comment says alot about your detractor

I don't know! One goes away for the weekend and World War 111 breaks out, and on this website! Peace, chaps.
But to add to the China bit above,
"David Cameron launches a campaign on Monday to prepare Britain for an era of public sector “pain”, laying the ground for decisions that would “affect our economy, our society – indeed our whole way of life”.With just over two weeks until the Budget...unleashing cuts that would hit “every single person in our country”.
Okay. The UK is far, far away. And yet next door in today's economic environment. If you think that we will avoid the fallout, then you have a different view to me.

I wish! Went up to Whangarei to see the father in law. Rain, rain and more rain. All good, as the trees and paddocks are dying....Last time I leave you in charge of the playground though, RT.

Nicholas - it says alot, europe will go through austerity and impact our exports, Asia/developing world will start to dominate world growth and demand our exports - the developing world will want food, developed world (read, the strugglers) less so.

We'll be impacted but not as badly, but partially because the era of cheap goods has ended, inflation is coming within a couple of years, and so are much higher short-term interest rates and lower housing prices.

I think Bernard is the most honest finance person I have ever seen and he is doing a great job informing people about the daily financial situation.
I agree that inflation makes the OCR small increase a necessity, but I maintain my opinion that the banks are speculating too much on it in this global climate, waiting like the sharks around the colony of seals, all gathered around a vollatile floating flock of sardines that they brought as a lure.
I wish I am wrong, but while we already have budget airlines, budget banks will find a growing future, the ones that will know how to tight their belt, and get down to the real level of their customers.

My strategy brings wealth to the country Steve. Yours just satisfies your greed and does nothing for the young and those at the bottom of the ladder. Do I need to bang you on the forehead. Your strategy makes it harder for them because you and the others investors have forced up prices artificially and when that happens you know what will follow. And it is just starting in Australia where high interest rates are slowing down the number of successful auctions and prices are starting to drop. If it happens there it will happen here. Buy your 20 houses. Of course the banks want to lend to you. That is the problem. They will not lend to first home buyers because you have pushed the price of housing beyond their reach. What will you borrow on the onext one. $250 to $350k? That is money a first home buyer cannot borrow. Why not just be happy with what you have got. Give
someone else the chance to borrow that money.

thank you Vera. You sound like a property person talking up "add value" potential.
I think thats just weasil words.
Yes yields haven't been 6-7% for years. PIs accepted that because they were confident of strong capital gains. In the current climate only a fool would be confident of strong capital gains. Even many of the bullish economists are talking flatness for quite a while.
I can now go to bed knowing that truly Property investment is not an option I want to pursue. It is yesterday's game (actually 5 years' ago game). As that wise headed Martin Hawes argues. Its a waste of time and money. I'll keep pumping my money into my growing business thanks
bonsoir

Off topic but hugely funny must read. Scott Adams, the guy behind Dilbert has done a piece for WSJ called "Betting On The Bad Guys". Laugh out loud brilliance.
http://online.wsj.com/article/SB1000142405274870402530457528500026595501...

I am in the fortunate position of coming off my current 8.99% rate in July. Being with Kiwibank I can look forward to the option of a probable 5.90% Floating rate or take a lock in option of 7.10% for 2 years. Either way if I maintain my current fortnightly repayment level i can chop off a decent chunk of my mortgage over the next couple of years. So it is all good news for me. Hooray!

Zippy - not quite the high yet - May 9 we got up to USD$1249.50. Although the price in NZD is higher than May because of exchange rates.

We are still not at the NZD$1950 that we saw in Feb last year either.

Alexanders survey is a good example as he only prints the cooments he sees fit to print....?

Soo.......getting back to basics....should I fix or float :)

Hello everyone

This floating an fixed loans is like the forex trading that I was doing.
It only effects the people that are in the market.The banks have these customers already.Like the forex you need new punters with new money.The only way to get them is to make the loans attractive enough so they want to come an play.The floating rate would need to stay low,building confidence in the market place.Telling everyone that we are going to hike it up,we going to ramp up the rates.Way to early for this sort of talk,take a drive around an see how many people that are out of work.NZ people get low wages an the cost of living is very high.

All good as the sky is blue an its a sunny day

Very nice site!

This information is nearly 3 months old.  Whats the updated situation on fixed vs. floating?