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Opinion: Olly Newland explains why the housing gloomsters are wrong and now is the time to buy
By Olly Newland
The news from the front seems to be doom and gloom these days if we go by the articles and news that get pumped out by the media.
But it pays to remember this about the news media: Bad News Sells.
You hardly ever see headlines that say positive things, let alone good news.
It seems that it has to be 'shock and horror' each time - and the more shock and the more horror the better.
Remember, all the media are jostling for attention and the headlines are designed to catch attention. Therefore - whatever the news is - many times the worst possible angle is portrayed in an attempt to make it penetrate the mind of the readers who are already swamped with messages from all sides.
So it is no different for news about the property market. There is no doubt that the market has slowed but it is not nearly as dead as the media would suggest.
There is always an argument between over-stating the downside and over-stating the upside and it sometimes takes fine judgement to decide which is the more accurate.
Related Topics
I have personally experience several very nasty slumps and very exciting booms both here and in Australia. (Both were costly) These experiences give me some authority to comment (you are entitled to disagree, of course).
I am also sure one day, the unpleasant experiences we have witnessed or endured will pass and we will look back and wonder why many of us were so extremely nervous without good cause.
Of course many people have been badly effected and one has to be sorry for them even if it was there own greed that put them there in the first place.
Even worse are the innocent who were duped by dodgy practices or outright theft.
The fact is we live in a capitalist society and financial disasters are one of the hazards of the game.
Done Deals
One thing is for sure. I got my best bargains during downturns.
Remember the Asian Crisis around the mid nineties (1997-99). All the Far Eastern countries went through something similar to what we are currently witnessing and, looking back the bargains I got at that time were mouth watering.
One was a house in Remuera in one of the best streets. It was openly advertised as "Asian owner panics and bails out". The CV was $530,000 and the agent let it be known that the best offer over $400,000 would be considered.
As usual, my bargain hunting nose twitched and I offered a jaw-dropping $350,000 which I thought would never be accepted as the owner had paid $450,000 two years previously.
To my total amazement it was counter signed at $365,000 and SNAP! it was mine.
A lick of paint, and some carpet and I had it independently valued at $495,000. I sold it cash unconditional for $460,000.
Total time from start to finish: two months. Not bad at all and better than a wage. A real win-win deal - for both me and the ultimate buyer - all thanks to a panicky seller.
It got better. About the same time a block of 12 shops were advertised again by an Asian owner who was panicking himself into a state of total meltdown. (Note: panic visits all ethnic groups equally, but the troubles in the Asian economies at that time pressured Asian investors out of all proportion it seemed at the time.)
The rent on the 12 shops was (or should have been) $120,000 net per annum but because of bad management, the absentee owner, plus 'The Panic' made for a heady mixture of both greed and fear - on my part that is.
I purchased the lot for $750,000 representing a potential yield of 16% when it normally would have been 8% maximum.
Two years sorting out the leases with some very rubbery tenants saw the rents finally settle at $115,000 net which at 8% gave a paper value of $1.43 million.
I put it up for auction through a major Auckland real estate company (rare for me to sell and even rarer by auction). Spirited bidding saw it hammered down at $1.39 million. Close enough, I thought. No need to be (overly) greedy. (Always leave something in for the next fellow.)
There is still money out there
The fact is that the recent boom was the aberration. The current market is the norm.
Things are much like the period 1998-2002 following the Asian Crisis except interest rates then were 11% and rising.
It took the horror of 9/11 to drop interest rates and fire up the market - which in turn started the whole chain of events we have witnessed over the recent past.
This recent article intrigued me. It showed that people with deep pockets didn't get there by being wimps. They got there by having the courage of their convictions.
To me it also says that the market may be slow at present ... but compared to what?
Omaha bach sells for $2.6m by Bevan Hurley NZHerald Sunday Aug 1, 2010
How the agents see it
I am the first to admit that real estate agents exaggerate and push the envelope over the edge and beyond.
But they don't generally tell untruths as they would lose credibility if they were caught out.
Therefore the figures produced by Barfoots, Auckland's biggest residential agents must be taken a face value and make interesting reading indeed. Now we are dealing with facts and not the fevered scribblings of reporters, just-out-of-school, trying to make a name for themselves.
Read the facts for yourselves:
Residential Settled Sales June 2010
Period Number of Sales* Volume of Sales
June 2010 665 Properties $347,834,232
June 2009 861 Properties $449,262,820
12 Months to June 2010 9,171 Properties $4,894,674,036
12 Months to June 2009 7,682 Properties $3,924,800,491
What is most important about this article is that the actual number of sales in 2010 was 9,171 properties while a year earlier they were only 7,682. If this increased number of sales is a sign of a worsening recession then we are indeed living in a topsy-turvy world.
Rents Rising
There has been much debate about whether now is the best time to rent or to buy. The problem with much of the debate is that the opposing parties come from completely irreconcilable points of view.
Renting is undoubtedly cheaper than owning on a strict 'money in - money out' basis.
Every accountant will agree with me when I say that - for maximum efficiency and cost-saving, renting will save thousands of dollars annually. But following that argument implies that an even more efficient way to obtain shelter is to live in a cave, rub sticks for fire and dress in rags!
We don't do any of those things because there is an emotional angle to consider - and what price emotion? What price self-worth? What price for the pride of ownership?
And what price for the hope at least, of making a profit one day?
The problems with renting are five fold
1. You pay forever and don't even own the letterbox
2. Once you're off the property ladder it can be very hard to get back on
3. Any improvements you make to the property will only benefit the landlord
4. You can be evicted at relatively short notice, and
5. Rents are rising.
In other countries where renting is a way of life, very long leases (decades, even lifetimes) are granted and these 'property rights' can often be bought and sold for substantial sums.
Think of it. If it were possible to rent a home for (say) 99 years with only occasional rent reviews then renting would definitely be a good alternative for you, and your children and even grandchildren as these types of leases can also be transferred quite easily (akin to long term commercial leases).
But we in NZ, regard renting as temporary and such bodies as the Tenancy Tribunal and the cavalier attitude by both landlords and tenants only make for more needless confrontation.
The Evidence
As first predicted here ... Auckland rents on the up
Rents are rising in Auckland as landlords try to recoup higher costs, real estate agent Barfoot and Thompson says.
Straight after this year's Budget I predicted that rents would rise because of the ill-conceived depreciation changes followed by unintended consequences.
For all the know-alls out there who boast that you are happy renters I will give you another prediction:
Within 2-3 years you will standing on the front lawns of the few properties which are available to rent, bidding furiously against the multitude just to get a roof over your heads.
For another point of view read this.
The GST Blunder
Not helping matters is another anomaly which has been brought to my attention just recently and which compounds the issue of rising rents, costs and market distortions.
I have just got off the phone to a developer friend of mine who has explained why many developers are hiding under their beds.
Other than the obvious that developers are a rare breed these days (thanks to craven bankers and shonky finance companies) there has been an eye-watering blunder with the new GST rate which kicks in next October where it increases from 12.5% to 15%.
Developers are holding back (starving the market and thus helping the rent rises) for the reason that if they start a project now (and that includes buying the land) then they can claim back 12.5% in GST refunds. Until now when they sell they pay back the 12.5% tax.
But if they haven't sold and settlement is after this coming October then they will have to pay back 15%.
A two and half percent increase doesn't add up to much on everyday items - but it's different on a house. viz: take the average $500,000 new build and ignore profits for the sake of the exercise.
Today a developer can claim GST at 12.5% and claim $62,500 by way of GST refund. But if he sells after October his refund may have been $62,500 but now he to pay back $75,000 creating a straight loss of $12,500.
But wait, there's more: a lot of properties being built today are $2 million or more, which would include many commercial new builds as well. In this case the pre October refund would be $250,000 but the repayment after October would be $300,000 or a $50,000 loss. What developer in his right mind would deliberately make a $50,000 loss from day one?
How are first home buyers ever going to get on the property ladder if the tax content alone is so high? No wonder more people are renting and rents are rising.
Is the recession coming to an end?
I am very conservative by nature and a bit of a pessimist to boot, but I am at the coal face not only on my own behalf but also as I assist my mentoring and consulting clients. Despite everything I can see glimmers of light. The world has not come to an end to the mortification of the doom merchants.
Overseas there are some good signs such as rising share markets, profitability and confidence returning, so barring unforeseen events an improvement is on its way.
Some say the world has changed for ever and people will be more frugal from now on. I don't believe that for one minute. Human nature never changes. As the economy improves we will see the same habits return as strongly as ever. People will spend, over spend, go broke,or make fortunes.
Is demand is picking up? I offer this as a portend of things to come: As recently as this week I advertised three retail shops and one large office space to lease - and received over 20 replies in just three days. Two shops have already been taken, leases signed, and the money banked. So too has the office, I have just been told, as literally I type these words.
Next week I have some one who says he will take the third shop (but I won't count on that until that's done and dusted). One of the strange things I have noticed during times of high unemployment (latest figure 7%) is a corresponding increase in enquiries for shops and factory space and to a lesser extent smaller office space.
I have seen this again and again as unemployment wanes and waxes. I put it down to the unemployed looking to start up a business as an alternative source of income.
Strange indeed are the ways of the market. So in a quirky way I must thank Alan Bollard for recently raising the OCR and compounding the unemployment problem because he has thus created another wave of prospective tenants for my properties.
I warned that the raising of interest rates in a brittle market would have unfortunate side effects and maybe now the ivory towered bureaucrats will put away their publicly-funded credit cards and take some notice. I have never quite believed statistics and rumour but believed in direct market research myself. Putting out the adverts for the vacancies and getting the responses I did was not only uplifting, but the truest market research that can possibly be undertaken.
In summary I believe we are bumping along the bottom of the cycle and real improvement may take a while to happen - but it will happen. Take your courage in both hands so that in the future you will not look back and say "If only I had taken advantage of the market during the recession instead of hesitating!"
Olly Newland
August 2010
www.ollynewland.co.nz
© 2010 Olly Newland. Used with permission.
244 Comments
Olly this is the worst
Olly this is the worst recession since the depression and if things are improving then it is at a snail pace. You cannot relate the current market conditions to any other earlier time as no other recession has hit the world like this one in modern times other than the depression. Looking back to the asian crisis is ridiculous as I am sure we got out of that one quicker and in better shape than we are now. New Zealand is not a rich country. There are not many people out there with your kind of pockets. The average income in this country is pathetic and that is why so many leave to get better paid work overseas and that is currently building up steam again. The balance sheet in the average NZ home is not impressive. They do not have your millions to use or borrow against. They have sizeable home loans,car loans,hp's and credit card balances. They do not want any more debt and if they did the banks will not lend it to them. I am sorry to have to say this but I do not think there are enough people in this country who have the ability or the inclination to get out there to buy the property off the people who currently need to sell it before the bank does and so there is going to be a long and slow drop in property values in NZ right across the boards including residential,commercial and agricultural. I don't think you live in the real world. You cannot understand or relate to the average person who is on a pretty basic income,already has a stretched balance sheet and has no inclination currently to buy any more assets.I agree there are people with money but they are in a clear minority.They are outnumbered by the people who are currently stretched and who need to reduce their debt by selling assets that no one currently wants.This has suddenly over the last two months caused the major shift in sentiment and the start of the drop in real values.
Shorter Olly:
Shorter Olly: fapfapfapfapfapfapfap
where is Peter "spruiky"
where is Peter "spruiky" MacDonald these days? Is Stratford not connected by telephone to the rest of the country? We need some good news Peter!! Fui Fui gone
Gus Gould for Prime Minister
Gus Gould for Prime Minister next eh Olly
Anon- well argued but i
Anon- well argued but i respectfully disagee. The Asian Crisis was bad enough but when you have experienced the 1987-1991 slump or the 1976-81 slump as I have then you can see that this slump is no worse than those. I live in the real world and deal every day with real people. Their problems or ambiions automatically become my problems or ambitions and I am doing my best to advise them as it is in my best interests to do so both socially and financially.
And for those of you who think I am promoting a "buy now" message let me assure you that I neither buy, sell or promote any property whatsoever. It makes no difference to me whether the housing market is going up or down as I am untroubled by any conflicts of interest. I give impartial advice either way.
One of us is right and one of us is wrong and I admit it could be me that is wrong - but i doubt it.
I say it as i see it - and no more.
OllyN
Congratulations Olly, this is
Congratulations Olly, this is your first well written article - I should qualify - that I have read.
Your optimism is to be commended and I can now see that you do look (as do Bernard and Rodney), at facts and figures. The only real difference is the facts you look at and your interpretation of them - therefor the conclusion you draw.
One thing at-least that you are correct about is that in all markets either upwards or downwards, that there can be winners and losers.
I think that if I were John Doe and were to save 10% as a deposit and purchased a home to live in here in Auckland that the value of my house would soon be in negative equity because, as Hugh Pavletich clearly illustrates in his interpretation of the raw data - that the underlying cost of the home mortgage is currently around 7 times the average income (remember 2.5 - 3 times is his statistical historical norm), thus the property market in-general will return to the historical norm over time and in the process it would take my deposit and more with it.
Also, because an equilibrium between lending and borrowing from banks seems to have been reached - our countries personal overseas debt levels are truly horrifying and without more borrowing ability we can only spend what little we currently have.
A debt to the bank will last 20 to 25 years, so if I were to purchase Olly, at your "todays opportunity knocks once" prices I would check that the market is in fact low. First. In your example above showing number of houses sold to the value of those houses.
12 Months to June 2010 9,171 Properties $4,894,674,036
12 Months to June 2009 7,682 Properties $3,924,800,491
You are correct that more houses were sold in 2010 than 2009 and that this is a good indication of future price increases how-ever the average value of each house sold has increased in 2010 by about $23,000. Given that this months house volumes have fallen by 17.5% over the previous month - where is the re-correction forcing the price back down?
You can say that the GST issue is causing developers to put hold on projects. But are your figures correct?
If a house currently costs $100 to build (including profit), then with GST @ 12.5% the buyer pays $112.5o. When GST is 15% the house buyer will pay $115.0o therefor shouldn't the developer be trying to get the house finished today before the price kicks in and to sell in tomorrows world with the increased across the board price increase.
GST is accounted for in the month it is created but profit and loss are done annually hence $112.5o - $56.25 (as the cost price to build including GST) = $56.25 (profit which less 12.5% GST is $50 profit). Sold after the date is $115.0o - 56.25 = $58.75 (profit which less 15% GST is $50.80 profit), a clear profit advantage in the pocket of the developer from spending now.
So there is no need Olly, for developers to suddenly stop developing because your "$50,000 loss from day one" is the calculation where the blunder lies.
Does a non GST registered home buyer sell today (as seen in the high number of listings), or do they hold till the kick comes and increased new house prices (where developers are GST registered), drives their current home value higher. The question here is why would any home owners currently have their property on the market to begin with?
Alas Olly I don't currently have skin in the game and for good reason, how-ever I tip my hat to the wise old men out their who do and look forward to my generations time once affordability has been put back into the words 'home ownership' and when the wealth of our countries aged is finally passed on to it's youth.
Might we have a standing
Might we have a standing ovation for Aaron please. Top shelf.
Here Here, excellent reply
Here Here, excellent reply and counter analysis Aarron !
Hey Olly, Back in early
Hey Olly,
Back in early 2005, you saw a massive property crash as a "done deal". I read that little book of yours, pretty well written and entertaining.
The problem is, from that point on, the property averages rose for another 2 1/2 years or so by another 30% or so...
Right now, you're saying it might be the best time to buy in years.
Could it be that maybe the best time to buy might be in another 2 years or so, after the prices fall by another 15-20% or so, especially the imminent soon-to-come:
- Mainland Chinese property crash (already fully expected by the Chinese govt & regulators), followed by Australian property meltdowns, once the Chinese demand for some of their primary exports collapses?
- "Stop the Iranian nukes" Middle Eastern war, which could possibly go mutually nuclear if it's delayed for too long,, and the associated oil price (and quite possibly food price) skyrocketing?
I mean right now the prices are incredibly high compared to the incomes, and the global risks have never been greater, not just from some fringe terrorist loonies, but from proper, big-deal sized shaky economies and very nervous governments and intelligence communities.
I mean, wasn't this one of the scariest times ever? With so many things that could wipe millions if not billions of people off the earth, and trillions of the global capital flows?
And, from a pure value buying point of view, aren't the prices way too high to justify all the enormous risks, some of them being extremely likely to happen soon?
Cheers!
Hey Olly, Back in early
Hey Olly,
Back in early 2005, you saw a massive property crash as a "done deal". I read that little book of yours, pretty well written and entertaining.
The problem is, from that point on, the property averages rose for another 2 1/2 years or so by another 30% or so...
Right now, you're saying it might be the best time to buy in years.
Could it be that maybe the best time to buy might be in another 2 years or so, after the prices fall by another 15-20% or so, especially the imminent soon-to-come:
- Mainland Chinese property crash (already fully expected by the Chinese govt & regulators), followed by Australian property meltdowns, once the Chinese demand for some of their primary exports collapses?
- "Stop the Iranian nukes" Middle Eastern war, which could possibly go mutually nuclear if it's delayed for too long,, and the associated oil price (and quite possibly food price) skyrocketing?
I mean right now the prices are incredibly high compared to the incomes, and the global risks have never been greater, not just from some fringe terrorist loonies, but from proper, big-deal sized shaky economies and very nervous governments and intelligence communities.
I mean, wasn't this one of the scariest times ever? With so many things that could wipe millions if not billions of people off the earth, and trillions of the global capital flows?
And, from a pure value buying point of view, aren't the prices way too high to justify all the enormous risks, some of them being extremely likely to happen soon?
Cheers!
Olly, Factor in much much
Olly,
Factor in much much higher future costs for energy into your equations and you will see that the recession is far from over, its only really beginning. The cheap oil fueled resource party is over. About the only property I see appreciating in value is agricultural as part of the 'global land grab', which is really about food security and a transition into 'real' assets.
Hello Olly N. Thank you for a
Hello Olly N. Thank you for a well written article that makes clear your point of view, most of which I agree with. I am a long-term investor, never selling all the properties I have bought over a 25 year period. For me rental income is as important over the long run as is capital gain. I agree with your view that rents will rise. Given the very slow pace of rent rises over the last 7-8 years I think they are currently well under-valued. I was buying property in the 1980s and 1990s and the initial gross yield was 8-10%. Properties in those same areas now are providing initial gross yields of only 5-6.5% now and in the last few years.
In effect, people have had the use of an asset (house) at a much cheaper rate than historically.
Your comments about the severity of this recession are apt. The media (including this site) bang away about how bad it is but, I think because there has not been a recession for a long time it's all a bit new to many and so the severity of it is magnified in their mind. Like you, I don't think its necessarily any worse than the late 80s and early 90s or the 1970s.
Thank you for the interesting comments.
Rents have been pretty much
Rents have been pretty much tracking inflation since forever. Your yields have dropped due to the current house price bubble. The coming falls in prices will bring both house prices and yields back to trend.
"There is still money out
"There is still money out there The fact is that the recent boom was the aberration. The current market is the norm."
Yep
"In summary I believe we are bumping along the bottom of the cycle and real improvement may take a while to happen - but it will happen."
What a bloody long winded way to state the obvious....well to some of us, like good old Doomster me. "houses are going to drop, to far above the long term mean"
Or put another way "bail out, time to buy is near bottom, bottom, just on the rise. Will roll around in a couple yrs, but hey could be a bit longer bottom this time, no hurry"
" Take your courage in both hands so that in the future you will not look back and say "If only I had taken advantage of the market during the recession instead of hesitating!" "
I wonder if all those doomstayers bailed out early....?
I wonder who is picking off the cheap good value properties, even resellig with a 20 to 40K profit in some cases?
Oh yeah those bloody doomsters right lol
Can't quite understand your
Can't quite understand your point old chap but I would ask you why investing has to involve selling. If the market is at a dip or a peak, one doesn't have to sell. Just keep the investment.
Olly, Do you hold any
Olly,
Do you hold any gold?
Steve
Good reading Olly
Good reading Olly
Sry above post is mine.
Sry above post is mine.
"The Asian Crisis was bad
"The Asian Crisis was bad enough but when you have experienced the 1987-1991 slump or the 1976-81 slump as I have then you can see that this slump is no worse than those. "
Absolutely agree.
Time will reveal 2009-mid 2011 as the investment opportunity of a generation. Not just residential housing - which I mention because the majority of contributors to this site don't seem to realize there are other ways and means to capitalize in the current climate.
Anon you stated.. "The balance sheet in the average NZ home is not impressive."
Reality check. It never has been and under existing policies never will be.
"They do not want any more debt and if they did the banks will not lend it to them."
Anon, this is where your synopsis falls over. It's not that consumers don't want more debt, it is the restrictions imposed by the retail banking sector which have put a cap on the public's debt exposure. Precisely the same series of events occured 1976-81 and 1987-1991. They will continue to be repeated in the future.
The banking sector follows the same script. They get to the end and revert back to the beginning. A trend the PE markets almost rely upon. Understanding such trends and how the public reacts each step of the way.. then acting on this knowledge, is how real money is made.
Pay too much attention to the media - unfortunately this website included, the ill-informed, poorly advised and/or inexperienced, and you'll amount to another statistic in someone's market analysis.
Good on you Olly for the
Good on you Olly for the article and well done Bernard for posting it. I agree with Anon above. I have eased back reading interest.co.nz (I used to read it every day for past 2+ years) because the constant negative beliefs were starting to turn me off.
Alot of the "speculators" have sold out, some are managing to hold on and are faced with becoming long term investors. Rents ARE rising, long term rates will drop back further, people on the ladder will upgrade at a discount to those who have to sell and the renters will keep saving for their deposit. In general life goes on, property goes up and down, buy good and think long-term horizons and for me property is still a great investment
Kind regards
Great article Olly!
Great article Olly!
"for me property is still a
"for me property is still a great investment"
Well said.
hahahahahahahahaha Good
hahahahahahahahaha
Good joke ;)
Did anybody else read that in
Did anybody else read that in the voice of Grandpa Simpson?
Was leaning more to Mr Burns.
Was leaning more to Mr Burns.
OllY, you place so much
OllY, you place so much emphasis on the sales figures , comparing 2009/2010 y/y ,yet fail to mention the sales figures 2001-2009.You believe yourself to be an astute /seasoned property advisor, yet are advising people that now is an appropriate time to invest , and this period is no different to other slumps, New Zealand will go through a generational change in regards to property,there will be no economic gain in purchasing real estate in New Zealand currently and in the foreseeable future .Your comments are inappropriate and ill judged.
well said. Only deluded
well said. Only deluded property spruikers like Oily N can't see what is blatently obvious to anyone else with an ounce of common sense.
Whats slicker and more full
Whats slicker and more full of it than BP.....Oily N
When Rod Duke of Briscoes and
When Rod Duke of Briscoes and Rebel Sports says "there is something out there economically worrying the living crap out of people" you need to be a bit more objective when looking at the state of the nation. This recession is just starting to hit a lot of people in New Zealand and we have a lot of water to flow under the bridge yet.Why would would you buy property now and even borrow for it as most do. There is a good chance it will be worth less tomorrow. This has years to go before things even get back slightly to a more stable and healthy economy.
giving thought to the
giving thought to the question concerning optimism,pessimism, the present economic situation and how people should respond, one has to ask-:
What difference does it all make to the Amish? not one iota.
What do we need in order to be happy , productive, content?
Briscoes and Rebel. Two
Briscoes and Rebel. Two stores that neatly represent the twin obsessions of New Zealanders, house stuff and sport. If they're doing it hard ...
Very selective Kakapo...why
Very selective Kakapo...why are you not quoting Hellensteins, they have up'ed their profit forecast.
"there will be no economic
"there will be no economic gain in purchasing real estate in New Zealand currently and in the foreseeable future "
Ostrich, based on what specific data and analysis?
Or is this your assumption.
Interested to know what experience you have based this comment on.
I agree growth in property
I agree growth in property price is over unless we drastically increase immigration to increase demand for housing, or drastically increase GDP so we have more money to spend on housing. Creating more debt and Inflating the economy doesnt increase real value in the long run, we just end up working longer and longer hours and have less and less to show for it.
I dont think wages keep up with inflation in the long run.
Problem with immigration is :
Problem with immigration is : What are they going to do when they get here?Displace workers already here~ ie: work for less. Doesn't sound like that's good for wage increases, and therfore house prices. And by GDP increase, I guess you mean, increasing our exports, so that we start to earn more than we borrow. Yes. But don't you think we'd be doing that now if we could? GDP can increase just by digging a hole, and filling it in again.
It staggers me that someone
It staggers me that someone can be so unaware of the seismic and permanent changes that are happening in the global economy.
I only hope Mr Newland that when you have lost the shirt off your back (if you REALLY ARE making investments now in housing) you are man enough to come back and offer a mea culpa in due course.
wouldn't be the first time
wouldn't be the first time he's got himself in to financial trouble.
Maybe this time he'll get it right, but I doubt it.
Note that he says in the
Note that he says in the comments he states that he's not buying or selling anything himself (must be all about spruiking for his advice business), and yet he tells everybody else that they should. Hmmmmm. And as for gloating about unemployment putting his rents up - what a nasty piece of work. He's as sleazy as Ron Jeremy selling used cars.
Sleazy, greazy, Oily
Sleazy, greazy, Oily
Give it your best sprooking
Give it your best sprooking shot Olly....throw the keyboard at it.....you are looking more like the "King Canute of sprookers" than ever.....The downturn is "structural" Olly....sprook all you like...this is not cyclical,,,there is no upside to be dragged from the future on the back of spin. At best you will get a razor sharp saw toothed slide...just the sort of edge that every property sprooker's bum needs to experience. Got your bandaids ready Olly?
Structural ? You mean like
Structural ? You mean like Cullen said the surpluses were ?
If there is one part of Ollys article I agree with its that human nature doesnt change....in time the banks will loosen up credit and everybody will be back into it again..until the next recession etc etc etc
one day maybe, but not until
one day maybe, but not until we go through some significant pain first
We just past peak oil, what
We just past peak oil, what you think you know about th last 50 years as no bearing now going forward.
regards
Wally @ 07Aug 9.29am Cheers
Wally @ 07Aug 9.29am
Cheers Wally, has to be the comment of the day !
Go back to finding acorns for
Go back to finding acorns for the coming economic winter Wally.
I see as part of the
I see as part of the Governments goal of propping up the housing market, the Government accomodation subsidy to the landlords, that is smuggled to the landlords via tenants, was up 18% last year to 1.2 Billion dollars.
http://www.stuff.co.nz/national/4000703/More-Kiwis-need-help-to-pay-rent
Another worrisome fact
Another worrisome fact underlying the high number of people receiving accommodation supplements is that there's an eligibility cut-off at an asset level of $8000. That's a hell of a lot of people with no savings and no assets.
the accomodation supplement
the accomodation supplement should be cut as it is holding up rents artificially.Let the market set rent.
IIR the accomodation
IIR the accomodation suppliment was introduced when the Govt started bailing out of state housing and increased state house rentals to market rates.
However like most Govt handouts it is being rorted left right and centre.
Olly go and drive down to
Olly go and drive down to Hamilton, Wellington,Wanganui and New Plymouth and see just how many shops,commercial and business properties are empty and how many houses there are for sale and for rent. It is staggering. And it is getting worse by the week. Are you saying it is different in Auckland. Can anyone in Auckland tell me what it is like up there.Is it different from the heartland cities. Where are all the buyers going to come from?Where are they going to get their finance from? This recession is exceptional.It is just starting for many people and it has a long way to go yet. You do not live in the real world. You have deep pockets unlike so many New Zealanders who are struggling with their debts and the rising costs of living. Retail employs so many people and it is struggling at present. If it lays off more people than it already has then this will put more pressure on the benefit system. And some of these people will follow those already treking over to Australia for work.
Auckland is very different.
Auckland is very different. Check Statistics NZ and you will see that even in the boom Auckland's natural population growth was greater than the rate of dwelling construction. There is no shortage of foreign buyers. There have also been signifigant changes to Auckland's District Plan which have pretty much stopped any major residential development. For example you are no longer allowed to build a 2 bed apartment that will sell for under $500,000 in the CBD (PM 2 Appendix 12). You are no longer allowed to build apartments in Newmarket unless 20% of the units sell for $900,000 plus (PM 196). These District Plan legislated prices are twice current values so no developer will build again until these prices can be achieved.
When the population is increasing and no development is allowed within city limits old rules about how much property should be worth versus income no longer apply. Go to NYC or Asia and see how much average income you need to buy average house.
These conditions are to keep
These conditions are to keep the riff-raff out old boy...
I can vouch for the
I can vouch for the Auckland's North Shore (where I aspire to live) and the near south (where I do live). In both sales are pitiful, but the odd gem comes on to the market and a good price is often got. On the North Shore there has been some intensive housing ("infill housing") over the last 15 years - these dwellings are on about 400 m2 and are ideal rentals. Presently there are scores of them on the market for the low 400's to 500's (depending on suburb) but very few (and I mean very few) are moving. Family homes on the shore are moving a little, but not a lot. Overall the statement that the housing market on the shore is in "Neutral" is a fair one. In the south house prices have plummeted, I live in Mount Wellington. A house very similar to mine sold for $490k just before the crash, I'd be lucky to get $350k for mine today. A brick-and-tile rental sold for $280k a few months ago (my neighbour bought it), the property investor who bought it three years ago paid $420k.
Banks are not lending over
Banks are not lending over 90% LVR because they are still factoring in at least at a 10% drop. But at 90% you have to have a fantastic income/s and be prepared to cover their butts with a fantastic insurance policy. As most NZrs real wages are dropping and real jobs are hard to get and the fantastic wages are limited to a small % you go figure Olly
at 90% they believe they are
at 90% they believe they are taking the risk, hence the criteria hurdle. They are willing to see this risk as acceptable as there need to 'manage' the market down to pre 2000 levels while unwinding the own exposure is tantamount. And anybody that thinks they care stop dreaming.
A 3 bedroom house costs $20
A 3 bedroom house costs $20 pw to manage by a rental agency and $40 pw on council rates. If the rental return is $300 per week, then net income is $240 pw. At 8% interest, $240 will service a loan of about $150,000 or little more. There is no property available for that price. So it is the game of putting our own 50% equity or take a loss and waiting for the 'capital gain'. I dont think this gain is anyway nearer.
You forgot to factor in the
You forgot to factor in the IRD with income tax and maintenance of the property, which is quite considerable, as tenants wreck houses.
Olly guys like bayleys will
Olly guys like bayleys will do well because their market still has money. but the lower end stuff is going to take a pounding
OllyN states, "Bad News
OllyN states, "Bad News Sells." And so it does. But that cliche relates primarily to newspapers ( or websites, in this case!). But he fails to mention what the past "Good News Sells", and that, delivered by a raft of property experts, salesmen, and seminar conveniers, sold property. Not newspapers at $2 per copy, but property at hundreds of thousands of dollars per purchase. Property that many bought based, in the main, on the Good News; that property never goes down over time; that the taxman will help pay for your wealth and that capital gains were assured. "Everyone is doing it; you're mad if you dont". Just remember OllyN, that the advice you give, and have given, isn't measured by the value of a newspaper if it's wrong. But by the devastation that you will have caused; the financial ruin that you will leave people in, if you are wrong. Now is not the time to be playing with peoples lives. Those who call 'doom' now, and are wrong, may be chastised in the future for limiting peoples profits. Those that call' The Next Boom' now and are wrong are going to oblitereate the lives of many, many New Zealanders.
The idea of NZ house prices
The idea of NZ house prices going up to even more unaffordable levels relative to income IS BAD NEWS to young lower and middle class families countrywide and anyone that cares about New Zealands future.
Falling house prices are only DOOM AND GLOOM to those wealthy enough to invest in property speculation and too greedy to care about anyone else. Oily N has demonstrated with this article that he cares about no one else but himself.
The last thing New Zealand needs now is rising house prices and more debt owed to Aussie banks, WHAT A DISASTER that would be. Our youth are already committing too much of their working lives to working for the banks as it is. Either that or they are leaving in search of a better life elsewhere because they can no longer afford to stay. NOW THAT'S SAD
Nicholas A. You are talking
Nicholas A. You are talking nonsense. All my clients must use their solicitors and accountants at all times to double check any proposed transaction and often lawyers and accountants send me clients because they are not familiar with some of the nuts and bolts of the market. Indeed your post and your frequent previous posts, are "advice" to readers so you too could be accused of the same thing- scare mongering and causing loss.
Other posters mention areas out side of Auckland as have taking a hit. I would agree and that's why the median price is not a good way to measure price fluctuations. The main centres are by and large OK with notable exceptions being parts of South Auckland and parts of West Auckland and all the nappy valley homes- not to mention leaky stuff. I would also venture to say that the mixing into the statistics the sale of 1000's of leaky homes, joke shoe box apartments or forced sales- should be left out of the figures. We want to know what the real market is doing. i.e. what willing buyers and willing sellers are thinking and doing. The picture could well be a little rosier.
What? Everything's rosy so
What? Everything's rosy so long as you eliminate from consideration all the things that aren't rosy? How very dishonest and selective of you.
Olly is right, me
Olly is right, me think. Rents increased 10% last year in Auckland, and the only way is up.Severe shortage of rental properties will last for years. Rates are low and will stay low for some time. Plenty of houses on market, must be few keen sellers out there. Good time to buy, for sure, but is there a money?
Should we be surprised that
Should we be surprised that demand for rentals goes up (and hence puts pressures on rents) given that there's no demand to buy at current prices?
Working Class Hero - Right so
Working Class Hero - Right so when purchase prices come down people will buy again and the pressure on rents will come off, rents should fall from whatever level they get to.
So the determining factor about how much higher rents will go is how fast the purchasing price comes down.
Good point !
hahahahahaha
hahahahahaha
Is Olly right. Is the
Is Olly right. Is the property market in central Auckland both commercial and residential still pretty neutral. It sure isn't anywhere else in New Zealand.
If by "neutral" you mean
If by "neutral" you mean nobody is buying at the prices the sellers are asking then yes, neutal describes central Auckland well. The question is, given this standoff, who is going to back down first?
Oily N
Oily N
I do not advise . I have an
I do not advise . I have an opnion that differs to yours, and post it here; that's all. Your own words ~ "Take your courage in both hands so that in the future you will not look back and say ,If only I had taken advantage of the market during the recession instead of hesitating!" can be interprested both ways ~ to sell and to buy. If my opnion is wrong, I shall have lost an opportunity to profit from price increases, but still have my capital in tact. If your advice ( taken from the very public offering that you regulaly make) is wrong, those who take it will likely lose all they have, and more depending upon the borrowings. Given the age of much of our property holding population, that is an event they will never recover from.
As an illustration, OllyN, of
As an illustration, OllyN, of how people feel when they have been maladvised, here's a post from another thread on another topic, from this site,today!
"by Bemused | 07 Aug 10, 1:56pm
.....Well I hope the directors and Consultants' houses become leaky homes, their wives leave them now or have extramarital affairs, their expensive wine tastes like sick, their children finally work out their fathers are not nice people and they generally spend the rest of their lives looking over their shoulders wondering if the law is going to tap them on the shoulder or an investor or one of their relatives is going to do them damage."
Nicholas Arrand, your posts a
Nicholas Arrand, your posts a quite dissapointing on this topic. You seem bitter toward OllyN and anyone who says anything good about property.
Me thinks you have some axe to grind. I am reconsidering the attention I pay your posts.
Please concentrate on the topic, not the man.
I'd like to believe that the
I'd like to believe that the market will return to levels more in line with the fundamentals, but I don't think it will.
The NZ market has undergone a structural transformation.
There's no need for first home buyers anymore. During the boom the investors bought up the properties they used to buy to turn into rental properties. And the would-be FHBs were forced to rent (which worked out nicely for the investors). A self-perpetuating cycle.
Instead of being driven from the bottom up, the property market is now driven from the top down. Prices at 7 times average income are not actually that unsustainable - rich immigrants, property investors, and those who already have significant equity built up in their homes are the ones buying.
Ordinary Kiwis are now good for nothing more than renting fodder for all those PIs. The market will still survive if people can't afford to *buy* houses, they only need to be able to afford to rent them.
Wow what a depressing future
Wow what a depressing future that sounds like.
I wonder if the poor renting masses would want to vote for or against a government that leads us down that path. Feudalism generally isn't too popular amongst the commoners when tried preiously. Or in your new future do they take away the vote and have Oily N as the tyrant King of New Zealand?
I'm sharpening the pitchfork.
I'm sharpening the pitchfork.
"As the economy improves we
"As the economy improves we will see the same habits return as strongly as ever. """";;jjhg
And who says it's improving or will ever improve? The days of cheap energy are over and we are at or near the top of the bell curve. Until we find a replacement for cheap energy then the economy "as we know it" is dead or dying - it's all down the back side from here on out - besides there will be more pressing and destructive "habits return" than property speculation in the next 50 years.
Good news. Distorted markets
Good news. Distorted markets are at their peak of unsustaianability when people start talking about 'a paradigm shift'; a 'structural transformation'. Take the legs away from any ladder ( the FHB's) and see how long those on the roof can hold it suspended in the air!
This time it's different. New
This time it's different. New Zealand is special and not like housing markets in every other western country.
Sounds like famous and very foolish last words to me. Time will tell.
I agree with Nicholas, but I
I agree with Nicholas, but I also believe in 'caveat emptor', as it is impossible to legislate against the actions of finance company crooks and others who dupe and con people out of their hard earned savings.
That said, Olly, I cannot see the reasoning for optimism in this market and I think your prognosis going forward is wildly optimistic. I think that it will become a real buyers market, but not for at least another couple of years. There is a massive amount of mortgage debt out there (far more proportionally than we had during the 80s, 90s and 00s), and interest rates are going to have to rise substantially over the next 2-5yrs. If we were to put on our rose coloured glasses and forecast mortgage interest rates around 10-12% in 2-3yrs from now, then I fail to see how prices will hold, let alone drop 20-30%. From my perspective, I see a lot of debt-stressed property around, and an interest rate of just 10% would kill most of these guys. You say that there is a lot of money out there, but if you calculate that proportionally with the amount of debt, then it is really peanuts.
Of course, neither of us knows what will actually happen - we can but rationalise, based around our inherent beliefs, prejudices and pre-conceived ideas. However, I would love to wager a grand with you that residential property in NZ will be 25% lower than it is now in 3yrs time. In any case, all the best to you.
Ludwig - "would love to wager
Ludwig - "would love to wager a grand with you that residential property in NZ will be 25% lower than it is now in 3yrs time" - sounds reminiscent of some of Bernard's erroneous predictions!
"interest rates around 10-12% in 2-3yrs from now" - what makes you think that when we have 2 year rates at 6.85% , 3 years at 7.2% and Bollard already talking about a lower peak than last time?...
OK, questiln #1 went
OK, questiln #1 went unanswered.
Quote:
I have personally experience several very nasty slumps and very exciting booms both here and in Australia. (Both were costly) These experiences give me some authority to comment (you are entitled to disagree, of course).
unquote
Did you experience the 1975 to 1980 period?
New Zealand House Prices Never Fall
http://neuralnetwriter.cylo42.com/node/3066
Checkout the charts :)
Steve
Steve. having lived
Steve.
having lived through that period it was a time of massive wage inflation, which meant that people could really extend themselves in 1975 and be sitting pretty in terms of ability to pay back by 1980. And lets be clear. If you had bought in 1975 and were still holding on in 1980 you were probably doing well. BTW, tell me what happened to gold from 1980 to 2000?
1975 - 1980 was when New Zealand was a very regulated and union bound society. I realize you immigrated here a few years ago so most likely don't have a feel for that time period in New Zealand's history. It was truely a different country.
. I think you have picked the wrong example if you are trying to discredit Olly. From my point of view, if we repeat a similar wage inflation as 1975 to 1980 then today's prices will seem reasonable.
However, as we have offshored a large element of the union jobs. And the unions have been crippled in terms of pushing for wage rises due to emasculation via regulation and wage arbitrage via globalization I'm wondering where that wage inflation will come from. I'm guessing for Olly's predictions to come true, we will need to see wage inflation in China & India first before it spilt over into NZ.
Nice article Olly. Not sure
Nice article Olly. Not sure if you are right or wrong, but it's great to get your point of view.
It's interesting that during the boom, there were people shouting "There won't be a crash, this time it's different " While now there are people "There won't be a recovery and house prices will fall another X0% because this time it's different"
Enjoying the debate..
Gibber has stolen my thunder
Gibber has stolen my thunder and has said what I wanted to say while i was busy typing away -- but i will say it anyway.
Steve-- yes I was flat out right through the crash of the 70's buying and selling and speculating in the thick of it
but luckily I wasn't even scratched when the walls fell in.
You chart is excellent and informative. Prices for houses did fall when compared to the rampant inflation of the times.
But as the chart shows prices recovered and exceeded inflation on many more occasions as time went by.
There are times such as now when residential property seems over priced,
but to off set that I believe that we are in for a big dose of inflation in the not to far distant future as the banks print more and more money while keeping interest rates low.
The trouble is that many people is that they want instant answers and quick fixes.
Like a TV program, they want situations to be created, reach full speed and be resolved with 60 minutes maximum or they get bored.
Investment in real estate doesn’t work like that. It has to be understood that real estate is a very long game
I believe that many Governments are deliberately trying to recreating inflation ( higher GST, carbon emission charges, more taxes etc) to offset deflation and this is happening here and overseas right now. Higher taxes and costs = wage demands= inflation.
I am not alone. Gold prices- the universal barometer of inflationary expectations -tells the story.
link: http://www.stuff.co.nz/marlborough-express/business/3999346/China-to-re-ignite-gold-rush
One billion Chinese can’t be wrong and they really know the waiting game very well indeed.
So are you forecasting
So are you forecasting significant wage inflation in NZ some time soon allowing us to pay even more of our incomes on even larger mortgages? Are you serious? I don't see too many people out there getting big payrises at the moment do you?
If you are not refering to wage inflation but price inflation then I partially agree with you. I expect the cost of basics like energy and food to go up while wages stay flat. But surely that leaves less income left after expenses to even higher mortgages or rents.
There is a reason that house prices and rents in the long term track wages. People can only pay what they can afford.
Okay. So 'the banks' print a
Okay. So 'the banks' print a squillion dollars or yen or pounds. And what happens then? Do they tell the banks to increase eveyones limits? Borow more than they collectively have already? Or do the banks that are given the new paper use it to pay off their debts agregated from 2 decades of speculative trading gone wrong ( like they are doing now). And then what? What happens to that debt created by the printing of money; that increased debt that we as citizens have had created for us all? How is that paid back? Higher taxes. Does that feed through to higher wages and thus higher asset prices?
There is no scope for further debt creation. Printing more money will be a signal to the markets that 'the end' has arrived~ ie: there is no other way out now, and those countries that print will be savaged, financially.
Debt repayment has to occurr at some stage. Inflating the money supply hasn't worked! We have tried it 4 or 5 times, and never gottoen around to repaying the debt. Why would that work this time? It won't and it cant.
I called into the central
I called into the central post office where I live to pick up my mail this morning and spoke to the lady behind the counter who emptied my box for me as I did not have my key. I asked her what she felt about the state of the economy at present and what people were doing in response. She said that she and the people who she knew were simply just trying to get on top of their debt especially the personal debts like credit cards and certainly were not looking to take any extra on. Now I know this lady's circumstances. She and her husband do not have any children and they both work and they do not have a big loan on their home. I think Rod Duke of Briscos is right. People are scared and instead of looking for debt are trying to get rid of what they already have and therefore the buyers are scarce and the number of sales and prices are under some pressure as a result. Sentiment has reversed and people just want to consolidate and take stock and wait to see what happens next. Vendors now outnumber buyers and therefore we have a strong buyers market and for some time to go. The economy needs to strengthen,jobs need to be created,incomes need to rise and people in general need to feel confident in their financial situations before we see a return to borrowing and investing.
well spoken common sense.
well spoken common sense.
Question: What would happen
Question: What would happen if every one repaid their debts to the banks?
Answer: the banks would all go broke.
Conclusion: Debt reduction is today's mantra. Tomorrows will be the opposite.
That's it in a nut shell,
That's it in a nut shell, OllyN. Everyone can't pay off their debts today, or tomorrow. But they, we, sure need to reduce debt. Many can't afford the debt they have; many more can and some can take on more. But collectively debt reduction has to occurr ( NZ can't afford to keep borrowing more than it earns). Where are this nations saving ~ the money needed to repay individual and collective debt? In our properties. Keep your house, by all means, if you can afford it ~ most can ( as you say, we all have to live somewhere) but those that are excess to living needs, well, do the sums, and if they don't work out, use them to repay debt.
The way system works, only
The way system works, only way to reduce debth is if someone else goes further into debth...and will stay like this for ever.
No it won't, or it doesn't
No it won't, or it doesn't have to, anyway. Stop turnover, and the debt is repaid by the last holder of that debt for as long as they can afford the repayments. Or reduce prices and those with historical capital gains will see less 'profit' than they hoped for, but it will cost the new owner less than it otherwise might.
I think Alen is correct NA,
I think Alen is correct NA, total debt can't reduced by paying it down since the money to pay it down doesn't exist unless it's created by further debt. Default (or debt forgiveness) will reduce it though.
What they usually look at is relative debt (debt to GDP or income) but nominal debt never reduces save for the massive defaults during the great depression.
Japan has also been reducing nominal private sector debt for twenty yeas but aggregate debt has increased as the Govt has, instead, taken on debt to stop the whole shebang collapsing.
Scary but true with a debt based based money system.
I think gold can extinguish debt though.
http://www.financialsensearchive.com/editorials/fekete/2009/0330.html
Ah, whats wrong with banks
Ah, whats wrong with banks going broke? That's a good thing. It would mean more people have found 'financial 'freedom' or is that not YOUR OWN goal Olly?
Olly what a ridiculous
Olly what a ridiculous question. How in the heck are the average New Zealanders ever going to pay off their debts when they get such pathetic wages. The only way for a lot of them is to sell their rentals and even their homes in such cases. This low wage economy of ours is causing so many to currently head to Australia. For the average Kiwi it is a long process to just pay off their home loans. Today however a lot of them are not coping with those home loans as well as their credit card balances,hp loans,store card balances,car loans and alike. You have not lived in the real world of the average kiwi for some time. For them life is crap at present and is going to get worse with gst ,ets costs and interest rate rises coming into play soon. This is the real world for many in New Zealand not your fanciful idea that there are a lot of people out their with buckets of money and just itching to invest it.
Olly they want there money
Olly they want there money back. They can do better with it by lending it in Aus or Asia. If the only funding we are left with is our own deposit funding they wont care. Then if we do have borrowing power they will lend it to us -at very profitable rates for them
Do they want their money
Do they want their money back?Seems to me they`ve(the banks) borrowed from overseas and would pay back as much as they could, leaving them no source of business-so isn`t Olly right as far as this thought goes.Of course if they went belly up as a result I`m sure we,the great unwashed, would very quickly be chosen as the peasants to pay the debt.
Olly probably has so much
Olly probably has so much property and so much to lose from a property slump that he has a vested interest in trying to "talk the market up". If he said nothing and left the market to market forces, I have no doubt that properties may be purchased cheaper than at present, 'a little further down the track'.
I think BH publishes Olly's
I think BH publishes Olly's maunderings to act as shark chum.
Is Oily N the Shark or the
Is Oily N the Shark or the chum?
No matter how hard he tries
No matter how hard he tries to talk the market up he will fail as the market is far bigger than him. I note that when it suits him he is cruel and condescending to other commentators. A lot of us remember his involvement in Landmark which lost a lot of people a lot of money so he has credibility only amongst property investors who have blinkers on like him. He even had the gall to come out and say that when he got away from Landmark he only had a few million left. He has no idea how hard it is for the average New Zealander who receives a very mediocre wage or salary and is expected to bring up a family and that is the majority of New Zealand families. They have a house loan or loans,car and other HPs,credit card debits which are often used to pay bills and a rising cost of living. How he expects these people who include teachers,nurses, tradesman and alike to somehow buy property with savings or with borrowings is staggering. Olly you do not know what the real world is for most New Zealanders. Many of them have never struggled financially as much as they are now and you think the property market can stay neutral from here. You sit in your office and deal with a few people who are looking at investing currently. These people you deal with are a very small minority in the community. The banks will not look at just any kind of deal these days. They have really tightened up.There is currently no where enough potential buyers or willing buyers to take over the huge amount of distressed vendors of farming,residential and commercial property out there in the market.
Just remember Olly doesn't
Just remember Olly doesn't create anything. If he buys and sells existing items (not just real estate) then it's a zero-sum game.
Somebody wins, somebody loses.
The game only gets bigger when you add to the physical supply, or when scarcity bumps up the bidding.
Both of which needed to be underwritten by continued incomes, which is where conventional thinking fails to take cognisance of finite supplies, and ultimate scarcities - read: limits to income via limits to supply. Read: limits to growth.
Energy rate being the linchpin.
It's nothing to do with doom or boom, it's to do with physics and reality.
And slow-dropping pennies (both types).
I dont want to say "I told
I dont want to say "I told you so" --- but I told you so:
http://tvnz.co.nz/business-news/akld-house-rental-prices-record-high-368...
and this is just the beginning.
Rents at record highs and ROI
Rents at record highs and ROI at record lows only says one thing to me Olly.
Remember your glory days, what was that story? Buying property at a 18% ROI during the Asian crisis. We are not, by any stretch of the imagination/wishful thinking in that position today.
We've got sub 5% gross returns and no capital gains, unless you can find some fool to buy for a 3% return.
Oh dear... Olly, let's hope
Oh dear... Olly, let's hope you don't base the rest of your ideas on Barfoot and Thompson figures...
But as I said, if nobody is buying (for whatever reasons) then we'd expect demand for rentals to increase, and thus increases in rent.
What you are actually celebrating here is an extra $20 a week rent while values themselves stay flat (equalling a loss when inflation is taken into account) or for many houses at the bottom end of scale (i.e., most rentals), dropping.
Bloody elated I'm not a landlord!
Not a landlord? No wonder you
Not a landlord? No wonder you are working class then.
Rents are up in Auckland but
Rents are up in Auckland but have been flat nationally for almost 3 years
http://www.interest.co.nz/charts/real-estate/rents-median
cheers
Bernard
I believe in what i see
I believe in what i see around me...my mate has been trying to sell a couple of units in a nice Waikato town for three years now..One has been rented and the other has been empty since xmas.The excuse from the letting agency is that the few people that would rent it, cant pass the credit check..He,s also been trying to sell a four bed villa in Northland for the last three years.This is the one he's been living in,he's had no one even look at it since xmas.
I dont like to depress him,by telling him that houses are worth what they were before the crash,before the funny money became available, add to this the tenants that have done a runner after a few weeks not paying the rent. He thinks he's going to cash up and move to Aussie by that time,Gods Cherubs will be growing beards.
We are living in cloud cukoo land,virtually all are non bank lending institutions have already died ,workers are stressed, bosses are stressed ,familys are stressed and you can't even get a smoke at a decent price,and the idiots want to ban tobacco by 2020..well you can kiss a third of the overseas visitors goodbye because they wont come if they cant get a smoke.Did they realise that the Obesity rate would go through the roof? instead of the Lung Cancer they will be dropping with heart attacks trying run faster to dodge the bosses whip .No folks... it will be the same old Crap,Labour will spend it, National will cut back.and the general standard of living will fall to the point of,' no return'..and that's the point of my little tirade 'the point of no return' has already been reached.
HI BH Did you watch TV1 news
HI BH Did you watch TV1 news tonight? The rent is moving up, how sad is that. Did you predict that the rent will drop or no move up?
Good point
Good point Olly,
http://www.trademe.co.nz/Browse/CategoryAttributeSearchResults.aspx?sear...
There are plenty of rentals available in Auckland City, any potentual renter not able to find a space must have their brain read and If couples cannot afford $350 or $400 per week for a two bed room, they can always share the space and half the cost with another couple.
Following the 2008 relestate agents had to get serious about their income streams and so became interested in renting flats. All we are seeing is the fruit of their medaling in the market place. The average flat may have increased by $20 per week and I understand that the agents commission is about $20 per week so go figure.
I live in the city and in the 10 room palace that I live in there are 2 rooms currently empty suitable for single people so my landlord wont be putting up her prices.
Ostrich Olly!
Ostrich Olly!
Anomymous said: " "I saw it
Anomymous said:
" "I saw it and it was just shameless scare mongering / advertising, undoubtedly paid for by the desperate and pathetic realestate industry."
Yes in a moment of delusion I decided to watch One News for about the third time this year.
And I agree with Anonymous. There was no reference to any data, and the "experts" they interviewed were real estate industry types.
Typical garbage served up by tV1, with no credibility, just like someone else round here
We are keeping eyes open for a move, lots of properties on trademe are not moving and the rents are even being dropped, so I can't see any great evidence of masive pressure on rentals I'm afraid
Its just another big lie
For the record: At one time I
For the record: At one time I had over 100 residential rentals. I sold my last one 3 years ago at the peak. Now I will be going back. Timing is everything.
The biggest lesson from
The biggest lesson from history is that we don't learn from history.
How far back does your data go? Not very far.
You have been in the real estate market since the early 70's, I reckon, and that makes you a baby boomer. Your generation, worldwide, represents the "pig in the python" in terms of buying power, and have reached the peak of demographic destiny, as the boomers retire and die, and the far fewer numbered X and Y generations take over the reins of this economy. It doesn't look promising in that regard. Have a look at Japan, for example.
Here's a good site to visit for demographics -thegreatbustahead.com or google Harry Dent
Your history doesn't go back far enough to mark any economic cycles of any major significance. We are in a major economic winter, and will not emerge from it quite so easily this time.
During the Asian crisis, there was not a world wide crisis happening simultaneously. Most of the economies of the world were holding their own. New Zealand, while an island, is not immune from economic happenings in other parts of the planet, especially with our trading partners. Our economies are intertwined. While it may not get as bad here as other places, it certainly won't be seeing the heady days of capital gains of recent years.
An awful lot of debt has to be burned off by sovereign nations, who are having trouble borrowing. Iceland and Greece are only the beginning. Seizmic shifts are happening on a ccurrency basis worldwide, but this is not mentioned in your article.
To give your article credence, you should have compared real estate (priced in paper money) to real estate priced in "real money,"or gold.
What good is it to have a 10% appreciation in property, when the price of groceries and electricity has increased by 20%? That is a net loss. This discussion is lost in your article, because the "it depends" or "x factor" that makes or breaks you is inflation (read: money printing by the central bank), or lack of it. You assume that prices only go UP, and only after you have bought your property. As many recently crowned property investors have learned/are learning, this is not always the case. Lending tightens, and less cash becomes available in a structural fashion. This is called a "Minsky Meltdown." The only way out is to default on debt or print money to pay debts, making all your saved dollars less valuable.
You are going to have to go back a lot further than the Asian crisis to impress me, and the scope of your data is going to have to reach far outside the Auckland market. The light you see at the end of the tunnel may very well be a train coming at you, because of factors beyond NZ control. I have only named a few.
Trying to forecast the direction of a market is difficult on a good day. However, let's not pretend to be 20 blind men, attempting to descibe an elephant by only feeling with our hands, wherever we happen to be standing. Having a look at only Auckland, and your limited experience in this part of NZ (much less,other part of the world, and only during your lifetime), and only during a 10-12 year time frame is akin to the blind fellow standing underneath the elephant and describing it as "fleshy, and round, and appears to get stiff when you stroke it." This is a good metaphor for mental masturbation. You need more data, before we can gather round the fire and hear wonderrful stories from uncle Olly about being a property investor.
And yes, I am a seasoned property investor. I grew up in the business with my father, who is having his head handed to him right now because of too much debt vs rent collected. I consider myself lucky to be out of the market. If I jump back in a year late, then I might pay 10% more than if I'd bought sooner. I prefer this than to buy, believing I got a deal, only to have the price drop another 20%.
You are doing what stock traders note as "calling the bottom." This is where fortunes are made and lost. Obviously, you believe the market is bottoming. Honestly, I hope you are right. I wish you were. It would hurt less than what I think is going to be happening to a lot of people over the next 2 years. My father is a casualty. He couldn't recover what he owes on his properties if he sold today. He's now a slave to the bank. It's one hell of a way to retire with a young wife and 2 kids.
"I grew up in the business
"I grew up in the business with my father"
"He couldn't recover what he owes on his properties if he sold today"
So you must be about 3 years old then? If someone's owned properties for 10 years or more, there's no way they would be worth less than what they owed...
...unless of course they constantly racked up the mortgage and spent it. Some people did do this, and are paying the price of foolish behaviour...
My father first entered real
My father first entered real estate as a sales agent in the 60's. In the 70's he started forming partnerships to purchase property. In the 80's he bought out most of his partners. For the next 20 plus years, he rode the baby boomer spending wave (without realizing it, and probably forming in his mind what he thought was a solid investment strategy), accumulating massive equity in his properties, mostly apartment buildings. He sold out most of his equity in the recent boom, but DIDN'T KNOW WHERE TO PUT THE MONEY.
My father knows nothing about alternative investments. Well, I take that back. Back in the 80's he invested in some oil wells and lost all his money. So he re-embraced real estate with open arms, once again. So this time, when sitting on a pile of cash, he didn't buy oil wells or anything else, he put it back into the one thing he always knew, buying several houses, all with loans. The rents are not sufficent to cover the loans, and he is having to supplement the mortgage payment with his own money, "until the market comes back, just like it always has." I would say that "this time it's different" really does apply here. The market isn't coming back so quickly this time. It's been 3 years, and unemployment is getting worse, not better. So add unemployment chart analysis to your list of must-have charts before buying. It's ugly out there. New Zealand is just late to the party.
My father is, of course, not in New Zealand. My father is probably Olly's age. From the time he started his real estate venture as a young man, to today, he has weathered all the financial storms and come out on top. When he sold his last apartment complex 3 years ago, he plowed all his cash profit right back into buying houses, to save on paying taxes (this is what you do in America to defer taxes). I urged him to stand on the sidelines, and was appalled to hear he had bought 5 houses instead, and at the top of the market, all of them with 50% loans. This is in California, mind you.
But hey, if it worked in the past, and all recessions are temporary blips on the road to prosperity, "ya can't lose with property, maaaaaate!"
Many now ex-investors are learning otherwise. At the height of the property boom, 24% of all sales were to so-called "investors." That represents an awful lot of unsold inventory right now, sitting on the banks' books, waiting to be sold. Adjust your numbers for New Zealand, and you can see the tsunami of "shadow inventory" that hasn't even hit the market yet, giving already skiddish buyers more to view before making a decision, and making them even more skiddish. You can watch it unfold in the pages of the property section of the newspaper. There's a lot of motivated sellers getting squeezed. A lot of people in the process of getting foreclosed. New records being set in mortgagee sales numbers. Where is THAT chart, Olly?
I can relate to Olly, though. I used to be a "believer" as well, back in 2007. I even made a bet with another investor that the "correction" in prices in Cape Coral Florida was only temporary. My investor friend had a lot more experience than I did in stock market analysis, and knew how to read a stock chart. He bet me $10,000 that real estate prices were not done going down, and that the real crash would be a whole lot worse than anybody would believe, especially in Cape Coral, if his charts were correct. He was right, and I had to eat my own words. It taught me the need to learn how to read a graph, do trend analysis, and look at more than one chart before making any hasty decisions about an investment. Cape Coral is now languishing at the bottom of the trough, with prices NOT bouncing back. Houses that sold for $300K new in 2005 (to many investors looking for "capital gain") are now selling for way less than the cost of replacement, at around $100K. You can buy a lot more house near a warm beach in Florida right now than you can in New Zealand. Many European news programs have done stories in Cape Coral, because it is so cheap, and many of the buyers grabbing up the mortgagee property are Europeans now. What makes New Zealand so special? Especially when Europeans are having a very hard time selling their own homes. That investor demand and vacation home demand has withered away, along with the banks unwillingness to lend.
Speaking of banks- There's your big mess! Most New Zealand banks are owned by Aussies! As the OZ market goes, so goes New Zeland lending. Westpac is doomed, and so are the others if they don't massively cut their exposure to the OZ residential market. This is why China not buying iron is so important. OZ is screwed. So are we.
That's also why we are joined at the hip with Australia, whose market now is beginning to teeter. They crash, we crash. Do you think the Aussie miracle will last if China slows down its buying of commodities? Oooops! Just happened. Plenty of homeowners over there are crapping their pants right now. I gave the link to the story weeks ago. I could post it again if this site was searchable by the name of the poster (Note to Bernard, did you get this? A search for "Happy Renter" turns up NOTHING- another flaw in the site). I don't feel like digging it up again. Those of you that read my posts saw it.
All of these outside influences matter, Olly, and all of you smug PI's. Not everybody will survive with their money intact. This is coming from someone who has made it and lost it a few times, and I'll have to say, KEEPING IT is harder than MAKING IT.
My father knows none of these things- only being a landlord and re-investing his money in property from start to finish, and I'm afraid to say that he is probably going to lose everything to the same beast that made him rich not long ago. I hate calling him because it makes me so sad. He has had all of the wind taken out of his sails. It's TERRIBLE. The only thing that could save him now is massive dollar devaluation, or the government printing money...but you can't predict that happening.
Hyperinflation is the only scenario, Olly, that I believe would make now a good time to own real estate. The Jews figured that out in the 1920's in Germany, during the Wiemar hyperinflation, buying up as much property as they could, and leveraging it with as much debt as possible that they knew would be inflated away by the government printing press. "Hey! What's a million dollar loan if a million dollars buys you a postage stamp in a few years?" This really did happen. A million Deutchmarks for a stamp! Google a book called "penniless Billionaires." Hitler later used the Jew's success as propaganda against them.
A better investment is gold, if history is any guide. Oh, and I just remembered, the most sought after book right now in the UK, by the financial community, is an out of print book about the Weimar hyperinflation, and lessons learned.
So will we have hyperinflation, Olly? Are you willing to "bet the farm" to find out? It sounds like you are, and could be catching a falling knife. Hyperinflation is the only arguement that could have you be right, and it would be dumb luck if you are stupid enough to buy into a falling market. If I had a crystal ball, and I knew there would be hyperinflation in 2 years, I would be buying every property I could get my hands on right now, and loading-up on debt. But I don't have a crystal ball. Do you?
Where is your "New Zealand's economy is so much better than everybody else" analysis? I'll be waiting. In the meantime, I will not be joining around Olly's campfire. I'm hanging with the precious metals campfire right now.
bye NOW! Olly
bye NOW! Olly
"There's a time to buy and
"There's a time to buy and there's a time to rent" Why would anyone buy now when facing negative equity for atleast 5 years, sellers who still think they own corrogated mansions, higher living costs about to come in, and interest rate rises with inflation continuing on.
Rent, save your hard earn CASH, be financially free and have a life without your walls being your prison. Renting is NOT wasted money because you are paying for exactly what you get. Homeowners( sorry, homes that banks actually own that mortgaged up to the eyeballs people think they own) always forget to tell you about the interest they pay annually on their 'dream' come nightmare struggle. Just like when they tell you "having kids is wonderful" when in fact most parents if they could turn back the clock WOULD!
On TV1 news tonight there was
On TV1 news tonight there was an item on the rental market in Auckland. Amongst many comments one lady said a house she was looking at had expressions of interest from 60 seperate parties.
Olly is right, pressure in the rental market is building.
Soon all you happy renters on this site will be crapping renters.
Let's talk a year from now.
Let's talk a year from now. See who is right. Life is a gamble. I'm betting on falling prices. Auckland could be a different market than the rest of NZ. I don't live in Auckland. You can have enclaves of properity inside of decimated economies. Africa is a prime example. I was surprised to discover recently that some of the most expensive cities in the world to live in are in Africa, and I don't mean South Africa, I'm talking ANGOLA. Who's every visited Angola? Who would WANT TO? What the hell is in Angola? Ooops, that's right- lots and lots of oil and commodities, and thousands of Chinese and Indians trying to get their share.
Happy renter sounds like he's
Happy renter sounds like he's a crapping renter now.
Haw Haw
Yes, you are right. I just
Yes, you are right. I just got off the toilet. I ate too much last night.... Go All Blacks!
'For all the know it alls.'As
'For all the know it alls.'As olly believes in direct market research I decided to do some this afternoon, using Barfoots and reviewing back to January 2008, rentals, average house prices ,listings and comments in regard to monthly figures, for homes listed by Barfoots which accounts for one third of the Auckland market.Olly points out that the most important figure is the year on year comparison for home sales 2010/2009,yet fails to contrast to previous years where sales figures are substantially higher over the previous decade.The average rental with Barfoots in July indeed $408 ,yet Olly fails to mention that some thirty months ago(30) January 2008 the average rental was $396 a chunky$12 less ( approx 2.8% increase ),in April and May of this year rents were $398 ( a 200 cent increase),but less than the rent one year earlier in April 2009.Even towards the later part of last year Barfoots in its own commentary were of the opinion that they had an excess of rental property. With migration having turned negative ,there would be no statistical evidence for supply shortage ,and Ollies view that Nicholas ,Ostrich and others will be jumping up and down on the lawn looking for a rental in competition is exaggerated.Rents do change ,next month maybe a little higher maybe a little lower.However if all costs are factored in regards to rental properties ,the reason for buying now is significantly less appealing than January 2008,and now we also have other global issues.The interesting data from Barfoots is in regard to monthly new listings and monthly sales.I have absolutely no way of knowing how many properties have joint listings , but given that Barfoots usually works as sole agency,where do all the unsold houses go.November 2009 Barfoots had 5600 homes listed,since which it has listed an additional 12210 new listings ,and sold 6418 homes yet at July 1 has only 6023 listings,what has happened to the 5429 homes now not listed nor sold?Have they been sold by another agency or failed to sell and removed from the market.Maybe Olly can advise what the real market is doing, although personally the comment 'not bad at all and better than a wage 'speaks volumes and may suggest I will ignore it.However my advice runs counter to Olly.Although currently overseas ,I follow New Zealands economy closely,the warning signs are gathering ,now is not the time to buy into a falling market.
I agree with your comments.
I agree with your comments. What you are speaking of is "shadow inventory." This, amongst other things, is all the homes going into foreclosure or mortgagee sales, or in the process of doing so. The other statistic you need is the number of people who have missed a mortgage payment, or 2, or 3. These statistics will become well known to Kiwi's in the next 18 months, I reckon. Buckle your seat belt! Weeeeeeee!
Speaking of which- this is pure GENIUS- this guy plotted the US market using roller coaster video game software going back to 1890. You get to ride the roller coaster real estate market to 2007. We all know how it's turing out since then. But hey, New Zealand is different. It's immune!
Have fun! http://video.google.com/videoplay?docid=-2757699799528285056#
I reckon Olly entered the market in the 1970's. Things have only gone up without any major corrections since that time.
For such a smart guy Olly,
For such a smart guy Olly, you just don't get, housing is beyond the means of most now. Without wage inflation, these prices can't be sustained. It's a ponzy scheme and people like you are making it worse. Shame on you.
It's "Ponzi" not "Ponzy" or
It's "Ponzi" not "Ponzy" or "Pomzi" (Is this a take on Brits?)
Named after Charles Ponzi. He was so good, that even the investigators sent in to prosecute him invested in his scheme.
http://en.wikipedia.org/wiki/Charles_Ponzi
Anon 7.09am: All the houses
Anon 7.09am: All the houses in NZ are owned by some one ( exeption State houses) . Whether you are a renter or an owner some body still owns that house,
As the vast majority are not being forced to sell then where is the Pomzi scheme?
I wil believe all you doom merchants and critics when i see mortgagee sales hit 30% and more of the total stock.
Look at the housing stock - a
Look at the housing stock - a vast number are trying to sell here in Auckland but no joy - I suspect their day of reckoning may come soon though if Bollard keeps hiking...
My complaint is that there are too many rentals on the Auckland market and not enough family houses - do people even make them anymore?
My guess is that State Houses
My guess is that State Houses are owned by....The State. And if by ' not owned by anyone' you imply that they are not on the commercial market; well of course that's exactly what is proposed by the Key Government at the moment. They are selling State Houses, firstly offered to the tenants, and then to the market, as they try to relocate from one area to another more suitable/affordable.
The Ponzi scheme isn't in the
The Ponzi scheme isn't in the houses themselves! It's the debt financing of the properties. A pyramid of debt which is collapsing back on to lenders, banks, and then lenders of last resort, sovereign states.
Bernard: When will posts be
Bernard: When will posts be able to eb edited for typos and pselling mostakes? Or is theer a way that i dont now abut?
Looks like it will be another
Looks like it will be another bumper year for mortgagee sales - on track to be 2500-3000 sales this year?
Three years ago annual mortgage sales were barely a fifth of that.
http://www.stuff.co.nz/national/4002376/Families-hit-hardest-on-forced-s...
The DEFINITIVE guide to
The DEFINITIVE guide to rental levels in NZ tells us quite clearly that there has been NO movement in rental rates nationwide in 3 years:
http://www.interest.co.nz/charts/real-estate/rents-median
No sign of any recent change either. Once Aussie pops off the back of a Chinese property bubble collapse look for rental rates here to fall as our economy takes a massive hit and unemployment jumps.
Agree. 68% increase in China
Agree. 68% increase in China property values in ONE YEAR? That's definitely not a bubble!
What goes first,housing
What goes first,housing bubble China Australia or New Zealand.Or will we return to Europe for the next round of debt issues.As we are living in Europe for a year,it is very difficult to believe that the austerity measures beimg taken will not be without further issues.Similarly when every financial magazine extols the virtue of investing in China/Asia and emerging markets you have to be somewhat contrary.Personally,I see untold social issues in China presently and in the future,and economically it will not be a symbiotic relationship with New Zealand.New Zealand housing, well the graph looks like Mt Everest,on every fundamental we have reached the summit
This will help House
This will help House prices
PRICES CONTINUE TO FALL IN GLOBAL AUCTION: (by J. Kaczor) Bidders in Fonterra’s August 3rd internet auction, globalDairyTrade, continued to be more concerned about future prices than availability of product. Average prices for all three lines of products, whole milk powder, skim milk powder, and anhydrous milkfat, fell again – for a third straight month for WMP and SMP, and for a second month for AMF. The price for WMP for deliveries in October is now $1.32 per lb, $.50 per lb lower than the price bid for deliveries in July.
The price for SMP for deliveries in October is $1.23 per lb, $.44 per lb lower than the price for deliveries in July. The price for AMF for deliveries in October is $2.01 per lb, $.79 per lb lower than for deliveries in August.
Buttermilk powder, newly offered this month, was bid at $1.27 per lb for deliveries in October.
Fonterra’s press release issued the day after the auction said the results reflected a continuing “rebalancing amid increasing supply and an uncertain economic outlook.” The percentage price decreases from July’s auction are 7.7% for WMP, 8.9% for SMP, and 7.6% for AMF.
The reference to product supplies is based upon current and future milk production estimates, and to levels of
stocks of a particular product. Regarding global milk supply, decent weather and recent rainfall in Australia and
New Zealand has resulted in upbeat projections for the next twelve months. Based upon results for the latest two months, Australia’s milk production is expected to be about 5% higher than for the past year. Based upon recent surveys of New Zealand producers, milk production is expected to be about 7 to 8% higher than for the past year.
Those increases, along with a projected increase in U.S. milk production for the next twelve months of 2 to 3% (more cows and more production per cow), translate into a potential significant increase in the amount of basic dairy commodities expected to hit the global market. (At present, Europe’s milk production is not expected to be
significantly higher than recent levels.)
The concern about levels of stocks is directed to nonfat powders: Europe has in storage about 440 million lbs of skim milk powder (twelve months old, and apparently unwanted) and the U.S. has about 175 million lbs of nonfat dry milk. Australia and New Zealand are uniquely able to route current milk supplies to products likely to generate the highest returns, which means cheese, WMP, and AMF.
Lets look at your example
Lets look at your example during the asian crisis.
You bought off a distressed seller at a low rate....and sold for a tidy profit.....which you consider betetr than working...
This about sums up the problem..Its better than working.....
While this was a perfectly rational decision on your part it made you presonally richer atthe expense of the Seller and eventually the buyer...
The seller lost money on the deal, but this was two consenting adults....so I have no issue here, he wanted your money...
If this had been a NZer who sold, what would have been the net improvement to NZ? answer none.
The buyer would have gone out and got a mortgage and the money would probably come from abroad....via a bank....what was created across these two transactions was debt to be serviced, not an improvement to NZ.
This is what strikes me about the core difference that the likes of Olly v many of us are talking about and comes up time and time again....It strikes me that the likes of Olly cant see that we are talking about the Macro (what's good for NZ), v Olly who sees only whats good for him...(and PIs in general). Olly's way of making mney is rational on an individual basis, but on a National basis it isnt, these are two fundimental opposing camps....
What strikes me time and time again is I can see from his perspective that his actions (and those of other PIs) are perfectly rational on an individual level and especially where that individual only thinks of themselves. Somehow however from his writings he cant see that what we on the opposite side of the argument are saying is that looking at the bigger picture what he is doing is not good for NZ. This I think is afundimental blindness of his and fellow PIs.....one of two...
The second is, he is time and time again talking about and relying on his life experience and while his success shows thats a pretty valid prop its not infallible....and yet he's too young to have faced the reality of the Great Depression (1930s) and certainly the Long Depression (1870s)....he would have to be a very active centarian for the former...
So what we have now is probably the second great depression, in this he has no experience, plus peak oil, of this he has no experience... This second depression was either caused by Peak Oil and/or will be driven by it....
So Olly is looking at a short term drop/recession and based on his previous experience concluding that there will be a bottom and its about now, so now is the time to buy...For a normal recession thats actually rational IMHO....I can agree with his decision mostly except that its probably not bottomed yet, in the new year then yes but timing bottom is notoriously difficult.
However this isnt a normal recession by any means....if you accept Peak Oil and think on its impacts then this has to have a huge impact on house prices and rents moving forward.
1) Energy ie transport fuel in the future will get even more expensive than it is. It is likely to sit (actually it will be volitile around but average) at 6% of GDP (maybe more), this measn that,
a) Private transport to and from work will be financially crippling.
b) Food requires a lot of transport fuel imput, so the weekly food bill will financially crippling.
These are just two impacts.
This alone is going to mean we stay in recession as a trend.
2) But we will have to undertake huge program(s) to move to alterative energy sources, capital programs like hydro, wind and tide....these impacts are likely to be similar to 1) ie a substantuial part of GDP "lost" to this...this again is 6% of GDP.
Capital works take time, a decade or more....some ppl like Robert Hirsch suggest 2 decades...
3) Our private and corporate debt, it will take us a decade tp pay that down...Govn debt looks simialr.
Its probable that we are looking at 15% of GDP for 1 to 2 decades removed from the economy, this then is a paradym shift and this is why I think property is going to be a disaster area.......and not just for NZ but PIs as well...
regards
Great post, but you are
Great post, but you are wasting your time trying to convince Olly. Just reading through his article,most of his arguments are clearly based on intuition and "experience". He relies on emotional arguments and folksy cliche's rather than hard data or analysis.
While it may have worked up until now, it doesn't necessarily mean it is a sound or logical strategy for the future.
What concerns me most about Olly's posts is the way he selectively looks at data. Just using Auckland Rental information when it is nothing like the rest of the country.
Nail on the head.
Nail on the head.
99% of people "selectively"
99% of people "selectively" look at data to make their own argument sound justified. These threads are like labour vs national, everyone thinks they are right and theres no letting up from either side.
Would agree generally.
Would agree generally. Property prices will not be higher than they are now for a generation, or easily 30 years....ADJUSTED FOR INFLATION. That is the "x-factor" over which we have no control. How much money will the PRIVATE bankers print? Or will they let it all come crashing down like it did in the last Depression, and we had structural debt defaults all over the place. It's a whole different set of problems when a government can't pay its debts, for the nation and its people. Greece and Iceland are only the beginning, methinks. Not a safe investing environment at ALL. It could end in a war, I'm afraid.
As for peak oil, I study quite a bit on that as well. The thing that changed my whole perspective on this is a google for the term "Abiotic oil" and then check out the White Tiger oil fields in Vietnam. Peak Oil is a lie perpetrated by the same people who control most of the "conventional" oil fields. That's something I've concluded recently. Until that point, I was a big believer in Hubbert's peak, etc. Not any more. The only reason we even use oil to put in our cars is becasue the oil companies own all the patents on fuel saving devices. It's a power and control thing, methinks. The Russians stood the whole theory of oil on its head in the late 70's.
Nevertheless, unless and until this technology is allowed to be released, food might actually be a good investment right now. It goes up with inflation.
"Control oil and you control nations; control food and you control the people." --Henry Kissinger
Might I respectfully suggest
Might I respectfully suggest you go back and reconsider your views on abiotic oil. There is an interesting thread on the subject here incuding a point by point rebuttal:
http://www.powerswitch.org.uk/forum/viewtopic.php?p=46894&sid=03687427a4...
The principle promulgator (and effectively its sole Western adherent) of the theory (Thomas Gold) was not even a geologist (his speciality was astrophysics) and the theory has never recieved any support outside a relatively few Russian scientists - even this support tailed off after the 1980s. Gold successfully managed to convince investors to start deep drilling at Lake Siljan in Sweden in the late 1980s. The project was a spectacular failure. Since Gold's death in 2004 thankfully the theory has been largely confined to the rubbish bin where hopefully it will remain.
Come on HR, abiotic oil his a
Come on HR, abiotic oil his a complete nonsense/hoax. The theory that the earths crust is assembling complex hydrocarbons from .. well... er.... other stuff?
Happy Renter!!! I think you
Happy Renter!!! I think you are full of garbage. Your story regarding your father is exactly that. Just a story.
At 12.01am you said you said with your fathers debt etc. what a way to retire with a young wife and two kids.
How old is your father? You said about Olly's age.
You said your father started selling selling real estate in the 1960's that would make him at least around 70 if he stated at 25 years old and in 1965.
What is the true story Maaaaaaaaaaaaaate.
How old do you think Olly
How old do you think Olly is?
He claims to have had a typical 1940's childhood, which may be a hint.
Well, Mate, some people do
Well, Mate, some people do re-marry later in life. And if you have money, you can get yourself a wife much younger than you. My now stepmother is only a few years older than me. My half-sisters are a year younger than my daughter. It will be odd for her to call them "aunty."
yes, my father is almost 70. Still does all his own rental property repairs, I'm afraid. He grew up on a farm. I can't relate. I hire people to do that stuff.
Happy Renter. Reading thru
Happy Renter. Reading thru your posts this morning it is a bit mixed up and hard to fathom.
Anyway good luck to him with a young wife and being able to father kids at his age!!
If he had such great wealth from selling 3 years ago why would he buy in his late 60's and why is he in such difficulty financially?
Do Bank's lend large amounts to people in their 60's in the U.S.A.?
HAPPY RENTER!! You better
HAPPY RENTER!! You better quit while you are behind and stop telling porkies.
If your dad is say 70 that would probably make you approx 45 years of age at a guess.
Your daughter could be say 25 years of age so that makes your half sisters 24 going by what you said earlier.
So your dad is in U.S.A. struggling with debt at 70 looking after a wife that you call young at least 48 years of age that being a few years older than you at 45 and the half-sisters ( are they twins?) are 24 and you call them kids and he needs to look after them
Yeah right!!!!!!.
You are having us on aren't you.
Happy Renter. You say you
Happy Renter. You say you hire people to do your rental repairs? Why do you need to do that? The landlord should be doing that shouldn't they?
Rodeo Clown. So if he is 70
Rodeo Clown. So if he is 70 odd and still needs to invest in property with supposed massive equity.
Read Happy Renters 2 stories and it reads very fishy.
One minute he has lost all his money in oil wells in the 80's and also he has bought all these properties in the 80's as well.
Doesn't appear to line up!!!
Lost in oil '81 after Oil
Lost in oil '81 after Oil Shock ended; bought back into property '89 after the Crash washup? A decade is along time in which to do all sorts of things.
Anon. at 11.24 a.m. Yeah
Anon. at 11.24 a.m. Yeah defend it. So he is at least 70 years of age with a young wife and 2 kids and he has bought 5 properties with 50% equity at the age of at least 67 years old and Happy Renter is talking about his dad's poor plight in regard to retiring.
With all this so called experience in real estate going back to the 1960's he is obviously is not very clever is he?
So how old are these 2 kids that his young wife has. Very fertile dad I would say.
"With all this so called
"With all this so called experience in real estate going back to the 1960's he is obviously is not very clever is he?" Isn't that just HR's point? That his father, with all his experience, has fallen back into the business of real estate investment. To use your own words : "not very clever".
"Every accountant will agree
"Every accountant will agree with me when I say that - for maximum efficiency and cost-saving, renting will save thousands of dollars annually. But following that argument implies that an even more efficient way to obtain shelter is to live in a cave, rub sticks for fire and dress in rags!"
What a load of twaddle that statement is. An accountant may agree with you if it is comparing like-for-like accommodation. Compare buying a cave with renting the same cave , by all means. But not buying a cave with what ever it is that most of us choose to live in.
On the whole, accountants
On the whole, accountants don't make very much, either. Neither do MOST lawyers. Why would you take their advice on investing?
he,s about due for a for a
he,s about due for a for a new book surely .any suggestions for a title.?
a,.....,,the older i get the better i was
b...... legends of the fall
c......you can never have too much
(d) "Worse than being wrong,
(d) "Worse than being wrong, is being right to early". A follow up to his masterpice of 2004 predicting the crash of '06.
Comment supporting
Comment supporting Olly
Supply of property has lagged for several years, recovery to normal supply rate will be slow, so probably worsening the supply side before it gets better, and then only if enough chippies, developers, bankers, financiers return.
Supply of people is still increasing, so basic underlying demand is increasing.
Supply of money is restricted, as is confidence, but should that recover, the stage is set for a marked increase in sales and probably of prices.
My guess-the trough will be a bit longer than usual but the recovery and price rises steeper than you might normally expect, and possibly earlier than expected.
In tough times youngsters are actually sometimes more able to enter the market; take over servicing the vendors debt, get a vendor second mortgage etc not available in better markets.
Yes you could go broke-but you have time to recover when young OR you could wait until you can’t get in and criticise the foolish or courageous that do.
Only young with above average incomes, abilities and a fall-back position should consider this.
Only ever do so where there is positive population growth and economic growth.
Work out the internal change factors you will use to influence value as well.
If you can’t see these things for yourself-do not blindly enter the market and gamble-know the odds.
Always buy what you are happy to hold long term, keep it if you can, and reduce the debt.
I was young once. Leased a home with compulsory purchase in 2 years, with only 250 deposit, requiring settlement at 13,500 price in 2 years. Did the grounds, paint, added carport, it valued at 18,500 when time to settle, so I borrowed 12,000 on first mortgage, found the missing 1,000 and sold it I year after settling for 31,500. Made nearly as much as the house cost in only 1 year with only maximum 2,000 invested. That deal would have been impossible in good times.
Many more similar purchases followed, usually I found property that subsequently doubled in value in 5 years. E.g. 8 years ago purchased at 220,000, 5 years later with a tidy up it valued at 950,000 but has since fallen to around 750,000. Nearly washed its own face through all this at 15,000 pa. rent on the 220,000 out.
Yes property is currently over-priced now. It usually is. You must be able to survive-that is the key-do not forget. Older people are usually more cautious but if I was younger I would see-
“There never has been a better time in the history of the world to be in property. Arguably -record population growth worldwide, record economic growth worldwide, record technological growth worldwide, record level of peace/low war threats worldwide and we live in the best country in the world in reasonable economic shape compared to the past, and most importantly many pessimists or financially stressed vendors are out there at present”.
"Demand" requires the
"Demand" requires the financial means of purchasing a property. With unemployment still high banks are still feeling nervous about lending to those with low equity.
Once the CFR get rachetted up this will only reduce the banks appetite for lending further.
But the real trigger looks to be the Aus housing market which looks like it may be coming off the boil much quicker than NZ and may be in for a sharper decline.
I reckon Armand is OllyN, as
I reckon Armand is OllyN, as I've only ever heard Olly use the term "washed its face " to describe a house covering its costs.
Wonderful ,Armand. I started
Wonderful ,Armand. I started investing since 1979. I agree now is the best time to buy a house( any one feel free to disgree with me). I remember vividly at the end of 80s after sharemarket crashed , no builders were building, interest rates was low. I don't need to tell the result.
After the '87 Crash you were
After the '87 Crash you were in your thirties. Plenty of time to recover if necessay.
After '99 DotCom you were in your forties. Still time to recover.
After 2008 your were in your fifties. Times getting short. Is there time to recover if I get it wrong with property, this time?
FYI the latest data from the
FYI the latest data from the Department of Building and Housing shows median rents are unchanged nationally but up in Auckland.
http://www.interest.co.nz/charts/real-estate/rents-median
cheers
Bernard
Its like Olly is now sitting
Its like Olly is now sitting back hands folded sweating drops of blood "O father this can't be please give to us another crisis one equal of past times".....
As the cheap money dries up and the banks stop lending.....sit back put your feet up and enjoy the crash!
Armand - rear-view mirrors,
Armand - rear-view mirrors, and approaching cliffs.
Every day you don't die, you can say "I haven't died, on that basis I won't.
Clearly that's delusional.
Same with things like capital gains. At some point, some of them attampt to get spent (not all of it goes to ego numbers in rich-lists).
Sooner rather than later (growth is exponential) the underwriting wasn't goung to be able to go around. It was also going to be in debt overshoot, at that point.
I was on record in the old (mid '80's) County Council days, as saying it had to happen 2000-2010. By 2000, I'd earmarked 2008, and we shifted to our forest block with that in mind. Built cheap so we'd have no mortgage at that point.
We types thought oil prices would ramp and explode. Now we realise that it can't - beyond a certain price, fiscal systems crash, and we've come to understand that energy underwrites fiscal activity - straight-line correlation.
Unless you get onto an alternative supply (solar is the only one, it gives a kilowatt per square metre, but you have to get the infrastructure in place before the oil becomes in contention) your rear-view crystal ball will fail you.
I see, over 150 comments and
I see, over 150 comments and the bloody house is still not sold.
Gibber's post and my
Gibber's post and my responses:
quote:
Steve.
having lived through that period it was a time of massive wage inflation, which meant that people could really extend themselves in 1975 and be sitting pretty in terms of ability to pay back by 1980. And lets be clear. If you had bought in 1975 and were still holding on in 1980 you were probably doing well.
unquote
This very much reminds me of the UK in the same period. As you probably know I disagree with what I think is a slack, ill-defined, and misleading use of the word "inflation". I use it purely in terms of money supply. Not cause and effect, just meaning a growing amount of currency in the system. The original use.
Yes, in the UK in 1970s there were consumer price rises and wage increases. Each day tins of baked beans cost more. It was a time during which many used their own currency to measure prices and wealth, and because the currency was devaluing, made erroneous calculations.
"Inflation" was blamed on greedy workers, on unions. The reason why the word "inflation" has been redefined is IMO so that most people do not understand how the money system works, and can be mislead as to the real causes.
Prices went up, and of course workers wanted more in their wage packet, because the currency was buying less. It was doing what currencies do, devaluing.
The real issue, the real cause, was inflation, an increase in the amount of currency, the UK Pound.
But, the population was mislead into thinking it was a social problem.
Then along came Margaret Thatcher.
IMO the union power and strikes were bad for the UK economy, but the real issue was the monetary system.
Does this sound familiar to those who lived through those days in NZ?
One thing I found when coming to NZ is that the news here was just a repetition of the news we'd had in the UK a few months or years ago in the UK. It's quite bizarre. One could almost think it was some sort of conspiracy.
Take a controversial debate here, then check the older UK news and you'll find the same debate, but concluded.
Do the politicians here just copy what goes on in the UK?
I wrote an article on the UK stock market recently. On whether it really was a good buying opportunity in 1975. In UK Pounds it certainly looked like it, but that currency is an elastic ruler. In fact, gold from 1975 to 1980 was a much better option:
Will Investors Be Fooled Again Into Thinking Stocks Are Going Up by Steve Netwriter 25th May 2009
http://neuralnetwriter.cylo42.com/node/898
Which neatly brings me to your next statement:
quote:
BTW, tell me what happened to gold from 1980 to 2000?
unquote
You know very well what happened. But do you understand why, and the bigger picture?
It's all about cycles. Something many investors fail to consider or understand, to their detriment.
For periods, it is better to go with "financial assets", those based on paper currencies. That's paper currencies, housing, the stock market, bonds. That was true roughly from 1980 to 2000. So yes, GoldUS$ went down.
But what you have proved by asking the question is that for a period gold was a poor option. Does that not tell you something? That for other periods IT IS A GOOD OPTION.
Do you agree or disagree?
If you agree, then the question is "how do you identify those good periods for gold?"
The answer is when "financial assets" have peaked, and "real assets" are the better option.
That's gold, and real things that have not been pumped up by the credit bubble.
This is one of the best simple explanations:
Dow-Gold Ratio: One of the most important ratios to understand
http://neuralnetwriter.cylo42.com/node/2166
You can look at for example the prices of NZ houses measured in oz of gold to identify the bull periods for property investment, and where the peaks are, and where it's better to be out of property investment and back into real money. That's out of speculation, and back into plain old simple real money. The 5,000 year old money that outlasts every paper money experiment.
It will surprise many that 2005 was the time to get out of NZ property and into gold.
You also said:
quote:
1975 - 1980 was when New Zealand was a very regulated and union bound society. I realize you immigrated here a few years ago so most likely don't have a feel for that time period in New Zealand's history. It was truely a different country.
unquote
Maybe you can see from my comments on the UK in that period that maybe I do. Only those who lived through it here in NZ will be able to tell me whether my experiences sound similar. Maybe there was an NZ version of Margaret Thatcher?
You then said:
quote:
I think you have picked the wrong example if you are trying to discredit Olly. From my point of view, if we repeat a similar wage inflation as 1975 to 1980 then today's prices will seem reasonable.
unquote
I'm not trying to discredit Olly, but I do disagree with much of what he has said in this article.
I'd prefer to debate cold hard facts, based on real numbers.
Then you said:
quote:
However, as we have offshored a large element of the union jobs. And the unions have been crippled in terms of pushing for wage rises due to emasculation via regulation and wage arbitrage via globalization I'm wondering where that wage inflation will come from. I'm guessing for Olly's predictions to come true, we will need to see wage inflation in China & India first before it spilt over into NZ.
unquote
But this can be seen in many countries. From one parent working families to two. A debt burden which has increased to breaking point.
Price rises of things you need does not need to happen because of wage rises, it can happen because the currency devalues. The more currency is created, by whichever method the banks use, causes the currency in your pocket to compete with more that others have, and thus prices rise.
Prices can also rise due to a shrinking supply. Most people seem to only consider demand. One must consider supply.
Fiat currencies are good as a medium of exchange.
They are poor as a store of wealth.
They are a poor unit of account.
Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves
Well put. Eloquently
Well put. Eloquently stated. I couldn't have said it better.
My response to
My response to Olly:
quote:
Gibber has stolen my thunder and has said what I wanted to say while i was busy typing away -- but i will say it anyway.
Steve-- yes I was flat out right through the crash of the 70's buying and selling and speculating in the thick of it
but luckily I wasn't even scratched when the walls fell in.
You chart is excellent and informative. Prices for houses did fall when compared to the rampant inflation of the times.
But as the chart shows prices recovered and exceeded inflation on many more occasions as time went by.
unqoute
Glad you liked the charts Olly :)
But houses didn't just fall relative to the local currency, the NZ$, because during a real inflationary phase, rising money supply, the currency would also have been devaluing, so houses in NZ valued in oz of gold would have been falling even more. The real fall.
quote:
There are times such as now when residential property seems over priced,
unquote
Agreed.
quote:
but to off set that I believe that we are in for a big dose of inflation in the not to far distant future as the banks print more and more money while keeping interest rates low.
unquote
Olly, I have read far to many inflation/deflation debates. I avoid such discussions because my view is roughly this. Whether the banks manage to re-inflate the money supply, or whether it deflates, the result will be the same. A world-wide financial collapse as a result of unsustainably high levels of debt. I think many countries of the world have reached a debt ceiling, and that will prevent "inflating away the debt".
quote:
The trouble is that many people is that they want instant answers and quick fixes.
Like a TV program, they want situations to be created, reach full speed and be resolved with 60 minutes maximum or they get bored.
unquote
I can agree with that.
quote
Investment in real estate doesn’t work like that. It has to be understood that real estate is a very long game
I believe that many Governments are deliberately trying to recreating inflation ( higher GST, carbon emission charges, more taxes etc) to offset deflation and this is happening here and overseas right now. Higher taxes and costs = wage demands= inflation.
unqoute
This gets me back to the word "inflation".
Raising GST increases prices. Those rising prices may result in rising wage claims. But that is not inflation. That's price rises.
Inflation is an increase in the amount of currency, and that can be reduced by people paying off debt, or increased by taking out more debt.
The way to see what is really happening is to avoid the official statistics, and use more reliable measures. Things which governments cannot so easily fiddle.
quote:
I am not alone. Gold prices- the universal barometer of inflationary expectations -tells the story.
link: http://www.stuff.co.nz/marlborough-express/business/3999346/China-to-re-...
One billion Chinese can’t be wrong and they really know the waiting game very well indeed.
unquote
Yes, the divide between east and west when it comes to money is significant. Those in the west have had full faith in their paper currencies, and have lost touch with the history of money.
Those in the east have not, and still understand the difference between a bit of paper, and something real.
I have a few books on the history of money, and they all tell the same story.
I disagree that gold is a barometer of inflationary expectations. I think that is too narrow a view. Gold is a measure of the faith in paper currencies. When the system hyperinflates or deflates and collapses, gold is the real monetary safe haven.
Nicholas Arrand | 07 Aug 10,
Nicholas Arrand | 07 Aug 10, 3:56pm
Well said :)
Olly,
quote:
Question: What would happen if every one repaid their debts to the banks?
Answer: the banks would all go broke.
Conclusion: Debt reduction is today's mantra. Tomorrows will be the opposite.
unquote
Olly, I think this is where we need to go back to basics and look at the very monetary system that everyone in the world uses.
We all use a fiat currency system. All of that currency is only in existence because it was created by people taking out loans.
If all debt was repaid, which is impossible anyway, there would be no paper currency.
Why can't it be repaid? Because only the principle of the loans was created, and not the currency needed to repay the interest.
It is I think and unsustainable and unjust system.
We should be considering better more fair systems. Bernard Lietaer has many good thoughts on this.
Alen & Kiwidave, exactly :)
Bernard,
It's not nominal rents that matter, it REAL real term rents :)
Olly also said:
quote:
For the record: At one time I had over 100 residential rentals. I sold my last one 3 years ago at the peak. Now I will be going back. Timing is everything.
unquote
Pretty good timing on selling Olly :)
IMO you should wait until NZ houses in oz of gold has bottomed. I think that's a much better method.
Paul Holmes' article today
Paul Holmes' article today summed it up very well. No amount of talking it up is going to work - people / families are hurting out there. Forget about the one off Omaha sales and look at reality Olly.
http://www.nzherald.co.nz/paul-holmes-on-new-zealand/news/article.cfm?c_id=1502869&objectid=10664400
A Harcourts agent told me
A Harcourts agent told me that they're sending a delegation to Shanghai this month to sell the Chinese NZ properties.
I agree with Paul Holmes
I agree with Paul Holmes article in the New Herald today where he stated the economy has tanked in the last six to eight weeks. As a professional in private practice it has got so obvious that the vendors are anxious and the buyers are getting very confident that they have a strong upper hand. When vendors cry or should for joy when they have sold it tells you how they are feeling. Buyers tell you consistantly there is so much on the market they are worried about putting a price on it today as it might be cheaper tomorrow and that if they do make an offer they are going to offer a price much lower than the vendor wants and if they don't like it they are going to move onto another home.
I regularly talk to agents,valuers,brokers,accountants, banking staff and legal colleagues all over the country and they say they are suddenly quieter. Talking to people in general there seems to be a sudden and severe lack of confidence that was described by Rod Duke of Briscoes on Friday as "New Zealand suddenly seems to be scared to spend"or words to that effect. I do not believe there are sufficient New Zealanders or immigrants who are currently willing to buy property to take out all the willing vendors currently on the market.Even if they are willing many of them will not be able to raise the finance needed. As ASB bank said last week they can only see the market dropping another 3% by christmas. I think this figure is conservative therefore you would be mad to buy any form of investment property at present especially if you are borrowing all or part of the purchase price.
Talking to people in general
Talking to people in general there seems to be a sudden and severe lack of confidence that was described by Rod Duke of Briscoes on Friday as "New Zealand suddenly seems to be scared to spend"or words to that effect.
RBNZ have stuffed up big time with rate rises. Fire the top three.
Thanks to the many posters
Thanks to the many posters who supported my views or debated the issues sensibly even if they disgareed with me.
We are now in the depths of the market trough and we will bump along lke this for some time yet thanks to daft interest rate decisions, increasing GST and other costs, rising unemployment and mortgagee sales - not to mention lousy weather.
I suspect that we will have a year or two more of this which in real estate terms is not very long before things will improve.
it reminds me so much of the mood of the market in the mid 70's and late 80's when exactly the same gloom and doom was preached with the same dire predictions that the world would end and we were all going to hell in hand basket without exception.
One can sympathise with those that have been badly affected ( been there - done that ) but it has to be said that the timing is perfect to "stock up" for those with vision and courage.
Olly would you buy a
Olly would you buy a residential property today for investment or would you wait to see what prices do in the next few months>
I'm happy to comment Anon. I
I'm happy to comment Anon. I think now is great time to buy (cheap money, few competing buyers, amongst other reasons).
But, I am a long-term owner of houses so I would only buy intending to keep. Any price increases may be 3-5 years away. That time-frame does not worry me but if you are keen to buy and sell, buy and sell, it doesn't look too promising for a few years yet.
Rental returns will be good over the next few years so that is another reason to buy now.
All the best for whatever action you take. Don't bother to send me a cheque.
Sorry anon- you will have to
Sorry anon- you will have to make an appointment with me for that sort of advice.
Reading these comments one
Reading these comments one thing that really stands out is the activity of Happy Renter. He seems very agitated, it's as if he senses the writing is on the wall regarding rental increases.
I predict that, quietly, Happy Renter will soon be buying a house to make the most of this period of relatively low prices and to protect himself against rental increases.
He will then, just as quietly, drop the moniker 'Happy Renter' and carry on posting in another guise on other topics.
We will, all, one day start wondering just what happened to that 'Happy Renter' guy who used to post here.
But, in truth Happy Renter need not be ashamed, as his story will mirror many people on this site.
Anon at 9.02p.m. I also
Anon at 9.02p.m.
I also don't think Happy Renter is that happy.
Yes he can certainly tell a decent tale, but I also think that he lives in a dream world and fabricates things to tell a good story to justify his posts most of the time, going by recent story writing.
Hello The Man. Did you see
Hello The Man. Did you see the TV1 report yesterday about the Auckland rental market?Suggestions of big numbers wanting rental houses to live in. Seems to me somewhat unusual at this time of the year and a sign that rental pressures are already building, even in the depths of winter.
The report was Auckland only but I believe it will gradually start to be reflected around the country.
Anon at 10.38 p.m. Yes I
Anon at 10.38 p.m.
Yes I did. I think that good properties will always be sought after in the major cities in N.Z.
Some of the not so good properties in the cheaper areas will be tougher to rent unless they are very realistically priced to rent.
Have rented 3 properties to tenants recently and had multiple parties wanting them.
There is demand.
Not just "happy renter",
Not just "happy renter", many on here have already done so and came back under different names. It takes time for people to wake up, but at least they did and thats a good thing.
Take advise from the experienced, as they say: if you want to go somewhere, its good to ask those who have already been there .
"Human nature never changes", hence history will repeat over and over again.
Totally agree with Olly, great read.
Agree with your comments
Agree with your comments Small Kev. Thank you.
I write a lot because I
I write a lot because I research a lot. Then I think about it for a long time. Then I research some more before drawing a conclusion. I have been invested in precious metals since 2008, and had all of my property for sale at the same time. The buyers disappeared even then. I finally sold the last of my property in 2009, for much less than I had hoped, but for much more than if I held out for a higher price, looking at the market today. I could easily buy the house I am living in, and pay cash. But why? If I simply sit on my hands, I could buy twice as many houses than if I bought now. The house we lived in last year dropped in value by an amount equal to more than all the rent we paid COMBINED. So, in a way, we are "buying" our next house, as prices drop. Nevertheless, we are not married to a bank. I we want out of the deal, we just give the landlord back the keys.
I am awaiting a return to cash-flow fundamentals. Do I believe that rents will go up in a significant way? Yes and No. Yes, in that they will keep up with inflation, but "no" in that they aren't going to go up FASTER than inflation, such as I think anonymousand Olly believe. I could be wrong, but I don't think I am. I will simply pay more rent, BUT I PROBABLY WON'T PAY MORE FOR THE HOUSE THAT WE DO EVENTUALLY BUY, IN ABOUT 3 YEARS, I RECKON. There will also be a lot more SELECTION of houses to buy to live in, so we will take our own sweet time, because landlords are basically subsidizing rents right now, and that can't last.
Either rents go up, or house prices go down. I speculate a LITTLE BIT of the former, and a LOT of the latter. I can live with that, especially as a RENTER, not a fully vested owner of property. I don't want my money tied up in property, and mortgages to pay, when prices are falling, and buyers are sitting on the sidelines. This is not a fun situation to be in, and not one that is easily remedied without some significant pain. "Investors" are being forced to sell when they lose their real jobs, because they can't pass their higher mortgage costs on to their renters, who can hand in the keys, simply move somewhere else, or move back in with mum. RENTERS have a lot more options, than a PI with a day job to cover the difference between rent collected and mortgage payments.
What happens when our PI hero loses his job? As is happening RIGHT NOW. Several months from now, after frantic calls to the bank, borrowing from mum until dry, and burning through savings, you are going to have a LOT of INVOLUTARY sale property hit the market and drive prices down further. Due to defaults that are happening and ABOUT TO HAPPEN ("shadow inventory"), when so-called PI's lose their real jobs and can no longer afford to subsidize rents, or raise rents to match the real cost of ownership, property enters the market INVOLUTARILY, but enters the market for sale nonetheless. This is what I see happening, and sorry if you don't see the writing on the wall. Perhaps it is different in Auckland, or whereever you are (dreaming), but that would be a disconnect from fundanmentals like we see in Vancouver Canada right now. That too will probably correct, once the China bubble pops. All things revert to the mean eventually. You can't grow trees to the sky. The higher the climb, the harder the fall.
Keep in mind that I have probably bought and sold more property than most PI's. I have owned and lived in several houses, including the building of our "dream" home. Every person, some time in their life should build their "dream home" so they can get it out of their system, and swear never to do it again! I am not a "happy renter" because I have ALWAYS rented. Right now it is a CHOICE, because the market fundamentals say it makes more sense. It took some time to convince my wife, but she is now on the same page with me. We are in no hurry. Life is good and stress free.
I will only re-enter the market once the cost of rent almost covers the cost of ownership, or the fundamentals (cash-flow) justifies the risk (right now, that would be employment and banking and lending, over which we have no control, and neither do buyers of any of your properties).
This is why I'm banking on prices falling in the near term- due to motivated sellers dumping property left and right, by choice and NOT by choice (the banks want their money). Not a fun situation for leveraged PI's right now. Unless their properties are paid-for, these are not good times for average PI's who bought in the last 5 years. Otherwise the banks own your properties, or soon will. I don't desire that kind of stress. So I don't put myself in front of the train. I make more money by not losing money right now, and prefer fishing. I may not even re-enter the market for good, and have a look at stocks, after their final capitulation.
Being a happy renter, I also get the added benefit being able to call someone to do my house repairs, not have to pay for them, not have to do them myself, and spend my weekends NOT doing house maintenance. I watched my neighbor repair cladding on his house this weekend. Screw that! I've done my fair share.
Anonymous, I think you are a property investor, actually, let's use the correct terminology- a property SPECULATOR, because not only are you looking for rental returns, you are looking for capital appreciation. That makes you a SPECULATOR. That's GAMBLING. Don't fool yourself otherwise. Don't get me wrong, I am a speculator as well. I prefer the term "investolator." However, most people don't know how to do fundamental market analysis before making a big financial decision, and get caught in the crash later. If you "own" your own home, you are still a SPECULATOR. If you have a mortgage, you are technically "renting" from the bank, and SPECULATING that home prices will go up. You are also SPECULATING that your monthy payment stays REASONABLE, as interest rates fluctuate. You are SPECULATING on continued inflation, and keeping your job so you can make the payments. With so many people losing their jobs, this represents an awful lot of inventory that is about to hit the market like a ton of bricks. This is something you have little control over. That makes owning a house with a mortgage SPECULATIVE right now. I don't like to speculate. I play to WIN. I want the most odds in my favor, and in real estate, that usually translates into BUYING CHEAP, at so low of a price that it is NEARLY IMPOSSIBLE TO LOSE.
Markets move in cycles, and follow market psychology. Those that say "ya can't lose with property maaaate!, aren't old enough to remember the pain of the last big crash, because they do happen." What we have just witnessed, with property rising faster than inflation, probably won't return for about 30 years, maybe longer. It is the rare occassion that real estate accelerates in value FASTER THAN INFLATION (money printing- that's all that inflation is- money devaluation by printing). Go look it up... because apparently you don't open any of the links I give in my posts, or you haven't read all of my posts...or you don't really do your homework before making buying decisions. I do, because I know the pain of losing it all, and swore to learn from my mistakes. If you haven't ever lost it all, don't think for a second that you will dodge a bullet. It's harder to keep what you have than to make it. This I know from my experience. A broke rich man is rich again in half the time. He knows how to make money.
It's more CONVENIENT to attack me, because you can't make a reasonable argument otherwise. This known as an "ad hominem" argument, or "to the person." It usually means that you have nothing to offer otherwise, and are giving up, as is evident by attacking me. In other words, my logic stands on its own, and you have nothing to offer to counter the argument, so, in essense, I win the debate.
Happy Renter. You have
Happy Renter. You have definitely lost the plot.
Your ramblings have progressively got worse and you are definitely the biggest clown and fabricator of the truth on this site bar none.
Yesterday you were saying you hire people to do the repairs on your rental property unlike your 70 year old father in the U.S.A. You probably should remember what you have written previously.
You really are one mixed up dreamer.
More projection.
More projection.
..the Government just allowed
..the Government just allowed more foreigners into the country with money and allowed them to invest in property? not the mega rich but the middle classes who have more money then your average kiwi saved. I read somewhere (probably here) there were buses of asians buyng up property in Remuera not long ago. Idont think this country needs any more ""high rollers" who just keep the wealth circulating amongst themselves, i think its the middleclass disappearing via migration thats stuffing everything up in nz.
I recently left New Zealand
I recently left New Zealand and moved to Melbourne. The reason was two-fold.
(a) No matter how hard I saved, property ownership was only possible by getting up to my eye-balls in debt.
(b) New Zealand's economy is very small and opportunities are very limited.
For me and my wife, flying to Melbourne was a gamble. We have friends & family in New Zealand, we had relatively safe jobs. We had significant cash reserves built up and these took a hammering in the move.
However I have no regrets. We were spinning our wheels in New Zealand. We were locked out of the property market by 'investors' like Olly who have grabbed everything and created a huge barrier to property ownership for normal working people like myself.
In only a couple of short months here we have seen an improvement in our monthly cash position. We are saving a little more than we did in New Zealand but our savings are in Australian Dollars which are worth more than Kiwi dollars. Things like petrol and eating out are cheaper here, other things seem more expensive.
The biggest difference is the opportunity here. I landed an excellent role very quickly on arrival. I could not have found a similar position in New Zealand. I was basically stuck in a job where I had not received a pay rise in two years. I am on the lookout for an even better role, one where I hope to employ skills that have lain dormant for several years in the stagnant New Zealand job market.
My wife is happier here. Having worked in New Zealand for 20+ years she was tired of watching her taxes being soaked up by bludgers.
People like my wife & I have voted with our feet. The Olly Newlands of this world have turned what is a basic human right, 'shelter' into an 'investment vehicle' and the New Zealand government were too slow to do anything about it. We are still hounded by the Registrar of Electors with their demands to know where we live so we can vote. Who would want to vote for any of the clowns in New Zealand politics?
We will be back for the RWC, but only as tourists.
LKSteve. Pleased everything
LKSteve.
Pleased everything has improved for you.
However, why the heck you blame Olly and other investors for forcing up house prices defies logic.
A true investor likes to buy property at a cheap rate and is more likely to keep the prices down.
Perhaps you should be blaming the people who buy houses to live in rather than the investor?
Economies, like investments,
Economies, like investments, move in cycles. Australia is not immune. Don't fool yourself into thinking that you somehow are forever saved. Things could get ugly there too. I do agree with your comments about politics. Politicians never fix anything. They make a bad problem worse usually, or when things get better, take all the credit. They are teh reason why New Zealand is not more competitive for brain power. The good brains get on a plane and leave for greener pastures. But I do think NZ will have its day. There was a time not long ago that the people used to jump the ditch this direction. Maybe it will be for cheap real estate? :)
I would highly recomment NOT buying any real estate in Australia right now. Like NZ, it's about to get a whole lot cheaper.
LK Steve - what a pack if
LK Steve - what a pack if whining drivel - I have taken away your "human right" for shelter???
For decades you have sucked on the teats of the NZ system, and now you turn your back on the country that nutured you, and your family and your friends, and filled your pockets with "significant cash reserves" just so you can selfishly line your own pockets with more some place else.
The only human right you have is to work and strive and maybe -or maybe not -get lucky one day- just like the rest of us.
You and your ilk are
You and your ilk are parasites Olly. Sorry mate, if the government had any balls they would legislate against your type. Unfortunately, many of our government ministers are also on the property investment bandwagon. The bottom line is that people like myself, with skills & mobility will choose to live where we have a fair-go. For now, that place is Australia. I hope you all get done-over in the impending New Zealand property crash.
LKSteve, it's amazing to me
LKSteve, it's amazing to me you are so much more sucessful in Australia compared to NZ'ed. The two countries are not that different.
Maybe you have a different way of thinking when you get to Australia?
The economic system is the same. House prices are higher there.
You wont go around bemoaning your fellow countrymen there though so your attitude will be better. Seems that makes all the difference.
LKSteve. Prices in Melbourne
LKSteve.
Prices in Melbourne are dearer than N.Z.!!!!!
So what are you on?
Too true. And they'll both
Too true.
And they'll both head way down south all the way to Antarctica when our best mates Chinese moms and pops have their own ponzi dreams dashed through sheer gravity.
LKSteve, you may have skills
LKSteve, you may have skills and mobility but obviously no brains. Houses in Oz are just as or more expensive. Moreover, do you want to live in a country where the government legislate what roof you are allow to own and sell? Maybe China should be the place for you instead of Oz.
HAPPY RENTER!! You better
HAPPY RENTER!! You better quit while you are behind and stop telling porkies.
If your dad is say 70 that would probably make you approx 45 years of age at a guess.
Your daughter could be say 25 years of age so that makes your half sisters 24 going by what you said earlier.
So your dad is in U.S.A. struggling with debt at 70 looking after a wife that you call young at least 48 years of age that being a few years older than you at 45 and the half-sisters ( are they twins?) are 24 and you call them kids and he needs to look after them
Yeah right!!!!!!.
You are having us on aren't you.
My father is in his late
My father is in his late 60's, his daughters and my daughter are under the age of 10. I am in my late 30's.
Happy Renter. Continue with
Happy Renter. Continue with the garbage!!!
So your dad in U.S.A. is fathering children when he is in his 60's is he?
Did it take you awhile to work out some figures then?
No wonder he is in the crap according to you, when he wants to have children at that age and be responsible for paying for them after retirement age,
Brains really does run in your family!!!
Does he realise that he will be over 80 years of age at his daughters 21st party?
Yeah Right!!!
"Rupert Murdoch, 79, ( I'm
"Rupert Murdoch, 79, ( I'm guessing you know who he is ,The Man) has two children with wife Grace Helen Deng (born in New York 19 November 2001) and Chloe (born in New York 17 July 2003)."
Ano at 9.29a.m. I know
Ano at 9.29a.m.
I know anything is possible nowadays.
However Mr Happy Renter says that his father who supossedly had piles of cash is now financially struggling at nearly 70 years old due to his property buying.
I am pretty sure Mr Rupert Murdoch wouldn't have been struggling financially worrying about paying the phone bill.
Happy Renter is just that but the only reason he could be that is if he was smoking something.
Happy Renter tells porkies!!!!
From reading HR 's posts I
From reading HR 's posts I got the impression the his father was doing ok when he had the child(ren) given the age he has just given us. And that his father's propblems came when, not knowing what to do with his cash, he got back into property. That appears to be when his father's problems started. We have all seen from afar what has happened in the States to their property markets, depending upon where you are.
Anon at 9.44a.m. Read the
Anon at 9.44a.m. Read the posts again. Full of rubbish just to make it look like property overated.
He has been telling porkies. With 50% equity and he is having trouble with the Banks?
He hasn't sold the new properties so value is totally irrelevant!!!
Ever hear about projection in
Ever hear about projection in the psychological sense? It's only liars who assume that everybody else is lying too.
Anon at 10.03 a.m. Read the
Anon at 10.03 a.m. Read the posts again and then comment.
The Man, Happy Renter is a
The Man, Happy Renter is a bit like Peter the other day claiming a big increase in a term Deposit, over the BIG 4 bank's stated rate. That was made up too, I am sure.
Did Bernard take on your bet over mortgage rates at 9%?
Anon at 11.29 p.m. No Bernard
Anon at 11.29 p.m. No Bernard hasn't but if he is interested it is still on.
This site is great. We have the negative people who moan about everything telling porkies to try and validify their weird way of thinking and jealousy.
Peter who ever he is. If he can show me the evidence that he is getting that 7.9% for 5 years then I will humbly apologise and not comment again!!!
I'm waiting.
The Man, the other day
The Man, the other day Bernard had an item on the poor sharemarket. I observed that people who are anti-PI were busy slagging off their own investment outlet, yet when negative PI articles are put up the PIs get on and defend their chosen investment.
Seems to me PIs are happier with their investments than are the anti PI types.
Anon at 11.39p.m. Of course
Anon at 11.39p.m.
Of course because property investors have control of what they are doing. They own the property whereas sharemarket investors own shares in a company they really don't have any say in what happens to the company and are really powerless to what happens to their financial position.
The Man, anon these last few
The Man, anon these last few minutes is me the RPIT. I get sick of using my RPIT and someone pinches it and abuses people so usually stick to anon now.
So PIs can control interest
So PIs can control interest rates, tax laws, unemployment figures and the world economy?
Cool.
Hello The Man, one advantage
Hello The Man, one advantage with shares is that you can diversify your risk. ie if the company does turn out to be cruddy, you move onto the next one. Ask a leaky building owner how powerful they feel.
Anon at 11.49p.m. Makes
Anon at 11.49p.m.
Makes sense to me as some clown was using "The Man" as well it is their way of trying to make us look abusive. Wait for it. They will say we are one and the same.
There's no doubt the site is
There's no doubt the site is busier when the property v whatever debate is on, but they are a dreary lot here on interest.co, for sure.
I just see it as good fun winding everyone up. I'm more than happy with my property investments so don't have any points to prove.
Some people get real grumpy, I can't believe it sometimes. There is a lot of lying goes on too, without a doubt.
"Rich" PI Troll Perhaps you
"Rich" PI Troll
Perhaps you are the lier a bit like that what's his face - Terry Serepisos who seams to be in the spot light for all the wrong reasons.
The only difference between share market / PI / and stud poker gamblers is that PI's borrow money from the bank to afford their lifestyle - if they have one.
I always laugh when PI's talk about owning property because generally they don't own anything. Again, the bank does, so really it's the PI who lies and misinforms from day one.
We've been renting a place
We've been renting a place while renovating a 1930s bungalow. Our landlords own 10 or 15 rentals (I can't quite recall the number), they live in a turn of the century mega bed mansion on a half acre section in a rural town and operate it as a B&B/corporate retreat. The hubby is a RE agent and the wife a life coach/personal development trainer. Both of them drive late model vehicles. They've got the batch in Taupo and hop across the Tassie once or twice a year.
When we moved in here the roof was leaking - badly. Our son, a roofer, quoted them and replaced the roof - yet had to wait nearly eight weeks for payment - given their cashflow situation was so tight.
Unbelievable really. With that level of "assets" I'd have crawled under a rock if I had to tell a 20+ yo family man who doesn't yet own his own home - sorry I can't pay you for weeks and weeks. Sadly however, I think this is a typical calibre from the multi-property PI sector. They expect their rent on time - declare all their struggling tenants as "no hopers" .... but what does that make them when they can't manage their cashflow properly either.
That reminds me of those
That reminds me of those Regency bucks who would dress to the nines and run up enormous debts on drinking, whoring, gambling and the best of everything, but not bother to pay the tailors, bootmakers, winemerchants, and other honest tradespeople that they saw as beneath them.
Mmmm, yup. However,
Mmmm, yup. However, philosophical as he is - our son smiled at the fact that they've likely got a bank manager on their tail - whereas he doesn't even run a credit card. Figures from a cashed up perspective he's far wealthier than they are. Smart kid.
In the long run, a roofing
In the long run, a roofing business has to be more viable than a life-coaching business, which is obviously a relic of boom-times that people will happily do without when things get tougher. Like designer dog clothes.
Did you keep paying the rent
Did you keep paying the rent whilst your son was owed money? Likes as not, they do have 'good cashflow' control. It's what most business people do; pay as late as they can and chase the cashflow owed, hard. Because of who you are you probably thought " But if we don't pay the rent we can be kicked out". That actually doesn't happen! Once the debts are settled it all goes back to normal. Landlords need the cashflow more than you think.
Of course we kept paying the
Of course we kept paying the rent - I wouldn't lower myself to their level. The son could have collected through the Disputes Tribunal had he needed to ... he hasn't got any debt, so no one's chasing him. He saves what he earns in excess of his living costs! Now there's a novel idea!!!
And if "most business people" run their businesses with the attitude you've described, then they're absolute hypocrits and will certainly go down big time. I know many landlords who need the cashflow ... because the majority of them are up to their eyeballs in debt and they HAVE to pay the bank first!!!!!
Depends on where you are
Depends on where you are according to Dunn & Bradstreet!
"Firms based on the North Island continue to be slower payers than their South Island counterparts. An increase of 0.2 days quarter-on-quarter had firms based on the North Island averaging 45.0 days to settle accounts and firms based on the South Island taking 42.0 days to pay their bills in the December 2009 quarter."
Kate. Why are you living in a
Kate. Why are you living in a rental while you are renovating a home you own. Yours must've been pretty knackered if you had to move out to renovate? Not terribly wise financially I wouldn't thought!!
Either because she can afford
Either because she can afford to do so financially or it is a pain to live in a house when it is being renovated especially with kids or both,you condescending dick.
Nice try - The Man.
Nice try - The Man. Actually, we flipped a house over a 12 month period. Bought at the rock bottom in Nov 2008 and made a tidy $60K after agents fees when the market recovered briefly end of 2009. Problem was - although we looked and looked and looked, we couldn't find a well priced replacement to live in. And having a dog - well we were a bit "stuck". One of the REs trying to sell us a new place said we could rent from him - got $100 off a week in rent (on a normally $300 a week rental - and even at that price they weren't covering their mortgage costs!) because we agreed to paint the ceilings which had peeled as a result of all the leaks in the roof! :-)
Meantime, we saw a steal of a 90 acre property only 14kms outside the city - 50 acres in pines, horse corral, stable, three bay implement shed, fully fenced with a good flowing brook through it.... but, it had a relocated 1930s bungalow on it that was virtually unliveable (although all the hard stuff, like piles, re-roof, septic etc was done). Offered cash - got it and have gutted the inside completely.
Now fully insulated, a kitchen and views to die for ... and still no mortgage.
Best investment (and we've had a lot of residential properties) so far we reckon.
Nice one Kate. The Man is
Nice one Kate. The Man is such a dick
Cheers anon - yep we're quite
Cheers anon - yep we're quite chuffed and the roofer son, wife and grandchild plan to build on the property next. Probably a re-locatable so that in the event we want to move - they can just pick it up and go too - or sell it separately. No section/subdivision costs and we think they can hook into our septic as well. Best of all, the rates on the entire 90 acres are only $900 a year - and our carbon credits are around $4,000 (that's if a market actually develops)!
Nice one Kate, I'm jealous.
Nice one Kate, I'm jealous.
I cannot fathom where he
I cannot fathom where he comes from. One minute he is ridiculing the tenants who are all doll bludgers and dropkicks and then he has a go at you who is renting while you renovate.Anyone who has half a brain knows that living in a house while it is being renovated has killed off a lot of marriages/relationships. Having no debt is great with such a neat property. Many a new zealander in trouble with the bank at present will wish they had been as smart as you.
He is coming from a position
He is coming from a position of too much debt.
:-)
Even Olly said on the weekend
Even Olly said on the weekend he had sold all 100 of his rentals by 2008 if I recall. A lot of PI's like the Man are going to be wish they had done the same when this drop in sentiment runs its course.
Kate. Not too much debt at
Kate. Not too much debt at all. You sound like you are taking advantage od someone else just like the negatives calling property investors greedy.
Anon at 4.24. Never once
Anon at 4.24. Never once called my tenants bludgers or dropkicks at all!!!
I have friends who are PI's,
I have friends who are PI's, and I'm not a renter, so no axe to grind.
But - it was obvious that capital gains has to fail to be underwritten at some point, permanently. They are, after all, an exponential expectation to consume.
When speaking of this to them, I note an important point: most PI's seem to have BIG tellys, but no books. Maybe a few rugby annuals, and a house-and-garden on the coffee table, but no real books.
Folks in my circles have shelves of them.
Maybe it comes down to how informed you are.
powerdownkiwi, just wondering
powerdownkiwi, just wondering how many people took part in your PI survey titled "How many books do you have and do you have a BIG telly?", it must have been a good number to come to the conclusion that "most PI's seem to have BIG tellys, but no books". Do you work for statistics NZ?
Powerdownkiwi, you missed me
Powerdownkiwi, you missed me out of your survey. I am a confirmed PI. I only invest in property.
I own thousands of books.
Most PI's are people on
Most PI's are people on average incomes trying to get ahead using property as a vehicle however as a lot of them are not that well educated they forgot to realise that markets do fluctuate and when that happens there are casualties.
Oh, you are again spot on! I
Oh, you are again spot on! I noticed this also
Happy Renter. Continue with
Happy Renter. Continue with the garbage!!!
So your dad in U.S.A. is fathering children when he is in his 60's is he?
Did it take you awhile to work out some figures then?
No wonder he is in the crap according to you, when he wants to have children at that age and be responsible for paying for them after retirement age,
Brains really does run in your family!!!
Does he realise that he will be over 80 years of age at his daughters 21st party?
Yeah Right!!!
Anon @ 12.12 - you hit it on
Anon @ 12.12 - you hit it on the head.
They want to get 'ahead'.
Of what, exactly?
Others? That's an ego problem, cheaply counselled.
Where they are? Just like ego, you can't outrun your angsts.
They couldn't all 'get ahead' now, could they? It went without saying, too, that they would create an underclass, who would cost to contain. Hence prisons and three strikes - eventually the graphs cross, the cost of containment crosses the 'ahead'.
PI's produce nothing, they either take rent from others (some of whom will be earning by being productive) or from hoping for capital gains. The latter is gone now. Permanently. Due to a lack of the productive bit, constrained in turn by supply of things to be constructive with.
Leaves then with sponging up what they can from a reducing-average tenant income.
If that's 'ahead', then yes, they'll get there.
I've got better things to do.
exactly! bang on the button
exactly! bang on the button
We live in a Global
We live in a Global World.....To give perspective to NZ property it is interesting look at other countries.
I've been researching Germany... This is a country that has been reasonably prudent ( by comparison) and is actually coming out of recession.... Actually has ongoing Trade Surpluses.
In germany one can buy really beautiful apartment buildings with yields of anywhere from 7-15%.
Mortgages can be had for 5-7% ... (from memory ).
The Govt has been ( in the past ) providing "renovation" loans to investors who are prepared to modernize old apartment buildings.. ( some are 200 yrs old. ).. These loans were at 3-4%.... Unmodernized buildings sell for WAY below replacement value.
http://germany.homesgofast.com/properties/fbcz1801-apartment-block-in-sa...
An enterprising person could do very well... it would be a "business" with very solid positive cash flow!!!
The economic performance of Germany is Vastly superior to Nzs'.... BUT I think NZ has alot going for it, and is a great place to live.
The reason I compare Germany to NZ..... is that it raises some good questions.... original thinking.
Germans don't value home ownership quite like we do... AND they do have some really tough tenancy laws which make being a landlord who likes to put up rents ... difficult.!!
One can become a little myopic by just relying on ones own experience, within a small country like NZ.
Don't get me wrong.... like Olly says, one day there will be some real , low risk , opportunity out there in Real Estate Land... I'm just not sure it will be in the next 2-3 yrs..???... I think his timing is wrong.
I recall Bob Jones buying up large in the late 1980s' ( bargins)... thinking his was the only Property Company to escape the mid 1980s' crash.... BUT in 1991 the world went into a deep recession... with commercial real estate collapsing.. That was the start of the END for RJI ltd as a listed company.... Goes to show that even Experts struggle to see things coming. I think Bob Jones has been quoted as saying that is is impossible to predict ...
( maybe he was referring to economists.?? )
(I also think Happy renter makes some really good points, )
Is it true that increasing
Is it true that increasing numbers of houses in NZ are sold on TradeMe (we certainly sold our this way to save big $ for both parties)? If so this must be distorting the statistics often quoted from real estate companies. I'm not sure if the figures from the real estate institute include private sales, anyone know?