Property investor and author Olly Newland talks here in this Double Shot interview about the outlook for the property market after a difficult 2010.
He says the bulk of the market stayed flat in 2010, contrary to forecasts of a 30% slump. He is now seeing some signs of confidence with rising average prices and volumes.
"People have looked back over the last 2 year and said to themselves: 'The world hasn't come to an end. The streets are still full of cars. The restaurants are still full of people. Business is still going on. Maybe this is all a bit overrated. Let's get on with it'," he said.
Newland said prices had gotten ahead of inflation between 2002 and 2007 and were now broadly flat, where it was still possible to make money. "That's better than falling," he said. He noted a similar pattern after a boom in the early 1970s.
He talked about investing in commercial retail property.
"My particular interest is in buying dead or nearly dead buildings and breathing life back into them. People are buying commercial property because the returns are better than the bank, and hopefully with a bit of capital gain," he said.
I asked Newland about investing in retail commercial property at a time when consumers are being more careful about spending.
"Retailers are always complaining, so you can't take too much notice of that, but if you're investing in retail and a shopkeeper leaves, there's usually a hundred more shopkeepers ready to give it another go. To me it doesn't make too much difference who's standing behind the counter, as long as they're paying me rent," he said.
I asked him about the change in the structure of retailing from small retailers to larger 'big box' chain stores.
He said 'destination' shops were springing up outside of the big box malls and there remained demand for tenants.
'Deckchairs on Titanic'
The government's GST increase and tax cuts that started from October 1 was a waste of time, Newland said.
"It was just reshufflling the deck chairs on the Titanic. I don't think people feel better off at all. People feel they're paying out on one hand and receiving on the other, and they're more or less square, so I don't think there's been much of a rebalancing at all."
Newland said the recession had hit the poorest hardest, with the mortgagee sales concentrated in the areas for poorer houses.
"There's a big disconnect between the poor areas and the better off areas. That's interesting," he said.
'Avoid the poor areas and Housing NZ'
"My advice to anyone investing in residential property is not to buy property in the poorer areas. That's a big mistake. People there are mostly beneficiaries and on basic salaries and simply can't afford more rent, and the costs keep on rising.
"If you're going to be a residential investor you're investing in better quality properties because you get a better class of enemy when you do that. I don't know why people buy poorer, little boxes because they provide bad returns and they're hard work."
I asked Newland about concerns expressed by landlords who had leased their properties out to Housing NZ, as reported by the Sunday Star Times' Rob Stock.
Newland said the government had been 'loony tunes' by discouraging rental property investors through reducing the ability to claim depreciation, while at the same time Housing NZ was desperate to use more private landlords.
He agreed that Housing NZ landlords who were struggling may put their property on the market, which may depress prices at the bottom of the market.
For more information on Olly Newland, go to his website here.
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