Opinion: The game changers

Opinion: The game changers

By Olly Newland

Olly NewlandThe events of the past three years (and especially the events of the past three weeks) have changed the economic environment to a new place for a long time to come.

The changes have meant severe financial stress for many, and it is now increasingly difficult to predict with any certainty the direction of the property market (or any market) so as to make rational decisions on the future.

The main 'Game Changers', in my view, are listed below. As more changes arise it will require a continuing nimbleness of mind and decision-making to keep ahead of the game.

In this article I will attempt to pull together a view of 'Where To From Here?' for the property and investment market and see if some order and sense of direction can be deduced from the realities that we now face.

Each 'Game Changer' as I see it is either positive or negative (sometimes neutral) for property investors when the medium and long term view is taken i.e. over the next one to three years. I have rated each one accordingly.

With some notable exceptions, most of the consequences have arisen from unfortunate events and tragic circumstances. No professional investor with an ounce of humanity should derive pleasure from that - but we are where we are. To pretend otherwise is to fudge the facts.

Game Changer Number 1 - Christchurch Earthquake

Tuesday 22 February 2011 will go down in New Zealand's history as an event that was THE 'Game Changer' for NZ.

This natural disaster, and its aftermath which is still playing out, will not only change the lives of the citizens of Christchurch, but everyone else in this country for years, perhaps decades to come.

It is a personal and economical tragedy for tens of thousands of people. Up and down the country there is universal sympathy for the victims and their families (as is right and proper).

But there is another side to this event that has to be addressed. The question has to be asked: How will the property and investment market going to react to this event?

The good citizens of Christchurch certainly need to know as a matter of urgency. Their homes and businesses have been destroyed or damaged. The Prime Minister has already said that at least 10,000 homes have to be demolished and as many as a hundred thousand severely damaged along with much of the city centre. These figure are a preliminary indication, naturally, but they underscore the impact of the disaster.

You cannot have destruction on such a scale, coming on top of all the other high-impact events that have occurred in recent times, without severe and wide-ranging consequences to follow.

The Consequences (-)
In my view this will be a large negative in the near future as the most unfortunate events play out. But in the next few years it will turn positive (+) in the investment sense, as large scale rebuilding and tens of billions of dollars pour into the economy.

Simply put, you cannot have such amounts of fresh new money enter the market without a large part having the effect of driving up prices, costs, and wages. Much of this is directly aimed at the property market which will ultimately benefit as a result.

Game Changer Number 2 - the Wider Aftermath

As with Game Changer Number 1 above, the Christchurch earthquake will likely keep the economy in recession longer than might have been. The dole queues will lengthen, and businesses in the region will suffer.

Already it has been suggested that 75,000 people have fled Christchurch and no doubt just as many more would if they could.

Over time, many will return but these will be in turn followed by other leavers - those who will have taken a little longer to take the plunge and leave the region. The inevitable aftershocks will confirm decisions in many minds - and I believe that many will leave Christchurch never to return.

They have to go somewhere. It seems logical to me that some will go to Australia, or more likely, to other New Zealand towns and cities. The big magnet will be Auckland (where there is momentum created by its size) and perhaps Hamilton, Tauranga (and all the towns between) will see an inflow.

After all, if you are looking for a job, or a place to set up a business, you would be unlikely to go to a small hamlet. You would head for where the action is.

This migration will put pressure on rents and affordable properties ... with the inevitable result that both rents and house and prices will rise in the medium and long term.

Indeed, in the long run, the earthquake may prove to be the 'recession buster' -- billions of dollars will be spent on re building, construction, and repairs, whether in Christchurch or elsewhere for that matter.

The Consequences (+)
Very soon (if not already) large numbers of shell shocked Cantabrians will be looking for alternative accommodation for themselves and their businesses. In the short term this is negative (-) because of the stresses and strains that will arise but in the long term it will turn to a positive (+) as new and existing homes are snapped up with moneys paid out by insurance and the the EQC. The end result will be increasing prices, wages and related costs.

Further note: The terrible earthquake and Tsunami in Japan will also have far reaching economic effects. The demand on our resources (timber, steel, labour etc) are going to greatly increase because of the rebuilding of Christchurch. In the very near future there will be even a greater demand for these same resources from Japan. We will face a serious crisis of demand for resources in the making.

Game Changer Number 3 - Changes in Depreciation Rules

In May last year the Minister of Finance changed the tax rules for residential investment properties because the Government perceived that the market was running red hot. (Too bad that he was two years too late.)

By wiping depreciation on property investments, in one fell swoop Bill English has put up investors' costs with the inevitable result. As the tax benefits are wiped, landlords will naturally look around for some means to recoup their losses. This will be done by deferring maintenance (= lost jobs) and by increasing rents.

I thought the battle had been won in the 1970s when the then Labour Government heavily taxed 'speculators' resulting in property prices and rents rising a further 40% on top of the 50% they had already risen. But it seems politicians never learn.

The Consequences (+)
I have no doubt that rents will rise sooner rather than later - especially in the suburbs that are close to transport, schools and shops. Starting in Auckland the demand will spread out, like ripples in a pond, and it would not surprise me at all if rents doubled in the next few years: A bonanza for investors, and a severe burden for renters.

The short-sighted politicians have unnecessarily created a potent cocktail leading eventually to shortages and cost increases. From an investor's point of view this will turn out to be a great positive.

Game Changer Number 4 - Leaky homes

Although it has been out of the headlines for a month or two, the 'rotten house syndrome' is still with us in the form of leaky homes needing major repair. This problem is an elephant in the room ... causing large distortions in the market.

Almost a decade of new-built houses have been effectively taken off the market, or sold at fire sale prices because of this debacle. Thousands of people, who have lived blameless lives, have been financially disadvantaged by this nightmare and face horrendous costs trying to recover from it. The number of houses so affected is in dispute, but runs into many thousands, with many more issues hidden by owners trying to avoid the problem.

However, if any good can be made out of it, it has dramatically improved the quality of even the cheapest houses and has tightened up the market even further creating a housing shortage mainly in the main centres.

The PM John Key, when asked about a housing shortage said that there was 'no housing shortage' and, as I have stated before he is right in one sense. Statistics New Zealand say that there are 1.4 million dwellings in the country. If you take the population at 4.3 million we have only 3.2 people approximately per dwelling - hardly over crowding. This may be an over simplification but that's what the figures suggest.

The trouble, is that a large number of the houses are in places that people don't want to live in. There are plenty of houses if you want to live in Taihape, Hari Hari or Tokoroa.

As we do not live in a totalitarian society people live where they want to - not where they are told to live to balance up demand. Hence it is in the main centres where the shortages are the most acute and it is the main centres where the pressure on housing will most certainly arise.

The Consequences (+)
Add these woes to the others and there can be only one answer: Yet more pressure on prices, rents and demand with the inevitable results.

Game Changer Number 5 - interest rates

Lower interest rates - not seen in this country in a generation - are a game changer of extreme importance.

For much of the time through my investment career interest rates have been stubbornly high: Close to 10% for standard first mortgages, and much more for mortgages in excess of the usual two-thirds.

Many of us investors with grey hair can remember how mortgage rates reached 18% to 22% during the inflation of the 1980s ... and how some of us managed by constantly revaluing our properties in order to draw down more money with which to pay the interest!

Current interest rates have fallen to an extremely low level, historically speaking. These have made property investment a paying proposition - almost. The longer they stay down, the more difficult it will be to raise them.

Just imagine what would happen of mortgage rates went up their previous levels. Do the numbers for yourself: Run an interest rate of, say, 11% or 12% across your current mortgages and work out how long you could hold out. Not very long I suspect.

Low interest rates make investment in commercial property particularly attractive as yields drop and prices rise. Three years ago a typical block of shops may have sold with a 9% yield. Now you would be lucky to get 6%. (Put the other way: those same shops have increased in value by one-third - and that's before you count any rent increases! The value of commercial property is based on its return unlike residential property which has the same value whether vacant or rented.)

Last week the Reserve Bank of NZ cut the OCR by 0.5% bringing down interest rates even further. I personally believe this was more of a political move than a necessity, as banks were cutting rates already - further downward movement seems unlikely.

Indeed, this cut may hasten the day when inflation returns, bringing a bonus for some and difficult times for others

The Consequences (-)
Enjoy the low interest rates while they last. Now may be the time to consider fixing rates for as long as possible because of the threat of inflation and the consequential higher interest rates which are a distinct possibility.

Game Changer Number 6 - The Global Financial Crisis

The Global Financial Crisis was the game changer of all game changers. As you may know I wrote a book The Day the Bubble Bursts in 2004, revised and re-issued in 2006. From previous experience I realised that the crazy boom starting around 2002 could not last.

Exactly how or where the break would come I could not tell exactly, and certainly the words 'sub-prime mortgage' meant nothing significant to me. (How innocent we were.) I doubt if many of us had ever thought about the subject at all. That's all different now.

One thing I knew for sure was: The party had to end.

Then it happened, and we remained transfixed for days and weeks, hardly believing our eyes and ears. Share markets collapsed, long established worldwide businesses vanished, and a whole bunch of crooked money cheats were exposed for what they were.

The mind-numbing timeline of events went like this:

(a) Between 2004 and 2006 interest rates in the US rose from 1 percent to 5.35 percent. Homeowners began defaulting on their mortgages, particularly 'sub-prime' loans (high-risk loans to people with poor credit records).

(b) By September 2008, 4.6 percent of US mortgages were 90 days in arrears. More than seven million Americans are expected to default on their mortgage payments by the end of 2010. Four million will lose their homes.

(c) Banks all over the world, which had bought US mortgage debt as an asset, suddenly owned a lot of bad debt. Billions of dollars were wiped from their balance sheets.

(d) Banks started running out of cash and had to borrow money from each other. Soon there was no-one left to borrow from. Beginning with Lehman Brothers in the US, banks all over the world came under strain and collapsed.

(e) The US Government bailed out its financial industry at a cost of $1.18 trillion. Trillion!

(f) The cost of the EU rescue package was $2.18 trillion, to buy faltering banks and guarantee loans. The UK's government rescue package amounts to $1 trillion.

(g) In October 2008 Iceland declared national bankruptcy, and became the first Western country since 1976 to accept an International Monetary Fund bailout.

(h) The Bank of England says the world's financial firms have lost $4.82 trillion. More than 100,000 banking jobs have been lost worldwide.

(i) Globally, taxpayers have now spent around $13.39 trillion (that's $13,392,103,900,000) to shore up the world's banks. That amount is predicted to increase.

Today the Governments and banks around the Western World (with the exception of Australia whose turn is yet to come) are still printing more and more money -- and we all know what happens if you supply too much of any commodity: the price goes down.

All going well, we will recover and get back to steady growth.

That could be very good for those with hard assets such as property because inflation is the investor's friend. The risk is that it all goes put of control and we have a a tsunami of inflation.

The Consequences (+) and (-)
These events are yet to fully play out, but the crisis was game changer the likes of no other. More and more money must eventually lead to inflation -- and for owners of real property this could be a very good thing. But inflation brings with it the seeds of its own destruction. Inflation robs savings, distorts trade, and devalues money. Out-of-control inflation ('hyper inflation') has very serious consequences that will not benefit anyone INCLUDING property investors

Game Changer Number 7 - Building industry at a standstill

Building consents hit eight year low

Home and commercial building consents slumped to an eight-year low in January, down 19 per cent by value on the same month last year. Home building consents alone have collapsed by almost a quarter in the past year. The figures were for the month before the latest big earthquake in Christchurch. There was a small lift in non-residential consents, up 2.3 per cent in January, (Statistics New Zealand). But overall, the value of consents for homes and other commercial building fell 11 per cent to $537 million. January it typically a low month for consents, but this year was the lowest value since February 2002.

In January, consents were issued for 90 new apartment units and 777 other homes. The total of 867 new homes was the second low.

Only last week a well respected building firm Sovereign Homes went into liquidation, another victim of the glacial building industry.

Sovereign Homes collapses

Will the Christchurch quake help the building industry?

In the long run yes. However I believe it will be years before the industry can make a real start in that city, and certainly not while the shaking continues.

In the meantime, the building industry will have to limp along ... surviving on such scraps as repairs and renovations, re-cladding leaky homes, building extensions, decks and garages and some commercial work.

The Consequences (+)
This will certainly end up as another pressure point in the market, and for those with patience could be a windfall as shortages in the affordable housing area increases dramatically. Simply put, there are NOT enough new dwellings being created where they are needed. Couple this with the glacial response from local governments to rezone land for residential use, and the even more glacial process for permits and the creation of infrastructure, and we have the perfect recipe for more and higher costs.

Game Changer Number 8 - Immigration and Population Growth

The latest statistics show that net emigration and immigration are see-sawing between positive and negative. These latest events will not help as tourists and potential immigrants hold off, and the displaced decide that greener pastures lie across the ditch in Australia

However the population of NZ is still growing with live births exceeding deaths plus overall positive immigration. The number of births again outstripped the number of deaths in New Zealand in the year ended September 30, statistics show.

Births continue to outstrip deaths

Statistics New Zealand said there were 34,940 more births than deaths, with 63,730 births and 28,790 deaths. It said the excess of births over deaths had been relatively stable in the last four years, averaging about 34,800 a year. It was known as natural increase and had risen from a low of 25,900 in the September 2002 year.

If we have 30,000 plus more people each year we need at least 10,000 more houses as the queue shuffles forward.

We are not covering this figure by far especially when you take in account the net migration figures, demolition and now the earthquake

Game Changer Number 9 - Sales dramatically slower

House sales prices fall

The latest Real Estate Institute of New Zealand (REINZ) figures show more doom and gloom for the property market. The total value of house sales dropped over $350 million from November to December with the number of listings, sales and house values all down. Some 4,397 houses were sold in December, down from 5,138 in November and 560 less than the 4,957 properties sold in December 2009. The total value of sales for the month was $1.9 billion, down from $2.26b in November.

Slower sales have a powerful effect on not only the real estate industry but all the ancillary industries as well. Every time a house sells, a large number of jobs are engaged from the movers and packers, through the decorators, insurers, painters, furniture and homeward companies, appliance suppliers, and trades in general.

So now we have a market that is stagnating, but not 'collapsing' as some forecasters predicted. Two or three years ago the gloomsters were announcing 'End of the World' scenarios with predicted falls of 30%, 'Falling Knives', and wholesale devastation. They have proved to be spectacularly wrong -- in some cases hysterically wrong -- with the general housing market wobbling within a plus or minus 5% range.

Yes, of course, there have been some very ugly losses, especially in the property development sector, lifestyle blocks and cheap shoe-box apartments, but for solid, friendly homes in leafy suburbs it's not been too bad at all.

The Consequences (+)
This very slow turnover and the consequences to the general economy will have the politicians worried. This is election year remember, and the rhetoric and finger pointing is is yet to begin in earnest. But it will. Housing, I predict will be a very serious election issue as rents rise, and accommodation dries up.

Game Changer Number 10 - Rents Sure to Rise

One of the most overlooked issues in this whole property business is the fact that neither residential or commercial rents have risen to any degree over the last ten years, despite property prices doubling in value during the same period. In other words, tenants are now renting or leasing properties for half the amount they were paying 10 years ago, and we as investors are effectively subsidising tenants out of our own pockets. Residential landlording is the worst performer with yields being around net 3% to 4% on a good day on current values.

Commercial is not much better, and investors are only staying quiet because yields are dropping i.e, values are rising coupled with the fact there are still some good tax advantages with commercial that residential no longer has something - a fact that is not so widely known.

This situation has to change. I feel confident in saying that over the next few years rents, especially residential will rise dramatically. This in turn will put pressure back on the housing market as tenants, who are currently enjoying subsidised lifestyles, will see that owning is a better alternative to renting.

Like the shampoo ad says: This will not happen overnight but it will happen within the next 2-3 years at the most.

Rents rising in Auckland

Auckland rentals are rising, while house sales in the city in January continued the pattern from the last quarter of 2010, firm Barfoot & Thompson says. It noted that while house sales turnover was low key, the rental market was active. Barfoot & Thompson managing director Peter Thompson said the 810 properties the firm let in January were 3.3 percent more than a year earlier but supply was still short. The $416 average weekly rental last month was $5 more than in December and $15 higher than a year earlier. "The lift in rents started in July last year, and January's average has set a new benchmark," Mr Thompson said. "A shortage of properties to let combined with landlords looking to improve their operational returns on their investments is behind the rent increases."

The Consequences (+)
Rising rents, which have stagnated for so long, will have renters throwing away their rent books and looking to further freeze any more rent increases by becoming house buyers instead. Too bad it will be too late for many who remain destined to be renters for life.

Game Changer Number 11 - Oil

The Middle East and the oil-producing nations are at each other's throats and in turmoil. It is too early to predict where this will lead except one thing is for sure: Oil will continue to remain expensive and probably even more so in the years ahead.

The Consequences (-) (+)
Increasing transport costs will force people back closer to the main centres, closer to transport, and to shops and schools. Living on the main road will be popular once again, and for investors, buying on the main road is the shortest path to greater profits.


Summary

Through the smoke and haze of confusion it seems to me that in the long run the signs are very positive for property.

It is unfortunate that some of this positivity comes from the misfortune of others but this has always been so, with investors having had their fair share of misfortune as well.

The flat market and stagnant rents, combined with the new and existing pressure points all seem to point in the same direction: Higher prices, higher rents and higher profits for those prepared to be both vigilant and patient.

There are going to be some very interesting times in the months and years ahead.

Olly Newland
March 2011
http://www.ollynewland.co.nz/
© 2011 Olly Newland. Used with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Olly good on you - stretching the rubber band in all directions – good game fun -   just makes sure it doesn’t slip off your finger -  suddenly hitting yours and other's noses.

Olly Newland starts with ".. it is now increasingly difficult to predict with any certainty the direction of the property market .." That's where this article should have finished. The rest of his writing, as he  himself admits, is just his guess.

Exactly right! I have been predicting with a 100% accuracy that I have absolutely no idea where the market is going! And I make no charge for this guaranteed information! On the other hand economists & other  often highly paid "experts" are really only put here to make weather forecasters look good!

I really find it despicable that people can actually delude themselves in the sophistry that tragedy and natural disasters are actually positive for a country’s GDP growth. What about all the loss in infrastructure and productivity? Why isn’t that calculated into the GDP as a loss? I have an idea since plague allowed Medieval Europe to emerge from the dark ages and stimulated GDP back then, why don’t we release a deadly virus here in NZ and wipe out 80% of the population? I mean what’s good for the GDP is good for the gander right?

Well there is idealized what should be and reality.

Nothing stimulates production , technological advances, economys like a good old fashioned world war wiping out millions of people...The US, Rome, British Empires going way back into history  all where built on destruction, war and disasters.

Thats reality...no good getting self righteous about it, or putting ones head in the sand.

I dont believe Olly thinks it should be that way, but at least he has to guts and present the reality in face of the PC BS brigade.

A disgusting comment, not to mention manifestly false. War destroys capital and kills people, making the economy smaller and less productive. Not only that, it also redirects economic activity and scarce resources from producing things valued by people and therefore increasing overall human well-being, to creating instruments of violence that are used to murder people and reduce human well-being.

War can only ever make a small handful of people (weapons manufacturers etc) richer at the expense of everybody else. If it's so good for boosting economic growth why does food have to be rationed?

Contrary to what you state, the Roman empire was successful not because of military might but because of trade and the rule of law, which allowed for capital formation (roads, aqueducts etc) and allowed it to afford its large army. In fact, its large state apparatus, including its army, led to its downfall because it required constant dilution of the amount of gold and silver in coins (the early version of printing money) to pay for it. This eventually impoverished its citizens to such an extent some actually welcomed the barbarian hordes. 

The US has never been an empire so I'm not sure what you're talking about there. But the reason empires invariably fall over is that violently enslaving people and countries is very expensive and its much cheaper to just trade with people to get the same resources. You have clearly fallen victim to the broken window fallacy. Peaceful, voluntary trade makes people richer while violence leaves us poorer.

Anyone has anything postive to say?  What a bunch of gloom merchants you lot are!  No wonder our country is in the shxt!

yes Chairman Moa....whatever circumstances best us ..we will confront them...we will endure them....and we will prevail....and can only hope we are wiser at that point.

There is nothing in this world....like sunrise....you just cant buy one more when all you want is one more.  

you forget to mention that " we will fight them on the beacheads , we will fight them,um, wherever it was "

I don’t disagree with everything Olly has to say I just take umbrage with the idea that somehow if I run around and break into people’s homes and cars and steal all their stuff I’m ”stimulating” the economy because everyone is force to go out and buy new stuff.

Troy - you might enjoy this (ODT today, in their 'Faith and Reason' slot.

http://www.odt.co.nz/opinion/opinion/152297/false-gospel-according-gdp

It'll be interesting to see if there's any feedback......

Yeah, like there is such a thing as "Sustainable Growth”. WTF does that mean? You can ether “sustain” or you can “grow” but you can’t have both.

You PDK recent events got me thinking about the Berlin airlift. I wonder how many have taken the time to read about what happens to high density populations when you take away energy and transport. Since the Russians controlled, and withdrew the use of, the railways it was pretty grim there for a while with the approach of winter. The episode was responsible for the invention of modern air traffic control as the allies had to supply the city by air. Can't remember if they managed to get decent amounts of heating fuel in.

I am sure you know the story.

I wonder if that was all GDP positive:-P

I suspect so.

I seem to remember reading about the crew who got that operation together - all WW2 guys who re-grouped - XYZ sparkplugs per flying hour, XYZ planes per hour, quite a logistical exercise.

Makes you wonder if the Murmansk convoys were the right way to go. The rag-tag circus migh have beaten the Ruskies into Berlin.....

Yes I wonder also. Poms had 2500 tanks on D-Day, but had shipped 5000 to Russia!

I guess the other lesson to be learned here on top Berlin being cut off from food and fuel, is what is often discussed about gearing up R&D or production in an emergency. Russia had the pressure on for a second front to open up, but the Poms had to delay simply because they didn't have the landing craft to do the job. Those landing craft led to the development I Electric Arc welding. Fella that designed the Auckland Harbour Bridge was instrumental in that process. The bridge was the last major box truss, or lattice truss bridge built. They went to welded box girders after that.

Saw an interesting doco on oil in WW II one time. When Hitler came to a stand still in both Africa and Russia before securing oil, he knew he couldn't win the war. That was 1941.

Nothing that has happened in the past few weeks, here or overseas, has changed my absolute conviction that the residential property market is headed for a huge downwards price correction. If anything, and to paraphrase another’s words, they convince me that, “My bearish views of the New Zealand property market will show to be wrong; they will turn out to have been too optimistic”.

 

We are among the minority worldwide , along with China/HK , Australia , and Vancouver ( Canada ) , who have not succumbed to a property crash ....... Unlike the Americans or the English , we are special , we are different ........ We haka . We eat hokey-pokey ice cream . We hang onto every utterance of goat gizzard squeezer Ken Ring . .......... But most of all , we have dear old Uncle Olly to cheer us along ........

.......... My friends , off to the open homes with you , one and all .....

Buy , buy , buy !

You forgot to mention the birth rate that Olly specifies.

All those babies are going to rise up and buy houses apparently in the near future?

so I say, brothers and sisters...get down and put ya hands on the radio and say " ah,yes,ah, believe in the brave new future ...for...um...for..um ..housing..yep..housing..dats right""

The govt. have been predicting for the last 3 years GDP way above what has actually transpired. Bill English was questioned on this by the opposition who doubted the 5% GDP for 2012 will happen. English said something along the lines of 'we cant make people spend...'

Confidence is the name of the game and what the govt are trying to install in everyone, they want people who can afford to (and only those who can afford to) to spend to help the economy.

Where they are stuck is the only people who have the means to spend, who have wealth, have it because they are smart and dont take on debt, they werent the ones who fuelled the credit boom last decade, and they wont be the ones who spend now to make up for everyone elses poor decisions is the past.

The economy had been fueled by idiots who borrowed and spent as much as the banks allowed them to, and now these idiots are in finiancial positions such that they are not allowed to spend anymore, even if they want to.

 "Where they are stuck is the only people who have the means to spend, who have wealth, have it because they are smart and dont take on debt, they werent the ones who fuelled the credit boom last decade, and they wont be the ones who spend now to make up for everyone elses poor decisions is the past."

It's my understanding that the ones with the wealth did assist in fueling the credit boom.  They have a neverending need to accumulate more money and to do so need somewhere to "invest" that money and chase the returns.  They invested in the financial institutions and didn't care where all that excess capital/credit went as long as they accumulated more money, even if it was only on paper.  The "idiot" consumer just wanted to be wealthy as well albeit misguided by the already wealthy.  The wealthy are just as much to blame, had they invested in productive ventures rather than financial capitalism we may have had a different result.

It mIt might also pay to define "wealth".

 http://www.converge.org.nz/pirm/money.htm - Money as a social disease.

My take on it is that the real wealthy (im using this term for want of a better word/phrase, I think warren buffet when im discribing this type of person ) get into an investment when it makes good economic sense based on fundamentals. They invest only after they know the business inside and out.

This happens before a bubble is formed, as bubbles take valuations away from fundamentals where it only makle

Once people catch on, more investment, leads to decent capital gains, leads to more investment by people who have no even considered the fundamentals and are just wanting something for nothing.

Havent had time to read all of link, looks interesting will read more when i have time so i can better see that particular definition/view of 'wealthy'

@meh,

Nice link. I met David Korten at a talk he gave in London back in 1998. He had quite an impact on me and caused me to really rethink the whole money game. Although reform efforts have not come to fruition as yet, the systemic collapse of the debt system is playing out as long predicted. One day the penny will drop but it might be too late to save the day. 

Yep, fantastic link - he's done alot to expose globalisation for what it is.

And as to his four proposals for change in conclusion - the sad reality is it would be so simple.  I so wish Aus and NZ could get together on these ideas in an economic and regulatory union and just do it.

 

The most significant event with respect to NZ property has been Japan quake and aftermath.

Japan had the lowerest interest rates, and they have (soon to be had) trillions of yen invested outside of Japan to gain better returns.

Before 2008, NZ had one of the highest interest rates in the world, and would of attracted a ton of yen. Banks need to make money on all this inflow so they lend big time, and we have the property bubble as seen leading up to 2008.

Now NZ has had a big quake, is in big debt, has slashed interest rates, and worse of all for NZ property in particular, the japanese are taking there money back to pay for the horrific damage in their own country. This is the main thing international currency markets are talking about at the moment. Repatriation, is the term used to discribe it. Turn on ch 95 and you'll hear the word all day.

Banks no longer are up to their neck in funds with pressure to lend to get a return on the money. Bascially the fuel for the bubble is getting taken away at a rate almost as fast as the credit crunch in 2008. Another 5% drop in property prices this year is an almost a certainty.

You guys are forgetting that stuffs posted here in this website are personal opnions/interpretations.  it's a free world!. So don't get too uptight about it.

........ I reckon you're totally wrong about that !

GBH - can you explain that ?

......... in my personal opinion , I probably couldn't explain that ...... but I may be wrong , again .

You have stated in the past that you have a background in the MSM (at the Press?). I did 10 years at the AK Star (back in the day) and did 4 years from 2003 to 2006 as a Google Webmaster. Gave it up in the end. Dealing with people who don't understand written english is tough. And my partner is a serious Jungian head-doctor re-arranger. Do I get an earfull about this stuff. She agrees with Chairman Moa, in long intellectual dissertations, so I guess, all up, I do too.

...... you've convinced me ....... I agree with the Chairman too , now .............. ...... possibly ....... or not ...

I bags da little Red Book !

During my time with Google one of the top webmasters was a guy called SEO101 (search engine optimisation)  who also gave up and if you have access to Google Web Forums the following link sets out his eventual response to many of the requests for support.

http://groups.google.com/group/google.public.support.general/browse_thread/thread/6a9a6654758fda2/8a376eaf13ef8077?lnk=gst&q=sperm+count

annihilated. ....now there's a word.........and sperm count...is quite nice too..!

Persistence wins the day......!

The main game changer is the insurance payout (or not) and will anyone get insurance on buildings being rebuilt. 

".. births again outstripped the number of deaths .." How does that work? The old coots checking out (or their inheritors) are sellers of whatever they had, and the bubs being born sure aren't the buyers yet! Population creep isn't keeping up on that score either, as those previous 'babies' who are now becoming  the 'grown up buyers'... can't afford to buy! Same thing is happening in the UK where the projection is that the 'first time buyer' will be... 44... at some time in the near future.

"Starting in Auckland the demand will spread out, like ripples in a pond, and it would not surprise me at all if rents doubled in the next few years: A bonanza for investors, and a severe burden for renters."

Sorry Olly basic economics says that for rents to double incomes are going to have to increase substantially, in the current environment this seems pretty unlikely.

This article is one of the biggest loads of BS I have read about property. Olly Newland is quaking in his boots, because if he wasn't he would not be saying things like this:

Rising rents, which have stagnated for so long, will have renters throwing away their rent books and looking to further freeze any more rent increases by becoming house buyers instead. Too bad it will be too late for many who remain destined to be renters for life.

This is basically saying that anyone who was born 10-15 years ago and is still a teenager will forever be a renter in their own country. Olly, the desparation was showing a while ago, but this one takes the cake.

Haven't you ever noticed that our lord and master, Darth Hickey, always throws Olly on before the weekend so like good Christ-oves we can all tear ourselves to pieces over the weekend?

Sorry to disapoint DonnyMac but I have other fish to fry on weekends. damn tasty ones too!!!

A few good bits of anaylysis in there, but I think in general this article is all wrong for a whole lot of reasons.

Here we go again. Property Investors that chase capital gains are scum.

"and a whole bunch of crooked money cheats were exposed for what they were."

Weren't you playing the same game Olly, just a different version of it and a bit further down the food chain?

If you really think you are a big shot, then bring the government down for taking away deprecition, like Bob Jones did when the Labour party changed tax for property investors. 

The government just can't get through to you can they. The idea of a tax change was to discourage a disproportionate level of investment in property, not give you the chance to skip maintenance and put the rents up. Slow learner I guess.

Funny how you can only see one side of the coin as well. Property has doubled in value (well not really but anyway) but rents have stayed the same. This means rents must got up. Forgive me for seeing the possibility that values might actually come down to effect the rebalance required. What I will also be interested to see is how austerity measures might affect property values, particulary when rent assistance is held, lowered, or withdrawn. That combined with rising unemployment.

Also I will say this as well. If Olly was making so much money from property investing, and doing so well from it, do you think he would have time to mentor other people? Or to write books? Or to do things like empower education seminars to sell his books? Sorry people but its greed, fear, or both, and its def both.

Good point Muppet King..similar to how Don Ha started selling motivational wealth seminars, and now he is going broke...some property investors going broke diversify into education as a last gasp.

Well, Ollyology has been good to me!   Im going to take my ill gotten rent moneys pour it into my boats petrol tank and clear out for the weekend.  Got to love those rentals! 

All the whiners should stay working till at least 10pm.  Don't want you lot out in the pubs bringing the tone of the place down, you lot could talk the smile off the Mona Lisa. 

I have ceased to be amazed by the outright ignorance and offensivness of PIs.....I seem to remember such behaviour from some in my younger days....mostly it seemed to hide fear/insecurity....

I dont agree with Olly, but at least he shows analysis of the situations and factors and a thought process...I think he misses some important things that should effect his outlook.....but at least he shows he's thinking....unlike the pro PI trolls such as yourself.

regards

You make a good point there Steven,  The ability to think does not necessarily equate to the ability to be successfull.   Many researchers, scientists, educators, analyists are financially inept, and many of the highschool dropouts are obserdly wealthy.  Why swim upstream? 

I am sure you meant absurdly....W.S.H. which funnily enough means ridiculous or senseless.

Hilarious!

:-)

Christov,  nice analysis and research there.

Just had a call from a tenant desperate for a house willing to pay $350 wk.  anyone vacant in Blenheim. Im full up.

My friend in Blenheim has an offer on a house that was first listed two years ago at 800K, now on the market for 530K. Rest assured the offer is a lot lower than that.

Oh wait but property always goes up doesn't it. Doublesi in price every 7 years.

If your friend can get it for under 300k great but otherwise forget it. no one is going to pay the rent on 400k!  and 530k who are you expecting? Charlie Sheen! good luck!

Sorry for the late reply.. been at the pub spendin the tenants rent.. Aint life great!

At  the risk of talkin to myself and going mad, im serious about the tenant.. any takers PM me otherwise ill point them in another direction. Cheers and Good Night :)

$530ooo will be too much Scarfie. There are heaps of unsold sections all over the place down here...no buyers....place is quiet man...really quiet. There has been an exodus of skilled people  from the region. Rentals are empty.

The number of better homes in Blenheim for sale has increased while the buying market has kept shrinking. On Friday the few in the Blenheim CBD at lunchtime were mostly those still with a job there...out to get a bite to eat...the public were not gorking at the heap of listings on display in agents windows, nor were they streaming into the offices.

The supermarkets were busy before the weekend....but that was it....oh and there were plenty of 'parking police' out and about with chalk ......chalking those who parked in the supermarket parks!!!!.......seems the council bosses have opted to force the peasants to park on the road and feed a meter....can't have peasants using shop parking spaces can we.

Well they have been waiting two years, so will wait as long as possible to get their price, which is substantially lower than the ask. Only risk is the current landlord undermining them.

Fellow student of Architecture and we frequently talk about what is happening. My only concern is if a mortgage is intended, which is information I don't want to disclosed to me. But I have made my feeling on the matter clear:)

Unfortunately another friend of a friend down there bought six months ago and I fear has put herself in a compromising position. Tried to warn her but some people don't understand that the last 20-30 years is not representative of the next 20-30.

Whoops double post

Biggest game changer of all........peak oil.

regards

@steven

CORRECT!

Steven....that looks remarkably like Dukey boy in another dress...although I would not have given the Duke credit for dreaming up Whale Skin Hubcaps for maximising  offence.

What about " peak debt " .......... that  fast approaching moment in time when the world's financial markets let out an enormous belch and deflate faster than my rubber-sheep-sex-doll after the act !

No, he's too fast and young to be the Duke...i quite like this guy...even though he's making it up as he goes along...sorta what Olly does really?

 "All going well, we will recover and get back to steady growth"

I hope you don't pay Olly for this rubbish Bernard!

"All going well" sound= s like a prayer......not a hope IMHO.

regards

At least Olly has the goolies to say it as he sees it and put his name to it as well.

You whiners and whingers should do the same.

If you disagree with what he says or have theories of your own, put them up on this site  together with your real names.

Let's see how brave you are then.

So is your name Big Daddy then...? gees what was your Daddy's name....? even bigger Daddy...?....patermiester.

My views were re-expressed @ 12.18pm.  BigDaddy. We have not yet even begun to see the shake-out that is upon us. Now. How about we have your real name too, oh so very brave one !?

We have put up our theories expectations...

regards

Donald Duck

PS how do you know just who I am? the Internet makes no difference in a name...argue the points and not the person.

regards

 

 

Yeah..play with ya balls, not the person...right on!

Don't be knocking WFF - I might actually qualify for it this year and get some of my own tax money back instead of giving it away to others in the form of rental property refunds and the like..

You probably missed out a few other managers, plus a whole bunch of consultants. Then we have OSH to make sure clipping the tickets is safe, ACC in case they get OOS (used to be RSI and we need people to think up these new names also) from clipping tickets. What about the dog?

Anyway Animal Lover, as a receiver of afore mentioned benefits I suspect that my days of getting it are numbered. Can't see a problem with that as long as reductions are across the board an we stop paying for children as a lifestyle option.

Problem I see is who the hell is going to pay for it given we are borrowing $300 Million per week.

Memo David Chaston, Bernard Hickey

Newland's articles could be accused of being self-serving. At the very least there should be a disclosure statement at the bottom of each of his articles. Strangely enough they never do. He should disclose how much skin-in-the-game he currently has (number of properties only will do) and the percentage value of mortgages.

the notion of rents doubling in the next few years is absolute bull, and I wish Berrand would not publish this garbage

But of course its always guaranteed to attract a bit of attention

Time for something from Rodney Dickens - he's always worth listening to  

MattinAuck:  Yes, totally.  Most people renting have no $$ left over at the end of the week, after paying the rent & other expenses.  So therefore it is physically impossible for rent to go up at more than the cost of general wage increases - which are minimal at present, & not likely to go thru some boom. 

Olly would need to explain where the wealth is going to come from to pay these tenants to pay more.  Hmmmm.... over-indebted country; govt going to have to throttle back its spending soon; oil and other commodities putting the squeeze on discretionary spending ..... Nope, I can't see where this magical boom is going to come from. 

Cheers to all, have a great weekend!

Actually Philly there is a chance rents will increase, but not for the reasons Olly thinks so.

Property will still decrease though so all those spruikers will stil takea hit on yields.

@Scarfie:  the only reasons I can think of are inflation going up, or a massive oil strike injecting truckloads of $$$ into the economy.  Hard to visualise otherwise.

Cheers

What happens is that the ever increasing amount of mortagee sales threaten the banks solvency. Instead of selling and taking the loss, they hold onto the property which somehow makes their books look okay. But not wanting to be a landlord they lock it up and leave it empty.

A shortage of rental properties combined with the increase in employement means people can't afford rents, so two or three families share a house. Same shortage of money means property still devalues because of no demand.

I know it is counter intuitive to view rents going up in a depression, but the precedent for this was Australia in the 1930's. But one thing I notice on here is that a lot of people spout off without doing a few lessons in history.

Landlords are still stuck with ever decreasing yields. Good job I reckon because most are speculators not investors.

The relationship between house prices and incomes in New Zealand is uncomfortably high. 

No commentators are predicting runaway house prices in the next couple of years (except for Olly and those with vested interests in property), but opinion is divided over whether they will decline dramatically or continue to remain stagnant till the correction is complete. 

Olly recommending buying property! now theres something new .

 

Have to agree on one thing , there is certainly a squeeze on rentals in Auckland and no signs it will get any better - also with Rugby world cup and the extra games and English fans - soon be at the point where people will wait till after the cup before renting their properties as the silly money on offer will be better than having constant tenants.  But you are right Matt  no chance of doubling the money simply isn't there in peoples budgets except at the very top end for a very  very small number of people - lets be honest if you can afford $1000 a week in rent you probably own your own home anyway.

 

I am not so sure about the concerns he has on interest rate rises because of inflation 18 months down the track.  Yes we are going to see some high numbers - but these are going to be a result of the currency decline - increasing oil - so fuel - energy and food prices rising - not as a result of rising wages / property prices / productivity/ increased employment - therefore raising interest rates will have little or no effect other than possibly put us back into recession and possible stagflation duplicating the last 20 years in Japan!

Still Olly never fails to get a rise out of people 50+ comments already

 

 

"Olly recommending buying property"

Isn't this tantamount to giving Financial Advice? Seems a lot like it. Or else it's sailing very close to the wind. Olly is going to have to go and get his Financial Advisors Licence.

If he said rentals will increase 10-20% in the next few years (I equate that to a 3-4 year timeframe) he might be semi-credible

but a claim of doubling has ZERO credibility

the guy is a charlatan and I am not going to waste any further energy on this idiot and this matter

sayonara

Ahhh  he is slightly wiser and stops short of recommending it - merely suggests that everything from sun up to sun down is a positive influence on property rents and prices!

 

 

so 10,000 homes = 30,000 people. Some will stay in Christchurch. Some will go to Aus. Some will end up in Wellington, Auckland, Dunedin, Nelson, tauranga, Hamilton etc. Maybe 10,000 in Auckland. Thats 1% of population or about half a year's normal growth. And those moving probably wont have sold their house for much, hence will struggle to afford Akld prices.

I dont recall Hurrican Katrina pushing up house values in new York - and the population there didnt drop too much and is recovering.

.... and as for disasters being a boost for the economy? if that was the case, we'd drop bombs more often. The bottom line is that productive energy / money etc is being diverted to restoring something to its former self. If there was no disaster then that investment would go to improving our position / creating wealth. If it was as simple as Olly thinks, why dont we simply divert billions to digging holes and filling them in again.

 

I think we'll see a wide dispersal of Cantabrians. Doubt we'll see 10,000 in Auckland - there simply aren't enough jobs here. Many who DO come to Auck will stay with friends or family, and as you say those who may be able to consider to buy a house here will struggle with the prices. And to be frank, having lived in the South Island I can honestly say that many Cantabrians would view "Dorkland" as a very much last resort - there is a lot of hostility towards Aucklanders down there. 

Of course Olly would never mention things in his piece that go against rises in property - things like what will become minimal immigration, a crap economy, growing unemployment  etc 

 

 

So I htink there will be minimal impact on hosue rpices 

hey Jimmy

 

I would copyright that digging holes idea before Olly tries to sell it to JK as an alternative to the cycleway!

Japan is beginning to look bad...

http://www.telegraph.co.uk/finance/currency/8389142/Japan-risks-credit-c...

and radiation is out to 20miles

http://www.telegraph.co.uk/news/worldnews/asia/japan/8389415/Japan-nucle...

20 mile radius, so far, so they wont be rebuilding a huge area.....

"The Foreign [UK] Office issued an urgent statement advising any Britons within 50 miles of the plant to leave the area immediately, and arranged charter flights to get British citizens out of the country.

Radiation levels 20 miles from the plant – well outside Japan's official 12-mile evacuation zone – came close to double the safety limit normally allowed for nuclear workers."

 

Stop panicking..the radiation level has reverted back to that slightly higher to the exposure you would get from a common X-ray....Olly's predictions are far more scary!

agreed. The media should be ashamed. They are mainly responsible for the nonsensical buying of iodine tablets in the USA.

Watching Sky has been interesting. Fox has been funny. They have been hysterical at times but that is to be expected. I have been disappointed by BBC and CNN who at times have really lacked balance - I really expected more from them

This has been a serious incident, but not a major crisis. We will see that this is slighlty worse than Three Mile Island (no deaths) but no where near as serious as Chernobyl 

Oh, well if you like bollywood b grade horror movies...

regards

Good one Donald...the melting MOX has stopped as if by magic...actually it's by govt announcement...all is now safe...one or two showers of seawater and all is well...no need to panic...go back to work...

Utter bloody BS......but it worked for most peasants and idiots who still believe govt announcements.

Oh look up there...another flock of pink oinks flying past.... 

Donald McDonald

The  difference is only  that the X-ray you get just for an instant and the radiation from the broken reactors you get 24/7 and is cumulative in the body.........

But the reactors aren't broken...only the housing infrastructure.

the rods have not hit totla meltdown either.

Tepco director weeps after disclosing the truth about Fukushima disaster

http://www.zerohedge.com/article/tepco-director-weeps-after-disclosing-t...

Great – the power is on at the plant – from another “nuke”

 

Good, more independent informations including comments about the "nuke accident" here:

http://allthingsnuclear.org/post/3927635973/fuel-amounts-at-fukushima

Ray White's top real estate office is in receivership - run by a former NBR Rich Lister - Don Ha.

http://www.propertytalk.com/forum/showthread.php?t=28412 

Ha Ha!

that fella Ha is a bullshit spruiker in the best traditions of Olly and co.

Game Changer #11

Black Swan Tsunami and Nuclear Meltdown in Japan

How much longer ?  - no wonder he's hot and angry

http://www.youtube.com/watch?v=SgTSlBHKb78&feature=youtube_gdata_player

 

....and a rather cold story.

http://www.newscientist.com/article/dn20245-japan-quake-shifts-antarctic-glacier.html

 

....but both set to make people thinking.

Wolly, Steven, pdk, Matt, Kate, Gertraud, Elly, Walter, etc – I know we have massive problems - but don’t worry too much – there is still no scientific proof we do need our planet.

 

Quite right Walter....who needs the planet!

Game changer 6

Olly, zero bound.....you are looking at govn spending and assuming private debt financed spending is in parallel. What you and the neo-classical economists have ignored for 2 decades is a) the effect of private debt......b) How much consumerism has taken over OECD economies c) Peak oil

a) Private debt, ppls spending will now be curtailed they are debt saturated...the lat decade of growth in anything was debt financed at an ever increasing level of debt....that is at its limits....

b) Govns are spending 10 to 25% of what has been withdrawn in private spending, the overall effect is LESS spending so the NET effect on a Nation's economy is deflationary and recessionary.....

c) Peak oil will cripple consumers and businesses alike...

All this adds up to dis-flation and then deflation and decade(s) of it.

In terms of rents rising there are two ways to achieve this...really its about net income to the landlord....so if rents cant rise or have to drop because ppl are porroer then the only other thing to drop has to be the capital outlay, so the mortgage has to be 25% or more less, this means property had to devalue by an even greater amount for PI to make sense....

So 5 maybe 10 years from now if property is worth 50% of what it is today, new PIs stepping into the market and looking for an income and no cap gain will probably make money....old ones will be bankrupt and destitute....and whiing the OAP isnt enough to live on.

regards

 

 

 

 

First time caller here. Isn’t it amazing what the web helps you discover when you poke around. Somehow I found this article published on 22 March 2011, woops, isn’t that next Tuesday, so I seem to have gotten ahead of myself?? Anyway for those futuristic posters/punters you may like to take a peep  http://www.interest.co.nz/node/50385Its all about home affordability with calculators and buy/rent reports. But as an expat kiwi thinking about world affairs and watching interest.co.nz with even greater interest it occurs to me that probably the best place to own property in NZ in Hamilton for the following 10 reasons: (PS, I am not a Hamiltonian, and have never lived or owned property there)

  1. Lack of volcanoes – unlike Rotorua, Taupo, New Plymouth or  Auckland even if they are dormant
  2. Plentiful water resources from the Waikato river
  3. Inland (unlike most NZ cities) so unlikely to be affected by Tsunamis, but close to excellent east and west coast beaches, eg Raglan and Mt Maunganui/Coromandel
  4. Minimal seismic activity (earthquakes) as not on any fault lines
  5. Proximity to NZ’s largest city but not affected by its congestion
  6. International airport, and not far for Auckland’s international airport (time to drive to it is often not as great as crossing the harbour bridge)
  7. Proximity to highly productive dairy and primary producing land , ie export producing land and therefore potential jobs
  8. Some great private and public schools as well as an excellent university which produces fantastic graduates like Chris Liddell
  9. Country folk with sound ethical values
  10. It’s NZ’s second garden city and not as windy as other inland cities 

Sadly as many other expat kiwis will confirm prices overseas are far greater than what average kiwis experience at home eg, my rental is NZ$5000 per month + condo, water, electricity, gas, water for a modest apartment in Europe.  So as I consider my return to NZ, property prices don’t seem so absurd, as many other foreign investors will agree. Especially as the NZ $ declines, capital markets become more uncertain, interest rates are lower, the world is becoming less safe and I want more control than lining the pockets of landlords overseas as I have been doing.

 

But in thinking about home affordability for first home buyers I think the government should consider an incentive as Australia does. Rezoning for development/cross leasing should be more cost effective with minimal local government costs/taxes. Do we need our ¼ acre sections? Saving for first homes purchases should be encouraged and not taxed as heavily. Thereafter there should be disincentives to invest heavily in residential property. However where I am based in Europe first home buyers at the age of 25-29 are rare and mostly its family money that finance them into their first home.

All reasonable stuff Tut, except this; "in thinking about home affordability for first home buyers I think the government should consider an incentive as Australia does"

The effect of the Australian Government first home owner scheme was, typically, the reverse of the intention. Home prices rose by far more than the subsidy, and across the board as it was leveraged x5 by buyers in the upper price ranges. Consequently the FHBs now have, not only an additional 100K of debt and rising interest rates (as the RB try to cool credit (debt) growth) but the prospect of being deep underwater with even a small correction in the OZ house bubble 

Unbelievable stupidity!

You might like to explore Steve Keens website. http://www.debtdeflation.com/blogs/

 Somebody give Alan a poke will you....come one Alan...you will have to paddle like mad now...the wave is ahead of you....behind the curve once again...ho hum

"European Central Bank President Jean-Claude Trichet indicated the bank still plans to raise interest rates next month, saying he doesn’t want to change his message on the need to contain inflation.

“I have nothing to add, nothing to withdraw,” Trichet told reporters today in Frankfurt when asked if policy makers are still in a posture of strong vigilance, ECB code words for an imminent rate increase. “No new message at all,” he said."

http://www.bloomberg.com/news/2011-03-18/trichet-says-ecb-policy-makers-have-nothing-to-withdraw-on-rate-stance.html

 

Here it comes Olly.....inflation....

 "China ordered banks to set aside more cash for the third time this year, judging that inflation remains a bigger threat to the world’s second-largest economy than Japan’s earthquake and nuclear crisis"

 http://www.bloomberg.com/news/2011-03-18/china-raises-banks-reserve-requirement-ratio-by-50-basis-points-next-week.html

What's the bet the SFO are called in?

You're such a Cassandra, Wolly... you old Golly Wally doodle-all-the-day !

  Hey dont forget the new Superstorm building in the north Pacific..The tremors along the west coast of the USA..and the spike in runaway pets in the Los Angeles area..Plus the MOX fuel in meltdown mode phew!,,The Arab world in revolt..and another war on the way.Where are those careless days of my youth? when i didn't give a Sh%%.

Yessiree-bob!

There's so much trouble in the world.. that i think i'll stay in bed for the rest of my natural born days or otherwise cancel the world due to lack of interest ( and i'm not talking term deposits there!)

cue Negro spiritual....

Donald - have you heard of bed bugs – they can “nuke” your arms and legs.

That's nukes to me ?

a bit of saturday silliness----it,s in the" picture paint,s a thousand words category"----the logo on the lady,s cap say,s it all----

http://www.heraldsun.com.au/news/duck-protester-shot/story-e6frf7jo-1226024497084

....and considering the colours she’s wearing she was clearly a political target.

"positive (+) in the investment sense, as large scale rebuilding and tens of billions of dollars pour into the economy."

"Simply put, you cannot have such amounts of fresh new money enter the market without a large part having the effect of driving up prices, costs, and wages. Much of this is directly aimed at the property market which will ultimately benefit as a result."

What Olly and others seem to keep forgetting is THIS IS A REBUILD. Those tens of billions must be borrowed or come from thin air and THAT SIMPLE FACT is not good in any way shape or form.

He's right about the 'inflationary' effect also (which he fails to actually recognise) but AGAIN that is not what I call a "positive".

This event is the equivalent of building your house once, then smashing it to pieces and building it again AND THEN STILL thinking that's a good thing for all concerned!

Just stupid and most definitely a game changer for all concerned!

"Ladies and gentlemen! Here we have a brand new house; built on freshly restored land, with materials and labour that cost much more than they otherwise would have done. All in the newly re-classified earthquake-safe zone of New Christchurch; where insurance companies confirm that they may, one day, issue disaster insurance again, and where jobs might now retrurn to repopulate the city. Now ~ who's going to give me an opening bid...?"

Yet again another auction filled with RE's on mobiles pretending they have a client on the line ready to bid! LOL

Not so "Justice"

Little or no borrowing should be involved. 

There is some $15 Billion-$20 Billion available already so no "thin air" should be involved.

The insurers and the EQC have all the money safely stashed away and just have to merely write out the cheques.

So it will be all fresh money and in the fullness of time the people of Christchurch who have suffered such terrible losses will be compensated - not from borrowings but from saved up exisitng funds.

That's what the Government has told us and the Government wouldn't tell us lies.... would they?

 

I am with you on this one  BigDaddy

 

While the Govt will need to borrow for its costs like roading and other infarstructure costs ECQ and private insurer will be writting out the cheques for most of the costs here.

Firstly; Lets' hope all the insurance brokers and companies, passed on all their risk to reinsurance ( it has been that it hasn't happned in the past. Aren't the SFO investigating one outfit for that at the moment - Henderson, or something like that?). And secondly, I doubt that the amount of any or all payouts, when they finally come through, will equal the amount of wealth destroyed or in many cases, pay off the debt.. Whatever the amount of the 'rebuild', there is likely to be a significant shortfall of 'new money', one way or the other, that will leave the community worse off. That's ....less to be-buy a new life with; less..... to buy a new house with; lower property prices to come; now and in the future. Just add up the wealth destruction in this country in the last 3 years! Earthquake; Financial Company Quake; Rotting House Quake ~ that's all good property buying power.... gone... down the drain, and not coming back. And guess what? We don't have the power to borrow much to replace it ( we've already done that with the $160bn we owe!) or the 'young' population to earn it's way back into money before it retires. Game over.

 

Lets also not forget the new insurance premiums in the coming years. They will sky rocket it they haven't already!

Either way these peope will be paying. Insurance companies are only interested in profit and the bottom line.

And why should Insurance Companies be any different to Bakers, Plumbers or the local Doctor?  What BUSINESS is not interested in bottom line except the Dot.Com lot who believed that you could survive for ever without profit.

Do we want them also running at a loss so they can't met claims when called upon?????

 

As I said. Let's hope that hold true. When you buy a loaf of bread from a baker, whatever the cost, you take the bread out of the shop with you. When you buy insurance, you buy what? A promise to pay; a piece of paper and a hope that the money will come through if need be. There have been many instances over the years of people/companies running the odds; keeping the premiums, or whatever payments made, and not passing them on ( pension funds being a classic victim). Who, insurance brokers amongst them, expected the extent of the claims that have hit Christchurch? One or two claims in the expected future, sure,(and they can be paid out from cashflow); but not claims on this wholesale scale. Time will tell.

Insuance Brokers don't carry the risk: they are intermedaries only. Insurance Companies  do.

But I take your point if people have been paying their good money to the Broker who hasn't forwarded the payments.

Sound like a good reason to deal straight with Ins Comapany direct or make sure you have conmfirmation of cover from company  to whom Broker has insured you with.

In regards to the amount to be paid out I guess that is where re-assurance kicks in, Insurance Companies know how much risk they can cover and then purchase re-assuarnce for large events to cover them selves and be able to meet the claim.

No different to individual covering their medicial needs: they know they can cover trips to the doctor but if they need a by-pass they purchase insurance for risk so the cost of the by-pass doesn't wipe them out

I assume there will be a few "Lloyds" names who might be getting a call.

Insurance companies know how much risk to re-insure based on what? History. An actuarial excecise that tells them 'how much risk to cover'. A bit like options writers know how much 'risk' to cover based on several factors, including, volitility. They gross up their profits from those calculations by not covering the whole amount of contracts written, until they need to. Maybe insurance companies are different, and insure their policies one-for-one, right away ( a split between retained earnings and re-insurance)? We shall see.

Wasn't really my point. Infact you completely missed it as usual. I will explain it too you shall I?

Anyone rebuilding who has access to insurance payouts and EQC money will still be paying through the nose in the future . In other words, you aren't saved, you haven't gained, infact NO ONE will. You will infact be paying ALL that money back plus interest the next few decades via the new premium rates plus fees. Infact we all will be

Wasn't really having a go at insurance firms, only the fools that think insurance is a saviour. 

Thanks for the personal dig as usual. You are pretty self rightous at times.

Maybe I didnt get it as usual because I didn't agree with what you have said.

In any event I can't recall anyone saying insurance is a saviour so I am no fool to use your words.

Insurance is to lessen the financial impact but usually never gets you back to the same point prior to event and so it shouldn't (even crashing the car you have excess and inconvienance whilst getting repaired and possible loss of no claims bonus) so you are right that no one has gained on a macro level.

There will be costs, one of which will be higher premiums.

 

 

I wish more appreciated your points, in addition the amount of waste based on the rational that is is insured is horrifc in Christchurch. I have seen shop stock not spoilled dumped in skips then taken to the land fill..new office furniture same deal...we all pay for this waste in the end.

I like your sarcasm.......if I'm not mistaken

Pretty sure this story applies to NZ as well, or will do soon enough...

http://www.newsobserver.com/2011/03/19/1063885/home-is-fine-offers-are-not.html

 

Where does Olly get this trip?. Property investors subsidising renters. Prices have doubled in the last 7 years therefore rents need to double.

Olly, try investors created a bubble while the renting market kept pace with inflation therefore property prices have to drop now to get good yields again.

You will write absolutely anything to make property look good. I doubt you even believe yourself.

I chuckled at the Don Ha "How to survive the Property Market" seminars advertised in the Sunday Star today. Perhaps, Olly could invest a few dollars in a place, and see 'what not to do'?! Or is his 'knowledge' ( not advice, though.... oh, no...) ,the same......

Maybe he was saying in the past that someone purchasing a negative gearred property in the past had to put their hands in the pocket as rent did not cover Interest, Rates, Insurance  etc.

They didn't mind doing this as capital growth and tax advantages provided an overall positive return.

So these ones are now in the crap with no capital growth and tax advantaged wiped out(and are effecttively paying a tenant to live in their house).

Those who kept to the basic on positive cashflow are not effected to anywhere the same level

Positive Cash Flow can be misleading. Is it based on Purchase Price or Current Market Value? The real calculation should be based on Alternative Application of Funds, not historical price cashflow.

 

If we are the upper bound of what a renter can pay and by and large, ignoring the odd one and odd location I think we are....then to get back to where you see a positive cash flow and it has to be a decent % above the bank deposit ie risk free rate of return which say is 5% nominally then you have to pay less for a property so the mortgage is less.

Anything else is dilusional IMHO....

So given we are going into a second dip or a third, whatever, (BE says, we are out of the second, in it, it was shallow, technical etc) here comes another...that has to put more ppl out of work, or cut their hours, or taking a lesser paid job....I cant see overall, that rent can increase, it makes no sense until we see clear signs of inflation ie lots of ppls wages are increasing......and I think its the opposite, so rents will decrease.....so something has to give.....

If you work on CPI is 5% odd and not core at 2% and house prices have not gone up by core let along CPI, a property is losing money......

The PIs then say rents have to increase.....no makee senseeee

regards

Correct.

If you have held the property for some time then it might be postive cashflow but cap rate on market value may be low.

I guess the point I am trying to make is many people got into investment properties for every reason but cashflow and in real terms some have effectively paid for their tenent to live in their house.

Had they really looked and analysed cashflow from point of purchase they might have come to different conclusion about their "ïnvestment".

My God, Someone actually gets it! 

Yet as soon as you mention you own some rentals on this site out comes the wooden stakes and holey water. 

Yes,

I own rentals too but commercial ones based on cashflow, tenants pay  the rates and Insurance  and I even pay tax on the profits.

I simply won't touch residential.

 

 

 

 

No I think its a case of some get tired of "you can lose money investing in property"...."rentals are going to go up   up   up!" etc etc....Olly takes about game changers but misses the biggest one of all, no more cheap energy to drive growth, and in fact less energy....so no growth, no ppl earning more to pay more rent....

Im all for a logical argument/discusion....but PIs throwing offense language, and generally trying to put down ppl who see un-addressed risks and poor investment then yes lets get out the stakes and holy water if thats what it takes to get good, profitable, risk weighted decisions in PI land, becasue the debt held by PI land is dragging NZ down and might yet see mortgage rates rise if we get downgraded, and I think we will........

regards

THE MOON MAN WAS RIGHT!

Well to a degree.  Christchurch just had it's biggest aftershock since Feb 22.  Easily over M5.

 

THE MOON MAN WAS WRONG !    : ..... that mad lunar tick promised a 8.0 magnitude quake , a shake bigger than the September 4 initial earthquake ..... And  he predicted it precisely for noon .

...... A minor aftershock , just prior to bed time , doesn't fit the bill ..... 5.1 ..... piffle , we laugh at 5.1 aftershocks ....... if it ain't over 6 , we don't bat an eyelid over it .

Phones temporarily out, but power on. M5.1 biggest since Feb 22.  A fairly major event with shaking in eastern suburbs around 16% of gravity - expect modest liquifaction.

The rubbish GNS and Quigley were talking about - no correlation between the moon and the aftershock sequence - has been proved false??  Note a large number of modest quakes around NZ today (and yesterday) - far more than normal including two 4.3s and a 4.6 in Twizel today, a 4.7 in Hawera last night and a 4+ in the North Island about an hour ago not fully reported yet.

Being a physics grad (a while ago!), I did a correlation between ocean wave energy (based on LINZ data from Lyttleton tides) and earthquake energy (GNS data) for the Canterbury quake seqence.  There was a 0.5 correlation for the aftershocks since mid December (prior to then the earthquake energy was declining more so the correlation was slightly less at 0.3).  That is a significant correlation, certainly not the zero correlation Mark Quigley quoted.

Some might have a little egg on their faces (TVNZ as well that is, scoffing that there was no moon man earthquakes today on the 6pm news).  BTW I don't think the moon man is 100% right in his predictions but there is a statistically significant relationship beween aftershocks and the moon.

Felt it here in Oxford too, although very slightly. We know that the moon has an effect on what we can see (tides) so quite frankly, it's not a big stretch to imagine that it also has an effect on what's under our feet (plus I like things to have an explanation, more reassuring than complete randomness).

interesting to note that the last four 5+ quakes have coincided with the full moon and the moon being at it,s closest point to the earth-- give or take a day or two--as the site,s operator say,s draw your own conclusions

http://www.christchurchquakemap.co.nz/dailyEnergy

Whilst we use more PC terms now, attempts to link the moon to actions used to be called lunacy.

The general public including the media are very soft on ministers telling us lies, but are prepared for a "Witch Hunt" with controversial people. Science quite often makes progress with publicly debating controversial statements – this is in this matter obviously not the case – so far.

Why didn't Ring predict the Feb 22 quake?

He sort of did (to within a day or so) which is what started the whole media circus concerning him.

 

 

Why didn't Ring predict the Japan quake? They could have switched off the nuclear reactors sooner.

It's all about keeping an open mind.

There is much science does not yet and likely will ever know.

Ken Ring ideas may steer towards learning more... maybe not.

We can try and protect ourselves from the worst possible outcome that we foresee. The Japanese tried.... greed always stretches the boundaries.

Emergency Kits at home are a brilliant start but not a shitload of use if you are at work, kids at school during the incident and cannot get home after.

Prepare and be aware but the rest is pretty much out of our hands.

I'll take science over Mr Good Times and his pawmistry, anytime.

'Instant Bernard' sees wallets being closed!...surely that started over 2 years ago...the quakes and shakes have only served to expose the trend .....expect it to become the normal Kiwi way from here on in....don't buy stuff...grow it instead...wait for the specials to come on sale and then offer less in cash...see Dunne squirm as the revenue stream dries up...Budget bullshit time has arrived again and this year it's all about restoring confidence...S&P's confidence!...hahahaha

Bolly on his knees in an effort to hang on to his cheaper for longer play all the way to election day. What happens after that is obvious but not for publication hell no...gotta give the banks time to sucker more fools into permanent debt to save the bubbles...the farming of the economy must go on.

Anyone for property...every banker and sprooker out there is banging the drum...it's your job to save the economy by borrowing from a bank and having a splurge...mind you don't stubb your toe on the way.

Most of the cretins I dont and wont feel sorry for because I bet as a tax payer I'll be paying their debt...the ones I do feel sorry for are couples/ppl just starting out on their first home and wanting to own it one day. They will take on crippling mortgages on property twice what its worth and risk seeing  huge loss.  Sitting here watching this unfold its seems another "no one learns from history, we are brighter this time" moment...

"Wallets being closed" the CC use still seems high....I wonder how many ppl are living on their CC, its not that unusual to see ppl using a CC to buy coffee etc....though these days more and more small shops are taking the CC button off their eftpos machines...I wonder if there are numbers on that? 

Bernard?  anyway to get the numbers of eftpos machines and then those without CC buttons are trend it?

regards

Credit cards can be a useful tool, if used correctly!

Small shops don't usually, and haven't ever, taken credit cards as long as I can remember.

Going the other way, fast food outlets have started only taking credit cards in the past few years... now all of the major chains accept them.

Burgerking used to take CC, I dont think they do now, Mac's dont either or at least the ones ive been in, dont.

regards

Yes steven, the sickness is being encouraged by govt and Bollard...."debt is good"..is the mantra in the Beehive and across on the Terrace in 'Bolly's Tower".

Reading that drivel from Sam Stubbs was enough to make me puke and no way will I go near Tower Investments.

The ocr game Bollard is playing will turn out to be a really stupid bit of pre election porking of the market......all those who have rushed to float to grab some quick savings will find the rate curve a bloody sight steeper on the other side. The smart ones will use it to pay off their bloated debts. The real morons will borrow more to buy shite.

The future promises another two decades of recession as the higher rates smash into households busy feeding the banks.