Opinion: Which way now for the market?

Opinion: Which way now for the market?

By Olly Newland

Olly Newland

I have in several previous articles and columns predicted the rise in rentals, starting in Auckland and spreading like ripples in a pond throughout the country.

Having just been to Australia and with the benefit of my own investments there, I have always looked at the Aussie property market to pick trends here at home. House prices in Aussie are sky high and A$1 million buys you little. Now rentals are moving as their market cools.

The natural disasters that have swept Australia have knocked The Lucky Country around.

I predict before long the exodus of Kiwis [from New Zealand] will slow, stall and then reverse.

See The Age: Softening property market, new home sales slow

New Zealand
With regard to the local market, it remains (as I predicted two years ago) more or less flat with very little new building coupled by little demand. Why is this? Why are new houses, especially modest new houses, so hard to build?

The answers are simple.

1. New houses carry a GST component of 15% on every door knob, piece of timber and blade of grass - this makes them immediately uncompetitive with second hand houses - which may only be across the road.

If the Government wants to revive the building industry then this is an area that should be looked at carefully.  Some of the actions that could be taken to help first home buyers include a serious effort to provide grants towards the purchase of first homes up to a certain price limit (which would vary from area to area).

There is a 'Welcome Home' grant supposedly available from Housing Corporation but it appears not to be actively promoted. I haven’t ever come across one single person who has received one of these grants. It seems likely it was created as a mere political stunt to anaesthetise the masses rather than a genuine attempt to help. (Call me cynical.)

  • A cash grant of up to 5% of the purchase up to a certain price limit (which would vary from area to area)
  • A subsidised interest rate for the first 5 years.
  • The ability to capitalise all or part of the Working For Families benefit to create a deposit. (http://www.workingforfamilies.govt.nz/)
  • Making interest payments for first home buyers tax deductible
  • Waiving  or substantially reducing the GST content on new home

In many other countries (Australia in particular) not only is stamp duty waived on homes but first home owner cash grants are also available which keep the building industry simulated and thereby helps the economy and the unemployed.

2. Local council regulations, fees and bureaucracy often stifle development and sub-divisional work. These costs add yet another large layer to an already over-priced product and could be another area where grants could be given for first home buyers. It is no wonder then that people choose to either buy second hand houses - or rent, which can be the cheapest option of all.

But renting as the preferred option is steadily losing ground. Rents are steadily rising and will, in my opinion, double in the main centres  over the next two to three years. This will have the effect of  pushing people back into the buying mode again, or forcing them further out into country areas where rents tend to stay lower.

Click image to read Crockers report (PDF 289kb)

As evidence of the 'rental creep' see the latest market report from Crockers, one of the largest rental agents in Auckland which confirms what I predicted many months ago. It makes interesting reading indeed.

In my view, the times have never been better to consider investing in the rental market. Positive factors include the combination of steady prices, shortages of good stock, rising rents and low interest rates. This combination only happens once or twice in a lifetime, and those of you who hesitate will look back in a year or two, and regret having missed the the boat - yet again.

Recent news tells us that over a quarter of all real estate agents have left the business because of the slow market. That's part of the property cycle.

NZ Herald: Quarter of estate agents walk out.

This will come as no surprise as listings are down, sales are glacial, and the market is flat. There may be some who think that it serves the agents right as they make a packet out of the market in the good years. That's a very short sighted view indeed.

If agents are leaving, so will be carpenters, electricians, brick layers, plumbers and a host of other trades who relied on a good property market to make a living. The Christchurch earthquake may have one benefit in the long run, and that is to provide jobs and a livelihood to those in the trades (they'll earn every dollar) - but that time is some way off yet.

Look at this graph from Harcourts and observe what a treacle-slow market looks like.

Commercial Property

Commercial property is having a somewhat better run than was expected when the GFC first exploded. While it is is true that there are large number of vacant commercial properties around, it is also true that there is a strong investor demand for well-leased commercial properties in the main centres.

Retail properties (shops etc.) are in great demand and investors are standing on each other's shoulders to get in on the act. As evidence of that, yields have steadily fallen typically by 2%-3%. Put another way, good commercial property has grown by 10%-20% in value especially those with strong or diverse tenants.

A small building in Matamata (of all places!) recently sold for a return of only 5.83% (i.e. the price paid was $1.25 million on a rental return of $73,500 p.a). True, the building sold with a bank tenant in place, but from experience let me tell you, banks are not easy as tenants ... as no doubt the new owner will find out in due course.

Small industrial properties (e.g. factories, showrooms, mixed retail industrial) are doing very well thank you, but larger industrial premises are still languishing. This is not a good time for investing in these unless they're leased to rock solid tenants on long leases.

Office space is still suffering (despite experiencing extremely high rent rates) and will continue to do so for some time yet. Many old style offices are effectively redundant. When I started out in this business, offices were great investments. Any one who needed an office immediately needed space for a desk, a typist, as well as a landline telephone, filing systems, photocopiers plus a host of other gadgets. Now many businesses can be run from an office at home, or a much smaller space.

Unless an office investment is cheap, (or luxurious and expensive) and well-leased, be wary of them as investments.

The Property Council of NZ says this about the commercial market:

1/6/2011 [6pm]
Property index shows slow, steady market conditions ahead
The commercial property market is still recovering, but the pace of recovery is slowing, according to the latest Property Council/IPD New Zealand Property Index.

For the year ending March 2011, the index recorded a total return of 5.9 per cent, which is a substantially lower return against the long-run return of 10 per cent. The total return comprises 8.3 per cent income return and negative 2.2 per cent capital growth.

Property Council chief executive Connal Townsend said the results indicated a levelling out in a continuing recovery cycle. “The index results will give investors some degree of confidence of a slow, steady recovery.”

Managing director of IPD in Australia and New Zealand Anthony De Francesco said the results suggested the overall commercial property market was moderating, with the speed of the upswing slowing. “This is supported by various macroeconomic indicators (such as employment growth and retail sales growth), which are pointing towards a soft economic outlook over the short-term.”

However, Mr De Francesco said the speed of the recovery would continue to vary across sectors, with the industrial sector continuing to outperform retail and office due to relatively favourable market conditions.

The office, retail and industrial sectors recorded annual total returns of 4.9 per cent, 4.9 per cent and 9.2 per cent respectively. The office sector reported a larger income return and retail showed lower capital growth declines.

Mr De Francesco said the average cap rate for the commercial property market was 8.4 per cent, which had remained relatively steady at that value for the past two years. “Over the short-term, average cap rates for the overall commercial property market are likely to remain steady.

“This will be underpinned by on-going unfavourable capital market conditions and a softening in the economic climate. However, cap rate dynamics are likely to vary across sectors.”

Mr De Francisco released the results at a Property Council market outlook event in Auckland today, which included presentations from consultant Ed Schuck, principal of Fidato Advisory on the role of Real Estate in institutional portfolios and interest in unlisted assets, and Bayleys Realty Group manager of research Gerard Rundle about current market conditions.

Mr Rundle said the commercial property market was in the midst of a slow, steady recovery that he expected to continue until 2012. “We’re coming out of a difficult time, so it’s quite surprising that four years after the Global Financial Crisis (GFC) we’re talking about recovery.”

See also, National Business Review: Commercial property market on the up, but pace of recovery slowing

I have to say that my observations don’t quite match those of the Property Council, but as the commercial market is so large and diverse it is little wonder that there are divergent views on such a complex subject. It also depends very much on which end of the market you invest in. The Property Council tends look at super-large investments in the tens of millions range (if not more) and that rarefied market differs considerably from the average investor's price range of $500,000 to $3 million.

Apartment Market

A sure sign that the property market is on the road to recovery is the sales record of shoebox apartments. These are steadily becoming the new the 'darlings' of the market. I have said on many occasions that the cheap apartment market was once hopelessly overpriced - and is now hopelessly underpriced. For those who have a strong stomach and want income and a punt on capital gain, then these types of investments maybe for you.

Sales results published 2 June 2011 City Sales sold 7 apartments under the hammer and one shortly after the auction yesterday.
They included a large (70m²) one-bedroom unit in the Princes St apartments attached to the Pullman Hotel (ex-Hyatt Regency), one sub-penthouse unit in the Spencer on Byron Hotel in Takapuna which has consent for both hotel & residential use, and 3 Princeton units taken out of the hotel pool. Auction results:

Learning Quarter Princeton, 30 Symonds St, 3 units each of 27m², all taken out of the hotel pool, all 2 bedrooms, rates & body corp levy $4572/year for units 4F & 4B, $4520/year for unit 2F, rental assessment $300-330/week, unit 4F sold for $103,500, unit 4B sold for $105,500 and unit 2F sold for $102,500 (Wendy Feng & Andrew Bond)

The Pullman Hotel, 6 Princes St, unit 15F, 70m², one bedroom, deck, parking space, rates & body corp levy $11,000/year, vacant possession, rental assessment $650-750/week, sold for $433,000 (Wendy Feng) The Quadrant, 10 Waterloo Quadrant, unit 1007, 42m², 2 bedrooms, deck, rates & body corp levy $5228/year, under hotel management, current rent $400/week, sold for $217,000 (May Ma & Mark Li)

Quay Park The Docks, 8 Dockside Lane, unit 238, leasehold, 60m², 2 bedrooms, parking space, rates & body corp levy $10,814/year (including $2400/year ground rent), current rent $500/week, sold for $165,000 (Hilary Seagrave)

Victoria Quarter Victoria, 135 Victoria St West, unit 13M, 33m², 2 bedrooms, deck, rates & body corp levy $3036/year, current rent $315/week, sold for $163,000 (Mark Jones)

North-east Takapuna, Spencer on Byron, 9-17 Byron Avenue, unit 1901, 48m² sub-penthouse one bedroom, deck, parking space, the unit has consent for dual hotel or residential use, vendor to remain a plaintiff in remedial works litigation, rates & body corp levy $4707/year, vacant possession, sold post-auction for $240,000 (Gabrielle Hoffmann)

Attribution: Auction, story written by Bob Dey for the Bob Dey Property Report.

Auckland Housing Trends for May
Meanwhile house prices remain flat despite a tightening supply according to Auckland's largest real estate agency Barfoot and Thompson.

The trend was down for May by a 2.5% which is well within the margin of error, but any graph in any period shows the same “wobbles”. The trend while still flat is under increasing pressure from factors such as the building industry being on its knees, leaky homes starving the market and immigration from both overseas and locally steadily hiking up rents.

Barfoot and Thompson

See NZ Herald: Building consents trend hits another record low

Banks are still touchy

All the baloney and hot air about banks being freer with their mortgages doesn’t add up when you consider the following story.

One of my clients owns an inner city commercial building with three retail tenants, right in the heart of Auckland sitting on freehold land. The tenants had been there for an average of 10 years and none of the tenants had missed a beat in all that time. Over the years his bank had an excellent overview of the reliability of the property by simply looking at the account through which the rents and outgoings ran and analysing the figures. (They really do this.)

My client was invited, indeed encouraged (note!) by his bank to apply for mortgage funding of up to two-thirds of his building's valuation, which after careful consideration he did. After 20 years as a customer of the bank with never any bother and being in the black most of the time, and having been invited to apply, my client naturally assumed the finance was a foregone conclusion. His property was valued at $1.7 million and the mortgage application submitted for $1.3 million -  a whisper under two-thirds.

You would think at this point my client would just pick up the cheque and get on with it, but oh no!  At this point the bank showed its true colours. After contemplating the application for three weeks the banks “generous” terms became clearer. There were a number of very nasty  fish hooks included such as:

(1) The bank deducted 10% off the valuation - “just to be conservative” - they said. So, for their purposes they valued his $1.7 million property at $1,530,000 and calculated the mortgage at $995k (or 58.5% approx) despite the valuation being from a long established and experienced valuer who was approved by the bank.

(2) Then the bank deducted 20% off the  rents – ”just to be conservative”- reducing the net rents actually being received from $119,000 p.a. to $95,000 ... despite the fact that there was never a day in the last decade when rent hadn’t been paid.

(3) Then the bank re-cast their calculations and with total illogicality said they would lend against their “valuation”.

But wait- they wanted more;

  • A charge (known as a GSA or General Security Agreement over the investor's large term deposit despite it being in a family trust. (A GSA is the newer version of a debenture, and a very powerful tool.) Someone holding a GSA can instantly appoint a Receiver to the debtor if the debtor fails to pay the debt. They can seize and sell the assets of the company to pay the debt and act as the debtor's agent to, for instance, complete a building project rather than sell a partially-completed development. A receiver has a duty primarily to the creditor — to take all the assets of the company, sell them, and in this case, pay the bank. All in all a measure way over the top for bank to demand in these circumstances.
  • A similar charge over ALL the other investment properties my client had
  • A personal guarantee from my client
  • Another valuation report from a different valuer
  • A mortgage over my client's family home
  • And a priority on the mortgage of a further $1M to hamper and further charges being registered on any property where the bank had its mortgages

There were four more pages of onerous conditions which it would be tedious to list here, but you get the message. The end result was that my client went elsewhere and got his mortgage with no problems from private lenders who see matters more simply. and, as you can imagine, the bank has lost a valuable client.

Incompetence is not limited to this particular bank. Various property managers are no better.

Let me explain: The Property Manager's Story

I sometimes relate stories of strange, shocking or weird stories that come across my desk. And now a good friend of mine (ahem) has experienced a truly bizarre and frustrating series of events with his property managers. These are events that defy explanation and are breathtaking in their revelation of incompetence and bias where one might expect professional neutrality. One of my companies manages tens of millions dollars worth of property, and we know only too well how difficult some landlords or tenants can be ... but this story beats the lot:

As my friend described it, the trouble began when he took his property manager to the Disputes Tribunal over a relatively minor matter. At that meeting the manager brought some of his staff along as witnesses.

To the astonishment of my friend, when one of the so-called witnesses spoke up at the Tribunal it was with a tirade of accusations - all couched in convoluted legal techno-babble. The nature of this outburst puzzled my friend because he knows, as we all should, that lawyers are not permitted at Disputes Tribunal hearings.

During a gap in the hearing my friend quickly opened his lap top and searched the name of the 'witness' only to find that she was a top barrister in an Auckland legal firm!

When the hearing recommenced, my friend mentioned this inconvenient fact and sat back to watch what would happen next. What followed, I am told, was an explosion from the adjudicator which rivalled that of Mount Tawawera directed towards the barrister-cum-witness. She was expelled on the spot and (as was learnt later) reported to the Law Society for a serious and deliberate breach of the rules.

In my experience the calibre of some bank managers and some property managers is appalling. Time and again my clients complain about unprofessionalism from these people. Just as some Financial Advisors need to be registered and authorised, there is a desperate need for higher qualifications and a better grasp of business (not to mention common sense) by bank managers and property managers so these types of blunders are kept to a minimum.

Olly Newland
June 2011
© 2011 Olly Newland. Used with permission.

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Olly "actions that could be taken to help first home buyers include a serious effort to provide grants towards the purchase of first homes up to a certain price limit (which would vary from area to area)"

Why on earth would you be pushing for that Olly? The Aussies tried that - unfortunately it was responsible for driving their bloated property prices even higher and less affordable - result; thousands of young famillies struggling to service unnecasserily high debt on their now underwater abode. 


The reason why you have never come across anyone who has received a Welcome Home grant from the Housign Corporation is that they don't exist.

Aaah, there's nothing like an opinion based on misinformation! 

Correct.  There is no welcome home grant.  There is a Welcome Home loan which doesn't look very helpful at all.


Good Idea Olly, 

I suggest you propose the same first buyer grant for used cars too. My daughter has been driving my 13 years old banger the past two years and is definitely in need of a better car. After all the car business is worse than the property business...so why not some "help" too ??

After that we can go on to some more "first buyer " grants like flat screen TVs  ??

We all know the reason for high property prices...defined as "prices that defy all logical economic reasoning" ...and "first buyer" or "welcome" grants is one of them !!

Good thing the banks are getting cold feet (maybe frozen even)...at least they see the writing on the wall.

Well you'll be pleased to learn Olly...that lawers are now working.... Saturdays.....to clinch those deals.....how very benevolent of them .....or do you think they might just be feeling the pinch a bit too...hmmmmmm.

Ah Olly, I so missed your comedy....

Grants speak of one thing, desperation to prop up a bubbled/bloated market, in that OZ was very successful, sort of in the short term.....what it means is in reality it stoked the bubble and has put first time buyers in particualr at great risk instead of those already in...

Steve Keen puts it very well....


(1) The bank deducted 10% off the valuation - “just to be conservative” - they said. So, for their purposes they valued his $1.7 million property at $1,530,000 and calculated the mortgage at $995k (or 58.5% approx) despite the valuation being from a long established and experienced valuer who was approved by the bank.

(2) Then the bank deducted 20% off the  rents – ”just to be conservative”- reducing the net rents actually being received from $119,000 p.a. to $95,000 ... despite the fact that there was never a day in the last decade when rent hadn’t been paid.

" Just to be conservative"  Does this really mean that banks expect even bigger falls than 10% in property I sak sardonically.  Regardless, it surely indicates that banks are not relying on past business performances because they see even tougher times ahead.

  Time to buy rental properties?  What a crock!


so of course unemployed estate agents,  "carpenters, electricians, brick layers, plumbers and a host of other trades who relied on a good property market to make a living..." will mean they can afford higher rents, doubled in fact in the "next 2 or 3 years." ....

If kiwis are struggling to pay rents at the present rate and are curbing their spending accordingly, not to save as the government and economists presume, but because they are really in a dire financial situation...( yeah yeah because it's their fault they're not as clever as you on their double income of NZ$65k and it's their own fault for not being smarter and making more money...) how are they going to 1. Pay the $800 a week rent and 2 as Olly says when they realise this and rush out to but the median house price of NZ$600 000 (as it will be in 2013) and even with a %10 deposit they'll be paying $3k a month $36 000 a year not including increased rates, water, electricity and gas...? But I suppose if they grow their own kai, home school their kids and pray they never get sick then presto... kiwis are doing it for themselves...

Ok so they won't be buying median you say... then even on a $400k property they will still be paying $2 500 a month excluding  the other stuff like inflation pushing interest rates to 10%... and oh, if banks won't lend the rich, why will they loan to the struggling middle-class, let alone the working class. How are Kiwis who return to NZ because they can't make it big across the ditch going to improve things, more struggling people maybe?

Don't mistake what I am saying, Olly may be correct (and far be it from to question the guru Olly when it comes to property in NZ after all he has been correct over the last few years eben if he has to say so himself - "With regard to the local market, it remains (as I predicted two years ago)"

But if he is right, then this country is truly stuffed. Picture at best; families living in cars and at worst; violent people taking things from the 'smart' people charging $800 a week for a cold Auckland $hit boxes.

Couple that with government mounting debt and a major flog off of state assets to the governments of foreign countries and TA DAH! all things rosey in sunny ol' NZ...

Don't say I'm being negative and a doomsayer, I've just done the maths that's all...

I am after all RICH RICH RICH... I'll just build a big wall round my flash house in Remers, buy some junk yard dogs, a big gun, personal body guards for me and my family and have fire spraying anti vehicle hijacking system attached to my Bentley and my musses Cayanne...then hire some tough dudes to collect my rental income for me... It'll be great, just like living in Johannesburg or in Bogota in Colombia...



Matin Hawes gave his views on property and answered a few questions here yesterday. 

He mentioned that he thought Listed Property Trusts (LPTs) are a good way to invest in commercial property at the moment.

I have a few KIP, APT, PFI etc and notice that I get lots of dividends from them every three months or so. 

What is your opinion on investing through them? 

I find that they give a good yield, are very liquid and have PIE tax advantages.   They also give me exposure to much better commercial than I could buy individually.

Do you think any of the LPT's are better than the others?



"Rents are steadily rising and will, in my opinion, double in the main centres  over the next two to three years "

friggin hilarious!

I'll print this off and see how wrong Olly is in 2-3 years

Its great to have Olly back because its great humour value!

They've only gone up 15% where I am in a whole year.  Three years at that rate would only be a 50% increase in rents - not a doubling.

Poor old Olly, the classic example of a one trick pony: He's damned if he does and he's damned if he doesn't, because property is all he knows and has, and in this market property is worse than nothing. All he can do now is spruik in the hope that there are still some suckers around on whom he can unload his junky white elephants.

"Rents are steadily rising and will, in my opinion, double in the main centres  over the next two to three years "

Of course they will, along with the massive increases in wages/salary that smile-and-wave has promised us.

If the govt really want to help first home buyers, they need to address the supply-side issues, and not by giving grants that will only add to the demand that drives prices up

Once interest rates start rising it is most likely that this flat market will change to a "FALLING MARKET" & you keep out of a falling market unless you wish to "Catch a Falling Knife".

The biggest mistake first home buyers can make in the current market is to jump in too early, thinking a 2% or 5% fall is a "BUYING SIGNAL" . This is what realtors told buyers in the USA in 2007 only to see prices fall a further 40%.


I wonder at Labour's inability to detect potential votes...they really do lack something...if Olly is not just 'drumming the books' to boost his capital gains, then he is pointing to a tenant voter bonanza for Labour and when Labour see votes can be had from a zillion tenants by promising to screw rents back by 5% per year for each year they are in office...backed up by the law...with bum kicking penalties for landlords who try it on....the return to the pig trough will be that much sooner...

If Mr Newland could describe how people could afford double the rent in 2-3 years then that would be appreciated

Assume a 3 bedroom $450 pw flat. Lets now assume 3% wage growth per annum over the next couple of years. I'd argue that much of that wage growth will be absorbed by inflation.

So Mr Newland - how is that household going to afford a $900 pw rent when their net income has basically gone nowhere?

I'd really like an explanation, because I think your proposition is a total load of garbage  


but JK said there  would be lots of wage growth!!!! he cant be lying, he just cant!!!!

Pigs might fly.....

Even core inflation is 2%....so that leaves 1%.....

Latest podcast from Steve Keen sums it up really...



Rents will double!!!!...what a ridiculous prediction...no way in hell will rents double over next 2-3 years...Either Olly is on drugs or needs to be...

What else can he say? Newland is completely dependent upon property. Without it he is even less than nothing.

All he can do is keep hyping property in the hope that some one is still listening.

He was one of those most responsible for driving suckers into the property market. I guess it is a case of like minds there. They all believe that the only thing in the universe that matters is property and that's why they are now so desperate.

The only people left who listen to Newland as if he knows what he's on about is a small number of the dumbest suckers and there are becoming fewer of them every day.

Interesting though that he is now actively moving from "boom times ahead" to "the Govn needs to support the market with first time buyers grants" etc....because there are jobs involved...not mentioning his ass of course....Builders will be moving to ChCh because that is where the labour demand will be....its a reversal for a friend of mine who lives in ChCh but mostly works in Auckland because that is where the demand is....so I wouldnt worry too much about the trades....




It's friggin hilarious that so many of you don't see why Olly's double rent scenario is quite possibly spot on.  It's because the USA will probably experience hyper-inflation and collapse within the same timeframe, thereby exporting huge inflation around the rest of the world.  Are you so convinced petrol won't be $4 per litre in 2 years?  Out of control debt and money printing can probably only end one way - massive inflation - massive erosion of our purchasing power.  $900pw avg rent is certainly on the cards - but it won't feel like it's twice as expensive for the reasons given.  It's just that $900 then will buy what $450 buys now - the landlord won't be any richer really. 

Olly was right in 1978 when he wrote his firts book on the "Coming NZ  Property Boom"

He was right again in his next book in 1981 "The NZ Property Boom".

He was right again in is 2004 book "The Rascals Guide" predicting that house prices would double.

And he was right again  in his 2005 book " The Day the Bubble Bursts"

He now predicts that rents could double in the next few years, and he bases that on what happens in Australia tends to happen here a few years later.

"High rents leave Sydney families homeless
 May 3, 2011

A growing number of Sydney families are being left homeless because of a shortage of rental homes and public housing, a study has found.
A report on the study by the Wesley Mission says families currently make up at least a quarter of Australia's homeless population and possibly as much as a third.
"Alarmingly, the population of homeless families is on the rise," Wesley Mission CEO Reverend Keith Garner said on Tuesday.Advertisement: Story continues below 
"They are in our suburbs, sleeping on the floor in a relative or friend's house, sleeping in their cars, living in a refuge after they've left a violent partner.
"They're mostly young, more often than not women, and they are almost always accompanied by young children.
Many families wanted to access rental properties but were unable to because of tight market conditions and real estate agents who "auction off" rental properties above market value.
"With the current limited supply of rental properties in Sydney and with average rental prices rising by 10-20 per cent a year, this is not likely to change soon," Dr Garner said in a statement.
The survey of 50 families found domestic violence was the most common reason for family homelessness, more than twice as common as relationship breakdown or divorce.
It also found seven in 10 children aged over 10 experienced violence or bullying, and five in 10 had encountered problems because of drug or alcohol abuse.
Six in 10 had been arrested or jailed".


Jesus Olly, give it a break. When you have to resort to sockpuppet accounts you know you're on a losing wicket.

It’s really Olly’s imaginary friend posting to us. Isn’t that right Olly?

The problem is there has been a paradigm shift in the last few years he cant fathom or contemplate, peak energy....this time its different, indeed it is....oh and if you do accept what he says look whats happening to OZ property values...


Arent we up to QEIII in the USA?  How much has QEI, QEII, and QEIII have affected us in NZ so far? 

If America goes bang then that's going to change the ball game, but I can't see it happening.  - they have the biggest guns after all.

Will rents double if America doesn't blow up?  I don't think so...



I'd bet on global deflation...and with that wage deflation, which yes could well mean rent is doubled because your wages are halved.


A 50+ yr old colleague recently returned to NZ for a brief visit. His comment after doing the weeks grocery shopping: "Eating in NZ is a luxury!"

I tend to trust the assessments of people I know who live & work in both countrys - rather than economists, accountants & politicians screwing the facts to suit there own agenda's!

And Olly - there isnt a hope in hell of rents rising as you predict!  We are hammered with petrol,food & rent/mortgage prices out of close to third world incomes!

Indeed, we pay international prices for food on backwater wages...

and yes Olly is day dreaming, now I can accpt the net profit on a rental can double after house prices collapse by 50%+....those buying in cheap will be renting out well, those fools who stayed will be wiped out....firesale anyone?


How much longer do you think the NZD exchange rate will keep soaring as it's doing now? Petrol and other prioces are high at present? - Wait until the NZD starts its falling from the skies! It is around US82c at the moment; it was below US40c in 2000.

A drop in exchange rate(s) will mean ...you guessed it: inflation. That's when the prices will start soaring, including property and, subsequently, rents.

Propety investment is one of - but not the only one - protection measures against inflation.

How are you going to be able to pay for your petrol, Alex13? Or you food, if both are going to soar in price? Are you wages going to soar to meet the higher purchase prices? Is your job that secure, in the face of rising unemployment, that you will be given a massive pay rise, or will you find that the soaring mortgage rates that accompany inflation eat up what is left of your income and any lagging pay rise you may get? Then what do you do to pay the bills? Sell your properties into a higher interest rate market ( who'd want them, then!) against other inflation strugglers who need daily spending money? Borrow more money at the new higher interets rates? It all depends 'where inflation shows up'. If it's wages inflation ( the '70;s and '80s) prices property, and most assets, will prices will rise, as they did. If its commodity price inflation, then property prices will fall. This time it will be 'inflation in all you need; deflation in all you own' Hang on to your cash, and get rid of the debt, Alex!

"Journalists with beach front holiday homes for sale battle it out with their sub-editors..."






All economic depressions share the same root cause. Too much credit that does not lead to enhanced future cash flows is extended.  In other words, this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made. Eventually gravity takes over, debts are defaulted upon, no more borrowers can be found, and the system is rather painfully scrubbed clean. It's a very normal and usual process.

When we bring in natural limits, however, (such as is the case for petroleum right now), what emerges is a forcing function that pushes a debt-based, exponential money system over the brink all that much faster and harder. 

But for the moment, let's ignore the imminent energy crisis.  On a pure debt, deficit, and liability basis, the US, much of Europe, and Japan are all well past the point of no return.  No matter what policy tweaks, tax and benefit adjustments, or spending cuts are made -- individually or in combination -- nothing really pencils out to anything that remotely resembles a solution that would allow us to return to business as usual.

At the heart of it all, the developed nations blew themselves a gigantic credit bubble, which fed all kinds of grotesque distortions, of which housing is perhaps the most visible poster child.  However, outsized government budgets and promises, overconsumption of nearly everything imaginable, bloated college tuition costs, and rising prices in healthcare utterly disconnected from economics are other symptoms, too. This report will examine the deficits, debts, and liabilities in such a way as to make the case that there's no possibility of a return of generally rising living standards for most of the developed world.  A new era is upon us.  There's always a slight chance , should some transformative technology come along, like another Internet, or perhaps the equivalent of another Industrial Revolution, but no such catalysts are on the horizon, let alone at the ready.


and yet as Olly predicts rents keep rising!

What I find so revolting about people who write these type of articles is that they see a huge problem coming, but rather than trying to be part of a solution they only see an opportunity to cash in and get rich on behalf of other peoples misery.

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