Morch
06-02-2005, 01:17 PM
Investors Forum, face a damming article in The Sunday Star Times today.
Over promising and under delivering, with the investors carrying the can for cost increases because they don’t have an out clause for cost escalations.
I’ve been to a couple of their meetings and heard the question asked about potential over runs and they have played it down as being a minor thing and then say that it’s reflect in an increased value of the properties which is supported by valuation which makes the property even more desirable as they will never be cheaper. I have also been told that they have absorbed many of the cost overruns.
There is one cardinal rule/saying and it goes like this “Cost does not equal value” and it’s so true. For those that don’t quite understand it just answer this question, to yourself. When someone buys a brand new motor vehicle, and then wants to sell it after driving it around the block, can they sell it back to the dealer for the same price?
I know that’s got little to do with property but buying of the plan, sharing in developers so called margins and or pre construction prices is fraught with danger as time which encapsulates a multitude of things, has a regular knack of stuffing up the desired result.
The following is one of the multitude. In the Christchurch Press yesterday, business section C1 with the heading
“Fewer coming to live in NZ”
In summary they say “the general consensus is for migration to fall to less than 10,000 a year, but latest December quarterly figures suggest it could be around 8000 a year. ASB economists said that would mean a sharper housing slow down and a more severe fall in economic growth. The net inflow of about 2000 migrants in the December quarter was the lowest since the first half of 2001"…
It’s worth a read.
I note also in the Sunday Star Times the Forum is running a ½ page colour add offering 11 different investment opportunities, so may be they have got a few problems coming up and members are unable to absorb the huge volume of developments. The economy of supply and demand has a way of sorting it all out. You just need to be on the right side when it happens.
It appears to me that in many cases rental returns (yields) are out of sink with capital invested and many promoters are now seeling the growth story supported by tax savings and telling folk not to be overly concerned about low yields like 3%.
I'm told that occupancy levels in some Queenstown apartments for example will be in the 20 to 30% range. I wounder how all the overseas investors will like that after being sold a much rosier story by real estate sales consultants, sorties to the UK etc.
I have heard of some folk making some serious money with the Forum and obviously not every development will be a winner.
Would appreciate any thought positive or negative!
Morch
Over promising and under delivering, with the investors carrying the can for cost increases because they don’t have an out clause for cost escalations.
I’ve been to a couple of their meetings and heard the question asked about potential over runs and they have played it down as being a minor thing and then say that it’s reflect in an increased value of the properties which is supported by valuation which makes the property even more desirable as they will never be cheaper. I have also been told that they have absorbed many of the cost overruns.
There is one cardinal rule/saying and it goes like this “Cost does not equal value” and it’s so true. For those that don’t quite understand it just answer this question, to yourself. When someone buys a brand new motor vehicle, and then wants to sell it after driving it around the block, can they sell it back to the dealer for the same price?
I know that’s got little to do with property but buying of the plan, sharing in developers so called margins and or pre construction prices is fraught with danger as time which encapsulates a multitude of things, has a regular knack of stuffing up the desired result.
The following is one of the multitude. In the Christchurch Press yesterday, business section C1 with the heading
“Fewer coming to live in NZ”
In summary they say “the general consensus is for migration to fall to less than 10,000 a year, but latest December quarterly figures suggest it could be around 8000 a year. ASB economists said that would mean a sharper housing slow down and a more severe fall in economic growth. The net inflow of about 2000 migrants in the December quarter was the lowest since the first half of 2001"…
It’s worth a read.
I note also in the Sunday Star Times the Forum is running a ½ page colour add offering 11 different investment opportunities, so may be they have got a few problems coming up and members are unable to absorb the huge volume of developments. The economy of supply and demand has a way of sorting it all out. You just need to be on the right side when it happens.
It appears to me that in many cases rental returns (yields) are out of sink with capital invested and many promoters are now seeling the growth story supported by tax savings and telling folk not to be overly concerned about low yields like 3%.
I'm told that occupancy levels in some Queenstown apartments for example will be in the 20 to 30% range. I wounder how all the overseas investors will like that after being sold a much rosier story by real estate sales consultants, sorties to the UK etc.
I have heard of some folk making some serious money with the Forum and obviously not every development will be a winner.
Would appreciate any thought positive or negative!
Morch