So Why Is NZ In Love With Property

[jmsnz]

There is a really interesting thread over here - http://www.sharetrader.co.nz/showthread.php?10542-Average-age-of-investors - that is in danger of being hijacked by another really interesting topic, in why so many people have so much exposure to property, and so little to shares.

I have a few theories that may or may not hold water:
a) We don't have a history of teaching financial skills/knowledge from an early age
b) People will gravitate to areas they know about/feel they have knowledge and skills in when they are making investment decisions
c) Given those 2 things, everyone immediately thinks they know more about property than (for example) Xero's share price (and TBH they probably do)
d) Many of the population that are of an age to have a reasonable level of investment funds know about or directly experienced the '87 crash, the 18%+ mortgage rates, finance company debacle which are more reasons to gravitate back to what they think they know
e) Leveraging shares is harder and more risky that property so you can't build large value share portfolios like you can property
f) You can see how much you have gained/lost on shares today which you can't on property and given that it is easier sell shares you are more likely to realise share losses than property losses, though having to realise a property loss is much more painful

For me I think that the country is the poorer for not having a better general financial IQ.

So why are we in love with property and how many here get their passive incomes from property rather than shares?

[fungus pudding]

So why are we in love with property and how many here get their passive incomes from property rather than shares?

Quite simply it's tangible. You can see it - touch it, and even paint it! I agree with your points in the main. I've stuck with property as I like the damn stuff, and even now heading for 70 I don't hold shares other than listed property trusts. Good buildings that someone else can paint. Property has given me a good living and I've never been interested in reading share prospectuses and so on. I know nothing about the share market. Not to say there's anything wrong with it at all. So I can't answer for anyone else but I suspect it's the tangible thing that lets people sleep at night.

[rentex]

I agree with fungus pudding.
It's tangible and you are dealing with people about the same things (mostly) that you have been through or are going through. Renting/living in a property.
Leverage multiples gains (and losses).

[smtrader]

e) Leveraging shares is harder and more risky that property


Besides all the other correct reasons mentioned, by far the number one reason is the willingness of the banks/fin institutions to lend on property. And by measure of capital adequacy, the RBNZ strongly backs them just as well.

I remember when i still was looking for a job at 18, my logic was pretty simple, which was 'im sure the banks aren't stupid to allow me to borrow to buy a house when i have nothing, it surely is a good thing'

From that reason all the others flow and just reinforce it being a good thing.. and of course, hold it for a 1,2,3+ years, and the result reinforces it even further.. just a on-going feedback loop.

[rayonline]

My folks (from Asia). Yeah property has a thing with a buzz there. Property tycoons etc. Something they understand ie - with their own home. It is tangible so if it loses it all there is still some valueless land vs a bankrupted company that doesn't even exist (less than a $0 value on paper). They can drive around and say that over there is mine. How the media portrays shares. Brexit shares down. Fonterra down. millions billions wiped etc etc. Speculator loses all from a borrow and short term invest plan and is unable to pay the loan back, on TV seen as cannot pay the loan sharks.

[JBmurc]

Yes your own Property is great mainly because the banks give it such a high equity value ...70-80% etc so if you have a debt free 500k house and good income the banks will be happy to give you 350k-400k to do want you like where you can invest ...sharemarket.... property,,,new supercar etc...

But not all property is an asset IMHO ...you go and buy a small investment apartment with 10k bodycorp+rates+insurance costs p.a for 450k ...that you can only get 400pw for ....so you are banking on a capital gain to make any money on the purchase and in turn holding a negatively geared investment ..