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rmbbrave
02-09-2006, 11:54 AM
The loan you never repay

Saturday September 2, 2006
By Anne Gibson


Just as people get used to a lifetime debt sentences with 50-year mortgages, out comes a new idea for cash-strapped house buyers: "deathbed mortgages".

An Auckland financier is promoting a new type of housing loan which might never be repaid and could be passed from one generation to another.

While other financiers eye the prospect of offering 50-year loans to help resolve the housing affordability crisis, executives at Greenlane-based Cairns Lockie are offering 10-year, interest-only mortgages.

If a homeowner was prepared to keep renewing the loan, these mortgages could be used to avoid ever repaying any principal. So a house - and its mortgage - could be passed from one generation to the next.

Borrowers "can in fact have a mortgage that never gets repaid", Cairns Lockie says on its website.

While interest-only loans are not new, until recently they have usually been short-term - typically for up to two or three years.

And in an unusual move, Cairns Lockie has also written one 20-year mortgage for an 85-year-old woman. No one expects her to live to 105 before she owns the house debt-free, says executive James Lockie. "It just suited her needs and she could afford the repayments."

If the interest-only loans take off, the spectre of today's young homeowners still paying mortgages well into their 80s might well become a reality.

Mr Lockie said the mortgages were attracting landlords rather than homeowners because the investors wanted to defer paying principal and keep spare cash free to buy more houses. They could also claim tax deductions for debt.

As Auckland's regional median house price climbs to $405,000, Mr Lockie expects more people to want different types of mortgages.

But the Consumers Institute's David Russell is concerned.

"It flies in the face of all advice that's been given whereby you pay off your mortgage as quickly as you can and start saving," he said. "This is just a soft option but an incredibly expensive and inter-generational option."

Hugh Pavletich, Christchurch-based co-author of the Demographia International Housing Affordability Survey, predicted such mortgages would become increasingly popular.

"As housing prices continue to escalate due to inadequate land supply, these desperate mortgage products will be seen as necessary," he said. "Sound and sensible mortgages can only flourish in sound property markets where housing affordability is achieved.

"It takes Aucklanders the equivalent of 6.6 years' full wage or salary to pay off a house but household mortgages should not be any more than 2 times a household's total annual income."

Problems had been growing for a long time as urban areas became more strangled and until land supply was opened up, housing would not become more affordable, he said.

British house buyers are being offered deathbed mortgages designed to be passed from one generation to the next, with only the interest paid.

They are saving up to $500 a month on repayments.

Borrowers can take out a 25-year interest-only loan and then extend it by another 25 years. When someone dies, they can pass it on to the next generation. But Mr Lockie said these loans were aimed at avoiding punitive death duties in Britain.

The idea of a 50-year mortgage for Kiwis emerged last month to help resolve the housing affordability crisis. The Commonwealth Bank and Westpac are considering 50-year mortgages and GE Money is offering 40-year loans in Australia.

Westpac said last month long-term mortgages sounded scarier than they were. The benefits were reduced monthly repayments, which meant people could buy more expensive houses.


Till death do us part

Monthly repayments on a $400,000 loan at 9.55 per cent: Interest-only, 10-year term: $3183.
Combined interest and principal, 10-year term: $5186.
Combined interest and principal, on a more usual 20-year term: $3741.
Source: Cairns Lockie


Borrowing big to help others

Dean Letfus of Paku

duncan macgregor
02-09-2006, 12:09 PM
It is a great idea for investor landlords who normally like to refinance every three years to get the deposit for another property.
I think that Auckland house prices double every 10 years not 7.8 years as he claims. I think as long as you can refinance every few years on a renewed valuation its a winner. A self funding property should get you into the next self funding property every three years look at the shamozzle you could leave when you kick the bucket. macdunk

rmbbrave
02-09-2006, 07:40 PM
Sorry Duncan,

The above post was barely started before I was interupted.

Pennywise
07-09-2006, 01:06 PM
and prices doubling every 7.8years or 10 years it doesn't matter...

look how much capital is pumped in to the "do up" and renovations to get these figures. They never take into account the amount of $$ constantly thrown at houses in NZ esp areas of high mainentance...ie our 80-100yr old villas.

his calcs are floored from word go.

I would love to know the TRUE figures minus all labour and capital inputs to house maintenance.

duncan macgregor
07-09-2006, 01:38 PM
quote:Originally posted by Pennywise

and prices doubling every 7.8years or 10 years it doesn't matter...

look how much capital is pumped in to the "do up" and renovations to get these figures. They never take into account the amount of $$ constantly thrown at houses in NZ esp areas of high mainentance...ie our 80-100yr old villas.

his calcs are floored from word go.

I would love to know the TRUE figures minus all labour and capital inputs to house maintenance.
You can never get true figures about anything. If i give you the true figures of my share investing for instance, then draw a comparison to yours i think you will find its chalk and cheese.
Property is much the same, what is good for one is not so good for another. When i look at a house to buy to rent out as an example this is what i look for.
1, exterior maintanance free for at least ten years other than a quick paint job [3days work for me].
2,I know c steel or decramastic tiles are good for 35 years i deduct the age of the house to see whats left.
3 I know its a paint and paper job every 5-7 years
4 I sell the house before a major repair is due at the top of the property cycle.
5, I only invest enough in the house for the rent to cover everything, and expect the house price to double in value in ten years time.
6, By buying right i expect a ten pc deposit to start the ball rolling, then look forward to the extreme rises and falls in the market place.
7 extreme rises is a time to sell extreme falls is a time to buy.
Property is much easier to understand than the sharemarket dont miss out by being negative. macdunk

Pennywise
07-09-2006, 02:19 PM
never missed out Duncan, purchased first property at 22.

best investment I ever made was buying a place and converting to commercial use...took time with RMA but yeild and returns were far better than residential.

+ better tenants (looked after place well) and the first GST claim is mine forever as you can sell it as going concern. tenants pay gst.

bigbear
07-09-2006, 07:26 PM
Whilst perhpas not quite on topic I beleive that we as a country just have to accept not everyone can afford to own their own house.
Perhaps not a scenario that is appealing but simply realism.
If you live in Auckland (I don't) and earn the average wage with say a wife a 2.4 kids the chances of you being able to afford a house even at the average end will be very low indeed.
I understand % of people who own their own homes has decreasd quite sharply.
If people are going to get involved in 50 year mortgages then they are failing to face the reality of the fact they can not afford to own their own house.
I bought my own house at 22 through a bit of hard work and some investment sucess. I would now need another $250,000 to repeat that again today. No question it has got hard, throw student loans into the equation (my last year at uni) and perhaps a bit of a debt mentaility (cars, stero, house stuff etc) and it is very difficult indeed. When it becomes so tough that you are sacrificing everyhing else (including any chance of investment or saving) you need to question wether we are building false hopes for a significant chunk of NZ.
Anyway those are my thoughts for what they are worth.

trackers
07-09-2006, 07:42 PM
Bah I picked mine up one year ago, at 23 - I take a pretty long view of the matter i.e world=finite space, population=growing...In the specific case of New Zealand I think that we are in for a year or two of stagnation, and hopefully wages will catch up a bit (this is where the problem is I suspect) before I believe we'll be off again...

But then again it depends who you ask, someone who owns a house, or someone who doesn't...

RMB's projections on population growth are, as I understand it, quite correct given that birth rates are slowing down continually over time (to what eventual level, who knows).. What it doesn't take into account is that places of massive population density like Asia, some of Europe etc are rapidly expanding in population - They can only build up for so long before theres going to be massive migration...

To places like NZ.

Thats my opinion anyway

bigbear
08-09-2006, 08:08 PM
Trackers I tend to agree with your big picture view.
However I suspect that you, me and probably 90% of posters on this site are more finacially aware than the general population.
As such we tend to have a better understanding of what is good debt (assets that increase) and bad debt (those that do not). Sacrificing immediate consumption for medium to long term progress is something that many potential first home buyers have a problem with.
A few generalisations above which may not unviersally be correct. I have always seen a house as providing me stability first and foremost and other benefits further down the list.
Many NZ'ers are financially useless and tend to have unrealistic expectations of what their first house will be (ie want something pretty impressive).
Was talking with my bank manager the other day. He mentioned that young professionals (eg accountants, lawyers etc) had a huge appeitie for debt and thought they deserved a $700,000 house at a fairly young (mid 30's) age. Of course they have the income to handle it but even then it is a given that both husband and wife are working to service house debt along with the other debt loading they carry.
That is all well and good for that group but for many this is just not acheivable and I personally belive a lot of people will end up having a miserable time iether servicing a massive debt or forever feeling they have missed out.
The comment that it depends whether you are an owner or not is very valid.

rmbbrave
09-09-2006, 09:19 AM
Trackers,

I have used the figures that assume Medium fertility rates an Medium immigration rates.

I am not so optimistic on the immigration front as you are at least with regard to "quality immigrants".

Lets assume English-speaking countries ie US, UK, Can, Aus, NZ and Ire will only take English speaking immigrants.

All things being equal most immigrants would have NZ as their 5th choice out of this bunch - meaning NZ will have difficulty attracting 1st class immigrants. I suspect that even many of the 3rd class ones that come here view NZ as a stepping stone to OZ.

In addition NZ has the lowest wages of the lot so NZers are also emmigrating to the other 5 countries as well as a few others.

NZ could always boost it's population by immigration by lowering it's standards.

This is always a possibility and not nearly as bad as it sounds - as measuring peoples "quality" by the number and type of qualifications they have is far from an exact science.

rmbbrave
13-09-2006, 09:01 PM
NZ house price rise still high, but easing
13 September 2006

The rise in New Zealand house prices ranks seventh in this year's survey of 20 rich countries by The Economist magazine.


The 12.4 per cent rise was down from the 13.7 per cent rise in the magazine's survey last year.

This week's publication shows Denmark posted the biggest rise, 23.6 per cent, compared with a 15.4 per cent rise in 2005.

Japan's 3.9 per cent fall in 2006 left that country bottom of the list, but was an improvement on a 5.4 per cent fall last year.

Prices in Australia were up 6.4 per cent in 2006 compared with a 1.9 per cent rise in 2005, while in Britain the rise was 6.6 per cent compared with 6.1 per cent in 2005.

House price inflation in the United States "has certainly caught a chill" according to The Economist, easing to 10.1 per cent from 14 per cent in 2005.

Apart from the United States, only Spain, Hong Kong and South Africa experienced big slowdowns in house price inflation.

AdvertisementAdvertisementThe German market is starting to awaken after nearly a decade of flat, or falling, prices.

House prices there have actually dropped 1 per cent from 1997 to 2006. That compared with a rise of 315 per cent in South Africa, 244 per cent in Ireland and 184 per cent in Britain.

The rise over the decade in New Zealand was calculated at 94 per cent, while in Australia it was 126 per cent. Worst performer was Hong Kong, where prices fell 44 per cent over the decade, followed by Japan where they dropped 31 per cent.

trackers
13-09-2006, 10:54 PM
Very interesting indeed there RMB...

With all the doom and gloom merchants around, surprised to see the US and AUS markets performing reasonably...

Why do you think Japan's market is so horrendous? 30% decline over a decade? geez...

Halebop
14-09-2006, 11:04 AM
quote:Originally posted by trackers

Very interesting indeed there RMB...

With all the doom and gloom merchants around, surprised to see the US and AUS markets performing reasonably...

Why do you think Japan's market is so horrendous? 30% decline over a decade? geez...

Japan is industrialized and wealthy, like the few lucky developed Pacific Rim Countries and Much of "Old Money" Europe. The key differentiator is that they lost a major war in living memory. They didn't have a baby boom (you don't have sex after the game when you're on the losing side). The German market faced a similar hurdle. There is no way demographics, birth rates and immigration did not play a significant roll.

USA, Australia etc performed well. Not quite the same thing as perfroming well. The housing markets that are still firing in Australia are those that are provding outsized job opportunities. These opportunities aren't chased by most 60 year olds. The key to defining wealth over the last 20 years has been to position in front of Baby Boomers. 20 years ago the boomers were aged 22 to 40, they were for the 1st time all in the same segments (Looking for Jobs, looking for a place to live, buying cars etc). In 2006 the oldest boomers are 60. The youngest are 42. For the first time in 20 years they will soon start fragmenting as a market again (and have probsably started already). While some will keep working and buying/trading up homes, investing for growth, others will stop or reduce working and will trade down their homes or sell riskier asset classes. There won't be so many people pushing the same barrow.

New Zealand has the same problem as the rest of the OECD although at least we had a bigger mini boom in the 70s (The Generation X'ers) and so the challenge of supporting the Boomers is a little smoother. ...so long as we don't keep exporting them (I have a tail end Baby Boomer Sister and 2 Generation X siblings as well, all exported to Australia).

rmbbrave
14-09-2006, 11:08 PM
quote:Originally posted by Halebop


quote:Originally posted by trackers

Very interesting indeed there RMB...

With all the doom and gloom merchants around, surprised to see the US and AUS markets performing reasonably...

Why do you think Japan's market is so horrendous? 30% decline over a decade? geez...

Japan is industrialized and wealthy, like the few lucky developed Pacific Rim Countries and Much of "Old Money" Europe. The key differentiator is that they lost a major war in living memory. They didn't have a baby boom (you don't have sex after the game when you're on the losing side). The German market faced a similar hurdle.

I'm sorry Halebop,

But you simply don't know what you're talking about.

Japan did have a baby boom after the war - in 1947 the TFR was over 5. They were at it like rabbits.

However the TFR dropped very quicky after that - there was no real baby boomers' baby boom.

http://web-japan.org/trends00/honbun/tj000128.html

Government Moves to Pump Up the Birthrate

Birthrates in Japan after World War II peaked between 1947 and 1949, when some 2.6 to 2.7 million babies were born annually--the first baby boom. Those born during these three years have been collectively called the dankai (mass) generation. This generation brought about the second baby boom, bearing over 2 million babies each year from 1971 to 1974. The dankai juniors, as those born during the second boom are called, are now about 24 to 28 years old--in other words, around the normal age to enter parenthood. But instead of their giving rise to a third baby boom, the number of births is actually falling at an alarming rate.

trackers
14-09-2006, 11:11 PM
Thanks for the reply. So to summarise, and over-simplify, the 30% decline in the Japanese housing market over the last decade is primarily due to having a small baby boom population? Bugger

This article is quite a good on-the-ground piece http://www.freerepublic.com/focus/f-news/1698184/posts

Halebop
15-09-2006, 12:32 AM
quote:Originally posted by rmbbrave

I'm sorry Halebop,

But you simply don't know what you're talking about.

Japan did have a baby boom after the war - in 1947 the TFR was over 5. They were at it like rabbits.

However the TFR dropped very quicky after that - there was no real baby boomers' baby boom.

The west had an 18 year Baby Boom. I'll stick with what I said. The net effect is that Japan now (and for quite a while) has what the west is trying with only limited success to avoid. Too many old people. Not enough young people. If you track Japan's demographics their financial markets performed accordingly - hence their heyday was in the 80s.

Pennywise
15-09-2006, 11:48 AM
quote:Originally posted by trackers

Thanks for the reply. So to summarise, and over-simplify, the 30% decline in the Japanese housing market over the last decade is primarily due to having a small baby boom population? Bugger

This article is quite a good on-the-ground piece http://www.freerepublic.com/focus/f-news/1698184/posts


The biggest reason for the "stats" looking so poor is you need to look at the huge bubble in real estate in Japan in the late 80s very early 90s.

It was out of control.
Looking at a single figure of -30% has to be appreciated alongside the massive explosion in housing prices during the infamous real estate bubble in Japan.

Right now, there are better real estate opportunities in Tokyo than NZ by far.
Apartment renting to foreigners in Tokyo can easily yeild 10% + against loans of 1.5%

Halebop
15-09-2006, 01:52 PM
Pennywise the market was out of control because of those demographics. Real estate was positioned in front of people at the right age who had accumulated enough assets or earnings to buy. Now they are old, on fixed incomes and not thinking about or able to afford leverage and real estate. When the next demographic wave hits the age sweetspot (30s to 50s) that will change. But Japan's birthrate is none too inspiring.

This is the same situation the West has enjoyed more recently. The markets without The Baby Boom have given an insight into our future. Unless we have more bums on seats after the baby boomers stop buying, I don't see the sorts of returns markets like Auckland have offered as being sustainable. That might not mean "crash" because NZ and Auckland in particular has a superior demographic "smoothness" than other countries. But the aging of the boomers will remove a significant lever none the less.

Pennywise
15-09-2006, 04:08 PM
quote:Originally posted by Halebop

Pennywise the market was out of control because of those demographics.

I disagree (somewhat[:I]) with this point. It may go some way to explain the buildup, but my point is the "stats" in Japan have been distorted.

The market was out of control due to a booming economy and absolute frenzy of wealth including in the face of massive export growth, a super strong currency and a military style dedicated workforce. The new generation of Japanese has quite a different attitude and they certainly don't work as hard as their parents did, this also being part of the problem.

The rising market stopped nearly overnight (around 90-91) and demographics certainly didn't change that fast. It has been a slow decline so it doesn't explain it fully.

I worked in this industry over there and I was involved with it first hand.
The biggest reason Japan hasn't pulled out of the housing slump is actually due to a nations "attitude" and skill in the mortgage market. They just kept lending money that became more and more bad debt for years.

*The US pulled out of their housing crisis by introducing the first CMOs (collaterised mortgage obligations) and quickly moved to recycle bad debt very quickly (have you read "Liars Poker"). Japanese government officals have been in recent years studing and working with the HUD in the US to understand the workings of Freddie Mac and Fannie Mae.
One of the biggest goals of the current government is to unlock the massive savings in the Post Office savings system by privatising it, freeing up some of that money to be available for the mortgage market. It would be the worlds largest bank.

Until recent times Japanese banks kept loaning money to defaulters like sticking plasters and this has stiffled the banking system for years.
The core rot in the Japanese banking system is/was NPL (non performing loans) and over the last 5 years, alot of US investors have started buying up and collaterising these bad debts.

This has helped lead to some recovery and stabilization in some city areas of Japan, but not rurally.

I blame the banking system before AND after the bubble for the property market mess they found themselves in over the last 15 years.

Many Japanese are still very gun shy on property after seeing their families get burnt severely after the bubble burst.

rmbbrave
16-09-2006, 10:01 AM
quote:Originally posted by Pennywise


quote:Originally posted by trackers

Thanks for the reply. So to summarise, and over-simplify, the 30% decline in the Japanese housing market over the last decade is primarily due to having a small baby boom population? Bugger

This article is quite a good on-the-ground piece http://www.freerepublic.com/focus/f-news/1698184/posts


The biggest reason for the "stats" looking so poor is you need to look at the huge bubble in real estate in Japan in the late 80s very early 90s.

It was out of control.
Looking at a single figure of -30% has to be appreciated alongside the massive explosion in housing prices during the infamous real estate bubble in Japan.

Right now, there are better real estate opportunities in Tokyo than NZ by far.
Apartment renting to foreigners in Tokyo can easily yeild 10% + against loans of 1.5%







In theory yes, but in practice it isn't as rosy as that.

I have some frinds who have taken out very cheap loans to buy their first house/apartment.

There is a clause in the agreement saying they can't sublet - meaning they can't have renters paying the mortgage.

Their salary is only enough to get one loan for one dwelling - If they do secretly breach the contract by subletting they can't count rental income from tenants as income to get another loan because they have to keep this income secret.

The NZ model, where an person with an average salary can buy 10 houses with 5% equity in each and have the tenants payng of most of the mortgage, isn't possible in my friend's cases.

If you rent an apartment you still have to pay quite a high monthly fee. Our friends bought an apartment and still are paying a third of the rent we pay every month as fees.

Tokyo may be different, perhaps you can get a loans from banks there to build a rental apartment empire, but given that that Japanese banks lost more money than NZ is worth in the burstng bubble, I have my doubts.

Pennywise
16-09-2006, 10:57 AM
Sure, but I was refering to a commercial venture with backing.

your explaination quite nicely sums up the problem with Japanese banks...extremely conservative now...

they also have some major problems with capital ratios...Mitsubishi Tokyo being the best of the major 4.



things will change, and when that confidence comes back, you can be sure alot of money can be made again. IMHO;)

Pennywise
16-09-2006, 11:02 AM
PS, the Govt. taxes and duties DO NOT help at all and real estate agent fees need a MAJOR overhaul...now, there is a business for you RMB. Shake up that mortgage market. Mortgage broking and 1% real estate fees;)

They (govt.) could go along way to make it cheaper and easier for home ownership.

JBmurc
16-09-2006, 05:51 PM
[quote]Originally posted by Pennywise

PS, the Govt. taxes and duties DO NOT help at all and real estate agent fees need a MAJOR overhaul...now, there is a business for you RMB. Shake up that mortgage market. Mortgage broking and 1% real estate fees;)

They (govt.) could go along way to make it cheaper and easier for home ownership.

-:DRealestate Agent fees are certainly over the top helping inflate house prices as the vendors asking price+agents 3-4.5% fee on 80% of NZ house sales.
-Can,t see the sale fees ever getting That low,would certainly reduce there numbers;) breeding like rabbits here in Queenstown something like 120 agents to some 20,000 people.
Worst of all is the money there making with alot of them earning well over 100,000 [xx(][xx(]alot more that most of people that are involved in building them.

trackers
16-09-2006, 06:42 PM
quote:Originally posted by JBmurc

[quote]Originally posted by Pennywise

PS, the Govt. taxes and duties DO NOT help at all and real estate agent fees need a MAJOR overhaul...now, there is a business for you RMB. Shake up that mortgage market. Mortgage broking and 1% real estate fees;)

They (govt.) could go along way to make it cheaper and easier for home ownership.

-:DRealestate Agent fees are certainly over the top helping inflate house prices as the vendors asking price+agents 3-4.5% fee on 80% of NZ house sales.
-Can,t see the sale fees ever getting That low,would certainly reduce there numbers;) breeding like rabbits here in Queenstown something like 120 agents to some 20,000 people.
Worst of all is the money there making with alot of them earning well over 100,000 [xx(][xx(]alot more that most of people that are involved in building them.




Think he's talking about Japan [:p]

JBmurc
16-09-2006, 08:02 PM
[:I]

artemis
24-09-2006, 06:50 AM
Net migration up - good for property. The following is an extract from the ASB Economic Note from last Friday.


The August 2006 net migration inflow was 1,090 people, seasonally adjusted.

The annual net migration gain was 12,490 to August 2006, up 89% on the year to Aug 2005.

Overseas visitor arrivals for August 2006 were up 3% on a year earlier.



Although inflows are at substantially lower levels than previous years, the net permanent migrant inflow on an annual basis appears to have picked up from the lows of late 2005. New Zealand gained 89% more permanent migrants in the year ended August. The pick up in migration over this year is supportive of the housing market, and consumer spending.

rmbbrave
26-09-2006, 05:40 PM
Website offers property data free

Saturday September 23, 2006
By Anne Gibson


Want to know what your house or apartment is worth? What properties of a similar size and value have sold for lately in your area? How much your land is worth compared with the house or unit?

State-owned enterprise QV is offering free property reports and market value estimates until October 8 to promote its services. It usually charges up to $69.95 a report.

But beware: So many people are visiting the site that some reports are automatically being blocked or redirected as spam. So QV is telling clients to check spam filters or junk mail folders to hunt for their reports before they complain.

The website asks you to enter details of your area and road or street address. A few minutes later, it automatically generates an email of QV's Essential Property Guide, which can be up to 20 pages.

The guide has a map showing the property in relation to surrounding streets and blocks, a legal description of it, when it last sold, its sale price and its estimated market value today.

Then it shows the 30 most recent sales within the past five years, a graph of sale price trends within the past decade and a comparison between the individual property price and that of the wider suburb and city.

The report also shows school zones and the demographics of neighbourhoods based on the 2001 Census.

Age, ethnicity, housing ownership, average household size, the time people have lived in the area, average rents, total household income, how many local people are unemployed and occupations are also shown.

Steve Langridge, general manager of QV Online, said the free service was being run to enable people to see the scope and range of information available to help them if they wanted to buy or sell a property.

More than 100,000 people have used the service since it started on August 22.

Use this link....

https://www.qv.co.nz/freereport/

rmbbrave
26-09-2006, 05:52 PM
My Dad bought a brand new house in Manurewa for $258,000 in 1995. QV estimates it's worth at $431,000 in 2006.

That's a gain of 4.8% over the last 12 years. My Dad hasn't added anything to it either. Just a fence and a few trees.

That's certainly not doubling every 10 years ie, 7% . Nor is it doubling every 7 years, ie 10%.

trackers
27-09-2006, 07:21 AM
quote:Originally posted by rmbbrave

My Dad bought a brand new house in Manurewa for $258,000 in 1995. QV estimates it's worth at $431,000 in 2006.

That's a gain of 4.8% over the last 12 years. My Dad hasn't added anything to it either. Just a fence and a few trees.

That's certainly not doubling every 10 years ie, 7% . Nor is it doubling every 7 years, ie 10%.


Have to say, thats a pretty small sample there RMB

rmbbrave
27-09-2006, 03:54 PM
quote:Originally posted by trackers


quote:Originally posted by rmbbrave

My Dad bought a brand new house in Manurewa for $258,000 in 1995. QV estimates it's worth at $431,000 in 2006.

That's a gain of 4.8% over the last 12 years. My Dad hasn't added anything to it either. Just a fence and a few trees.

That's certainly not doubling every 10 years ie, 7% . Nor is it doubling every 7 years, ie 10%.


Have to say, thats a pretty small sample there RMB


It sure is Trackers!

If you know of a house that has had no substatial improvements done to it, then do a free QV report on it, post the price increase here, and then we'll have a sample of 2.

rmbbrave
27-09-2006, 03:56 PM
The Reserve Bank concurs with rmbbrave

Homeowners warned to save


1.50pm Wednesday September 27, 2006


Many New Zealanders regard their homes as wealth "in the bag" and are leaving themselves vulnerable by saving less as a result, the Reserve Bank has warned.

It said an ageing population could prompt a fall in house prices and recommended the introduction of policies that would encourage wider savings for households.

In a paper Household Savings and Wealth in New Zealand, the bank expressed concern that the household savings rate, as measured by Statistics New Zealand, had declined markedly over the past 20 years.

It said the net worth of the household sector had almost doubled since 2001 and many homeowners appeared to be relying on capital appreciation in order to accumulate wealth.

"For many homeowners, the wealth associated with rising house prices is unrealised," the bank said in a statement.

"However the evidence suggests that many households may view this increase in wealth as 'in the bag' and may have lowered their savings from current income as a result."

The bank said that over the past four years, households had withdrawn an estimated $7 billion from housing by selling properties or increasing their mortgages.

While a "sizeable portion" of the equity withdrawn from houses had probably been reinvested in other assets, it said a significant amount would likely have been spent.

The bank warned there could be an increase in people trying to sell their homes as baby-boomers retired, potentially driving prices down.

"As the population ages and more households attempt to realise wealth built up through capital gains, doing so will require that there be enough willing and able new buyers of these assets at current (or higher) prices," it said.

The bank also said borrowing to support higher asset prices had largely been financed from abroad - which could make borrowers and lenders vulnerable to changes in interest rates or the continued willingness of overseas parties to provide funds.

The analysis paper was prepared as background for a presentation by Reserve Bank Governor Alan Bollard to the New Zealand Institute of Finance Professionals.

- NZHERALD STAFF

rmbbrave
27-09-2006, 06:36 PM
My Dad sold a house in for $162,000 in Papakura, in 1996. QV estimates it's worth at $347,000 in 2006.

That's a gain of 7.7% over the last 11 years.

Now we have a sample of 2.

trackers
28-09-2006, 07:37 AM
I brought a house for 236,000 in December, 9 months later on QV puts it at 273,000.

Thats 15.7% in 9 months, extrapolated to 20.9% in 1 year.

Previous owners did well too, QV report extract:

26/11/2005 $236,000
09/02/2004 $180,000
15/12/2000 $127,000
25/05/1993 $106,000

Not designed to brag, but the most accurate example I can come up with is my own property. Also worthy to note that if you calculate a 10% deposit, and work out returns based on capital gains (if realised) less interest paid and rates you are looking at more like 200% on capital outlaid in ~1 yr...

Must also mention that your latest example is a gain of 214% over 10 years, looks better that way!

Snow Leopard
28-09-2006, 08:45 AM
To take the sample to 5 and try and compare results

<pre id="code">
House From To %pa
===== ==== ==== =====

RMB1 1995 2006 4.77%
RMB2 1996 2006 7.91%
Trak 1993 2006 7.39%
PT1 1990 2006 4.87%
PT2 1989 2006 5.13%
</pre id="code">

PT1 sold for $190,000 in early 1990 and is currently valued by QV at $420,000
PT2 sold for $195,000 in early 1989 and is currently valued by QV at $472,000

JoeKing
28-09-2006, 09:28 AM
Sample 6 a little different.
JK buys 2 acre section Rotorua 1999 $158k, spends $240 building, $60 landscaping etc.total $458.
Current CV (Sept 2005) $800K. Mortgage free.
Most recent sale in area 3 houses away CV $ 1.25 sold Dec 2005 $1.9
Neighbors house currently for sale CV $800k tenders starting $1,4.
I guess our property would probably be worth similar.
One of you guys will be better at the maths than me but I think we should be quite pleased?
Cheers
JK

trackers
28-09-2006, 12:19 PM
JK, 300% in 7yrs - not too shabby..

I think its important to point out that while these house prices are showing a roughly 7% p.a odd gain, in most cases these are fairly highly leveraged amount, so the ROI is obviously much much higher.

Also the property i showed, roughly 20% gain total from 93 - 00 (ouch...); 250% gain 00 - 06

duncan macgregor
28-09-2006, 12:32 PM
quote:Originally posted by rmbbrave

My Dad sold a house in for $162,000 in Papakura, in 1996. QV estimates it's worth at $347,000 in 2006.

That's a gain of 7.7% over the last 11 years.

Now we have a sample of 2.



RMBBRAVE, Lets take your dads house that he sold for $162,000, now worth after ten years $347,000. You made it sound worse saying 11 years not ten as the dates show.
Your figures show a 7.7 pc gain which sounds really mediocre or is it?. Let us presume that it was me he sold the house to for the sake of arguement. I would have financed it with a deposit large enough that the rent covered all the outgoings.
Let us say to give you all the benefits of doubt, that I was forced to go as high as 20pc deposit [normally 10pc] to acheive this.
1, deposit = $34,000
2, Capital gain = $185,000 after according to your figures
Work out your mathematics again only this time include everything.
The figures above are pretty pathetic for the astute landlord who gets the capital gain with the banks money not his own.
Do the sums with my figures which i bent over backwards to lower for the sake of debate.
$34,000 turned into $185000 over ten years or even make it eleven if you want then tell me what percentage my lousey investment acheived.
Macdunk

Snow Leopard
28-09-2006, 12:52 PM
Duncan's example
input: $34k
output: $34k + $187k = $219k [rental income is equal to loan interest etc expenses]
period: 10 years

%pa return = 20.47%

rmbbrave
28-09-2006, 01:09 PM
1996 to 2006 is 11 years inclusive. You can call it 10 or 10.5 it doesn't change much.

I am well aware of what can be achieved by leverage and then renting a house out to tenants. But my Dad didn't do that he bought his house with borrowed money and lived in it - and that's what I will probably be doing.

Borrowing to invest magnifies gains and losses, and property buyers have been lucky that they have lived in times when the NZ population has been increasing by about 1% per year.

But the rate of population increase is slowing down and before I die it will have started to fall.

I am not counting on property to go up at anything like the rate it has and sometime before NZ's population increase turns into a decrease house prices will fall year after year after year.

Comparing gains on LEVERAGED property with gains on un-leveraged shares is not what I'm looking for. I would like to compare un-leveraged shares with un-leveraged property.

If you would like to do a QV valuation be my guest and feel free to add it to our sample of 5.

No houses that have had extensive capital improvements.

duncan macgregor
28-09-2006, 02:14 PM
RMBBRAVE, What you overlook is the fact that most people borrow to live in a house. The fact that you live in the house must be taken into account against renting some where else. The rent that you save paying against the capital gain is no different than collecting rent from a tenant. I have borrowed heaps to buy property, but would never borrow to buy shares. Property as a business must be run with the banks money for maximum gain. Property versus shares, property wins every time for the average joe blow. If you own a property, it only takes three or four years to refinance, then get all your initial deposit back, pay yourself the rent. You can then have a capital gain with none of your initial deposit money involved in the house.
The price of the average house in the area you mentioned doubled in the last eight years according to the REINZ. Next eight years who knows might stall a bit then surge up. MACDUNK

minimoke
28-09-2006, 02:26 PM
DM
1n 1996 you would have been paying about 11% interest (Source RBNZ) on your mortgage so your weekly interest bill on a $128k mortgage was $271

According to the 1996 census the average weekly rent in Papakura was $183.48

(if we use your technique you would need to put in $95,000 in cash to keep your mortgage to $67,000 of which the $183 rent would pay the interest plus rates and R&M)

Continuing with the $34k deposit, you are loosing $88 cash a week which you have to fund. Over a year this is $4,576. You will also have to fund say $1,000 in rates plus, say $300 in insurance. So you are having to find $5,876 a year.

What’s repairs and maintenance and capital improvements worth – say $1,000 a year? So all up lets say you are putting in $7,000 a year or $70,000 over the 10 years. Your $185k now gets reduced to $115,000 + plus your initial $34k = $149k all up.

Alternatively you could have out your $34k into the bank and cleared $50,000 (4% net compounding) after 10 years. Add to this the $70 you could have saved by not spending it on the rental you would end up with $120k.

So the easy low risk route clears you $120k and the other way gives you $149k –assuming the property is rented out 100% of the year.

minimoke
28-09-2006, 03:13 PM
quote:Originally posted by rmbbrave

Website offers property data free
https://www.qv.co.nz/freereport/

Thanks for the link RMB. I ran a report on my place with QVNZ valuing it at 15% more than I would have. It also shows a downward trend in average sale values since the beginning of 2005. But values have increased at 4.5% a year for 10 years.

rmbbrave
28-09-2006, 08:56 PM
quote:Originally posted by minimoke


quote:Originally posted by rmbbrave

Website offers property data free
https://www.qv.co.nz/freereport/

Thanks for the link RMB. I ran a report on my place with QVNZ valuing it at 15% more than I would have. It also shows a downward trend in average sale values since the beginning of 2005. But values have increased at 4.5% a year for 10 years.


You're welcome.

Please add it to our capital gain sample.

rmbbrave
28-09-2006, 09:03 PM
quote:Originally posted by duncan macgregor

RMBBRAVE, What you overlook is the fact that most people borrow to live in a house. The fact that you live in the house must be taken into account against renting some where else. The rent that you save paying against the capital gain is no different than collecting rent from a tenant. I have borrowed heaps to buy property, but would never borrow to buy shares. Property as a business must be run with the banks money for maximum gain. Property versus shares, property wins every time for the average joe blow. If you own a property, it only takes three or four years to refinance, then get all your initial deposit back, pay yourself the rent. You can then have a capital gain with none of your initial deposit money involved in the house.
The price of the average house in the area you mentioned doubled in the last eight years according to the REINZ. Next eight years who knows might stall a bit then surge up. MACDUNK



Having never borrowed form a bank - I have a question.

Do you have to be getting a salary to get a loan from a bank?

If I had say $850,000 in cash and shares and wasn't working could I get a loan from a bank for 90% of the value a $300,000 house using only the house as collateral?

Halebop
28-09-2006, 09:08 PM
quote:Originally posted by rmbbrave

Having never borrowed form a bank - I have a question.

Do you have to be getting a salary to get a loan from a bank?

If I had say $850,000 in cash and shares and wasn't working could I get a loan from a bank for 90% of the value a $300,000 house using only the house as collateral?

With enough collatoral you could but the house alone at 90% unlikely. Many banks will happily lend 80% on the assumnption that it's an investment property. A friend of mine who was only recently self employed and looking to refinance nominated his home as an investment property after getting a wink from his relationship manager at the bank. They lent 80% without any need to verify his income.

trackers
29-09-2006, 06:20 AM
quote:Originally posted by rmbbrave


quote:Originally posted by duncan macgregor

RMBBRAVE, What you overlook is the fact that most people borrow to live in a house. The fact that you live in the house must be taken into account against renting some where else. The rent that you save paying against the capital gain is no different than collecting rent from a tenant. I have borrowed heaps to buy property, but would never borrow to buy shares. Property as a business must be run with the banks money for maximum gain. Property versus shares, property wins every time for the average joe blow. If you own a property, it only takes three or four years to refinance, then get all your initial deposit back, pay yourself the rent. You can then have a capital gain with none of your initial deposit money involved in the house.
The price of the average house in the area you mentioned doubled in the last eight years according to the REINZ. Next eight years who knows might stall a bit then surge up. MACDUNK



Having never borrowed form a bank - I have a question.

Do you have to be getting a salary to get a loan from a bank?

If I had say $850,000 in cash and shares and wasn't working could I get a loan from a bank for 90% of the value a $300,000 house using only the house as collateral?




Better half works in commercial lending (a lot prop investor situations) - They look at your 'ability' to repay the loan...Usually the required payments should not take up more than 35% of the loan, though in some cases they will do much higher than that... Not sure how you could exclude your cash and shares from the security though, that may not fly...

minimoke
29-09-2006, 07:38 AM
[/quote]
Having never borrowed form a bank - I have a question.

Do you have to be getting a salary to get a loan from a bank?

If I had say $850,000 in cash and shares and wasn't working could I get a loan from a bank for 90% of the value a $300,000 house using only the house as collateral?
[/quote]

A $270,000 loan will cost you about $500 a week in repayments. The bank wants to know you have the income to service these repayments plus, rates, insurance, food, power, car running etc.

Your income can come from interest from your cash. You may get to include the income from shares but the banks tend to discount the face value of the shares by 50% when assessing your assets – so I am not sure how they would discount an assumed dividend yield.

The bank will probably want to see some sort of credit history – some ex-pats and new residents can find this a challenge.

$400k in cash at 7% is only going to give you $28,000 a year gross – this won’t be enough to service the loan.

A $60,000 income will give you borrowing power to around a $150,000 mortgage.

“Low Doc” mortgages are something new for those without a financial history and may be an alternative.

duncan macgregor
29-09-2006, 02:17 PM
quote:Originally posted by rmbbrave

My Dad bought a brand new house in Manurewa for $258,000 in 1995. QV estimates it's worth at $431,000 in 2006.

That's a gain of 4.8% over the last 12 years. My Dad hasn't added anything to it either. Just a fence and a few trees.

That's certainly not doubling every 10 years ie, 7% . Nor is it doubling every 7 years, ie 10%.

lets look at what your dad did again with a question at the end.
I will presume he placed a deposit on this house and was paying it off like paying rent.
1, do you think he could have saved $173,000 any other way with his deposit.
2 I think he would be hard pressed to acheive that.
His deposit earned him $17,300 pa over ten years the interest on the loan is rent he paid to the bank.
3, His house can be used to borrow money at a cheaper rate for business, or car, or even to play the market.
4, Remember he was paying a loan on a $258,000 house that gets easier to pay back as time goes on.
5, Do you think he made a mistake and risked it all on the share market. macdunk

minimoke
29-09-2006, 03:15 PM
quote:
1, do you think he could have saved $173,000 any other way with his deposit.


DM
If I may answer your first question – it is “yes”

Sorry to bore with numbers but heres how:

Back in 1995 it is likely a 25% deposit would have been needed to buy the home.

25% of $258k = $64,500. Put this away and get a 4% net return over 12 years gives you $37,000

Your 75% mortgage ($193,500) would cost $20,300 a year in interest at 11%. But RMB’s dad could have rented a house for say $200 back then. Had he rented he would have had $10,516 in cash extra a year.

By renting he would also have saved $1,000 in rates/ insurance a year.

$11,516 x 12 = $138,192 + $37,000 interest received + $64,500 initial cash = $239,700 equity

With your way he has $431,000 - $193,500 mortgage = $237,500 equity

minimoke
29-09-2006, 03:44 PM
To take the sample to 6 and try and compare results

House From To %pa
===== ==== ==== =====

RMB1 1995 2006 4.77%
RMB2 1996 2006 7.91%
Trak 1993 2006 7.39%
PT1 1990 2006 4.87%
PT2 1989 2006 5.13%
MM 1996 2006 4.5%*

* property has had absolutely no capital improvements, indeed maintenance in 30 years which is why I bought it!

duncan macgregor
29-09-2006, 06:40 PM
quote:Originally posted by minimoke

[quote]
1, do you think he could have saved $173,000 any other way with his deposit.


DM
If I may answer your first question – it is “yes”

Sorry to bore with numbers but heres how:

Back in 1995 it is likely a 25% deposit would have been needed to buy the home.

25% of $258k = $64,500. Put this away and get a 4% net return over 12 years gives you $37,000

Your 75% mortgage ($193,500) would cost $20,300 a year in interest at 11%. But RMB’s dad could have rented a house for say $200 back then. Had he rented he would have had $10,516 in cash extra a year.

By renting he would also have saved $1,000 in rates/ insurance a year.

$11,516 x 12 = $138,192 + $37,000 interest received + $64,500 initial cash = $239,700 equity

With your way he has $431,000 - $193,500 mortgage = $237,500 equity

[/quote
MINIMOKE, Fair enough, but the only hope the average guy has is to invest in property. If I had bought a house when i first arrived in NZ it would have cost me approx $8,000. Now if i were a total bum,that house would keep me in my old age with a reverse mortgage.
We are not talking about the astute investor who makes this or that, in business, shares or what ever, but JOE BLOW. NZEALAND has more JOE BLOWS than any country that i have ever visited. Give me an Indian kid off the streets of Bombay and i will show you a potential business person above your average every time. MACDUNK

rmbbrave
29-09-2006, 07:45 PM
Unfortunately that little Indian kid is unlikely to do business legally.

Chances are he'll end up a millionaire or in jail or both.

2 Indian members of my cricket team have just been arrested for fighting with a Japanese car dealer over a deal that went sour.

One of these blokes (the millionaire one) has already been arrested for sending stolen cars to Dubai.

rmbbrave
30-09-2006, 10:53 AM
Millions of dollars of drug lords' loot confiscated
30 September 2006
By EMILY WATT

The Government has seized $25 million of criminal property including jewellery, motorbikes and nearly $20 million of real estate as the confiscation of drug lords' loot picks up pace.


Police issued restraining orders on the property of a record 41 more criminals last year, up from 15 cases five years ago.

Property seized includes $4.8 million of farmland, $300,000 of motorbikes, $1.1 million of cars, $2.8 million of cash, $600,000 of jewellery, and one piece of art worth $14,300.

Under the Proceeds of Crime Act, the courts can seize assets amassed through criminal activity. The assets are then sold and the money goes to the Crown.

Last month, the Crown seized $1 million each from former Mr Asia drug boss Darryl Leigh Sorby and alleged anti-terror soldier Robert Charles de Bruin in Auckland High Court. The pair were convicted in May of importing and selling almost $12 million worth of ecstasy.

Sorby lost a property at Paparoa, in Northland, a yacht, a Subaru Legacy and $210,000 in cash. De Bruin will have to sell a property for which he paid more than $420,000. He also stands to lose $379,000 in cash. It is understood the pair are appealing against the order.

Despite a steady increase in the number of restraining orders each year, only $1 million was confiscated last year, and a further $2 million is waiting to be sold.

It usually takes 3½ years after issuing a restraining order till before property is confiscated because of delays waiting for a conviction and any appeals.

The Government is promising bold new powers for police to seize "tainted" property, and to lower the threshold for proving property was obtained as a result of criminal activity.

The new Criminal Proceeds (Recovery) Bill, approved for introduction to Parliament by the Cabinet this month, will let police seize property even if the offender is not convicted. The onus will be on the criminal to prove the property was legally obtained.

Detective Sergeant Darryl Brazier, of Tauranga, who has prosecuted several drug lords, said crooks were taking increasing pains to conceal their loot, such as registering a car in a partner's uncle's name.

"We're talking about very industrious people who know full well any display of wealth is going to draw attention of the authorities."

He said police worked hard to identify any assets during an investigation.

The Government is hoping the new law will be as successful as that in New South Wales, which has averaged 100 restraining orders a year in 13 years, and netted $103 million.

How is this property sold?

You might be able to get a bargin.

duncan macgregor
01-10-2006, 01:45 PM
Property is sold at public auction with anything like that. Its exactly tha same as a mortgagee sale, it gives the appearance of all square and above board. macdunk

rmbbrave
02-10-2006, 08:55 AM
Too many eggs in housing basket

Monday October 2, 2006
By Brian Fallow


New Zealanders seem to be in the Mark Twain camp when it comes to diversifying their assets.

"He said he believed in putting all his eggs in one basket, then watching it like a hawk," says Professor Richard Herring. "He went bankrupt. A wonderful writer but probably not a good investment adviser."

Herring is professor of international banking at the University of Pennsylvania's Wharton School and this year's Reserve Bank professorial fellow at Victoria University.

To his expert eye, New Zealand households' eggs are perilously concentrated in the housing basket.

"The vulnerability of the household sector is that they have a heavy concentration in housing, which is highly leveraged [debt-financed] and leveraged in such a way that they bear an enormous risk of rising interest rates. All those things are fixable."

Herring is not predicting a housing bust. Or ruling one out.

"Has the boom gone too far? We genuinely do not know. My interpretation of the evidence is that it is ambiguous. If you continue to have a stable interest rate scenario and a very robust economy with strong growth, it should all work well. But there are some indications that the household sector is pretty stretched.

"But even if we don't believe the housing boom has gone too far in New Zealand, we should still be worried about the household sector's portfolio concentration in housing. Because it really doesn't require a prior boom to cause a problem in house prices. It can happen for purely exogenous [external] reasons. But it would be worse if it had been preceded by a boom."

Between 1973 and 1980, as the country reeled from oil shocks and Britain's entry into the European Common Market, real house prices fell almost 40 per cent.

But because it was an era of rampant inflation, nominal house prices disguised the bust. They were more or less flat.

"As I talk to New Zealanders, it seems to me that the crisis that is in everybody's mind and memory is the stock market crash in 1987, not the housing slump that extended from the 1970s to the 1980s."

A study by the International Monetary Fund of 14 countries found housing slumps occurred once every 20 years on average. They are less frequent than sharemarket crashes but last twice as long and do twice as much damage to the economy.

Japan, Herring notes, has only recently emerged from a housing bust that began in 1990.

An OECD study found that house prices, relative to disposable incomes, were above their long-term averages in 11 of the 16 countries looked at.

New Zealand's multiple, where prices are 4.5 times incomes, rates as very high by international standards.

"A more relevant measure of affordability might be the cost of servicing debt, which of course depends on interest rates as well as prices. In most OECD countries the fall in interest rates has more than offset higher house prices. Australia and New Zealand are the key exceptions."

Paying the mortgage consumes a larger proportion of New Zealand household incomes than in most other countries.

"But it is not unprecedented. In the latter half of the 1980s New Zealanders managed to service even heavier debt."

High levels of mortgage debt, relative to incomes, and the fact that even fixed-rate mortgages are for what are by US standards very short terms, make New Zealand, with Denmark, the country most exposed to a rise in interest rates.

So why are New Zealanders so devoted to housing as an asset?

"Well, it has been very profitable. People looking back see nothing but increases in the nominal price of housing."

Since the economy was liberalised - and comparisons further back are problematic - the performance of the housing market has been remarkably strong, Herring says.

"Maybe not as strong as people think, because they tend not to evaluate these things with sufficient rigour, but nonetheless there is an impression that it is a very safe asset."

While people are v

Dean Letfus
03-10-2006, 07:59 AM
quote:This guy is dreaming if he thinks his 35 houses and flats (which would be worth about 35x300,000 = $10 million now) will be worth over $100 million when he dies in 40 years time
As I am "this guy" can I correct you. I said my portfolio would be worth 100 million minimum. I never said I wouldn't buy any more property. The fact is I have purchased another 1.4 million doallars worth of property since September when the article was published and will have purchased 100 million dollars worth of propery before i die. That property could be worth who knows how much due to growth over time.
And even if I don't I never have to work again ever, and neither will my kids, thanks to 2 years of property investing :-)

Halebop
03-10-2006, 09:03 AM
Good luck to you Dean. History and demographics tell us:

Your own appetite for debt and risk will reduce with age.

Residential property investors migrate to other forms of investment as they mature. The long term returns from residential even with favourable demographics just aren't that good.

Statistically over 40 years you will face 2 major property slumps* (Yes, even in New Zealand). Because the cause of the slumps will vary, we cannot know the outcome. But if it is something that impinges on cash flow (Like lower rents or higher interest rates or both) then a debt funded expansion is sure to cause some difficulties at some point.

Financial shocks, although rare, modify even your lenders appetite for risk. Post 1987 there were plenty of property investors with adequate cash flow who had property sold from under them for substantial losses by banks who didn't want the risk or who themselves were forced to correct their lending ratios.

To maintain that trajectory on house price performance we need to maintain the ratio of bums on seats (via Net Migration and Net Mortatility) and maintain the amount of capital available for lending (Itself fueled by Demographics) and the benign lending and interest rate scenarios that pool of capital has created (5% or even 0% house deposits?!). Another impact is Productivity. New Zealand has a poor record of productivity growth so will require a sea change in thinking to deliver here, particularly if labour pools shrink while the cost demands of an aging population grow. On the upside New Zealand is a relatively attractive place for immigrants and we have new government policy that seems to be encouraging a higher birth rate (the jury is still out on the sustainability of that one).

"The future belongs to those who believe in the beauty of their dreams". Those who "do" will reap the rewards so good luck to you, because most people don't make that effort, don't have the ambition or lack the willpower to even live within their means let alone accumulate capital. Just don't underestimate the power of being in the right place at the right time, there is a reverse side to that coin.

rmbbrave
03-10-2006, 11:40 AM
quote:Originally posted by Dean Letfus


quote:This guy is dreaming if he thinks his 35 houses and flats (which would be worth about 35x300,000 = $10 million now) will be worth over $100 million when he dies in 40 years time
As I am "this guy" can I correct you. I said my portfolio would be worth 100 million minimum. I never said I wouldn't buy any more property. The fact is I have purchased another 1.4 million doallars worth of property since September when the article was published and will have purchased 100 million dollars worth of propery before i die. That property could be worth who knows how much due to growth over time.
And even if I don't I never have to work again ever, and neither will my kids, thanks to 2 years of property investing :-)


Hello Dean,

Welcome to Sharetrader.

The Herald article quoted you as saying this:

"Auckland house prices double in value about every 7.8 years so it doesn't matter whether my loans are interest-only or principal and interest combined,"

...and concluded this...

He expects his portfolio to be worth $100 million to $200 million by the time he dies".

If what you say is true (house prices double in value about every 7.8 years) then your $10m (approx) worth of property will be worth $160m in 2038 when you will be aged 76 and hopefully still around.

2006.....$10m
2014.....$20m
2022.....$40m
2030.....$80m
2038.....$160m

In fact you won't need to buy any more property to get your $100m+ potfolio. The only thing you need to happen is for property to double about every 8 years.

In my opinion the crazy part is "the value of property will double about every 8 years". This simply will not happen.

In fact our small sample of six properties has shown it hasn't happened in the last 10-17 years either. Doubling every 8 years means an annual growth rate of about 10% and our little sample shows an average growth rate of 5.76%

RMB1 1995 2006 4.77%
RMB2 1996 2006 7.91%
Trak 1993 2006 7.39%
PT1 1990 2006 4.87%
PT2 1989 2006 5.13%
MM 1996 2006 4.5%

As you own a fair few houses please add some of them to our sample. You can get a free QV report until October 8 (1 per email address). Only houses that have had no substantial capital improvements. You might be suprised by the results.

duncan macgregor
03-10-2006, 01:27 PM
quote:Originally posted by Dean Letfus


quote:This guy is dreaming if he thinks his 35 houses and flats (which would be worth about 35x300,000 = $10 million now) will be worth over $100 million when he dies in 40 years time
As I am "this guy" can I correct you. I said my portfolio would be worth 100 million minimum. I never said I wouldn't buy any more property. The fact is I have purchased another 1.4 million doallars worth of property since September when the article was published and will have purchased 100 million dollars worth of propery before i die. That property could be worth who knows how much due to growth over time.
And even if I don't I never have to work again ever, and neither will my kids, thanks to 2 years of property investing :-)

Good on you DEAN, some of the people here are blind to how easy it is to make money in the real world. I look on property as increasing in value at an average of 10pc per annum. Lets give MBBRAVE another little sum to work out.
Next door is a seven acre paddock valued and bought 11 years ago at $65,000. It was rented to the farmer next door on the other side for grazing at whatever the rates cost. Upkeep is Zilch now has a valuation of $350,000. I find that capital gain on average is ten pc.
I think you will find DEAN that even when you become rich the same people will tell you that it was only luck.
I would like to ask a question and that is after your initial start do you have any of your own real money involved?. Most property investors take their own money out and play with the banks money.
macdunk

rmbbrave
03-10-2006, 03:59 PM
"I look on property as increasing in value at an average of 10pc per annum."

All the way forward to the year man first lands on the Moon, with no leverage, I suppose Dunk?


From our small sample above the average is 5.74% over the past 10-17 years, when the NZ population has been growing at 1% a year.

Why don't you do a valuation at QV on a HOUSE with no substantial capital improvements that you know and give us a sample of 7.

Farmland on the edge of cities bought a while ago can show massive gains. I know a plumber on the edge of Hamilton who bought a small farm 25 years ago and has been selling bits of it to developers. He has $5m in the bank and still a fair bit left.

But we can't all go buying farmland on the edge of cities can we? Also you need income to pay the bank back for the loan. So it isn't an example that is relevant for most people. Most people buy houses in cities.

10% per year gain is about what you get on the sharemarket Duncan without leverage so there is nothing amazing about your neighbour's paddock.

srotherh
03-10-2006, 07:09 PM
Dean
My take on your situation is
Can you weather any down turn in the market,(rental or valuation) or increase (interest rates) with the amount of debt you are carrying.
Lack of equity is liable to be your stumbling block

You need to be able to service your debt in all markets or your properties will be taken off you.(+ anything else you own)

Dont take this as negative comment
It is a fundamental fact of life

Good luck

Dean Letfus
03-10-2006, 10:14 PM
HI srotherh. My equity in a fire sale of my properties would see me with over 2 million in the bank so can I weather any storm? absolutely.
In relation to the capital growth rates I'm happy to supply some samples. NOTE: I only buy property not requiring work so I have done no capital improvements on any of the following.

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

I could go on. My worst performing property is achieving way over 10% PA increase. This 5.7% growth stuff is only true if you don't know what you are doing. Buy well in the right areas and 10% per annum is conservative.
Get a good education in property and nothing beats it IMHO!!

rmbbrave
04-10-2006, 12:18 AM
Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

Stranger_Danger
04-10-2006, 04:46 AM
Hi Dean,

Firstly, well done. Secondly, and not wanting to be a cynic, but the figures you quoted were

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

Note how the numbers get steadily bigger?

I suggest you read Bob Jones's latest book, in particular the hilarious (and true) chapter "Why Developers Go Broke".

In it he talks about the human nature element, in this case about development - ie, if you're successful at a lower level, it would deny human nature to persevere at that level, so they keep doing bigger and bigger deals, all debt funded. He calls it an addiction.

Whilst I realise you're not a developer, I hope the same forces are not at play - esp given that you're not adding any value to the buildings (as you say) - you're basically just leveraging up increasingly larger purchases.

Could your ego adjust to different market conditions? Could your finances?

minimoke
04-10-2006, 08:09 AM
I am only vaguely familiar with Deans story having just glanced at it somewhere a while ago. Hence I’m unqualified to comment on the great figures shown with the purchases.

If I use my QV report I find that over time the property has increased at an average rate of 4.5% over 10 years. However in the past two years it has increased at a rate of 14.5%.

So this begs the question. Is it time in the market or timing the market that counts?

duncan macgregor
04-10-2006, 08:30 AM
quote:Originally posted by rmbbrave

Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

RMBBRAVE, for petes sake get with it.
1, most people that buy and sell houses have an understanding with a real estate agent.
2, The agent can look up any house in the street tell you the valuation when it was sold and at what price.
3,The property investor wants the market to rise and fall in price the more extreme the better.
4,I gave you in the past 10pc capital gain with the banks money which is the low end of the scale if you buy and sell at the right time.
5, After you get your first property self funding you refinance to get your initial deposit back its all the banks money.
6, I cant imagine anyone with the brain to have a property portfolio to give out the address of a property for all and sundry to gawk at.
macdunk

minimoke
04-10-2006, 09:43 AM
Just a couple of thoughts.

If Dean has over $7m in property assets and has traded over $14m in property over a couple of years I would imagine he would be in IRD’s radar for Capital Gains Tax as a trader. So the RV values need to be tempered by a CGT contingency on the sale of the property.

There are also inherent risks with affordability ratios. It appears to be generally accepted that housing is getting less affordable with income / property value ratios increasing. While it may be well and good to see one’s property increasing at fantastic rates it only has two real values. One is the value which can be used to leverage borrowing; the other is the value on sale. If your property increases in value too much there is a risk that the pool of available purchasers will shrink; leaving you with a property that is difficult to sell. A $1.5m property might be great for leveraging loans but the pool of available buyers is significantly smaller than the pool of buyers in say the $500,000 value range. Generally that may not be a problem if you can afford the outgoings but if you have done your sums on a 10% mortgage interest rate but rates increase significantly (like to 20+% in the late 1980’s) then the equations don’t look so great.

Halebop
04-10-2006, 09:55 AM
A sample from a 2 year bull market is not valid to anyone (except maybe the real estate institute). Dean in 2004 and 2005 I more than doubled my money in equities each year without any debt. While my management of risk and selection criteria partially got me there by avoiding too many duds, the main contributor was that I hooked my boat to a rising tide. I don't mistake a rising tide for expertise or imagine I can extrapolate the rate of rise.

In a fire sale, any residual equity is an illusion. It 'aint called a fire sale for nothing. It burns your money first.

rmbbrave
04-10-2006, 11:11 PM
quote:Originally posted by duncan macgregor


quote:Originally posted by rmbbrave

Wow Dean that was quick!

Five valuations reports from QV.

As they only allow one valuation report per email address I assume you used 5 different email addresses.

I only have 2 email addresses so I only got 2 reports.

I used to walk down Scott Road in Papakura everyday on my way to school (Papakura High School) and it's only 2 street away from where I spent the first 20 years of my life.

I might even know the house.

What number Scott Road did you buy?

RMBBRAVE, for petes sake get with it.
1, most people that buy and sell houses have an understanding with a real estate agent.
2, The agent can look up any house in the street tell you the valuation when it was sold and at what price.
3,The property investor wants the market to rise and fall in price the more extreme the better.
4,I gave you in the past 10pc capital gain with the banks money which is the low end of the scale if you buy and sell at the right time.
5, After you get your first property self funding you refinance to get your initial deposit back its all the banks money.
6, I cant imagine anyone with the brain to have a property portfolio to give out the address of a property for all and sundry to gawk at.
macdunk


Duncan,

You've lost it mate. A house will suffer no harm by people "gawking" at it! (not that anyone will waste time going to Scott Road in Papakura to gawk at Dean's house)

You have consistantly tried to compare like with unlike on this thread.

I asked for people to use QV while it was free to get valuation reports on houses with no substantial capital improvements.

You have raved on about:

1. leveraged property,
2. undeveloped land, ie your neighbours' paddock,
3. Dean Leftus's examples which use a RV and not the "Estimated market value" used by QV.

Unless you are willing to do a valuation report with QV on a house you know that has had no substantial improvements don't waste my time with any more of your irrelevant examples.

Halebop
05-10-2006, 12:50 AM
quote:Originally posted by broke

One can beat this average using leverage...

I can beat market indices using leverage as well. With CFDs I can leverage myself to 99% depending on the contract. The trick is leverage can also beat me. Apparently this never happens in property scenarios.


quote:Originally posted by broke

but only by...accumulating [u]investment properties</u> with the expansion

I think the key here is the term "with the expansion". What happens to the math if I change "with" to "without"? Worse than that, what if I leave "with" as is and change "expansion" to "contraction"?


quote:Originally posted by broke

and becoming free-hold before it ends.

I'd let the "average owner" off with the error but not the seasoned property investor. Freehold relates to ownership of the land title and not the investor's debt status. The statement should be "Debt free before it ends".

Halebop
05-10-2006, 08:59 AM
quote:Originally posted by broke

Thanks for the terminology but as far as I am concerned, unless there is no debt, the bank owns the house - hence my saying "rental". Yes and it is thanks to the average owner's delusion that they are creating wealth that we may enjoy the cream of exuberance until they choose to inevitably slave away to absorb that exuberance.

Rental and freehold have nothing to do with each other. I can have a mortgage or no mortgage and the property can be either freehold or leasehold simultaneously. I was correcting the use of the term freehold, which was applied incorrectly to describe the property as unencumbered by debt. Freehold has nothing to do with debt obligation although a substantial portion of those unsophisticated "average owners" would believe otherwise. In New Zealand when a home owner borrows money from the bank they own the land title and improvements and the bank uses the land title and improvements as security. The cost of that security is interest on and fees associated with the mortgage. The owner does not pay rental, ground rent or endure the loss of ownership perogatives that would be associated with the nearest antonym of leasehold.

minimoke
05-10-2006, 10:40 AM
We often hear how property values keep increasing XX% a year but little cognizance seems to be taken of the cost of maintaining your asset – which is a cost that doesn’t have to be borne in other investments such as a share portfolio.

In an article yesterday it appears that we need to be putting in $5,000 a year to maintain our houses – so this figure needs to come off any increases in capital gain.

If the average sale price in March 2006 is $324,000 you would expect to see values rising by 1.55% just to cover the maintenance costs.



New Zealand houses 'need serious fix-up'
New Zealand houses are often built in such a way they will end up damp, and most homeowners know they need to fix up their houses but usually do not, a building research study has found.
Of the 565 owner-occupied houses inspected by researchers from the Building Research Association of New Zealand (Branz), each house needed an average of $3700 worth of repairs.
When interviewed, homeowners said they spent an average of less than $1300 a year home maintenance, which researchers said was not enough to maintain the houses.
This was, however, an improvement on previous years.
In 1999, houses needed about $4900 worth of serious repairs, and researchers said the average overall condition of houses was better than in previous surveys.
The survey found in 58 per cent of the houses, the water cylinder had no earthquake restraints.
Dampness was a major problem – caused by poor ventilation, and improper cladding, and 43 per cent had poor or seriously inadequate underfloor ventilation.
This was a major problem, which could lead to timber decay, invasion by fungus and borer and dampness, Branz materials manager Mark Jones wrote in the October edition of the association's magazine, Build.
"Around 40 litres of water evaporates from the soil under an average house every day.
"In a number of houses inspected in the survey, water was flowing under the house from driveways, paths and lawns," he said.
Many houses also had poor kitchen and bathroom ventilation, and cladding used on the outside of houses on almost half the houses was too close to the ground.
"Increasingly, priority seems to be given to linking inside and outside at the expense of good building practice, and the newest houses seem to be the biggest offenders," Mr Jones said.
Also, 78 per cent of the deck barriers on houses – and most houses had decks – did not comply with building requirements, being too low, or having gaps that were too big.

Dean Letfus
06-10-2006, 06:50 AM
Hi Stanger. I'm not leveraging up at all on my properties. I trade properties as well so my rules are very strict. I buy property at minimum of 15% below valuation and put in 20% deposit. I use profits from trading to fund the deposits. So my portfolio is currently geared at 63%. No fear of getting hurt in a slump. And my portfolio pays me cash every week in addition to the capital growth and huge tax benefits. Only a war would affect me and that would affect us all!! Gotta love property!!

minimoke
06-10-2006, 07:37 AM
Dean
Might I suggest that you are actually purchasing at the real valuation. That being the value a willing buyer and a willing seller agree on. Indeed, it is the sale price that QVNZ will register rather than your paper valuation.

Stranger_Danger
06-10-2006, 01:16 PM
Hi Dean,

I have to admire your enthusiasm, but frankly it kind of scares me.

The main problem I have with your approach is it all sounds so incredibly easy and indeed, the only risk you seem to forsee is war.

I've read through your website and the only comments I have are

(a) Your philosophy, indeed your website name, is basically "massive action". In my experience, massive action is not the way to good investment returns (in any asset class).

Personally, I prefer a risk averse "slow but decisive action" approach, one based on trying to look at the future rather than the present, or, even worse, the recent past.

Whilst running around doing a deal a day sounds terrific fun, the more "action" I tend to have in my life, the less money I make. Less is often more.

(b) From reading your website, you don't make improvements to the properties, tax minimisation is a key part of your strategy and you use property managers to look after the properties.

In other words, the bank provides most of the money, the taxman chips in, you don't improve the properties, and someone else looks after them.

In this context, I get why you're so enthusiastic!

The flipside as I see it is that you are literally "riding the market".

In good times, your strategy of "maximum action" makes sense. In a different market, the cynic in me says you have a whole lot of unmaintained buildings looked after by apathetic third parties that you really have no intrinsic interest in (the buildings themselves, not the returns).

If property prices are not going up, do you REALLY care that Mr Jones has a major problem with his rented house? With the middlemen involved, do you even know?

The only thing as I see it that you can bring to the table is building selection and negotiating skill and in this market, winning that war is the easy part - just pay more.

In a different market, this strategy will probably work differently, regardless of what you ultimately record on your spreadsheet (which, as you point out, changes based on the tax outcome you want. Hmmm)

Anyways, don't mean to be over-critical. I suspect we just have very different styles, and there is more than one road to the pot of gold so best of luck.

rmbbrave
07-10-2006, 01:36 PM
Is David McEwen talking about Dean?

Property is not immune to risk
03 October 2006

By DAVID MCEWEN
Many New Zealanders are terrible investors because they are poor judges of risk. My theory is that many of our ancestors must have been hopelessly optimistic to sail halfway around the world to try and carve out a life in a strange and hostile land.


As a result, it is part of our genetic heritage to focus on the upside and virtually ignore the possibility that something could go wrong – the "she'll be right" attitude.

Even acknowledging this, a recent comment in the newspaper stunned me.

An investor proudly revealed he owned 14 investment properties, mostly on interest-only mortgages. He reasoned that property in New Zealand doubles every 7.8 years and he was looking forward to cashing in on the capital gains one day.

He is right in that house prices have doubled frequently in the past 150 years, but it is always a danger to expect history to repeat precisely. It is even more dangerous to expect the pattern of gains to be repeated after one of the most rapid four-year periods of capital gains this market has seen.

The powerful concept of reversion has shown in the past that once every 10 years, booms are almost always followed by protracted periods of under-performance, or short and sharp crashes to bring assets in line.

Thanks to a wave of easy capital, loose lending practices and immigration, house prices have gone up far faster than usual in the past several years. Logic would dictate that the next doubling therefore will take considerably longer than the average.

Another long-term trend is that property generally goes up by roughly the rate of inflation, though it stays slightly ahead. Sometimes it goes up faster, at other times slower. Having risen considerably faster than inflation for several years, again it is distinctly possible property will not keep up for some time.

US economist Gary Shilling notices the same trends in his country. The median price of US houses is 35 per cent above its usual link to the inflation rate, making housing vulnerable to price declines at least that big.

He goes as far as forecasting that a gradual slowdown in house prices will begin before Christmas, then accelerate to produce average price declines of 25 per cent by the first quarter of 2008, followed by a slow recovery.

"Such a nosedive in prices will wipe out the thinly capitalised speculators, sub prime borrowers and the low ends of sub prime debt as well as assorted other lenders, mortgage bankers and home builders," he warns.

"Those folks will get the bulk of the media attention, but they probably aren't numerous enough or collectively important enough financially to do serious damage to the US economy."

Instead, most people who still have jobs will soldier on, servicing hefty mortgages on properties that in many cases are worth less than the amount they have borrowed.

"The 25 per cent or greater decline in house prices I foresee will sire consumer spending retrenchment that almost guarantees a major recession," he warns.

A decline in consumer spending could also lead to deflation, lower interest rates and lower shares.

Mr Shilling may be wrong and we may be in for a "soft landing", in New Zealand at least. But we recommend property investors make sure their property investments are cashflow positive and that in general, New Zealanders look at retiring debt.

http://www.stuff.co.nz/stuff/0,2106,3817115a1865,00.html

rmbbrave
07-10-2006, 06:24 PM
Has City of Sails run out of puff?

Saturday October 7, 2006
By James Ihaka and Wayne Thompson


An Auckland business leader wants a change to the city's "City of Sails" moniker, one of New Zealand's most recognisable slogans.

Chamber of Commerce chief executive Michael Barnett said the term - which is about 25 years old - "no longer reflects the region or its people".

Instead, he said the region needed "a consistent and compelling regional brand identity that can be used for tourism bodies, local and regional councils, economic development agencies, business and education institutes".

But the Weekend Herald could not find any great groundswell of support for change.

Tourism Auckland chief executive Graeme Osborne said he was unaware of any significant debate about the term, which appears on the organisation's website and letterheads.

Former Auckland Mayor John Banks said he hadn't spent much time thinking about an alternative name.

"But I do think you would be hard pushed to find something better than 'The City of Sails' and I would be appalled if some kind of politically correct name was promoted," he said.

Manukau City Mayor Sir Barry Curtis was a little more receptive to a slogan change. He said he had always thought of Auckland as the "City of Mortgagee Sales" instead of the well-worn "City of Sails".

minimoke
09-10-2006, 08:35 AM
quote:Originally posted by rmbbrave

Is David McEwen talking about Dean?

Property is not immune to risk


Interesting article. Couple of other points.

Property may double in value every 10 years or so over 150 years – trouble is no one will live that long enough to see that average growth – meaning at some point someone will ride the highs (eg Dean at the moment) and someone else will suffer the lows (the people Dean is buying off).

If property increases at slightly higher than the rate of inflation, inflation has been trending up since the beginning of 2003 prior to when Dean started investing. At 4% it is now at the highest rate since 1991. But nowhere near as high as in the late 70’s / early 80’s when it averaged 13% or as low as in the 20’s/ 30’s when it averaged -3%.

And why do rises get followed by slumps. As inflation rises so does interest rates. At the beginning of 2003 mortgage rates were 7.83 and they are now 9.55%. A couple of percent increase may not seem much but if you are fully geared a 22% increase in your interest bill will start to squeeze some pockets, leading to some of the bargains coming up that Dean may be alluding to.

patsy
09-10-2006, 06:53 PM
quote:Originally posted by minimoke


As inflation rises so does interest rates. At the beginning of 2003 mortgage rates were 7.83 and they are now 9.55%. A couple of percent increase may not seem much but if you are fully geared a 22% increase in your interest bill will start to squeeze some pockets, leading to some of the bargains coming up that Dean may be alluding to.



The important issue is that as inflation goes up, debt is vapourised. It makes sense to borrow as much as possible in a high inflationary environment, like NZ's currently (and with government policies that are definetely inflationary as well) somewhat regardless of interest rates.

JBmurc
10-10-2006, 12:33 PM
And why do rises get followed by slumps. As inflation rises so does interest rates. At the beginning of 2003 mortgage rates were 7.83 and they are now 9.55%. A couple of percent increase may not seem much but if you are fully geared a 22% increase in your interest bill will start to squeeze some pockets, leading to some of the bargains coming up that Dean may be alluding to.

I see you can get a 7.5% 5year fixed rate with ASB ;)

Dean Letfus
13-10-2006, 09:52 PM
quote:I've read through your website and the only comments I have are

(a) Your philosophy, indeed your website name, is basically "massive action". In my experience, massive action is not the way to good investment returns (in any asset class).
Sorry stranger but I can't stop laughing long enough at the above to answer properly. Taking consostent action IS the way to succeed. If this hasn't happened 'in your experience" then you were not adequately educated or didn't really take enough action.

An earlier post by another also stated that I might be "in IRD's radar for CGT". I pay plenty of tax on my trading. Any professional property trader who was not paying tax deserves to be in jail.

Dean Letfus
13-10-2006, 10:07 PM
As I'm not familiar with this chat room I don't have a good feel for it's members yet but many of the posts indicate a lot of intellectualising (spelling?). But are you guys achieving your goals? Are you living the life of your dreams or at least taking some action to head towards them. I can tell you that property has been very good to me. It is not rocket science. With a decent education and hard work it is not difficult to retire in 3 to 5 years or even less. Don't over analyse yourselves into doing nothing

trackers
14-10-2006, 08:50 AM
quote:Originally posted by Dean Letfus

many of teh posts indicate a lot of intellectualising... Don't over analyse yourselves into doing nothing


Always one to give credit where its due, and I think you pretty much nailed it there (in regards to myself anyway).

Stranger_Danger
14-10-2006, 04:12 PM
quote:Originally posted by Dean Letfus

As I'm not familiar with this chat room I don't have a good feel for it's members yet but many of the posts indicate a lot of intellectualising (spelling?). But are you guys achieving your goals? Are you living the life of your dreams or at least taking some action to head towards them. I can tell you that property has been very good to me. It is not rocket science. With a decent education and hard work it is not difficult to retire in 3 to 5 years or even less. Don't over analyse yourselves into doing nothing


Hi again Dean,

Finally we are on the same page about something. I would rate over-analysis as being even more dangerous than "massive action". As you are suggesting, at least your way something gets done!

In answer to your question, I could retire tomorrow. The question would be, why? As for achieving my goals, I'll never achieve them as I'm constantly changing the targets and making them bigger. To me, its all a big fun game, but, only if you don't go broke. Thus my reluctance when it comes to debt fuelled "massive action".

Don't get me wrong, honestly, your enthusiasm is great to see, you're plainly successful, and that is great.

My only concern is that you're a fairly new entrant into a red hot asset class and you seem to show absolutely no fear.

I'm all for achieving goals and living dreams, but, where I suspect we differ is I get interested in an asset when things have gone wrong (or better yet, other things have gone wrong and a similar asset gets marked down) whereas you seem interested in a single type of asset only, and appear absolutely convinced nothing can ever go wrong.

Also, your rebuttal to the comments of others is that they are "intellectualising". This is similar to the late 90's where anyone who didn't buy into the dot com swindle "didn't understand" or was "out of touch".

When making money a certain way seems so easy (for a while), a certain sign that things have gone a bit far is any non-believers "don't understand" or are "intellectualising".

I hope my healthy cynicism is proved wrong and you continue to increase your wealth exponentially.

History is on my side, however.

rmbbrave
22-10-2006, 04:14 PM
There are 3 8000 + Square metre sections near Taupo on sale for a $1 reserve on Trade Me. The RV's are between $335,000 & $480,000.

The vendor says this...

"Selling on behalf, my developer friend has overstretched himself. The bank manager is calling, his wifes about to divorce him, hes stressed & looks like death! He needs a quick, cash, unconditional sale."

Let's see how much they're really "worth".

http://www.trademe.co.nz/Trade-Me-Property/Sections-for-sale/auction-74443374.htm

rmbbrave
03-11-2006, 02:29 PM
2 out of the 3 properties sold for about half of their RVs. The third was (illegally) withdrawn before the end of the auction.

1, The Rateable value / Govt. valuation was $480,000 and it sold for $220,800.

2, The Rateable value / Govt. valuation was $350,000 and it sold for $210,200.

duncan macgregor
03-11-2006, 07:11 PM
quote:Originally posted by Dean Letfus

As I'm not familiar with this chat room I don't have a good feel for it's members yet but many of the posts indicate a lot of intellectualising (spelling?). But are you guys achieving your goals? Are you living the life of your dreams or at least taking some action to head towards them. I can tell you that property has been very good to me. It is not rocket science. With a decent education and hard work it is not difficult to retire in 3 to 5 years or even less. Don't over analyse yourselves into doing nothing
GOOD on you DEAN for letting some of the losers know what really happens in the property business. Some work overseas but insist in being so right about what really goes on. Some of the losers i suspect, have never owned their first house, but feel justified in condemning some one that owns a few. I have never met anyone that owns a few properties short of a quid. End of the story. MACDUNK

rmbbrave
07-11-2006, 12:01 AM
quote:Originally posted by duncan macgregor
I have never met anyone that owns a few properties short of a quid. End of the story. MACDUNK


Well you can't argue with that!

It's a truism Yogi Berra himself would have been proud of.

You might as well have said...

I have never met anyone that owns a truck full of money that's short of a quid.


By YOGI

This is like deja vu all over again.
A nickel isn't worth a dime today.
I always thought that record would stand until it was broken.

rmbbrave
07-11-2006, 10:55 AM
Japanese women fertile ground for a new line on sex

Tuesday November 7, 2006
By William Pesek


If you think mobile phones already rule your life, consider NTT DoCoMo's latest offering: One that tells you to rush home and have sex.

Yes, Japan's biggest mobile-phone operator is going where presumably none has gone before: The bedroom. A service it is providing rings to tell would-be mothers when they are at the most fertile point in their monthly reproductive cycle and that it's time to procreate.

Lest you think it amounts to inappropriate or crass marketing, Japan is likely to see more such innovations.

The population last year shrank for the first time since World War II, a period when Japan lost more than two million people. Excluding the war years, the population has not fallen since Japan began compiling data in 1899. The birthrate in 2005 fell to a record 1.25 babies per woman, down from 1.29 in 2004.

The Government says a birthrate of 2.1 is needed to maintain today's population of 127 million.

The trend has far-reaching economic consequences. Demographics rarely fit easily into investment decisions, yet comments this year by Jim Rogers, who co-founded the Quantum Hedge Fund with George Soros in 1970, explain why investors should care. "If the present birthrate, which is the lowest in the major developed countries, continues, there will be no Japanese," Rogers said. "Who will pay the enormous debt?"

It's an important question that explains why Rogers said in January he wouldn't be increasing his Japanese stock holdings.

With fewer people, it's harder for Japan to pay a national debt that the OECD estimates at 170 per cent of annual gross domestic product.

It's difficult to imagine another nation in which a mobile-phone fertility service tracking ovulation trends would be offered. Surely, its mere existence would seem to underscore how much attention the birthrate is getting in the world's No 2 economy. Yet not where it matters most: The Government.

Yes, Japan is back. The economy is growing faster than 2 per cent, banks are sound, corporate balance sheets are stronger and companies are hiring again. And as Shinzo Abe, prime minister since September, is focusing on the reduction of public debt.

Strangely, the connection between debt and demographics is scarcely under consideration. Japan's problem is far more acute than just the estimated US$9 trillion ($13.45 billion) of public debt outstanding.

As the number of working people shrinks while the number dependent on welfare and social services grows as the population ages, Japan has a fiscal timebomb on its hands. Fewer people mean a smaller workforce and lower tax revenue, making it harder to reduce Japan's debt.

Japan has two options: Increased immigration or more babies.

It would be best if Japan did both, yet a cultural aversion to opening the floodgates to foreigners puts the onus on churning out more kids. It's easier said than done.

Persuading people to procreate is a tall task for governments, not to mention an awkward one. Singapore created a government-sponsored dating programme that has drummed up more ridicule than births. Australian Treasurer Peter Costello raised eyebrows in 2004 urging citizens to have "one for mum, one for dad and one for the country".

Governments have no business telling citizens to have babies. What they should do is create economic environments that help those who want more children to have them.

It's an especially touchy subject in Japan, where public officials want to avoid echoing wartime nationalist calls to increase the birthrate. Yet efforts have so far been too timid and unsuccessful to keep the population stable.

In late 2004, an official "white paper" concluded that if present trends continue, the population will be 100 million by 2050.

There's one hitch: It's not clear how much sex the Japanese are having. The most recent annual Durex survey - the 2005 study involved more than 317,000 people worldwide - found that the Japanese have the least

rmbbrave
22-11-2006, 09:55 AM
Migrants give economy a second wind
22 November 2006
By SUE ALLEN

The housing market and retailers can look forward to a second wind underpinned by a jump in the number of new migrants planning to live here.


Statistics New Zealand show permanent and long-term arrivals were 2400 ahead of departures in October, compared with 1800 in October 2005. For the October 2006 year, the net migration gain was 13,800, up from 6000 in the October 2005 year.

Net figures deduct the number of people arriving from the number of people leaving.

The figures are tracking slightly ahead of the Reserve Bank's forecast of about 12,000 a year.

Citigroup senior economist Annette Beacher said the migration figures were key to the strength of the housing market.

Taking the strong historic link between increased inward migration and building consents, Ms Beacher said it was "hard to believe" consensus between economists was for a collapse in the housing market.

Any attempt by the Reserve Bank to slow down the economy or the housing market by further raising the official cash rate - which guides mortgage lending rates - would just push the New Zealand dollar higher and hurt exporters.

AdvertisementAdvertisementNew Zealand has some of the highest interest rates in the world, making it attractive for people to invest here.

A further increase would make investing here more appealing and push the New Zealand dollar higher.

BNZ chief economist Tony Alexander said that the above average number of new arrivals would add a few more workers to the workforce, relieving some pressure on wages.

But it would also mean more people looking for houses, which would push up house prices and increase the amount spent in shops.

Retail sales figures for the three months to September showed sales were up a stronger-than-expected 1 per cent, or $160 million, in the September quarter compared with the previous three months.

The figure was ahead of the 0.8 per cent economists predicted.

Mr Alexander said the migration figures would worry the Reserve Bank.

The central bank raised interest rates last year to cool the economy and keep a lid on inflation.

It has a target to keep inflation between 1 per cent to 3 per cent.

Inflation was up 3.5 per cent in the year to the end of September.

The housing market is showing signs of increased activity with the arrival of the busy spring and summer selling season.

Real Estate Institute figures showed house prices accelerated again, rising 9.83 per cent in the year to October, up from 7.93 per cent in the year to September.

rmbbrave
02-12-2006, 12:44 AM
"our houses are less affordable. New Zealand's house prices are about eight times the average disposable income, while in Australia they are six times, and five to six times in the US."

http://www.nzherald.co.nz/section/story.cfm?c_id=3&ObjectID=10413381

It is worth keeping half an eye on Aussie demographics, facts and figure to see which way house prices in NZ will go.

A rational NZer would shift to Oz where the salaries are higher, the houses cheaper and the weather warmer.

However human beings are far from rational - just like NZ house prices.

Jess9
03-12-2006, 01:07 PM
But that still has an interest cost, and if used for consumption, then cashflow is only reduced...then what if "da bank" tightens its residential lending criteria, and maybe the house valuation falls?

Bottom line residential has over shot fair value in NZ. As noted above, look at the US (they started this last boom first, led by AUS, then us...the US are well into the slump now, AUS are entering, so where is NZ likely to go?

tricha
03-12-2006, 02:00 PM
Jess9 - Bottom line residential has over shot fair value in NZ. As noted above, look at the US (they started this last boom first, led by AUS, then us...the US are well into the slump now, AUS are entering, so where is NZ likely to go?

The answer [?][?][?]- Same as, for sale signs are multiplying - The heart of the U.S. economic expansion has been the housing bubble, and it has burst. Much hot air has been created in the fervent hope of finding a bottom in the collapsing U.S. housing sector. Despite the headline number on October sales of existing home, the underlying data produced little that suggested a bottom is near. Sales of single family homes, like the one you live in, did improve in October to the second lowest level in a year. These sales are off 11% from a year ago. Condo sales are now down 15% from a year ago. Identifiable condo inventory for sale is nine months of supply. Prices of single family homes are down 3% from a year ago after rising $200 in October. Condo prices are off 5% from a year ago, and are at the lowest level in a year. In some communities, home sales are off 50% from a year ago. The economic repercussions of this real slide have yet to show in the numbers, but with foreclosures in the U.S. in a decidedly rising trend that will happen.

rmbbrave
13-01-2007, 04:05 PM
http://www.nzherald.co.nz/section/12/story.cfm?c_id=12&objectid=10417812


There is nothing optional about old age, nor about many of the expenses, burdens and other liabilities it may bring.

A common mantra these days is "I'll never retire - I enjoy my work too much". That only serves, however, until some medical problem or other infirmity renders one unable to do the job as it must be done.

"Retirees of the present and future, on average, will be wealthier and healthier" than any past generation, notes a commentary in In the Vanguard, a newsletter published by the mutual fund manager Vanguard Group.

Good news, that - but tempered by a realisation that longer-lived retirees may have to make their money and other resources work for decades, not just a few "golden" years.

As healthier people live longer, they perversely may need more and more expensive medical care than ever. Inflation, compounding year after year, will have a greater chance to eat away at their money's purchasing power.

From a big picture, "macro", point of view, this is already shaping up as one of the major economic stories of the 21st century.

In the US, the irresistible force of 76 million baby boomers meets the immovable object of old age - starting, oh, any minute now. A similar process has been set in motion in other developed countries.

American boomers are accustomed to using their political and financial clout to reshape the system according to their needs and wishes. We want education, they said in the 1960s, and it was so. We want jobs, they said in the 1970s, and society accommodated them.

Imagine the fuss they will create as they check out the available choices in senior assisted living, geriatric medicine and such. You think healthcare is in crisis now? Just wait.

Faced with an approaching melee, social institutions have effectively ducked for cover. Reform Social Security? Oh, let's not do that yet. Shore up the old pension system? While we grapple with that, let's transfer as much of the burden as we can to private pensions. "More than ever, you are responsible for funding your own retirement," says discount broker Charles Schwab & Co.

It's a scary job, trying to meet the liabilities of an unknowable future with assets that must be gathered far in advance.

By the time you find out for sure whether your preparation has been adequate to the task, it's usually too late to do much to fix it.

rmbbrave
14-01-2007, 02:28 PM
http://www.stuff.co.nz/3928206a13.html

Property buyers in New Zealand face lots of barriers, not least inadequate information. There seems to be far less freely available data on the property market here than in cities such as Sydney or London. You can find out for nothing that in Bondi Beach, houses sell at a median price of just over $A1m, that Balmain house prices dropped by nearly 5% in 2005. You can find out auction clearance rates, days on the market, levels of discounting. But as with most markets here, detailed house price information either costs or is closely guarded by those in the business, or is non-existent. Have you ever asked a real estate firm what a property sold for? We've never found them joyously happy to tell us. Imagine if people got wise and bid less? The horror. Far too much is anecdotal. One recent ploy we hate is the "upwards of" indicative price. A few weeks ago, we went to see a plain villa on a subdivided section in the poor part of an average suburb, hemmed in on both sides by rights of way. The ad said "upwards of $500,000". I thought again that, gosh, my toenails need a trim.

Another big jip is the oft-quoted median price rise. The median price is the price midway between the least expensive and most expensive home sold in an area during a given period of time. It falls when more people are buying cheaper homes than buying dearer homes, and rises when the opposite happens. It's a very rough average of price changes, as it measures only houses that have sold, so a 25% growth figure doesn't mean your house has risen in price by 25%, unless all the houses in your suburb are identical. And an increase in the number of houses sold cannot push up the average price, unless they are mostly more expensive houses.

The recent property boom has been fuelled by the absence of a capital gains tax on all investment properties, stamp duty or perhaps a mortgage interest levy. The Independent Financial Review argued if the IRD simply publicised and enforced existing rules on investment properties (tax might be due, even if you aren't in the business) it would have had an impact on the market. A change is too late for this cycle, but only structural change will make a difference in the next one.

What do I think? We've been talking slump for two years, but I do think one is coming, and might have started. After rises as high as NZ, house price inflation in Australia, the UK and US has fallen to near zero. The Sydney Morning Herald noted prices were in their third year of staying pancake flat, but the flashest pads, costing $10m-$20m, were still selling. Britain's south-east picked up again last year, but analysts say the market is dangerously stretched. If prices here fall, some value may return to the market. It's long been absent. Either way, we'll be out there, muddying our shoes, fingering the handouts, smiling through gritted teeth.

rmbbrave
21-01-2007, 12:14 PM
No vacancy for renters

By Nicola Shepheard
Prospective tenants are bribing property managers and landlords with flowers, gifts and free labour in Auckland's super-heated rental market.

January and February have always been a landlord's market as students and professionals return to Auckland from summer breaks, but there are signs the competition is fiercer than ever in sought-after areas.

Director of rental agency Hot Property, Phillipa Gordon, said this month has been far busier than last January. She received 10 applications each for two $650 four-bedroom properties in central Auckland last week.

Andrew King of Auckland Property Investors' Association agreed it was "relatively easy" to find tenants, and said he had no trouble filling a house in December, which is usually the slowest month.

Another indicator is Trade Me, which carries rental listings for agents as well as private landlords. A Grey Lynn three-bedroom townhouse listed on the site last Sunday had been viewed 721 times.

"It's hard," said student Sammy-Rose Scapens, who turned up 15 minutes early to an open home in Westmere yesterday. Scapens, 19, said she tried to make a good impression.


"You try to talk to the landlord before everyone else does, get really dressed up."

Gordon has seen all the ploys. Offers to pay extra rent (two this week alone), business card flaunting, even personal bribes. Two friends vying for the same property were particularly inventive: one wrote a poem extolling her virtues as a tenant and gave Gordon chocolates; the other brought her flowers.

King's had offers to paint his properties and one builder offered to build an extra room for free.

Martin Dunn of agency City Sales sees fewer desperate measures for city apartment rentals, but said the market was surprisingly buoyant considering the influx of new apartments last year.

He said while numbers of overseas students may be down, there was a new trend of 20-somethings wanting to save on commuting costs and live in the city. He said a good one-bedroom place would rent within a week.

Rising rents do not seem to be deterring tenants. A December Massey University rental survey shows the national median weekly house rent rose 3.8 per cent last year, from $260 to $270.

Auckland's median rose from $320 to $330.

And rents are tipped to keep climbing. Andrew King said higher demand, increased maintenance costs, rates and insurance rises were all having an effect. He said high house prices were helping to push demand up, as young families were forced to rent for longer.

Hot Property's Phillipa Gordon said to win the race for good rental properties tenants did need to stand out. "But really pushy and cocky people are a turn-off."

Harrowing search for a home

I almost had to leave the room when the guy in the designer shorts said his flatmate was a landscape artist and would sort out the back lawn for free if they got the house.

We were six weeks into a harrowing seven-week search for a new home, and my patience for crass self-promotion was at breaking point.

When our landlord served us three months' notice in early December, my heart sank. I'd been there before - last time we found a place within three weeks. But this time we were five people looking for a four-bedroom house. I knew December in Auckland would be dead, and January murderous. It was. The open homes were like extreme speed-dating for a life-partner: 30, 40 people poking about, smiling at each other through clenched teeth, scoping out the house and the competition, on charm offensive.

Worse even than a media scrum.

Then there was the obsessive-compulsive scanning of Trade Me and newspapers, co-ordinating flatmates for viewings, discovering where our common ground ran out (in Mt Albert).

The application process was more rigorous than most job interviews I've had (three character references, car registration, make and model - would my beat-up 1988 Toyota be our downfall?).

Finally, when I was seriously reviewing my couch-dossing options, we got a call. The plac

rmbbrave
22-01-2007, 08:39 AM
NZ houses among least affordable
Monday January 22, 2007
By Anne Gibson

New Zealanders are paying some of the world's highest house prices compared to our incomes and Auckland ranks alongside London as one of the world's most expensive housing markets.

The third Demographia International Housing Affordability Survey released today showed it takes Aucklanders 6.9 years of full annual earnings of $57,500 to afford the $395,000 median house price.

Auckland ranked 21st out of 159 cities surveyed, with the least affordable city being Los Angeles.

Christchurch ranked 31st out of 159, with its residents taking six years of $48,400 annual earnings to afford the $291,000 median.

Wellington fared better in place 47 with its residents taking 5.4 years (earning $61,400 annually) to afford the $331,000 median.

A survey author blamed tight land supply for New Zealand's housing squeeze, saying excessive land use regulation had strangled subdivision expansion and artificially pushed up prices.

In the past year, New Zealand house prices rose about 10 per cent, significantly more than the rise in people's incomes.


Most analysts expect Reserve Bank Governor Alan Bollard to hold the official cash rate at 7.25 per cent on Thursday - and give homeowners a breather from higher mortgage rates - after lower oil prices contributed to better than expected inflation figures.

Housing Minister Chris Carter told the Affordable Housing Forum in Wellington late last year that the Government had identified three new ways of solving the crisis - new uses of planning rules, special sector partnerships and Government-led development projects on surplus Crown land.

"People of my generation are deeply disturbed by the enormous difficulties our children face in getting into the housing market, and housing affordability is an issue preoccupying hundreds of thousands of young households around the country.

"The problem with supply is not that we haven't been releasing land for development as those who want to gut the Resource Management Act are fond of claiming," he told the conference.

Hugh Pavletich, Christchurch-based co-author of the survey with Wendell Cox in the United States, criticised councils for ring-fencing cities which he said was strangling the supply of land crucial for development.

"Houses should not cost any more than three years' annual incomes," he said, calling for more rural land to be freed up.

"Less than 1.4 per cent of our land is urbanised, so there's no shortage of land for housing."

The survey found Australians had the world's most pervasive housing affordability crisis, taking 6.6 years of full earnings to afford a house. New Zealand come in close behind, taking a median six years, followed by Ireland and Britain.

Canadians have the world's most affordable houses, taking only 3.2 years of full earnings to afford a median-priced place. Americans score close behind, taking just 3.7 years of earnings to buy a house.

The survey found many people living in North America were much better off than New Zealanders. Their housing markets are the world's more affordable.

Darren Gibbs, chief economist of Deutsche Bank in Auckland, said low incomes were one of the reasons for NZ's poor ranking in the survey.

"We have high house prices compared to low incomes and our incomes are low because we're not a productive country."


How many years to buy a home?

Number of years' income to buy house:
* Australia 6.6 years.
* New Zealand 6 years.
* Ireland 5.7 years.
* Britain 5.5 years.
* United States 3.7 years.
* Canada 3.2 years.

JBmurc
22-01-2007, 06:27 PM
From my personal side interest;) spec building experience hear in Queenstown where the current property market has been very flat for the last couple yrs
And with all the doom&gloom of houses in NZ being among the least affordable world wide-Queenstown- Central otago-surely must be the most expensive region nationwide
-Auckland's regional median house price climbs to $405,000
-To buy land in any of the new sub-divisons here your median purchase price would be round 300-400,000

-putting the average decent house(freehold newish 3brm+)
priced over 600,000 better areas 700k+

-Unless sections come down or building costs reduce prices can't fall
Unless like me your willing to take a $40,000 loss and sell well under valuation just to move on with other interests
- will be much pain to come for the big boys developing these many hundreds of apartments hoping for top prices 500k-1mill+

JoeKing
23-01-2007, 07:45 PM
JBmurc
Totally off subject. Copied this from another thread.
"started with 80,000 AGM shares today ,great med-long term buy Posted - 12/04/2005"
AGM would have been about 10c then, today hit 71.5. You will be very happy if you still hold??
Cheers
JK

JBmurc
24-01-2007, 03:42 PM
nan sold out stupidly, Joe
really guts me would have been up 40k-50k for only the last couple months,belived at the time because of how far out till they were acutally making good money some -mid 2008 so invested the funds into MCR who have the same MKTcap but are making serious money & production

rmbbrave
28-01-2007, 06:19 PM
Thinking of moving to Oz? Think again
Sunday Star Times | Sunday, 28 January 2007

Homes are even less affordable in many parts of Australia, reports Greg Ninness.

Kiwis considering moving to Australia may need to think twice if their plans include owning their own home.

Because while rising house prices are making home ownership increasingly less affordable in this country, the situation is even worse in many parts of Australia.

The Demographia Survey of Housing Affordability released last week shows the median dwelling price in Auckland was 6.9 times the median household income in the region (as at the September quarter last year).

Home buyers in Wellington and Christchurch fare slightly better, where median prices are 5.4 times and six times median household incomes.

But people thinking they may improve their chances of owning their own home by jumping across the ditch to Australia may be disappointed.

About 34,000 New Zealanders move to Australia on a permanent or long-term basis each year, many attracted by what they see as better career and lifestyle opportunities.

The UK is the second biggest destination, attracting about 12,000 a year.

But if they are heading for the bright lights of Sydney, long a mecca for young Kiwis, they could be in for a rude awakening.

Sydney has one of the most expensive housing markets in the world, with median prices being 8.5 times median incomes, making the city marginally more expensive than London, according to the Demographia survey.

And the problem is not confined to Australia's largest city.

Western Australia's mining boom has made Perth, once one of the most affordable Australian cities, the second least affordable after Sydney - and most other Australian cities are catching up fast.

The trend was confirmed last week when Australia's Housing industry Association released its Housing Affordability Index figures for the December quarter of last year.

The index breaks out figures for first home buyers. These showed a first home became 5.5% less affordable in the December quarter and and was 15.5% less affordable than it was a year before.

The study blamed a double whammy of rising prices and rising mortgage interest rates for pushing affordability to its lowest level since the index was launched in 1984.

Some believe the cost of housing in the big cities is so high it is starting to affect middle income earners as well as first home buyers.

Australia's opposition housing spokeswoman Tanya Plibersek said cities such as Sydney and Perth could face shortages of key workers such as teachers, nurses and police, because they could not afford the housing costs.

"They'll find it almost impossible to afford to live within commuting distance of their work," she said.

http://www.stuff.co.nz/3942757a13.html

rmbbrave
29-01-2007, 01:39 PM
Home equity loans rise as Kiwis spend
By ALAN WOOD and SUE ALLEN - The Dominion Post | Monday, 29 January 2007

Reverse mortgage company Sentinel says it remains on a growth trajectory after Kiwi retirees taking home equity loans helped it to double its loan book to $179 million in 2006.


The number of loans increased by 94 per cent, to 3493 by the end 2006.

Sentinel's New Zealand loan book rose from $89 million in 2005, as older people became more willing to draw down against the value of their homes, managing director Richard Coon said.

Sentinel is considering a share market listing, possibly next year, to increase access to new capital, to underpin the brand and to make it easier for existing shareholders to sell shares.

In Wellington, the Kapiti Coast and Upper and Lower Hutt the number of loans increased from 152 taken out in 2004 and 2005 to 282 last year.

Mr Coon said the company was also expanding its presence worldwide, with its products to be launched in several countries in 2007.

Sentinel is already in Australia, Spain, South Africa and Ireland, and has 80 staff worldwide.

"Worldwide we've done over $500 million of loans including New Zealand," he said.

"In the calendar 2007 year we're expecting as a group worldwide to do around $1 billion."

In the financial year to March 2007, it was hoping to grow its New Zealand business, with Kiwis of an average age of 72 using the products to borrow lump sums against the value of their house.

Sentinel launched in March 2004, wrote about $35 million of New Zealand business in its first year, $70 million in the second year and was on target for $100 million in the year to March 2007.

Sentinel still has 80 per cent to 90 per cent of the New Zealand market, but with an increasing number of competitors, including the recent launch of Bluestone, he would expect that high share to drop, Mr Coon said.

Sentinel's research showed that older people were borrowing against homes responsibly and conservatively.

The average lump sum initially drawn down typically represented about 13 per cent of the value of the property, Mr Coon said.

In central Wellington, the average initial amount drawn down by a borrower was $48,442, compared with $39,708 nationally. The average property value of a borrower in Wellington was $341,475, compared with $307,705 nationally.

In Wellington, 78 per cent of borrowers used the money for home improvements.

People on the Kapiti Coast borrowed an average of $40,278 against an average house value of $297,000; those in Upper and Lower Hutt borrow $33,627 against homes valued on average at $255,414.

East Auckland had among the highest property values borrowed against in 2006, with an average of $513,753.

Mr Coon said New Zealand was quickly catching up with Australia in terms of people taking to home equity release packages, and these were becoming increasingly sophisticated.

http://www.stuff.co.nz/3942997a13.html

rmbbrave
29-01-2007, 03:13 PM
Another reason not to move to OZ - unless you actually want to drink "treated sewage".

Queensland Premier Peter Beattie scrapped plans for a A$10 ($11.24) million referendum on the issue, saying record-low inflows to dams had left him with no choice but to introduce treated sewage in the drinking supply.

http://www.nzherald.co.nz/section/2/story.cfm?c_id=2&objectid=10421395

rmbbrave
30-01-2007, 03:48 PM
Property bubble must burst
The Dominion Post | Tuesday, 30 January 2007

By DAVID MCEWEN

What's the difference between investment and speculation? One of the best descriptions of the chasm that separates them comes from billionaire investor Warren Buffett.


He says speculators tend to act like Cinderella at the ball. "They know that overstaying the festivities – that is, continuing to speculate in assets that have gigantic valuations relative to the cash they are likely to generate in the future – will eventually bring on pumpkins and mice.

"But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There's a problem, though: they are dancing in a room in which the clocks have no hands."

Speculators buy with the express intention of selling, preferably in as short a time as possible, at a whopping profit. The flaw in this plan is that they require someone equally as greedy and presumably less intelligent to buy from them at the inflated price.

Such buyers are not hard to find when a market is raging and prices are rising steadily. However, they are extremely hard to locate when the market dips.

Many people are aware that the market has gone wild during a bubble, but most wrongly think they have got enough talent to know when a crash is coming and get out before that happens. I am concerned that the property market in this country is a bubble. Recent articles that quote research showing that New Zealand has among the most unaffordable property markets in the world underpins this view.

Essentially, during very long periods, property price growth struggles to run away from the inflation rate. It can do so for extended periods, only to fall back below the inflation rate.

The reason is that our salaries are tied to the inflation rate – in fact, our salaries are a big component of the inflation rate – so if property is rising much faster than inflation, eventually nobody will be able to buy property, and the property market will have to stagnate for as long as it takes for inflation linked wages to catch up.

By adjusting the long-term rise in property prices by inflation, you get the real growth in values. Robert J Shiller, professor of economics at Yale University and a leading authority on markets, set out to do long- term research on property values adjusted for the distortion of inflation.

Professor Shiller searched the globe to find the most reliable property statistics over the longest period on record. He found this in the central suburb of Amsterdam, the Herengracht, where reliable statistics date from 1600.

Professor Shiller then produced what must be the longest range graph of property prices ever recorded, covering 350 years, starting at 1628.

The prices were adjusted to remove inflation and showed an extraordinary thing – the price of a house in Herengracht, adjusted for inflation, had barely moved in 300 years.

But the graph also showed extraordinary cycles where property outpaced inflation for up to 20 years, only to fall below inflation for the next 20.

The notion that after a decade of booming prices in New Zealand, the property market will now settle for a steady growth rate still well above inflation, seems to me to be deeply flawed.

patsy
31-01-2007, 06:37 PM
The previous McEwin article is very interesting because it raises an important issue that flies in the face of those that argue that as long as immigration is positive, then property values will keep on rising. If houses were bought 100% cash, then the law of supply and demand would apply - if demand outstrips supply, then the asset price increases.

However, because houses are mortgaged (that is, bought with future cash flows coming from salaries and wages), then the McEwin argument applies. This means that regardless of immigration levels, there is going to be a point when house price increases would drive debt levels that could not be serviced with future cash flows. Again, irrespective of immigration levels, as long as immigrants do not pay 100% cash.

Jess9
31-01-2007, 09:37 PM
Another thought...after another 6-10 years a new round of unmortgaged and high salaried property buyers arise to enter the property market. They see the market has been in the doldrums for years, and being smart also see that by using there newly acquired leverage to buy stagnent, inflation eroded nominal 2007 priced property once again stacks up with rental return and likely overdue cap. growth, and the cycle starts to turn once more.

Halebop
31-01-2007, 10:26 PM
quote:Originally posted by Jess9

Another thought...after another 6-10 years a new round of unmortgaged and high salaried property buyers arise to enter the property market. They see the market has been in the doldrums for years, and being smart also see that by using there newly acquired leverage to buy stagnent, inflation eroded nominal 2007 priced property once again stacks up with rental return and likely overdue cap. growth, and the cycle starts to turn once more.


That could happen but we'd need some big changes to birth rates and/or immigration first. Based on average projections for fertility, mortality and migration, in pretty much exactly 10 years time we will experience our first drop in projected labour force size. Additionally, the key 1st home buying demographic of under 39 year olds is already reducing in size and will take about 13 or 14 years to recover to current levels*, where it will begin gently rising again for 10 years and then drop again for another 20+ (And that includes some "success" assumptions surrounding the recent government sponsored "family friendly" breeding policies).

* ...Coupled with a subtle demographic shift in attitudes by under 39 years old "Gen X'ers" against buying a first home.

Hommel
01-02-2007, 01:32 AM
I have been thinking for a long time that the past few years boom in residential property has been fueled mainly on debt, not real wealth, and that once everyone is "mortgaged to the hilt" the main driver of the boom will not be there. Against that building prices have and will increase significantly and that, and immigration, will underpin house prices to some extent. Just waiting for beach property to drop a bit (hopefully) !!

patsy
01-02-2007, 09:28 AM
quote:Originally posted by Halebop

[quote]

Based on average projections for fertility, mortality and migration, in pretty much exactly 10 years time we will experience our first drop in projected labour force size. Additionally, the key 1st home buying demographic of under 39 year olds is already reducing in size and will take about 13 or 14 years to recover to current levels*, where it will begin gently rising again for 10 years and then drop again for another 20+ (And that includes some "success" assumptions surrounding the recent government sponsored "family friendly" breeding policies).




I agree entirely. In fact, the Japanese have gone through the cycle you're mentioning some 10 years earlier than the West. The stagnant Japanese economy can be explained by demographic factors, and by a sort of early baby boomer generation that the Japanese had. The Japanese also had a similar Kiwi mentality in that property buying was used as a means of savings. As such generation grew older, they had to unlock their savings thus driving the sector (and the economy, overall) down.

It is not unrealistic to expect that the West would follow a similar cycle. On top of this, in the particular case of NZ, the tremendous liquidity injected by a low interest rate policy plus unrestrained government spend will catch up with us in that income from assets is not commensurate with asset pricing. Not a pretty picture for NZ property if a Japanese-style cycle coincides roughly with the timing of an imbalance of investment return given by cheap money.

Jess9
01-02-2007, 04:24 PM
Regarding my last comment...and thinking on following comments...it is still likely a factor, for high growth cities, e.g. Auckland, Nelson, Blenheim, Queenstown, Tauranga to name the top few.

Halebop
01-02-2007, 07:08 PM
quote:Originally posted by Jess9

Regarding my last comment...and thinking on following comments...it is still likely a factor, for high growth cities, e.g. Auckland, Nelson, Blenheim, Queenstown, Tauranga to name the top few.


Jess those cities are high growth because of demographic factors, not despite of them. Predicting more of the same when demographics urge otherwise requires the assumption that a new external factor will be introduced like sustained spikes in immigration or birth rates? The factors I mentioned in the previous post already consider an average level of success in breeding and migration policies. So if places like Tauranga did continue to grow when the only population segment showing any significant growth was over 65 year olds then those "oldies" have to originate from somewhere... Like Auckland, Wellington etc. Perhaps providing a situational benefit but likely a net zero sum gain.

rmbbrave
09-02-2007, 12:18 PM
Population grows 1.1pc in 2006


New Zealand's population rose to 4.17 million at the end of last year, according to Statistics New Zealand.

The estimated figure was a rise of 45,100 on 2005.

Of that natural increase contributed 30,400 and net migration 14,600.

The figures represent a 1.1 per cent growth in the overall population, but growth rates were different for different age groups.

The number of people aged over 65 grew by 2.8 per cent to 519,000, while the number of children under 15 shrank by 0.2 per cent to 874,000.

The number of people aged 15-64 grew by 1.2 per cent.

An updated population estimate based on 2006 census data will be released in August.

http://www.stuff.co.nz/3956408a11.html

One third of NZ population growth is due to immigration - is that high compared to other coutries?

rmbbrave
10-02-2007, 11:28 PM
Risks of over-indulgence at home
The Dominion Post | Tuesday, 30 January 2007

BOOM TIME: People have been predicting the bursting of the property bubble for some time and yet it goes on. But analysis of the data shows that it is unsustainable.

Domestic and rural property prices are too high and people are stretching themselves to borrow too much. It can't go on like this much longer, writes Craig Ebert.


If you think New Zealand's house prices are looking incredibly lofty, and debt servicing stretched, then there is evidence to substantiate your concerns.

The ratio of each to household disposable income has pretty much doubled since 2001. And in the past few years the annual increase in household borrowing has more than trebled.

Similar indications of over- indulgence have emerged in the rural sector, with the ratio of farm prices to land-based incomes doubling over the past five years.

These trends are clearly unsustainable. But even where these figures sit right now Ein such wildly uncharted territory in relation to New Zealand's longer-term history Eserious questions need to be asked about housing and farm values, and debt servicing, in relation to incomes.

Sure, many have been sounding the death knell for the property boom for a good while now, only for it to keep pressing higher. Yet this doesn't mean it's justified. Remember, there were those who were saying the Nasdaq looked overvalued at 3000, only for it to go to 4000, then 5000, in a relatively short space of time. Of course, the Nasdaq eventually nose-dived to about 1200, returning price- earnings ratios closer to long-term norms. Fundamentals won the day, as they tend to in the end.

Admittedly, that's an extreme example. But the essence of it bears thinking about in relation to New Zealand's housing and rural property markets over recent years. There are clear signs of increasing stretch, though the tipping point for a correction does not appear imminent.

Consider this. Outstanding borrowing by New Zealand households has doubled since 2001, to about $145 billion Ealmost as large as the nominal economy itself. Debt against the agriculture sector has likewise expanded 100 per cent.

This, in turn, largely explains the approximate doubling in overall interest payments over the period Einterest rates are not very different to 2001, which puts paid to the notion that "competitive" lending markets have driven the debt accumulation.

To my mind, the drivers have been more overwhelming and persistent Enotably, an over-low New Zealand interest rate curve established by the Reserve Bank Erather than any occasional 0.25 per cent discount from the curve, in an admittedly competitive mortgage market which, incidentally, now includes a state- subsidised bank.

Asset valuations have also doubled over the past five or so years. This has been obvious for homes, with no sign of any let-up even now. But it's also been the case for farms.

Of course, a doubling of debt, asset prices, and interest payments, would be understandable if incomes had increased by anywhere like the same proportion. But they haven't. Indeed, according to income and outlay accounts published a few weeks ago by Statistics New Zealand, gross household disposable income increased just 23 per cent in the five years to March 2006.

And this measure of income is as comprehensive as they get. It accounts for such fundamentals as wage inflation, employment growth, incomes of the self- employed, immigration, investment returns, welfare, and net of tax.

It also includes a measure of gross farm income, which actually moderated to around $2.9 billion in 2005-06 according to the Statistics NZ data, from $4.5 billion in 2000-01. Incidentally, the peak was $5.4 billion in the 2001-02 March year, when the currency was low and world export prices robust.

Sure, there are notorious measurement issues with the household accounts. Hey, let's be honest, they're not even official, but experimental.

A potentially big blind spot, for example, is income from trus

rmbbrave
10-02-2007, 11:42 PM
And AIR NZ has been doing it's utmost to lift NZ's unemployment rate but to no avail.

More "job losses".

Airline jobs in balance
The jobs of 1850 Air New Zealand front-line staff are up in the air as their employer weighs up contracting out the work they do to a Spanish firm. Alan Wood reports.

http://www.stuff.co.nz/3956643a13.html

rmbbrave
11-02-2007, 01:14 AM
http://www.stuff.co.nz/3956783a11.html

Tenants in bidding war over rent crisis
By HAYDON DEWES and NICK CHURCHOUSE


Skyrocketing house rental prices have reached crisis point, with tenants locked in bidding wars for accommodation as a shortage of affordable properties fuels demand.


There are also fears that suitable rental properties are slipping out of reach for those trying to save for first-home deposits as rents increase faster than incomes.

Rents nationwide are accelerating ahead of income growth, fuelled by bumper migration figures, the house-price escalator and a scarcity of affordable new homes.

The rental market in Wellington - listed as the second most expensive in the country in a Massey University study - has hit crisis point, with young professionals clambering over each other, offering hefty up-front payments to landlords and bidding for properties by offering to pay above the advertised rental price.

Renters report facing queues of up to 40 people at an open home for a rental property, while landlords are bombarded with e-mails from prospective tenants within minutes of listing houses - often from all over the country.

rmbbrave
14-02-2007, 09:15 PM
"Property goes up 10% per year" - dream on !!!

Houses 'way above value'

14 February 2007

House prices have ballooned to a record 42 per cent above what they should be worth, New Zealand's biggest money manager says.


Real house prices, adjusted for inflation, have increased on average about 2 per cent a year since 1960, AMP Capital Investors head of investment strategy Leo Krippner said yesterday.

But prices had gone up 75 per cent since 2001, taking them to more than 40 per cent above their long-term average their "natural" level. "That is unprecedented ... they are massively overvalued," he said.

The last house price-bubble happened in the early 1970s, when strong immigration pushed prices 39 per cent above their fair value by 1974.

Prices slid nearly 40 per cent in the next six years.

Homeowners at the time did not feel the impact in sale prices because inflation running as high as 18 per cent masked falling prices, Mr Krippner said.

However, in today's relatively low inflation environment, a fall in real house prices (adjusting for inflation) toward the long-term trend would hit homeowners through low sale prices.

But he did not expect house values to fall 40 plus per cent.

Demand for housing from first-home buyers would probably limit price falls to about 10 per cent during the next few years.

It was also possible that house prices had found a new level and that a downward adjustment to the previous long-term trend was not needed.

"But history generally shows that when (prices) get this stretched there is some degree of pull-back."

Property investors would be better off buying commercial property, rather than sinking more money into housing.

Bank of New Zealand chief economist Tony Alexander said house prices were likely to keep climbing at above 10 per cent a year "for a while yet".

http://www.stuff.co.nz/3960872a13.html

rmbbrave
15-02-2007, 04:12 PM
Immigration could well keep property pices rising. It already accounts for a third of NZ's population growth.

You really can't prdict what will happen with immigration - NZ could increase or decrease it's quota. NZ's competitors for quality immigrants ie US, Canada, OZ could increase or decrease theirs.

Talented Indians and Chinese could realize there are better opportunities at home than in NZ.

Almost anything could happen.

rmbbrave
08-03-2007, 04:57 PM
Rents 'kept low by tax breaks for landlords'
By NICK CHURCHOUSE -

Residential tenants are being subsidised by the taxman, with landlords happy to keep rents low and live off tax breaks, an economic report says.

Westpac chief economist Brendan O'Donovan said rents had increased 14 per cent in five years, while house prices had doubled.

The discrepancy had driven down yields (rents as a percentage of capital value) for landlords, but was being mistakenly quoted as evidence that the housing market was overvalued and due to "pop".

The real reason was lower interest rates and tax rebates, Mr O'Donovan said.

The combination meant landlords could afford to leave rents low and make money off capital gains while on low mortgage interest rates and reap tax rebates afforded to investment property owners.

"The pressure on rental growth is low because the price of the house was doing the adjustment for the yield rather than rents themselves. The price went up instead of the rents.

"The tax system is effectively subsidising landlords."

Landlords typically make a loss on rental properties after mortgage interest and expenses, and this can be written off against taxable income. The rebate is linked to the landlord's marginal tax rate and, with the top rate increased to 39 per cent in 1999, a greater incentive was created to use rental property to offset the tax bill, Mr O'Donovan said.

Typically, house prices grew at about 5.5 per cent a year but, with such rapid capital value growth recently, the short-term outlook was for a catch-up period.

"We are due a period where house prices take a breather for a while; you will more likely see rents growing in line with income."

Gail Vietri, from Quinovic Property Management in Ponsonby, said that, with a massive shortage of good rental houses, rent increases of $20-$30 were being tolerated by renters.

Even with increases, some properties were still receiving six inquiries within a day of listing. "It hasn't been like that for years," she said. But big jumps in rents were not likely, with increases constrained by what people could afford.

Vivian St Quinovic Property Management in Wellington had noticed an easing of heavy demand throughout January and February as students arrived in town, but owner Keith Boyd said the pressure on inner-city properties was still high.

Mr O'Donovan said that while rental properties were being sought by high-net-worth buyers looking to take advantage of tax rebates, it would always be hard for new home buyers, but not necessarily for tenants.

"Having a roof over your head is no less affordable than it has been in the past, but it is a lot tougher for the first-home buyer to get in there."

The tax rebates were more valuable to high earners, creating higher competition from those with more buying power. "Not only are more people able to take on more debt, more are willing to as well."

But government interference, as with the Reserve Bank's threats of interest rate rises to settle the property market, was unnecessary, Mr O'Donovan said. "You can't be King Canute and try to stop the tide. Where house prices have gone, they've gone for good reason."

The market had been self- adjusting, but that cycle was more or less complete. "You can think of it as a cyclical beast. You have periods of unders and overs. We're probably due for a period of under."

Halebop
08-03-2007, 08:41 PM
Agreed Aspex, some of the analysis is a wee bit too flakey in that one. If property investors could ratchet the rent as well they would. The only thing they have raised is the capital value of property thanks to demand for housing as an investment, easy credit and helpful tax policy. Certainly the unispiring growth in rental income could hardly be the motivator (particularly given the levels of renovation capex that has been sunk into Auckland over the last few years).

Ultimately, an investment is valued by it's cash flows, which is why property investors find housing more affordable than garden variety owner occupier home buyers. The pre tax cash flows of most Auckland residential real estate does not support the capital value. Despite debate on the merits of increasing interest rates, at some point physics will reign true.

Not sure a mortgage levy is a great idea but something that more specifically targets property investors is at least a step in the right direction. Still think a change in tax policy is the easiest and most direct method to impact.

Watching Keiran Trass on Campbell tonight he seemed to claim that property investors were benign and should not be demonized for their borrowings and investment habits. I found it a bit like saying don't blame car drivers for oil imports.

skinny
09-03-2007, 07:32 PM
Erm, it may be a bit lost in translation, but I think the essential point that the Wpac economist was making is the same you guys are. The MIL was never a goer, tweaks to the tax system may be a differnt story ;)

Halebop
09-03-2007, 07:47 PM
Sorry I was referring to the economics of real estate rather than the author's own prognosis.

Comments like "Landlords typically make a loss on rental properties after mortgage interest and expenses" and "But big jumps in rents were not likely, with increases constrained by what people could afford" tells me investor perception and simple math have something of a reality (or is that realty?) gap.

Steve
10-03-2007, 10:11 AM
Don't forget that many MP's have rental properties, and they are unlikely to want to put national interest above their personal interests...

patsy
11-03-2007, 01:33 PM
quote:Originally posted by Steve

Don't forget that many MP's have rental properties, and they are unlikely to want to put national interest above their personal interests...



Thre is no question that MPs will do as they suit personally best for them. However, the increase in the tax rate for trusts to 36% is almost a given, and this also impacts them most of them directly - yet they are going to do it anyway in the next budget.

The problem is that tax deductions for investment properties were put in place with the social objective of fostering the increase in housing stock (like business deductions were put in place to foster the creation of employment opportunities). However, the gap between taxation for property investment and taxation for other types of investments (e.g., the recent overseas share holding tax change) has widen so much that the social benefits of tax deduction for property developers/investors have severely backfired to those who were meant to benefit (i.e., the community overall has property ownership as an elusive objective).

rmbbrave
13-03-2007, 03:58 PM
Brits look to NZ for first step on property ladder
By COLIN MARSHALL - NZPA | Tuesday, 13 March 2007

Young British people are so desperate to get on the property ladder they are considering moving to New Zealand for a "cheap" house with the aim of saving enough to then buy a house back in Britain.

A new survey by Britain's National Savings and Investments (NS&I) has found a quarter of Britons trying to buy their first house would consider moving overseas to do so Eand a third of those had their eye on New Zealand or Australia.

NS&I spokesman Mark Brooks said a property boom in Britain had caused average house prices to double over the past six years.

Told that New Zealand's own property boom had pushed the national median in this country to about $330,000 or £119,000, Mr Brooks said that was unlikely to deter British househunters.

"Ours is £200,000 ($NZ563,539)."

NS&I surveyed 1000 people who did not own their own home for its latest Quarterly Savings Survey.

Mr Brooks said it was surprising to find so many people would consider immigrating to New Zealand or elsewhere to buy property but with more households in Britain than houses available, people were looking for a solution.

"It's harder and harder for people when they're looking for new homes to actually get on the housing ladder and first time buyers especially.

"Instead of either staying at home longer, living with their parents, or alternatively renting, which is also expensive, the survey shows that people are looking for alternative ways to get on the UK housing ladder."

New Zealand's "cheaper" prices appealed, as did the weather, and a strong affinity with New Zealanders, many of whom had lived in Britain, Mr Brooks said.

Also, many young British people had travelled to New Zealand on extended holidays.

"They see New Zealand and think `what a great place to live' Ethat's why it's higher on the agenda than it would have been previously."

Mr Brooks doubted British people would be aware New Zealand had had its own property boom.

He said property ownership was part of British culture and moving to New Zealand was just one way of fulfilling that "normal" dream.

"Getting on the housing ladder is very important."

Other destinations considered by British people looking to move abroad to buy a house were Spain (43 per cent), America (22 per cent) and Eastern Europe (20 per cent).

New Zealand's national median property price eased in January to $327,000 from $330,000 in December.

Auckland's median was $415,000, Wellington $351,868, and Canterbury/Westland stayed the same at $290,000.

In Waikato/Bay of Plenty, the median was $307,875 while Southland, the fastest growing region, had 25.6 per cent growth from from $124,250 in January 2006 to $156,000 this January.

Other median prices for January included Manawatu/Wanganui $215,000, Taranaki $272,500, Northland $305,000, Hawke's Bay $280,000, Wanganui $215,000, Nelson/Marlborough $307,000, Central Otago Lakes $432,200, Otago $221,750.

Reserve Bank Governor Alan Bollard last week raised the official cash rate from 7.25 per cent to 7.5 per cent in a bid to cut household spending, citing the booming housing market as a main reason.

http://www.stuff.co.nz/3991698a10.html

Steve
13-03-2007, 07:16 PM
quote:Originally posted by patsy

Thre is no question that MPs will do as they suit personally best for them. However, the increase in the tax rate for trusts to 36% is almost a given, and this also impacts them most of them directly - yet they are going to do it anyway in the next budget.
Is this increase to 36% a definite or proposal?

patsy
13-03-2007, 09:39 PM
quote:Originally posted by Steve


quote:Originally posted by patsy

Thre is no question that MPs will do as they suit personally best for them. However, the increase in the tax rate for trusts to 36% is almost a given, and this also impacts them most of them directly - yet they are going to do it anyway in the next budget.
Is this increase to 36% a definite or proposal?



Not signed up yet but it is the quid-pro-quo of business and personal tax reduction, plus closing a "loophole" (per Cullinski words) for all the small business owners who hold shares in trust thus defeating our beloved government's personal top rate.

rmbbrave
18-03-2007, 12:27 PM
Bankruptcies hit 8-year high
By ROB STOCK and KAREN ARNOLD

Bankruptcies have reached an eight-year high and experts are warning people to reduce their personal debt.

In the first eight months of this financial year, 2380 people have become bankrupt, a 22 per cent rise on the same period last year.

Until this year, bankruptcies have been rising by only a few percentage points each year.

The five main causes of people going broke are job loss, excessive use of credit, relationship breakdown, ill health and a lack of health insurance and decisions to stand as guarantor for someone else's loan or business venture.

Business commentator Rod Oram said people had been pushing their luck for a long time and warned bankruptcy rates would accelerate should there be a severe recession and unemployment. "It's time to start reducing debt now."

http://www.stuff.co.nz/3997084a10.html

2380 people are not very many though - there are around 20,000 new immigrants every year.

rmbbrave
21-03-2007, 06:33 AM
Migrant numbers may be twice forecast rate
By SUE ALLEN - The Dominion Post | Wednesday, 21 March 2007

Permanent inward migration may be almost double official estimates and will help keep the housing market solid for some time, an economist says.

Figures from Statistics New Zealand issued yesterday show permanent and long-term arrivals exceeded departures by 2100 last month, compared with 3100 in February 2006.

In the year to February, New Zealand gained 13,200 more permanent migrants than it lost, compared with 8300 in the February 2006 year.

The number is slightly below the Reserve Bank forecast of 14,000 to 15,000.

Deutsche Bank chief economist Darren Gibbs said that, taking a different approach and deducting all arrivals from all departures during the year, he calculated net migration was closer to 24,000 for the year.

Statistics New Zealand bases its calculations on those people declaring an intention to live here for 12 months or more from the time of arrival.

It appeared that some people were arriving for a declared short term, but ended up staying longer, Mr Gibbs said. "That may explain why the housing market has done so well in the last few months."

Last week, Real Estate Institute figures showed that the number and value of sales had picked up in February, with median prices at a record high of $335,000.

The link between one of the Reserve Bank's biggest headaches, the housing market, and migration is well established. The more people arriving, the more houses are needed and the higher prices climb.

Mr Gibbs said consumer confidence and wage increases were also helping to underpin the housing market.

Daniel Wills, ASB Treasury economist, said migration remained elevated though slightly below expectations, providing little relief for the Reserve Bank's concerns that domestic spending would fuel medium-term inflation.

Reserve Bank governor Alan Bollard raised the official cash rate from 7.25 per cent to 7.5 per cent this month. Interest rates are up to about 8.5 per cent for two-year fixed mortgages and could rise further.

On an average $160,000 loan, the rate rise will mean about an extra $50 a fortnight, which should slow spending and take some heat out of the economy.

The net loss to Australia in the February 2007 year was 22,200, up from 21,100 in the February 2006 year. Annual net permanent migration has eased since reaching 14,800 in the year ended November 2006.

rmbbrave
23-03-2007, 05:01 PM
Lincoln Tan: NZ wages too meagre for home ownership dream

TV stars can no longer afford their home
Once, I had a dream. In fact, I had many dreams when I lived in Singapore.

One was to be able to live in a place which had four seasons, and not just hot, hotter and hottest.

Another was to raise a family in a land that offered space - both physical and psychological - so my children would have space to run around in and be able to think critically.

But most of all, my dream was to own my own house.

Not a two-bedroom apartment on the sixth floor like ours in Singapore, but a house - with a garden - that sat firmly on the ground.

Coming from a country which has a land mass no bigger than Lake Taupo but with a population soon to reach one and a half times that of New Zealand's, it's not surprising 90 per cent of its people live in high-rise apartments. Owning a house with a real backyard was just a fantasy for most of us.

So, exactly 10 years ago this week, I packed my bags and moved to New Zealand with the hope of making my dreams come true.

Then, the houses in New Zealand were really cheap - considering my little condominium apartment, which friends called my pigeonhole, cost more than $500,000.

We bought our house, in fact two houses, even before we moved to New Zealand permanently. One was a house on the North Shore, which was to be our new home, and the other was an investment property in Wellington.

The low kiwi dollar then meant what we paid for the two houses did not even amount to the cost of my 80sq m apartment.

So much has changed in the past 10 years. We sold our Wellington house, and when I had to move to the South Island five years ago, sold our Browns Bay home so we could buy a house in Christchurch.

We made a few bucks from the exercise, but it also turned out to be one of my most dream-shattering actions.

Who would have dreamed the median price of an average home in Auckland would reach a new record high of $430,000, or that an average house in the North Shore where I live will cost $503,000?

The home I sold in the low $300,000s was back on the market last year for $570,000, and Auckland's property market is still showing no signs of slowing down.

Since I moved back to Auckland last year, I have been renting and hoping against all odds that Isaac Newton would be proven right - that what goes up must come down.

It takes an average Aucklander about seven years of earning $57,500 to afford to buy a house at the median price, says this year's Demographia International Housing Affordability Survey. But I guess that span of time would likely be a lot longer than seven years if one is Chinese.

Nielsen Media Research found 47 per cent of Chinese here earned an annual income of $10,000 or less. Low pay and inability to find work has forced many immigrants to look for work offshore.

I have met many Taiwanese and Korean families who are "fatherless" because he is working back in their country of origin. This has actually worked out well for some people.

I have a journalist friend who had struggled to find decent work in the mainstream media here after a short stint with the now defunct Auckland Sun, so he went on to become a senior leader writer for The Straits Times in Singapore.

What he earns enables him to afford maintaining his home and lifestyle in New Zealand, even though he has to shuttle regularly between the two countries.

Just as I viewed Auckland property prices a decade ago, houses here continue to be seen as cheap and affordable only by those earning their wages offshore.

One American I interviewed last month thought houses here were dirt cheap, compared to Los Angeles.

Last week, it was reported the British are looking to New Zealand to buy their first home because they were cheap.

So, as politicians continue their debate on whether to turn parents who smack their children into criminals and whether to tear down billboards in the city, little time is spared to talk about our economy or how we can raise income levels.

Kiwi employee

Mr_Market
24-03-2007, 10:43 AM
I see no reason why the NZ$ could not fall 50%. After all it has been there before.

rmbbrave
24-03-2007, 01:53 PM
Before that happens you'd need a big rise in unemployment followed by a big cut in interest rates.

As it is, unemploment is likely to get lower as the 1946-50 baby boomers will be retiring in 2011-15 and there aren't enough workers to take their place.

New Zealand is one of the four countries - along with Australia, Canada and the US - that had the biggest baby boom. And our boomers hit 60 this year(2006), meaning that in five years(2011), twice as many people will be leaving the workplace as entering it.

"We'll have the biggest demographic trough we will ever have experienced. There will be a war for talent and if we want to prepare for that, to attract and retain the best people, we need to create different environments."

Mr_Market
24-03-2007, 05:42 PM
Indeed we do have high employment, however I feel that it will probably be some external catalyst that will sink our dollar. Inflation in Japan would be a good candidate.

rmbbrave
26-03-2007, 09:13 AM
Baby boomers squeeze young home buyers from market

First home buyers will increasingly be squeezed out of the market as a rising number of asset-rich baby boomers with debt-free family houses try to cash in on property for their retirement.

More than a third of new mortgages are going to borrowers who own a house and that trend looks set to continue, banking industry experts and financiers say.

Many of the one million Kiwis ranging in age from 40 to 60 are fuelling the heated real estate market that has seen national house prices rise $35,000 in a year from $295,000 to $330,000 by December.

The investors already own a debt-free house so are easily able to out-bid those trying to get their foot on to the housing ladder. Debbie Bell, ASB's corporate communications head, said lending to existing homeowners was up by a third in the past three years.

"People who already have a house are buying because of the capital gain," she said. "They can get 100 per cent finance to buy their next place and by the time a deal settles, prices are rising so fast they can find they already have 5 per cent equity in the place. Even with a mortgage at 9 per cent interest, they get the rental income plus the capital gain and can sell in a couple of years with a good profit."

But baby boomers were not the only competition for first-home buyers, she said. Investors living in Australia, Britain, the United States and Asia were buying here and an upsurge of migrants were also making the going tough for new buyers, Debbie Bell said.

Jeff Staniland, Mike Pero Mortgages' chief executive, said the business did not collect data on how many property owners applied for mortgages. But he believed many franchisees would confirm this was a growing trend because of people's need to create wealth and the strong real estate market.

Housing Minister Chris Carter is examining ways to address housing affordability. He is talking to councils about bringing in new incentives or rules so developers build lower-cost housing in new subdivisions and developments. And the Centre for Housing Research will this month release a major study on the future of Auckland homeownership and the role of the private rental market.

Shamubeel Eaqub, research director at Goldman Sachs JBWere (NZ), said people should not be surprised to find a large portion of residential mortgage lending was going to homeowners for investment because a growing portion of the population were at their peak earning power.

"We have known about this demographic bulge and this also explains why house prices appear to be set by investors and not owner occupiers as was traditionally the case," he said.

He is concerned about the situation, questioning what happens when baby boomers, born between 1945 and 1965, wished to liquidate their property holding if they are not planning to bequeath them.

Dr Gareth Morgan, economist and author of Pension Panic, is concerned about what he calls "New Zealand's caste of nouveau landlords" and predicts a glut of property when the baby boomers attempt to cash up their real estate at the same time.

Kieran Trass said many banks viewed lending to property investors as a better proposition than financing first-home buyers. "No formal data is held on what mortgage funds are used for but I've thought for years it should be monitored by the Reserve Bank and sourced from the individual lending institutions," he said.

"Many property investors have given up waiting for the long-ago predicted property crash and are actively buying properties now."

But James Lockie, director of General Finance, disagreed, saying only 34 per cent of all his firm's loans went to investors.

"About 66 per cent of our home loan lending last year was for owner occupiers," he said. Westpac chief economist Brendan O'Donovan questioned whether there had been a substantial rise in mortgages issued to existing home owners.

He had not seen any data to show a dramatic increase in lending to this sector, he said, and he doubted there had been a big shift in pat

rmbbrave
26-03-2007, 11:29 PM
High rents force Kiwis out

Skyrocketing property prices are making more New Zealanders "homeless", with families forced to share properties and boarding houses increasingly full.

Wellington Housing Trust coordinator Alison Cadman said there had been a significant increase in homeless families as Wellington's rents increased. High market rents and increasing pressure on council and Housing New Zealand properties meant more families were doubling-up.

A nationwide steering group has been set up to deal with homelessness, which increasingly includes families living in hostels, boarding houses or with friends and relatives because they cannot find a home.

The group, which includes Auckland, Wellington and Christchurch councils, district health boards, government and social agencies, met for the first time this month.

Wellington Regional Public Health social environment adviser and steering group member Clare Aspinall said the problem was hidden. "Homelessness isn't just about people with addictions living on the streets. A lot of New Zealand people would be surprised to find out who is homeless."

But it was not known how many New Zealanders experienced homelessness, because limited data was collected.

Ms Cadman said the situation created health problems due to overcrowding and rising tensions within families. "I've had quite a few mothers calling saying they have their (adult) children and their families living with them and they can't stand it any longer."

Capital City Lodge, which provides longer term accommodation, is upgrading its Newtown site to cater for increasing demand. "There are just so many people – just normal people, just trying to find a place to live, or a roof over their heads", manager Will de Cleene said. One resident had reported up to 100 people going for a flat in Brooklyn this month.

But the shortage in Wellington is likely to get worse with the upgrade of Wellington City Council's housing stock after a $220 million government rescue package. The properties – largely bedsits – will be converted into two bedroom accommodation, but residents will have to be removed during the upgrade.

Ms Aspinall said the steering group had identified three types of homelessness, with "secondary homeless", those living in temporary accommodation – also known as couchsurfers – likely to be the largest growing group. The group was planning a range of strategies, but also needed government support, she said.

A spokesman for Housing Minister Chris Carter said the Government was aware of the issue and some work was under way.

He said more than 6000 state houses had been added in the past seven years and an accommodation supplement was available to assist low income renters in the private market.

rmbbrave
03-04-2007, 11:22 PM
quote:Originally posted by rmbbrave

2 out of the 3 properties sold for about half of their RVs. The third was (illegally) withdrawn before the end of the auction.

1, The Rateable value / Govt. valuation was $480,000 and it sold for $220,800.

2, The Rateable value / Govt. valuation was $350,000 and it sold for $210,200.




A house in Massey, Auckland is for sale on a $1 reserve.

Vendor says "Registered valuation from March 2006 is $280,000".

Let's see how much this one goes for.

http://www.trademe.co.nz/Browse/Listing.aspx?id=94494903

coge
04-04-2007, 11:27 AM
http://www.trademe.co.nz/Home-living/Home-d%C3%A9cor/Other/photos/a-94494903/p-38616283.htm


If it looks like this I'd get an engineering report!:D

rmbbrave
05-04-2007, 06:24 PM
quote:Originally posted by aspex


quote:Originally posted by rmbbrave

A house in Massey, Auckland is for sale on a $1 reserve.

Vendor says "Registered valuation from March 2006 is $280,000".

Let's see how much this one goes for.

http://www.trademe.co.nz/Browse/Listing.aspx?id=94494903


$1 reserves are a come-on.
The vendor always has the choice of a vendor bid because on Trademe there is only the placement cost to cover and you can start again.


Look's like you were right!

Something dodgy was going on.

From Trademe: This listing was withdrawn by the administrator

rmbbrave
12-04-2007, 12:28 AM
Benefit numbers hit 27-year-low

The number of people on the unemployment benefit has dropped by a third in the past year to a 27-year low, and the overall working-age beneficiary numbers have dropped by 34 per cent since 1999.

Figures released today by Social Development Minister David Benson-Pope show unemployment beneficiary numbers dropped from 44,549 at the end of March 2006 to 28,845 at the end of March this year – a decline of 35 per cent.

The number of solo mums and dads on the domestic purposes benefit (DPB) also dropped 6 per cent over the same period.

But the figures show the number of people receiving the sickness and invalid's benefits continued to grow, by 4 per cent and 3 per cent respectively.

Since 1999 sickness benefit numbers have risen by 46 per cent and invalid's benefit numbers by 47 per cent.

Overall 265,747 working-age people are receiving a benefit down on the 401,415 receiving one in December 1999.

Mr Benson-Pope said the number of people receiving the unemployment benefit was now at a 27-year low.

He credited the Government's "active labour market policies".

The Government's Working for Families package was also successfully encouraging solo parents back into work.

Despite an ageing population growth in the sickness and invalid's beneficiary numbers was slowing, he said.

Maori Affairs Minister Parekura Horomia said the number of Maori on the unemployment benefit had dropped below 10,000 for the first time in years.

The number was now 9902 – down from 44,000 in 1999.

The official unemployment rate stands at 3.7 per cent – one of the lowest among developed nations.

National Party welfare spokeswoman Judith Collins today said the figures showed a "relentless" increase in the sickness and invalid's benefit numbers at the same time unemployment benefit numbers were dropping.

"No one would criticise a decrease in the level of unemployment. It should be embraced as the perfect time to reform aspects of welfare when there are jobs and opportunities in the economy.

"But what's puzzling is the relentless increase in the number of people collecting sickness and invalid's benefits, when there appears to be no epidemic of sickness and injury," Mrs Collins said.

"David Benson-Pope needs to explain how this can be, when the sickness benefit is supposed to be short term."

Dean Letfus
16-04-2007, 01:03 PM
All these articles point out the obvious really. The baby boomers are getting ready to retire and the biggest boom in NZ's history is around the corner.
All we have to do is accumulate property as fast as possible and get ready to retire around 2012.
I love property

rmbbrave
16-04-2007, 02:19 PM
"The baby boomers are getting ready to retire and the biggest boom in NZ's history is around the corner"

Most people argue the opposite Dean.

Retirees don't have as much income as workers and so they sell assets (property shares) to make up the difference causing a drop in property and share prices.

Most argue that more retirees leads to a slowdown not a boom.

I'd like to hear why you think...

"The baby boomers are getting ready to retire and [this will cause] the biggest boom in NZ's history ..."

JBmurc
16-04-2007, 09:02 PM
[quote]Originally posted by rmbbrave

"The baby boomers are getting ready to retire and the biggest boom in NZ's history is around the corner"

Most people argue the opposite Dean.

Retirees don't have as much income as workers and so they sell assets (property shares) to make up the difference causing a drop in property and share prices.

Most argue that more retirees leads to a slowdown not a boom.

I'd like to hear why you think...

"The baby boomers are getting ready to retire and [this will cause] the biggest boom in NZ's history ..."


---Yeah have to say I agree;)
-IMHO with floating interest rates going over 10% soon, property which is also been booming for the last 5yrs+ is going to slow down in a hurry.(I've been spec building 4 the last 5yrs and very glad to have sold my last spec house with no more planned)
-With yields returns on property going down well below property costs
wouldn't baby boomers be selling out of the investment propertys and taking there 100%+ Cap growth Tax free funds forwarding funds into safe bank deposits returning 8%+ or Blue chip high yeild ASX stocks.
-Also as the baby boomers retire alot downsize there property forming a glut on the higher priced property's as they release more funds.

-Buying an investment property at top of the property cycle on a 10% floating or 9% fixed return with a est. 6%-7%max rent return +insurance+rates+envor rates+on going repaires+Rent Managerment costs

-Property Boom not likley more like doom

-JBmurc only holding sections going back renting;)

srotherh
17-04-2007, 06:47 PM
Dean
Good to see you still are following the property investment forum
Do not agree with you but Keep adding your input
Gives a bit of balance

trackers
18-04-2007, 10:30 AM
They believe, rightly or wrongly, that among other things, NZ will need a steady influx of immigration to get the economy ticking over - that, and that there are large numbers of people waiting for the baby boomers to retire, before purchasing a home. The cashing up theory is valid, but keep in mind that only 1% of NZ'ers own 3 or more property's

Also, if you believe in cycles, around 2010 is when the next boom is due. Dean et al chat about it quite a bit over at www.propertytalk.com

rmbbrave
19-04-2007, 09:25 AM
Fixation with property not quite true
The Dominion Post | Tuesday, 17 April 2007

By MARY HOLM

New Zealanders are not as property mad – or as mortgage mad – as we've been led to believe, recent research shows.

Among the findings:

We are no more heavily into property than people in many other countries.

Almost half of home-owning households have no mortgage.

The average mortgage is less than $80,000.

Fewer than than 8 per cent of households own rental property.

Fewer than 3 per cent of households own holiday homes.

Despite some baches being worth millions, their median value is less than $170,000.
This does not mean that New Zealanders would not benefit from spreading their savings across other types of assets, such as shares, share funds and bonds. Many people are scarily undiversified, and would be hit hard if property values were to slump. The research does suggest, though, that interest rate rises are good news – not bad news – for the huge number of mortgage-free home owners who hold term deposits or bonds. That number is bigger if we add renters.

The research also suggests – dare I say it – that if the Government enforced laws more strictly, and taxed the gains of landlords who clearly bought properties with the purpose of making gains, the change might not anger all that many people. Non-landlords – the vast majority – might applaud such a change if they realised it could mean lower taxes elsewhere.

The research, by Treasury officials, found that our home ownership rates across age groups tended to be slightly lower than in Australia, Canada, Finland, Italy, Sweden and the United States. The exception was people 75 and older. In that age group, we have among the highest home ownership rates.

Turning to investment property – which includes rentals, holiday homes, timeshares and other non- residential property – our ownership rate is similar to Australia's, except that Australians under 25 are more likely to own investment property than Kiwis.

Americans, on the other hand, are much less likely – except in the 75-plus age group. Generally, Americans are more heavily into shares, bonds and other financial assets – giving them good diversification.

On mortgages, not many of us are heavy borrowers. Of those New Zealanders who do have loans, fewer than 21 per cent have a mortgage more than half the value of their property, and fewer than 6 per cent have a mortgage of more than three-quarters of the value.

Predictably, there is a strong tendency for younger people to have big mortgages. Only 8 per cent of property owners over 65 have a mortgage, and their loans average less than $30,000.

Rental property ownership is highest among those aged 45 to 64, but even then only about 12 per cent own rentals. Not many hold their rental properties on into retirement. Of 65-74-year-olds, only 5 per cent are landlords, and from 75 on, only 2 per cent are landlords.

"Apparently, investment in rental property is liquidated once the household head reaches 65," the report says.

Though in many ways it is good to learn that New Zealanders are not as obsessed with property as we are sometimes told, it is comforting to know that:


Almost half of households in the bottom 20 per cent by income own their own homes – not hugely different from about two-thirds of those in the top 20 per cent by income.

About three-quarters of households headed by someone over 65 own their homes. That rises to nearly 80 per cent when the household is headed by someone over 75.

http://www.stuff.co.nz/4029286a1865.html

rmbbrave
21-04-2007, 09:40 AM
Falling migration might hold rates

Migration is sinking like a stone and along with a high Kiwi dollar and mortgage rates could prove to be the leading edge of a domestic slowdown and a reason to hold interest rates, according to one economist.

Others expect the Reserve Bank to lift interest rates twice more this year, because of the strength of the economy. But the Reserve Bank governor Alan Bollard is expected to be cautious and not move rates next week.

Westpac Bank said the economy was in a vulnerable and unsustainable position, with a high current account deficit and high debt levels.

"At some point, the final 25 basis point of monetary tightening is going to send the housing market over a tipping point," Westpac said. When house prices stopped rising, the economic correction would be sharp.

Official figures out yesterday showed about 1000 more people left the country permanently in March than arrived, with a jump in the numbers moving to Australia. It was the first negative figure for the economy for weeks.

Strong migration has been a factor in rapidly rising house prices in recent years, with a wave of tens of thousands of new migrants since 2001.

On a seasonally adjusted basis, Statistics New Zealand said there was a net inflow of just 600 in March. Arrival numbers had troughed, but more and more people were leaving the country. The three-month annualised figure sank "like a stone" from 16,000 a year in December, to just 6400, annualised in March, according to one economist. That was half the Reserve Bank's target level for this calendar year, according to Citigroup economist Annette Beacher.

It was hard to predict a pickup in housing, retail sales and the work force unless migration picked up too, she said. The combination of lower migration, a higher dollar and high mortgage rates gave the Reserve Bank time to wait.

http://www.stuff.co.nz/4032946a13.html

duncan macgregor
21-04-2007, 10:40 AM
The next property boom is tied like every thing else to the strength of the dollar. Watch the overseas guys move in and buy up when the dollar crashes. Nz will be the retirement capital of the world one day in the not to distant future. All your young people will bugger off, make their money and come home to retire. Lets face reality, you would have to be the village idiot to invest in fishing, farming, forestry, or manufacturing companies at this time in the cycle. Its only a matter of time your dollar will plummet, property in this country will be a real cheap investment for overseas retirees creating the only worth while investment left. All my money is invested in Australia prefer to live in NZ on my property.:D:DMacdunk

lakedaemonian
23-04-2007, 01:13 PM
I wonder if Japan has the potential to be New Zealand's "canary in a coalmine".

It's my understanding Japan is ahead of NZ(and most other western nations) on the demographic curve by about 15ish years.

PLUS, Japan experienced the peak of it's very heady real estate bubble 15+ years ago.

Combine that with the pending ramp up in NZ super savings to begin to close the gap between average NZ and Japanese savings rates is that enough to recognize potential challenges/opportunities?

I'm not one to worry about sudden/sharp economic crisis...I'm thinking we're more likely to see an extended slow downward spiral like what has been found in Japan..particularly in regards to real estate and the high rising, but hallowed out NZX?

EDIT: one key difference I DO see between NZ and Japan of 15 years ago that may have significant impact is our option to turn on/off the immigration tap...an option Japan has decided not to exploit.

patsy
23-04-2007, 08:08 PM
quote:Originally posted by lakedaemonian



EDIT: one key difference I DO see between NZ and Japan of 15 years ago that may have significant impact is our option to turn on/off the immigration tap...an option Japan has decided not to exploit.



Yes, Japan is some 15 years ahead as far as the demographic bubble is concerned. Looking at Japan's evolution of their macro-economic factors can give good insights of what not only NZ but the West may experience as the baby boomer bubble passes through.

However, although manipulating immigration could have an effect in moderating a Japanese-style deflation, we have to keep in mind that the same holds true for most Western countries. This means that NZ may be trying to attract skilled immigration (mainly from Asia) to tamper deflation at the SAME time as other Western countries.

Despite the fact that we want to fool ourselves about NZ's "great" lifestyle, most skilled Asians would not put NZ as their first choice, neither would they consider NZ's employment opportunities and remuneration comparable to first world countries. If NZ's cannot attract skilled immigration to tamper the demographic bubble, then the two only choices are (1) face deflation or (2) take the usual approach of attracting the bottom of the immigration pile, which yet again would serve only as a source of increase consumer demand, not brains.

boatie
24-04-2007, 10:08 AM
From rmbrave...re NZ....

(2) take the usual approach of attracting the bottom of the immigration pile,

NZ Herald today reports that 4,500 Tongans have registered to pick fruit in NZ as "temporary" workers.

Not counting other countries.

mmmmmmmm

Where will they live ?
Who will do their jobs while away from Tonga ?
Do they get their jobs back on return ?
What return ?
Pregnant women allowed ?
Health checks ??
Mathematics....Duration of stay to pick fruit multiplied by income rate less PAYE (is there tax on temporary workers ???)less accomodation and costs equals ?????. How much to take home
And what is duration of permit ?
What is duration of picking season ??
Number of Tongan overstayers now ??
Extra resources hired by Immigration to ensure return when the fruit is picked ??

Number of NZers on welfare benefits well able to pick fruit ???

Practical response : Buy cheap rental properties in Hastings and Blenheim.

rmbbrave
24-04-2007, 09:41 PM
I think the growers usually provid some sort of accomodation.

Circus tents, shiping containers, portaloos - that sort of thing.

rmbbrave
25-04-2007, 09:00 AM
This week the papers are full of stories of how average people can't afford to buy a house.

For those who think prices are going to keep going up answer this question:

Who is going to buy them?

Kids or a house - family can't have both

http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10436022

JBmurc
25-04-2007, 09:22 AM
NZ will need a steady influx of immigration to get the economy ticking over-Alot of guys I know that are in there prime of there working careers are shifting to Aus for twice or more pay than here- mostly tradies,engineers,mechincs etc(just watch the exodus of builders, plumbers etc Once building slows up here under 10%+ rates)

Nz will be the retirement capital of the world one day in the not to distant future-Great, a country full of residents moaning about how terrible NZ basic services are(much like Queenstown as rich retired residents & holiday makers moan about poor local services from the mostly transisent forgein workers on $10-$14)

rmbbrave
25-04-2007, 05:55 PM
I tend to see an adult immigrating to NZ as being far cheaper for NZ INC than raising a NZ baby to an adult.

Children are consumers of Govt services - Education, health, maternaty leave for parents etc. An adult immigrant has all of these costs paid for by their home country's govt. If they can get a job they start paying taxes and become an asset for NZ INC.

Mr_Market
25-04-2007, 07:35 PM
quote:Originally posted by rmbbrave

I tend to see an adult immigrating to NZ as being far cheaper for NZ INC than raising a NZ baby to an adult.


The reality is that most of them will come in with partner and probably a couple of kids, followed a year or two later by bringing in their parents too. They will buy a nice big 4/5 bedroom house, thereby driving up property prices and dislocating the poor kiwi battler.

Also, due to NZ's largely agrarian economy, these skilled immigrants are probably working in non-productive areas of the economy such as finance/banking, goverment and other services, taking nice fat salaries/commisions, therefore exacerbating our anemic productivity stats due to both their numbers and non-creation of income.

rmbbrave
29-04-2007, 10:25 AM
Sunday, 29 Apr 2007

Mortgagee sales double
Real estate agents say mortgagee sales have doubled in the past year as a small but rising number of debt-laden property investors reach crisis point.

Thursday's interest rate rises, pushing floating mortgage rates to a near decade high of 10.05% and one-year fixed rates as high as 9.05%, are expected to worsen the outlook for over-committed borrowers.

"If mortgagee sales are going up, that can really only mean one thing - people are struggling," said Graham Viall, who oversees national mortgagee sales for Harcourts.

He said Harcourts' mortgagee sales had doubled from about five per month a year ago to about 10 per month now. About one-third of mortgagee listings were now investment properties.

Viall said some investors appeared to feel there would be less capital growth in the property market in future, meaning they were not fighting as hard to hang on to rental properties that were not covering interest and operating costs. Rising interest rates were "not helping".

Luxury properties are also beginning to figure in distress sales. Viall said a property in Parnell, Auckland, recently went for $1 million in a Harcourts' mortgagee sale. In Taupo, a Two Mile Bay home worth $1.2m is up for mortgagee sale.

Other agents reported similar trends. At LJ Hooker, auctioneer Keith Niederer said mortgagee sales in Auckland had more than doubled, from up to two per month a year ago to about five per month. At Ray White's in Auckland, salesman Damian Piggin said he handled two mortgagee sales in Auckland last month, the same as for the whole of last year.

Niederer said some property investors were feeling the pressure from having to refinance borrowings at higher interest rates as fixed mortgages matured.

"It's going to be interesting times, I think. Just look at the newspapers, it's mortgagee, mortgagee, mortgagee," he said.

But the biggest mortgagee sales agents in Auckland, Barfoot and Thompson, refused to comment, saying it was "sensitive" information.

At present there are 15 mortgagee sales on auction website TradeMe, up from six at the same time a year ago.

The numbers of mortgagee sales are always a small part of the market, but any rise can be an early warning sign of a downturn. Heavily negatively geared property investors are most at risk if the market cools.

An ANZ bank survey of property investors last month found almost half were running their properties at a loss, and relying on capital gains to offset the shortfall.

ANZ bank economist Cameron Bagrie refused to divulge whether his bank was experiencing a rising number of property owners in mortgage arrears, saying such information was confidential.

But he was becoming "a little bit nervous about the property market". He said a variety of economic factors meant the economy could turn, affecting confidence and the willingness of property investors to ride out any rough patches.

"I think there's going to be a little more supply coming on the market, and when the supply comes on the market I think you're going to see the prices ease.

"Confidence is a very fickle game. An awful lot of property investors out there are in it for the capital gain. And if the capital gain's not quite there, you're going to see some pockets of the property market that are going to come under a little bit of a squeeze."

http://www.stuff.co.nz/4042211a10.html

JBmurc
29-04-2007, 06:36 PM
;)Glad I just sold my Queenstown spec home good bye 450,000 debt
Going be some major pain here from the 700,000-2mill apartments(yields 4-6%) to the 400,000-2mill jacks point sections that ain't selling (local valuator I know ,said he and others don't even value alot of there sections because of the unrealistic expectations of most vendors(had One guy who wanted to Trade his cheap $600k brought before release jacks point section for my new house,Truth is I wouldn't have traded for 300k [:0]yep going be alot of pain coming for the highly geared investors in NZ

rmbbrave
29-04-2007, 07:53 PM
Well Done JB,

The yield is the key measure for what a house is really worth.

I wouldn't touch a house yielding 5% as an investment with a barge pole.

rmbbrave
29-04-2007, 07:57 PM
... Other competitive pressures will emerge as we slip further behind Australia. The New Zealand Institute's number-crunchers released a graphic report at last week's Australia New Zealand Leadership Forum in Sydney.

Australia's GDP per capita (A$47,181) is about 30 per cent higher than New Zealand's (A$33,682), with NZ well below the OECD average. NZ's figure is now lower than all Australian states, including Tasmania.

Top performers are resource-rich Northern Territory (A$59,649) and Western Australia (A$58,688). The lowest is Tasmania at A$35,253 - but even that state heads off New Zealand on A$33,682.

Those low incomes are driven off the low wages are paid here, which have acted as an incentive to keep manufacturing exporters here.

But there's problems ahead. Each week, about 700 Kiwis join the exodus to Australia.

If companies want to stay here and develop high-growth technologically advanced industries to replace the departing manufacturing base, they will be hard-pressed to compete for highly-skilled labour.

Other figures presented to the forum suggest that a million New Zealanders now live offshore - roughly 20 per cent of our population.

Australia, with a population of 20 million, has just 800,000 offshore.

While Australia turns to our highly-skilled people to fill gaps, New Zealand's ethnic mix is changing as we turn to the rest of the world to cover shortages. The business implications from this are profound.

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10436710

rmbbrave
30-04-2007, 10:55 AM
Property prices have gone up a lot but rents have gone up only a little. Therefore the yields have gone down.

Barfoot & Thompson's average weekly rent remained almost static last year, moving from $348 a week in January to $359 at the end of the year.

Auckland property management firm Crockers said average median rents for three-bedroom houses had risen nationally from $252 a week in 2003 to $295 last year. Auckland rents rose in line with the national trend in the three-year period. Ponsonby rents rose from $549 to $555, Papakura $264 to $298, Mission Bay/St Heliers from $496 to $516 and Takapuna from $410 to $452.

http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10436857

rmbbrave
30-04-2007, 07:22 PM
After the property goldrush

Property has become the no-lose investment. That's what they thought in Sydney, too - before their property prices crashed. Ruth Laugesen reports.

Tony Mattiuzzo has seen the carnage of a property crash first-hand. As a real estate agent in Sydney's western suburbs, he has to give vendors the gut-wrenching news that they must swallow huge financial losses if they want to sell the home they spent every last dollar on.

"I have seen price drops of $50-$60,000, in some cases up to $100,000, because the prices were over-inflated when they purchased the property two years before," he says.

In one notorious example, a three-bedroom brick-veneer house in the suburb of St Clair sold for just $260,000 last year - down about 42 per cent from its last sale at $450,000 in 2003.

The house was worth less than the $405,000 mortgage.

In New Zealand, property mania is pushing prices to dizzying new highs. Many buyers here seem convinced property is the no-lose investment where prices can only go up.

But just across the Tasman is evidence not only of how painful it can be when property prices fall to earth, but also of what the warning signs are of a dangerously over-heated market.

Like New Zealand today, Sydney had a red-hot property market in which price gain followed price gain. Prices rose one-third from 2002 to 2004.

But in the long slump that followed, prices across the city fell an average of 10 per cent and up to 40 per cent in some areas. Across the whole of New South Wales, residential prices have fallen by an average of 10 per cent since 2004.

Even now, signs of recovery in the market have been followed by more retrenchment. In the latest quarter, prices in Sydney have fallen an average of a further 1 per cent across the city.

Observers say before the crash, prices had lost all touch with reality. Suburban mum and dad investors were taking on staggering debts in order to buy multiple rental properties to ride the property rollercoaster.

The market had begun to slow in early 2004. Then the New South Wales government announced a 2.2 per cent property vendor tax aimed at taking the heat out of the property market.

Doubts about the Sydney property market crystallised. The bubble burst. When the government lifted the tax again within a year, it was too late. Investors fled to other states, where prices have continued to boom.

Property consultant and investor Olly Newland, who has ridden out 40 years of property price fluctuations in New Zealand, says there are lessons for Kiwis in the Sydney crash.

He believes the property market here is so overheated that it may take only a single event for a rush to the exits here too. That event could be anything from an interest rate rise, to a change in the tax treatment of investment properties, to a sudden drop in migration, or a downturn in the economy.

In Sydney, bankruptcy advisory Geoff McDonald of consultancy Hall Chadwick says ordinary couples from the western and southern suburbs have been among those who have gone broke in the price crash.

"These are mums and dads who got caught up in the excitement of a very buoyant property market," he says.

Many fell victim to peer pressure, and borrowed against the rising value of their own home. Those who fell hardest had bought multiple rental properties, all running at a loss in order to gain tax advantages.

Once property values fell, some investors were left holding properties with mortgages that were 40 per cent higher than the value of the property.

"They just didn't have the cash to keep paying the highly geared loans," said McDonald.

Price falls have been worst in the working class and middle class suburbs where the mum and dad investors lived, because they tended to buy in their own neighbourhoods. And when they came to sell their rental properties, that helped push prices down further.

"It had become so pricey, that in one or two years, people had doubled their money," says Mattiuzzo. "People that purchased right at the tail

rmbbrave
09-05-2007, 08:59 AM
House prices 'overvalued by 20pc'
After a big jump in interest rates, house prices for investors are overvalued by about 20 per cent, Westpac says.

The bank expects the housing market to cool down "on all fronts".

Westpac economist Dominick Stephens said that if fixed-term mortgage rates remained high for a long time they would have a "big impact" on the housing market late this year and next year.

The "investor value" of an average home is about $65,000 less than present market prices, after an extremely sharp jump in fixed mortgage rates this year from 7.9 per cent in February to 8.6 per cent for five year terms, Westpac says.

The average median selling price is $343,500, but the Westpac report suggests the current value for an investor is only $278,000 - and that is based on conservative assumptions on interest rates and a rise in rents.

The investor value of $278,000 on average is calculated using a five-year fixed mortgage rate of 8.5 per cent, though advertised fixed mortgage rates for two years are about 9 per cent. A higher interest rate would imply a lower investor value.

The calculation also assumed a 2 per cent increase in rents in the six months to June and a long-run average capital gain of 6 per cent a year, though Westpac expected house prices to stagnate next year.

"Houses are now selling for much more than they are worth to property investors," Mr Stephens said. The numbers "don't appear to stack up for investors", though the figures did not mean investors would immediately start selling for as little as $278,000 for an average house.

The lack of return for investors would remove one element of demand, especially at the lower end for investment property and first homes.

It is unclear how big a part of the market investors make up, but they could borrow up to a third of all home loans. There would be a notable absence of new investors from the market and house sales volumes would slow down, Westpac said. High prices and high mortgage interest rates were also tilting people toward renting instead of buying.

"On all fronts the housing market looks set to cool," Westpac said.

Rents are expected to rise, but renting remained a cheaper option than trying to pay off a mortgage.

Westpac argues that the recent boom in house prices is not a bubble. Rather, property was seriously undervalued in 2001 to 2004 by about as much as prices are overvalued now. Prices caught up with the "true value" only in the last couple of years.

The investor value of a home of $327,000 at the end of last year compared with a selling price of $328,000, indicating prices were fair value.

http://www.stuff.co.nz/print/4052618a13.html

rmbbrave
11-05-2007, 08:58 AM
Record-high job figure sparks migration call
Many more people found a job in the past three months, taking employment to a record high of more than 2.1 million, sparking calls for increased migration to fill the demand for workers.

http://www.stuff.co.nz/print/4055056a13.html

Wellington Regional Chamber of Commerce chief executive Charles Finny said there should be "immediate measures" to tackle labour shortages faced by business, with a strong demand for workers.

The chamber's latest survey of employers shows they are finding it harder to get both skilled and unskilled staff.

"Employers still want to take on more people - the problem is that they are just not out there," he said.

Economists said the growth in part-time jobs might reflect the fact that it was hard to find fulltime workers in such a tight job market.

Mr Finny said immigration rules needed to be relaxed urgently to meet the demand for workers.

boatie
11-05-2007, 03:58 PM
Quote :

Wellington Regional Chamber of Commerce chief executive Charles Finny said there should be "immediate measures" to tackle labour shortages faced by business, with a strong demand for workers.

The chamber's latest survey of employers shows they are finding it harder to get both skilled and unskilled staff.

"Employers still want to take on more people - the problem is that they are just not out there," he said.

Economists said the growth in part-time jobs might reflect the fact that it was hard to find fulltime workers in such a tight job market.

Mr Finny said immigration rules needed to be relaxed urgently to meet the demand for workers.

*****All this is true only by accepting the large numbers of NZ residents on welfare or otherwise not working in productive jobs - and waiting to be supported by those in existing jobs plus they assume by the new migrant workers - if they work. Many quickly suss out the possibilities. The crime,drugs, etc etc which will only continue to spread throughout NZ - and the cost of bureacracy/police/legal/courts/victims/insurances/loss of protections etc caused by it - will swamp any perceived benefits of immigrating those to do the work.. but unfortunately this not a concern if you live in Bolton St or Thorndon. Nearest Gang house ?

rmbbrave
11-05-2007, 09:46 PM
A Portsmouth pensioner is claiming a record after living in the same house for 96 years. Alex Baker has stayed in the two-up, two-down terrace since he was born there in 1911. When he spent his first hours there, the Titanic had yet to sail and World War I was still three years away. The house, bought for £130, is now worth £130,000 - but Alex laughed off the idea of ever cashing in. He told the Mirror: "This house has always been my home, so why would I ever want to leave?"

http://www.nzherald.co.nz/column/story.cfm?c_id=702&objectid=10438956


Assume the house was bought for 130 pound in 1911 - it doesn't say - now worth 130,000 pound.

From 1911 to 2007 the average yearly price increase has been 7.5%.

lakeside
12-05-2007, 06:48 AM
7.5 % Makes SLFP goal of 15% per annum look good. They develop property & do finance too.

1/3 property, 1/3 loans 1/3 cash would be a good long term conservative balance.

Then again 1/3 Nickel & Uranium, 1/3 oil and 1/3 warrents & CFTs if you are in a hurry (to get rich or poor!)

Makes the super funds eg AMP 4-5% returns look pretty slack.

rmbbrave
19-05-2007, 10:23 AM
quote:Originally posted by aspex

Winston is on the case!!!

http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10439006

Mr Peters said Reserve Bank Governor Alan Bollard was hamstrung by an act "that is paranoiac about one thing, inflation, to the detriment of other factors which make a sound economy".
"There are other ways of addressing the issue of inflation," he said.

"I mean, is it necessary to bring in 48,000, 50,000 immigrants a year, regardless of their quality, regardless of whether they're aligned to jobs?" he asked reporters shortly after delivering a speech in Wellington.
Immigration was an "important factor" in the debate and people should "not avoid the obvious", Mr Peters said.



Winston is on the case and as per usual is talking crap.

"In the past 12 months, about 82,000 new migrants arrived in New Zealand, while 71,000 people left permanently - the balance between the two figures is the net migration gain."

http://www.stuff.co.nz/4064615a13.html Migration dip may cool house prices

Some of that 82,000 are NZers coming home, lets say 30,000. The other 50,000 are foreign migrants. Without them NZ's net migration would have been minus 40,000 in the last year.

rmbbrave
20-05-2007, 08:14 PM
Without immigrants the health system would be in even more of a shambles.

http://www.stuff.co.nz/4066346a10.html

80pc of new doctors foreign

More than 80 percent of the doctors newly registered in New Zealand each year are overseas-trained.

The stunning new figure highlights the continuing haemorrhage of Kiwi-trained doctors from the New Zealand health system - up to 30% of graduates are lost overseas within five years of qualifying.

rmbbrave
25-05-2007, 09:59 AM
Business after baby-boomers

The economy's health depends largely on medium-sized businesses passing into the hands of young and ambitious new owners and managers when their baby-boomer founders retire, says the ANZ National Bank.

The bank, which yesterday released its first annual survey of mid-sized or larger privately owned businesses, said the boomers' approaching retirement could have a profound effect on the sector.

ANZ National Bank chief executive Graham Hodges said the demographic shift, which would see a sharp jump in the retirement age population between 2006 and 2016, was often mentioned in relation to superannuation and savings issues.

"There has been less discussion around what that change in the demographic cohorts is going to do to business. This survey gives a feel for what's going on in the minds of the sector."

ANZ National corporate and commercial banking managing director Nigel Williams said the bank's Privately Owned Business Barometer found that just under half of main business owners of larger, privately owned companies were looking to retire over the next five years, but only about 10 per cent had formal plans for how they were going to get out of their businesses.

"If owners don't manage this well, the inherent wealth in their business might be a lot less when they come to exit than what they currently think it is," said Hodges.

Owners might choose to stay longer in their businesses but, having achieved a degree of comfort, would tend to be less aggressive in their investment and expansion plans and would perhaps focus on conserving the value of their business.

Williams said ANZ National believed owners should consider how to release capital or reduce their involvement while allowing a new group of management or owners to take the company to the next level.

"It is incredibly important that the next set of owners and management of these companies are successful in growing them.

"If they don't then we'll compromise New Zealand's growth," said Williams.

"We won't have these mid-sized companies become big companies."

The numbers

New Zealand's medium-sized businesses:

* 3500 firms employing 30,000 people with annual revenues of about $11 billion.

* 89 per cent are more than 10 years old, 35 per cent are more than 30 years old.

* 66 per cent of shareholders are over 50, one third are over 60.

This is something I hadn't thought of !

I'm pretty sure the value of property and shares will fall as BB's sell those assest to fund their retirement but this articlesays that the value of privately owned businesses will fall too.

My fathers neighbour runs a wedding dress shop and has been trying to sell it for years so he can retire. Unfortunately no one will buy it from him for a good price.

moe
25-05-2007, 12:52 PM
Off to Oz: 600 Kiwis leave a week


More New Zealanders are leaving the country – mostly to Australia – and fewer are returning, according to a new Government report.

The Department of Labour's report on permanent and long-term migration issued yesterday showed the number moving to Australia has reached 615 a week, compared to 578 on average last year.

It said the trend over the last four months had resulted in the first drop in migration inflows since October 2005.

The National Party seized on the data in Parliament in debate over budget legislation, saying last week's Budget, which did not deliver income tax cuts, would see more people "vote with their feet".

"It's a city the size of Gisborne being wiped off the New Zealand map in the space of one year," National spokesman for foreign affairs Murray McCully said.

The number of New Zealanders heading for Australia rose to 32,200 in the year to March, from 30,100 a year earlier.

Immigration Minister David Cunliffe said there was no cause for real concern and Kiwis were being replaced with immigrants from other countries. "As with all such statistics they bounce up and down," he said.

"It is pleasing that there is still a positive net inflow of migrants and that New Zealand continues to make gains on the global brain exchange, where we compete with many other countries.

"I don't remember Sir Robert Muldoon for much, but I do recall he had an amusing line about Kiwis who move across the Tasman."

Muldoon said Kiwis migrating to Australia raised the average IQ in both countries.

The Labour Department report showed net migration inflows fell to 12,100 in the year to March, a drop of 2700 from a peak in December. Before that migration had been rising.

"The recent decrease in net migration has been driven by growing departures, particularly of New Zealanders, as well as fewer New Zealanders returning from overseas," the report said.

In the year to March, there was a net inflow of 38,300 non-New Zealanders. "The increase in non-New Zealand citizen arrivals has been driven mainly by increased arrivals from Asia," the report said.

Arrivals from South-east Asia were particularly strong, soaring 71 per cent to 6300. The number of Kiwis returning fell to 23,700 in the year to March, from 24,200 in the previous 12 months. The report said there had been a change in the last year in the origin of those moving to New Zealand, with traditional sources like Britain and Australia on the decline.

National spokesman on immigration Lockwood Smith said: "To be losing good New Zealanders to Australia, Europe and the Americas, and to have to survive by having more Asian people come to New Zealand is a little bit troubling."

rmbbrave
27-05-2007, 10:58 AM
How does racist Lockwood Smith know that the Asians replacing the fleeing NZers aren't as good as the people leaving.

The business migrants each carring a million plus are surely better quality. Many of the others would be better too otherwise they would fail to get the points.

They have to compete against Europeans (Poms, Dutch, etc) to get those points too.

lakedaemonian
27-05-2007, 12:14 PM
quote:Originally posted by rmbbrave

Business after baby-boomers

The economy's health depends largely on medium-sized businesses passing into the hands of young and ambitious new owners and managers when their baby-boomer founders retire, says the ANZ National Bank.

The bank, which yesterday released its first annual survey of mid-sized or larger privately owned businesses, said the boomers' approaching retirement could have a profound effect on the sector.

ANZ National Bank chief executive Graham Hodges said the demographic shift, which would see a sharp jump in the retirement age population between 2006 and 2016, was often mentioned in relation to superannuation and savings issues.

"There has been less discussion around what that change in the demographic cohorts is going to do to business. This survey gives a feel for what's going on in the minds of the sector."

ANZ National corporate and commercial banking managing director Nigel Williams said the bank's Privately Owned Business Barometer found that just under half of main business owners of larger, privately owned companies were looking to retire over the next five years, but only about 10 per cent had formal plans for how they were going to get out of their businesses.

"If owners don't manage this well, the inherent wealth in their business might be a lot less when they come to exit than what they currently think it is," said Hodges.

Owners might choose to stay longer in their businesses but, having achieved a degree of comfort, would tend to be less aggressive in their investment and expansion plans and would perhaps focus on conserving the value of their business.

Williams said ANZ National believed owners should consider how to release capital or reduce their involvement while allowing a new group of management or owners to take the company to the next level.

"It is incredibly important that the next set of owners and management of these companies are successful in growing them.

"If they don't then we'll compromise New Zealand's growth," said Williams.

"We won't have these mid-sized companies become big companies."

The numbers

New Zealand's medium-sized businesses:

* 3500 firms employing 30,000 people with annual revenues of about $11 billion.

* 89 per cent are more than 10 years old, 35 per cent are more than 30 years old.

* 66 per cent of shareholders are over 50, one third are over 60.

This is something I hadn't thought of !

I'm pretty sure the value of property and shares will fall as BB's sell those assest to fund their retirement but this articlesays that the value of privately owned businesses will fall too.

My fathers neighbour runs a wedding dress shop and has been trying to sell it for years so he can retire. Unfortunately no one will buy it from him for a good price.


You bring up a VERY important point.

I've been working on this myself for the last few years, selling up one business late last year while the valuation was high.

One important consideration is that banks and commercial lenders will have to become comfortable with lending against cash flow as opposed to just assets.

Younger folks, if they have any hope of buying out the baby boomer businesses, will need to have lenders willing to look at sustainable businesses in a different light.

Traditional asset based commercial lending will have to shift somewhat towards cash flow based lending(because young folks are broke) if there is any hope of unlocking boomer capital tied up in small/medium sized businesses.

Otherwise, the intangible value of small/medium sized businesses will be destroyed.....hurting boomers, but potentially making for great opportunities for those cashed up :D

NZ is STARTING to see cash flow based lending with major franchises, but it will ta

rmbbrave
11-06-2007, 12:44 PM
If you think immigrant are going to hold the price of your investment properties up - think agian. There is lots of competition now for quality immigrants from countries with alot more to offer than NZ.

NZ loser in international race for skilled migrants

By Lincoln Tan

When I went to Taiwan last year, I met a few men who called themselves ex-Kiwis.

In Taiwan, they were highly qualified in their fields, and were citizens of both New Zealand and Taiwan. But they told me that when they were in New Zealand, they struggled to find employment. Without a means to earn a living, they had no choice but to return to Taiwan.

Then, I shuddered at the thought of moving back to my country of origin. But a week back in Singapore and looking at the opportunities around me, I am very tempted to do just that.

A far cry from the country in financial crisis that I left for New Zealand, Singapore is now booming. Business opportunities and jobs are plentiful. New developments are happening everywhere - two big casinos, a Universal Studios theme park and even a giant ferris wheel.

Moves to attract more overseas investment dollars have been intensified and the feeling is the economy is set to move rapidly upwards. To help fuel its economic growth, Singapore has set its sights on bringing in skilled migrants and investors - setting a target to grow its population by two million.

This move would pose a challenge to New Zealand in the face of competition for skilled immigrants, Minister for Immigration David Cunliffe said last week.

Singapore, with a population and living standards similar to our own, had announced plans to increase its population to 6.5 million by targeting skilled migrants from countries including New Zealand, he said.

That is the kind of challenge we are up against. But is New Zealand's response to the challenge of overhauling its immigration policy and laws enough to lift it to meet this global challenge to draw the best and brightest to our shores?

Changes to the investor and skilled migrant categories for entering New Zealand still carry the same mark of arrogance. The focus is mainly on what the immigrant can give to New Zealand and not vice versa - a stark contrast to Singapore's drive, where the focus is on what the country has to offer to investors and skilled migrants.

New Zealand and Singapore differ greatly in the way they view immigration and they way they treat their investor and skilled immigrants. For example, Singapore values international work experience. Singapore employers see overseas work experience as an asset. Such experiences count for nothing in New Zealand where most employers continue to view Kiwi experience as the only skill that would make someone employable.

So as employment doors continue to get slammed on skilled immigrants here, many are finding new opportunities elsewhere where they feel valued and able to contribute. In a trip to Jakarta last week, I met a Dutch engineer with New Zealand residency who moved there because he couldn't find employment in his field back in Auckland.

While New Zealand has immigration requirements such as a high level of English to deter immigrants from Asia, Singapore has been eyeing the investment dollars of the newly affluent Chinese, Indians and other Asians.

The Singapore Government has been busy forming alliances with its ethnic communities to help break into new markets and promote ties with their home countries. The Straits Times last week reported how Singapore was working with the Arab Association helping with a push into the Middle East and to help promote the perception the country was Arab-friendly.

In New Zealand, ethnic community groups are often sidelined, and politician involvement is often limited to attending cultural events and delivering speeches. There is no working partnership to push New Zealand abroad.

Looking at the multi-pronged approaches to wooing immigrants and investors made by a country like Singapore has left me wondering if a change of policy alone would be sufficient to mak

Bel
13-06-2007, 09:10 AM
Great, singapore can look after it's citizens by opening it's door to foreign nationals who want what they've got the easy way. Then in a few decades they can pass one child only laws or some such since there won't be any land left for its own citizens to raise families.

I love short term views. Protecting the lifestyles of it's citizens is obviously not what the role of the Government, rather it's better to earn extra $$$

The Doctor
16-06-2007, 09:45 AM
sounds like buying a 'holiday home' in Otara...who/why would you?

moe
16-06-2007, 10:13 AM
quote:Originally posted by aspex

Watch for the Asian migrants who have their NZ citizenship,go off to Oz where they can live forever without paying any tax on their NZ income (except for perhaps 2% held back by IRD)
This is totally tax free in Australia so $2m at 7.5% is $150k less a nominal $3k tax.
That should relieve the housing market once it starts.



Is this on any NZ income Aspex,eg: rental income? So if you are a NZ citizen but residing in OZ(and are an australian for tax purposes) you don't pay any tax on income generated in NZ?

Thanks

Moe

rmbbrave
17-06-2007, 10:20 AM
Housing now a tenant's market
5:00AM Sunday June 17, 2007
By Rebecca Lewis

Rents are failing to keep pace with surging Auckland property prices, creating fears of both rent rises and of landlords not bothering to invest in rental properties.

While property prices in the city increased 17 per cent in the 12 months to April, Crockers' latest market research shows rents for two- and three-bedroom Auckland properties rose only 4 per cent in the same period.

"The yields are decreasing - it is a serious problem," Crockers marketing manager Karen Coleman said. "More and more people are needing to rent, but there are fewer people who are able to buy in order to rent - at some point, rents may have to dramatically increase."

Serial investor and property guru Olly Newland said investors had less of an incentive to buy rental properties.

"You would only be getting about a 3 per cent return on value, which is just unacceptable.

"If people could pay double the amount of rent, it would be worth it for everyone, but of course, most people can't afford to do that."

Experts say it is unrealistic to expect rental values to keep up with property prices.

http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10446200

lakeside
20-06-2007, 06:26 AM
All in the news today that Micheal Cullen and IRD want to stop investors claiming back rental losses on their salary.

This could have a big effect on the housing market. There are a lot of people been doing this - especially on new propertys with depreciation but also older yield ones.

The question is how long will it take to find another way around whatever legislation they come up with. Also if Labour need National to pass it.

rmbbrave
23-06-2007, 10:32 AM
Speculators on the prowl

By Anne Gibson

Speculators are hunting Auckland's urban fringes for landbanking deals. Like bounty-hunters riding the boundaries, groups of millionaires and wealthy migrants are looking to lock away land on the city's rural outskirts for big gains.

In one case, landbankers are being enticed to buy a large block of Papakura land being marketed as "strategic".

The rambling rural block on Auckland's outskirts lies on the rural side of the metropolitan urban limit that ringfences the city from the countryside.

"Rarely does a significant land holding of 35ha which borders an industrial estate become available for sale," said agent Shane Snijder of Bayleys, who is selling the land owned by two brothers. A third brother is selling an adjoining 15ha.

Tenders closed on Wednesday.

"Don't miss this land bank opportunity," Mr Snijder said in advertising the property.

Rex Gazzard of Bayleys Papakura said landbanking was rampant around Auckland's outskirts and savvy investors could easily double their money in a couple of years if they bought the right blocks.

This week's parliamentary inquiry into housing affordability heard a clamour of submissions pleading for urban limits to be lifted and more sections freed up for subdivision around the fast-growing Auckland.

Demographia, which publishes an annual housing affordability survey, the Property Council, which represents investors, and the Master Builders Federation all called for urban boundaries to be lifted.

Some criticised the Auckland Regional Council for restricting land supply.

Because land is the single most expensive component in housing, they all argued that freeing up more sections would help ease the country's housing crisis.

But the ARC's submission counterattacked, hitting out at those wanting Auckland to sprawl into rural-zoned areas.

The city had more than enough urban land and sensitive rural and coastal areas must be protected, it said.

Mr Gazzard said landbankers knew it was possible to make a fortune by buying strategic blocks on Auckland's perimeter.

Wealthy migrants from China, Taiwan and Korea were particularly active, hunting for those opportunities, he said.

"But they don't like tenders. They prefer to negotiate one-to-one rather than compete against others," Mr Gazzard said.

Wealthy investors such as millionaire Hugh Green, on the National Business Review Rich List at $190 million, own more than 1000ha around Auckland's outskirts but he bought it as farmland three decades ago.

Mr Gazzard said rural land on the city's southern outskirts went for around $16,000 a hectare but land-bankers were offering double or more in many cases because they knew the potential gains were huge.

Wealthy South Aucklanders - particularly the Urquhart and Yates families - held strategic blocks but these families were third and fourth-generation land owners, he said.

Pukekohe farmers could also be regarded as landbankers.

"Farmers are landbankers in a way," Mr Gazzard said.

Rick Martin, the North Shore developer and property owner, said he could not afford to landbank because land prices and interest rates were so high.

Martin has large holdings at Albany, Silverdale and Waimauku.

GIVE ME LAND

* Auckland has 559sq km or 55,933ha of land within its metropolitan urban limits.

* Auckland Regional Council says this is enough for 16 to 25 years of demand.

* It estimates 44 years of capacity outside the limits to meet demand for rural lifestyle lots.

* Since 2001, consents were granted for 52,000 new houses within the city's limits.

* That was 60 per cent up on the number of new housing consents from 1991 to 1996.

* Wealthy landbankers are scouting the city's fringes to buy blocks for big profits.

* They are counting on councils expanding the limits and re-zoning the land for houses.

NZ's population is expected to go into decline from around 2046 so the 44 years of capacity for lifestyle blocks should be more than enough.

16-25 years of capaci

rmbbrave
24-06-2007, 09:38 AM
Auckland house prices overtake Australia's big cities'
5:00AM Sunday June 24, 2007
By Julie Jacobson

Median house prices in Auckland are now outstripping those in all of Australia's major cities, except Sydney and Perth.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10447536

Averaging it out

Australian property prices (A$):

Adelaide$302,000
Brisbane$345,000
Canberra$395,000
Hobart$294,000
Melbourne$380,000
Perth$455,000
Sydney$516,000

Auckland property prices (NZ$):

North Shore$535,000
Waitakere$378,113
Manukau$433,250
Auckland City$492,000
Papakura$317,500

rmbbrave
24-06-2007, 09:45 AM
NZ house prices are a bubble waiting to burst.

The Ockers have higher wages, better weather and cheaper houses. And NZers can move there to take advantage of these.

If you are thinking with your wallet why stay in NZ?

Halebop
24-06-2007, 10:26 AM
I started browsing the various property related stories linked to the one above.

Unsurprisingly, an investor group "rejects" capital gains tax as it has failed to work in Australia where "property prices are higher", an interesting take from someone accusing the RBNZ of "peddling popular myths"...
http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10446337

Something that is quite clear is that wage growth has not matched house prices, despite both being in boom conditions for the last 6 years. Nobody really needs the CTU to tell us that I imagine...

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10446401

Hugh Green, credited for his land banking success (I suspect he'd describe himself as a farmer), suggests supply of land is not going to fix much...

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10447363

...and someone on the reserve bank thread suggests high house prices is attributable to a shortage of houses, never mind macro economic indicators like cheap and abundant liquidity, Baby Boomer demographics inclined towards real estate (especially compared to share investing where 1987 is still obviously a culture defining event for them) and at the peak of their earning (and borrowing) prowess, a tax system that does indeed skew the investment framework*, a balance of payments deficit funded by low local ownership of corporates and high local exports of interest payments (apparently this isn't inflationary?) and a monetary policy and economic framework that have demonstrably restrained inflation except where we can't easily substitute (like housing, major construction inputs, health care workers etc).

* It's flawed to compare housing investment as level pegging with business owners on the tax front. How many business owners claim depreciation on appreciating plant and equipment? Most housing investors earn income from a wage, salary or business drawings and use the rules on deductions to ensure they reduce their taxable income, but obviously not their net wealth position. A business owner has no such luxury as his plant, be it a sawmill, printing press or beer fridge, does in fact depreciate and is required to generate free cash flow to pay for his earnings and tax bill.

...but good luck to those who say rent increases will save them from high interest rates or "punitive" taxes. From the multiples it's clear there is only so much money that can be extracted, so the young couple earning $68,000 gross a year is not going to cough up an extra $10k to meet your post tax mortgage servicing costs. We can argue the reasons back and forward but Property prices are simply ahead of themselves.

tricha
25-06-2007, 08:52 PM
Rmbbrave - "NZ house prices are a bubble waiting to burst.

The Ockers have higher wages, better weather and cheaper houses. And NZers can move there to take advantage of these.

If you are thinking with your wallet why stay in NZ?"

You forgot to mention lower taxes, lower interest rates and they even give u $5,000 cash for every new Ocker u have;)

But theres nothing like home and if global warming increases, no water, no food and a huge desert.

rmbbrave
26-06-2007, 09:57 AM
Tricha,

It is a bit pointless comparing tax rates because the lower the taxes the less services you get. So if you actually want these services then you have to pay yourself.

In Japan I pay about 5% income tax but I get no health cover, no pension and if I want to use the highays I have to pay tolls. If I had kids at high school that would cost me too. So low taxes = low services.

The trick is to live in 2 countries. When your young and healthy, you don't need health cover or a pension so live in a low tax country. When your old and need a pension and health services live in a high tax country.

It's a neat trick if you can pull it off.

I have never had a full time job in NZ so have never paid much income tax. But I'll be coming back for my pension and subsidized health care.

rmbbrave
28-06-2007, 10:55 AM
Child-free and single - by choice
By LOUISA GAULT - Sunday Star Times | Sunday, 24 June 2007

The paper warns that for New Zealand to retain its fertility rate, the remaining population must average 2.8 children per woman for replacement level fertility to be achieved. However, the authors concede that given social, economic and time constraints on parents, any increases in family size would seem unlikely.

http://www.stuff.co.nz/4106398a19716.html

rmbbrave
29-06-2007, 10:48 PM
But as they are choosing to be single - it seems unlikely that they will find you as fascinating as you find them.

rmbbrave
19-07-2007, 11:42 PM
Homes now more out of reach

Rising interest rates mean the more than 80 per cent of the average pay cheque is needed to pay a mortgage on an average house.

Interest.co.nz's home loan affordability index worsened in June to 81.2 per cent of pay needed to repay a standard mortgage, up from 79.4 per cent in May and well above the 68.2 per cent of income a year earlier.

Five years ago, it took 45.3 per cent of take-home pay for a weekly mortgage payment on a median house.

While weekly pay rose $28.79 in the past year, that has failed to match the rise in weekly mortgage payments for a median-priced house of $107.12, publisher David Chaston said.

Benchmark interest rates for a two-year fixed mortgage rose 31 basis points over the month to 9.22 per cent in June, as the latest Reserve Bank Official Cash Rate rise to 8.00 per cent took effect.

Most economists polled by Reuters expect the Reserve Bank to raise rates next week for a fourth consecutive time, to 8.25 per cent, as it tries to dampen inflation pressures, particularly in the housing market.

Median house prices fell 0.7 per cent to $347,500 in June, but were up 12 per cent on a year earlier.

The most affordable region was Southland at 43.4 per cent of the average pay, against the benchmark for affordability of 40 per cent. Auckland was the most unaffordable region at 104.1 per cent of income.

An average buyer would need to allocate 9.9 years of their current annual income to afford a median-priced house, up from 9.3 years in June 2006, Mr Chaston said.

"We seem stuck with an affordability crisis for a very long time unless major public policy changes are made," he said.

"Urgent actions attacking housing supply inhibitors and new-build rates are required."

The index was based on individual pay, but the reality was that most buyers relied on more than one income to buy a mortgage, Mr Chaston said. It assumed a 20 per cent deposit.

George
20-07-2007, 05:47 AM
This news item seems to be at odds to the current negative view about property.
Just like shares if everyone is saying something, the opposite may be closer to the reality.

http://www.theage.com.au/news/business/home-demand-creates-threeyear-supply-lag/2007/07/19/1184559956043.html

George
21-07-2007, 05:48 AM
Another positive view

http://www.theage.com.au/news/Business/Melbourne-property-looking-hot/2007/07/20/1184560039648.html

rmbbrave
30-07-2007, 11:30 PM
Property will double in price in decade: marketers

Could property prices continue to double every 10 years? Investment property marketers believe so, but economists doubt it.

"What you will find is a small group of people who are very wealthy owning the majority of the property and most other people will not be able to afford to own," says property author and founder of the Hybrid property services group, Kieran Trass.

"That's going to happen in New Zealand over time."

Trass is imagining how the future would look should property prices double every 10 years, a scenario those selling investment properties to mum and dad investors are telling their clients will happen.

"I think we are going back to where we came (from). Back to the days where a few landlords owned all the land in the country and other people worked but never expected to own property."

Perhaps new ways of buying into the housing market will emerge as a result of the repeated doubling of property values he and his peers predict, he says. "Maybe there will be ownership-sharing loans where the bank takes a share in the houses people buy. "Instead of owning a property, people will invest a little money in a fund which happens to own the suburb of Mt Eden, or wherever. They might buy shares in the fund for the right to live in their home, and share in the growth."

It's an image of the future to which most New Zealanders would react with horror; the antithesis of the Kiwi dream. It raises the spectre of home affordability getting worse until only the richest can afford property, and the rest are consigned to tenancy-slavery.

But it's the kind of New Zealand that would have to emerge, if - and it's a big if - house price growth rates pan out to be as high as investment property marketers predict.

We asked 10 of the best-known investment property sales organisations to tell us the capital growth predictions they put to investors thinking about buying properties from them.

We got answers from Hybrid Group, Key2, Safe as Houses, Catalyst2 and NZ Invest, all of which said they believed property values would double in the next 10 years, although a number said they preferred to use more conservative projections of 5% growth each year with prospective clients, rather than the 7.2% needed for prices to double.

Russell Benshaw, of Key2, said: "When we do a financial analysis with clients, we stick to a standard 5% per annum, but we do a sensitivity analysis with 6%, 7% and 8%. If we told them we were going to get them 10% per annum, they would say you have got rocks in your head because the figures would look crazy."

Nevertheless, Benshaw says he expected the properties Key2 sold to outperform the 5% figure over the next 10 years.

Benshaw predicted the market would see only flat to modest growth in the next couple of years, but would then push on again, a view shared by many, although some, such as David Orrell of Safe As Houses, which specialises in building or buying properties for investors and then leasing them to Housing New Zealand, says older hands like himself remember beyond seven years ago, when the country experienced a period of no growth which lasted five years.

But even if that happened again, those buying now and holding on for 10 years - the minimum he suggests is reasonable - would still get that doubling effect. "I haven't got one customer who wouldn't say they were glad they bought a property from me five years ago," Orrell said. "I would definitely say in 10 years' time, that'll be true of people buying today."

Like Key2, Safe As Houses uses a 5% projected growth rate.

Tanya Kwasza, of Catalyst2, says her firm uses just 4.65% capital growth rates from projections as a worst-case scenario.

NZ Invest uses a rate of 7% in projections.

Few of the firms give credence to a possible drop in prices.

But is the continued doubling of house prices possible?

Jeff Matthews from Spicers is pretty clear on that. "It just won't happen," he says. Forward projections of 7.2% per annum can be sho

rmbbrave
05-08-2007, 09:49 PM
The sh!t is very near the fan now.

Very near indeed.

rmbbrave
05-08-2007, 09:55 PM
The sh!t is very near the fan now.

Very near indeed.

Mortgage stress explosion in NZ
Soaring interest rates and house prices have triggered an explosion in "mortgage stress", with the number of households devoting more than 40% of their take-home pay to home loan repayments tripling in just three years.
Home is where the heartache is


New research for the Sunday Star-Times by economist Brian Easton shows that half a million New Zealanders are now living in mortgage stress, spending more than 40c in every after-tax dollar their households earn on the mortgage.

"There has been a sharp rise in households under financial pressure because of their burgeoning mortgage bills," said Easton.

Overall, 175,000 households, or 11.2% of all households, are in mortgage stress, in figures to June 2007. The figures represent a large swath of the mortgage-belt, as only about 30% of all households have a mortgage.

In 2004 just 3.7% of all households were in the mortgage stress zone.

Easton said while for some households heavy mortgage repayments were a deliberate part of their life financial plan, for others it was a huge strain and left little in their budget for anything else.

National leader John Key said the figures "show there's real pain out there, and it's likely to get worse over the next six months".

Mortgage brokers say new entrants to the housing market are under even greater strain, with Mike Pero Mortgages saying 50% of take-home pay is now usual for first home buyers. Some are even committing 60% of their after-tax income to repaying a home loan.

"Increases in income haven't kept pace with property price rises and the cost of finance," said Mike Pero Mortgages franchise owner Matthew Mark.

Last week the international credit ratings agency, Fitch Ratings, ranked New Zealand as the world's riskiest housing market, with our prices among the world's most over valued.

In a survey of 16 developed nations, Fitch also ranked New Zealand households second only to Denmark for their debt vulnerability. With its high interest rates, New Zealand also had the worst interest to income ratios in the survey.

Key said about one-third of mortgages are due to be renegotiated over the next six months on higher levels of interest.

"That will really bite in at homeowners. Homeowners are paying the price for Labour's economic mismanagement," Key said.

He said heavy government spending was helping fuel inflation, thus forcing interest rate rises. Reserve Bank governor Alan Bollard hiked the official cash rate two weeks ago, the fourth rise in a row, pushing some floating rates up to 10.5%.

And Key said real estate agents were telling him some property owners were being forced to sell their homes and downsize in order to cope with their mortgage repayments.

Acting Finance Minister Trevor Mallard said some financially stressed families would be being helped by the Working for Families package, which would not have fully kicked in over the time period of the research. And KiwiSaver was just coming in now.

"We do recognise that home ownership has been a big part of New Zealand's national identity which we don't want to lose," he said.

"Having said that, we are definitely worried about the increasing appetite for debt by New Zealand households in recent years. The so-called `wealth effect' from rising house prices means people have felt wealthier and been prepared to get into greater debt."

Mallard said the government was likely to announce new policies later this year aimed at tackling housing affordability, with help for young families purchasing their first home, and policies that would increase the supply of affordable homes.

Mallard rejected National's suggestion the government was to blame for the high interest rates.

"What has brought about higher interest rates has overwhelmingly been the strength of domestic consumption, not government spending and we may start to see interest rates come down if inflationary pressures ease.

"We've got one of the lowest rates of unemployment in the developed world - this is a great result, but it does put pressure on inflation," Mallard said.

rmbbrave
05-08-2007, 09:58 PM
The sh!t is very near the fan now.

Very near indeed.

Home is where the heartache is
Mortgage stress is rising fast in New Zealand's suburban heartland. Ruth Laugesen reports on the high price of home ownership.

On the surface, Lily and Andrew seem like exactly the sort of couple who can carry heavy, heavy mortgage debts and survive.

After two years of angst and indecision, Lily and Andrew recently threw themselves into the Queen City's hot, hot housing market, buying a wooden bungalow in middle-class Sandringham for almost $600,000.

Now each month the bank takes the lion's share of their pay packets. The late-30s couple pay $5000 to the bank, more than half their after-tax income.

Andrew and Lily have joined the 18&#37; of all New Zealand households who may be experiencing mortgage servicing difficulties or mortgage stress, according to an analysis for the Sunday Star-Times by economist Brian Easton.

Are this couple stressed? They don't look it. They earn well, are good with money and never went out much anyway.

But probe a little deeper and you find the real sacrifice they made, painfully submerged. The costly item that has had to be pruned out of their budget is a baby. They don't know when they will be able to afford to have children.

"If we didn't have this mortgage, we'd be thinking about having a baby this year. But we certainly can't afford it. The reality is you have to have a dual-income household," says Andrew.

Their awkwardness and sadness about this means they do not want their real names used for this article.

Easton's new research gives a glimpse of the hidden strains such as these emerging in the suburban mortgage belt as towering house prices, coupled with savage interest rate rises, begin to hit home.

Easton used latest Reserve Bank figures on household borrowing to June 2007, combined with Statistics New Zealand data from the 2004 Household Economic Survey.

The figures make for sobering reading. In 2004, 3.7% of all households were paying more than 40% of their take-home pay in mortgage payments. But in just three years, that proportion has tripled - to 11.2% of all households. This is a fair swath of the mortgage belt - remember only around 30% of all households actually have a mortgage. The rest rent or have paid off their homes.

These are households living in a state of "mortgage stress", a level of debt that gobbles up an onerous amount of after-tax income for debt servicing.

The numbers living in mortgage stress have risen from 56,000 to 175,000 households in a three-year period. That's over 100,000 extra households in this position in just three years.

A sea change of this kind in the mortgage belt carries with it real political dangers. In Australia, mortgage stress has become a growing issue ahead of this year's general election, with Prime Minister John Howard accused of presiding over interest rate rises and soaring house prices.

Here, interest rates have risen sharply too, and are now well over 10% for many floating rates. Two weeks ago Reserve Bank governor Alan Bollard put the squeeze on mortgage-holders again, with his fourth interest rate hike in a row.

So what is a fair measure of mortgage stress?

In Australia, 30% of gross income is widely used as a benchmark for mortgage stress. To come up with a roughly equivalent figure with data available here, Easton used a benchmark of 40% of disposable income, or income after tax.

He says thresholds for what causes financial strain will always be a matter for sharp debate.

"Certainly they involve judgements, but any reasonable alternatives would lead to the same conclusion. There has been a sharp rise of households in financial distress because of burgeoning mortgage bills," says Easton.

He says the figures should be interpreted with caution, as some of those experiencing stress will be couples or single adults more able to cope with debt. And some families will be better off from April this year when Working for Families payments were increased.

On the other hand, he says, the figures don't include the high consumer debt repayments many households are also carrying on top of their mortgages.

In fact, New Zealand's own homegrown measure for housing affordability would cast the net much wider than the Star-Times measure of mortgage stress. The Ministry of Social Development's annual Social Report uses housing costs of more than 30% of disposable income as a benchmark for housing affordability problems. In this band, not all households experience strains, but low-income households are at particular risk of running into difficulties.

By that measure, Easton's figures suggest 18% of all New Zealand households are living with either affordability difficulties or mortgage stress. That amounts to 265,000 households and 750,000 people.

Kiwibank chief executive Sam Knowles says he believes that when repayments start hitting 30-40% of disposable income, "those kind of ranges are where you start to hit stress".

"There are some people who don't have other commitments, who are very good managers with their money who could go above that, and there are other people who have five kids who no way could they afford anything like that. It depends on the situation," says Knowles.

He says while once mortgage lending criteria had clear bars on how much after-tax income a couple could spend on their mortgage, now criteria are fuzzier. Past credit behaviour is now a major factor. If a couple have been scrupulous in paying back debt in the past, a bank will be happy to lend heavily.

But, he says, household mortgage debt simply cannot keep increasing as it has been doing.

Credit rating agency Fitch Ratings report that New Zealand households now rank second in the developed world for their debt vulnerability, according to a survey of 16 developed countries. With its high interest rates, New Zealand had the worst interest to income ratios in the survey.

At Kiwibank, the numbers of households falling in arrears with mortgage payments has been climbing for the past year.

"It's reached its limits, not for everyone, but clearly, that's what all these figures are saying.

"The real question you've got to ask is, do New Zealand households have the resilience to manage through this current peak of interest rates, or will we see bankruptcies and things come in," Knowles says.

He says whether jobs remain secure is the key to what happens next. "It's a very fragile situation, it's a risky situation, but it's by no means a doom situation."

For those buying homes now, chances are they will have to go well beyond the mortgage stress zone of 40% of disposable income. At Mike Pero Mortgages, franchise holder Matthew Mark says typical borrowing for new borrowers is now 50%, with some going up to 60%.

"It's becoming more common. Increases in incomes haven't kept pace with the increase in prices and cost of finance," he says.

Those levels of debt, he says, are "a little bit scary".

"It doesn't leave a lot of room for anything that's unforeseen, and in that situation we definitely advise the client to consider very, very carefully what they're looking to do," Mark says.

Retirement Commissioner Diana Crossan says the problem for many borrowers is they have little choice but to take on heavy debt.

She says in 1980 in Wellington, it would have cost a person in an entry-level public service job three times their annual income to buy a house. Now it would cost someone on the same entry-level public service job seven or eight times their annual income.

"My concern is in the long term we end up having a group of New Zealanders who can't afford to have a house. Our whole system has relied on New Zealanders getting to retirement owning a house," she says.

At budget services around the country, clients from the middle-class mortgage belt are no longer a rarity. Auckland-based Presbyterian Support budget service manager Maureen Little says one family whose bank account she manages have been brought to their knees by recent interest rate rises.

Their mortgage bill eats up more than half their $2500 fortnightly take-home pay. Their North Shore home is worth close to $500,000, with a $212,000 mortgage.

When they came to Little, their power was about to be cut off, their mortgage was $5500 behind, and they had final letters about their failure to pay insurance on the house.

"This is a couple who are relatively well off. They've had to basically lower their expectations of a social life. They basically don't have one. They go to church, they make sure their daughter gets to school, well-dressed and well-fed. They've cut back on food," she says.

She believes extra borrowing on the mortgage was this family's undoing. "Had they just left their mortgage alone, they would have been fine," Little says.

"I think there's been a real splurge on credit in the last three or four years. I've even got older people who have kept on dipping into their mortgage. And now they're getting closer to retirement age they realise with horror they still owe as much as they did 10 or 15 years ago," she says.

Little says her clients include couples earning $80,000 to $100,000. Once, says Little, a budget crisis was a symptom of poverty. Now it is just as often a symptom of consumption and heavy debt

rmbbrave
05-08-2007, 10:04 PM
A baby or a house?

What kind of life do you have if you have to chose between that?

minimoke
06-08-2007, 07:29 AM
Home is where the heartache is


But probe a little deeper and you find the real sacrifice they made, painfully submerged. The costly item that has had to be pruned out of their budget is a baby. They don't know when they will be able to afford to have children.

They could trade the house for a $350,000 in Papakura

moe
06-08-2007, 07:48 AM
Or two houses in Dunedin.

Sideshow Bob
06-08-2007, 05:28 PM
Or two houses in Dunedin.

Maybe 1 and a bit houses. Median price in Dunedin is about $260K. The average house here isn't worth that!

moe
06-08-2007, 06:29 PM
Here you go, for example.....

http://www.realestate.co.nz/573295?max_price=300000

http://www.realestate.co.nz/570232?max_price=300000

The cheaper of the two is about 5 minutes drive to the university and could be rented out easy. The other is is a allright area close to schools and golf course.

You'd get change out of $350k for these two places in Dunedin. I think Aucklanders need to cut back on the Flat Whites, cocktails and big screen tv's. Try saving some of those 6 figure salaries for a couple of years...you can't have it all now.

Arbitrage
07-08-2007, 08:26 AM
Look, housing has been a political football since adam was a cowboy. Politicians can play with policy as much as they like but the market will always win in the end.
Prices are higher in some places because more people Want to live there (hence the difference between Dunedin and Auckland). Affordability is a meaningless populist tool except that it fires up peoples imaginations and wins votes.
The market will determine affordability in the end. Prove me wrong with some real analysis please.

Sideshow Bob
07-08-2007, 05:29 PM
Why is affordibility a meaningless tool??

Arbitrage
09-08-2007, 07:42 AM
Can someone explain to me what they think it means?

Halebop
09-08-2007, 09:24 PM
Can someone explain to me what they think it means?

Arbitrage I'm sure affordability is not meaningless to the large proportion of borrowers who pay a substantial proportion of personal income just to live in a home.

I've recently moved back to Auckland after a year away in the (not so) winterless north. I'm not renting the same house that I rented when I left but there isn't a material difference in the rent I'm paying yet property values are about 10% higher (REINZ and RBNZ statistics tell me that my rent is actually around 3% higher but the house is worth around 12% more - 'course the stats are skewed by reporting what is selling rather than what your house is actually worth but it provides an indicator).

Now in any market where I've participated there is a name for low income growth and high capital growth and it isn't great fundamentals. The same trends appear when comparing house values with incomes. The trends are simply not sustainable. A well known property figure was recently quoted as saying house values will double in the next 10 years. This is easily achievable if incomes also double. A dubious value proposition if they don't. At some point in the property pyramid you need someone who can buy your 350 metres of suburban paradise. At 9% fixed rates the average Auckland house price is now costing around half the average joint medium income (pre tax!). Ask those poor sods if affordability is meaningful or meaningless?

Arbitrage
11-08-2007, 09:46 AM
Okay try this.
In the mid 1980's capital was hard to get hold of through a tight mortgage market. Therefore the ability to buy a house was difficult as the level of deposit required was much higher than it is now. Interest rates were much higher too. As capital has become easier to get hold of, access to buying houses has become easier. Does this mean affordability has got worse as they say (based only on % salary and property cost) or better? Are these variables the only relevant measures?

Halebop
11-08-2007, 06:40 PM
Check out Bob Hargreaves work at Massey University. When people quote home affordability data they are typically quoting his reports. He includes income levels, interest rates and derived capital values to determine a rating. His system wasn't around for most of the 80s so we don't know if values were better or worse.

Home affordability (measured as a percentage, higher being worse) was a terrible 55&#37; or so in 1988, bottoming out at 20% in 1992 as interest rates plummeted along with economic activity.

I would be hopeful his data quality has improved since early reports in the 90s. Affordability is now at 40%. This compares with 35% in 97 at the peak of the last property boom.

While we can suggest from his data that homes were indeed more expensive in 1988 relative to purchasing power, the outcome was also catastrophic with a recession that lasted years and resulted in the loss of hundreds of thousand of jobs (also due to some economic restructuring). Conditions are presently tighter for us than those that preceded the last mini property bust and recession, which should be enough to show caution. Few would suggest we need to get to 1988s levels to be worried, although that would indeed be reason to worry.

Arbitrage
13-08-2007, 07:33 AM
http://property-group.massey.ac.nz/fileadmin/research_outputs/HomeAffordabilityReportDec_06.pdf

rmbbrave
22-09-2007, 11:19 AM
Skills drain hits housing
Skilled Kiwi workers are flocking to Australia in the biggest rush for six years, with a net loss of almost 26,000 in the past year.

Despite the flood across the Tasman, there are still more migrants coming to New Zealand than people leaving long- term. The net gains are just a shadow, however, of the peak migration four years ago which drove up house prices. Statistics New Zealand figures out yesterday showed a seasonally adjusted net gain of 750 people in August, the biggest monthly gain this year, taking the annual gain to 8730.

The annual gain is down to levels where it is no longer pushing up house prices or consumer spending, economists said.

"The continuing easing in net migration will take the pressure off the housing market and see slower consumer demand growth, a development that will be welcomed by the Reserve Bank," ANZ Bank economists said.

The annual gain is well down on the net gain of almost 12,500 in the previous 12 months to August, and a fraction of the 42,000 net gain at the peak in 2003, which was a big factor in rapid house price rises.

The falling net migration gain reflects 5000 more people leaving for Australia than the 20,000 or so last year, with a relatively steady number of new migrants coming here.

The Reserve Bank expects net migration to get even weaker, hitting a trough of just 5000 in the first half of 2008. It remains uncertain if that will turn to a net loss next year, Citigroup economist Annette Beacher said.

House prices have been closely linked to migration for the past 50 years, with a new Reserve Bank study showing a 1 per cent increase in population from migration leads to a rise in house prices of roughly 10 per cent. During the 1970s house boom, inflation- adjusted prices jumped 40 per cent after 124,000 migrants arrived in just two years. In the late 1970s, 350,000 people left over five years and real house prices slumped 30 per cent, the Reserve Bank migration study shows.

Slowing net migration this year is expected to take more steam out of the housing market, with a big slump in sales volumes in the face of four increases in official interest rates this year.

There was a similar skills and brain drain from New Zealand which peaked in 2001, before dropping off rapidly after the September 11 terrorist attacks that year.

Ms Beacher said the brain drain in 2000 was well documented, covering all skill types from professionals to machinery operators, and there could be a repeat.

"More policy response is urgently required in this area," she said.

Net annual migration hit a recent trough in late 2005 at around 6000, under the impact of tighter immigration rules, a fall in the number of foreign students studying in New Zealand, fewer Kiwis returning home and more moving overseas. Net migration peaked in 2003 at 42,500, boosting economic growth and house prices.

rmbbrave
20-10-2007, 01:19 PM
NZ net migration slows
New Zealand's net migration is slowing, with the growth in population through immigrants dipping for the year to September.

The net inflow from permanent and long-term migration eased nearly 40 per cent compared with the year to September 2006, to 8300.

Statistics New Zealand figures showed the latest number was also more than 30 per cent less than the average net inflow of 12,200 for the 17 years since 1990.

The main source of immigration, Britain, was down on last year, with 8215 immigrants compared with about 11,000.

The Philippines provided the next largest inflow of people, 3396 arriving to live in New Zealand in the past 12 months, almost double the previous year. Filipino immigrants have increased almost fourfold since 2005.

Statistics New Zealand population analysts said the growth from the Philippines was due to unemployment in that country and opportunities here, as well as more families than individuals arriving.

Immigration from India was up by 1125 people for the year to September, compared with the previous year. More than 2400 immigrants from Fiji also arrived.

ASB Bank economist Daniel Wills said the moderating numbers would be pleasing for the Reserve Bank of New Zealand, because they would ease pressure on the housing market.

The bank would need further signs of sustained moderation in demand, however, before it relaxed its watching brief on inflation.

"The data does not alter our view that official cash rate cuts remain a distant prospect, with the first cut unlikely till late 2008."

Kiwis departing for Australia were at their second highest level for the past 10 years, with about 26,200 permanent net departures in the year to September.

The highest net loss across the Tasman since 1997 was 28,359 in 2001.

ANZ analysts said that could increase over the next 12 to 18 months, with the New Zealand and Australian economies following diverging paths.

Further declines in net migration could accentuate an already tight labour market, they said.

Dr_Who
21-10-2007, 10:05 AM
It is game over for the property investors and developers. I sold 80% of my properties when I started hearing the taxi driver, my hairdresser and everyone else talk about how much money they are making from their investment property. The sad part is that these guys still have their highly leveraged property thinking the market will always go up and wont slow.

The party is over with alot of bad hang overs to come.

rmbbrave
24-10-2007, 06:51 PM
Population growth slows as country ages
New Zealand's population is expected to grow for some time yet, but the rate of expansion will drop as the number of deaths catches up, then overtakes the national birth rate.

Statistics New Zealand projections show population growth beginning to slow, with the population peaking at just over the five million in the late 2020s but not heading any higher.

The growth rate has sat around 1.4 percent a year since 2001 but this will drop off as the number of deaths each year soars to match births.

Statistics NZ predicts births will stay at around 60,000 a year through to 2061 and net migration will remain around 10,000 per year.

In the same period annual deaths should more than double from 28,000 to 62,000, caused by a greater number of elderly due to the large number of people born from the 1950s through to the 1970s . By the mid-2020s people aged 65-and-over were expected to outnumber those aged under 15 - children currently outnumber the elderly by almost 2 to 1.

By the late 2020s footpaths could be crowded with walking frames and mobility scooters as the number of pensioners shuffles over the one million mark - on its way to about 1.4 million in the 2050s.

Arbitrage
29-10-2007, 01:00 PM
RMB and DR Who, you guys seem to think the glass is half empty when it comes to property investment. Look over the tassy and you will see rents thru the roof in sydney. Houses are less affordable and people rent longer.

Here in NZ I haven't sold property and am looking forward to the increased cahflow from higher rents over the next 12 months.

As is usual with the property cycle, property values will fall or stabilise for a while. The media will soon shreak on the front page about that and then complain about rents being too high. As yields from rents increase, property will start to look like a good buy again etc etc.

As for population growth, general stats are meaningless. Sure the population of taihape may be falling, but auckland is growing as usual. Which city do most of the immigrants go? Where are most of the students? So where do you invest in rental property? With a bit of research, the glass is half full and as usual heading for overflowing in the property investment game.

tricha
29-10-2007, 07:57 PM
RMB and DR Who, you guys seem to think the glass is half empty when it comes to property investment. Look over the tassy and you will see rents thru the roof in sydney. Houses are less affordable and people rent longer.

Here in NZ I haven't sold property and am looking forward to the increased cahflow from higher rents over the next 12 months.



So u are saying its a good time to buy property Abritrage, hmm. :confused:

With more big juicy tax cuts and all the other fruit over here in OZ :D, I'm picking there will be a stampede over here soon and it will be mainly the younger ones.
This is what will bite the NZ property market unless immigration picks up to cover it.

( Kiwis departing for Australia were at their second highest level for the past 10 years, with about 26,200 permanent net departures in the year to September.
The highest net loss across the Tasman since 1997 was 28,359 in 2001 )

Arbitrage
30-10-2007, 01:21 PM
No not a good time to buy as the yields are so low, and capital values are stagnating/falling. However, as a long term investor the predicted increase in rents is always welcome.

As for the immigration stats, yes you are right about the trans tasman movement. However many of our immigrants come from the uk, South Africa, and Asia, so the loss to Australia is offset by these. NZ population is predicted to increase and peak at around 5 million so we have a bit of time to go yet. Plus like sydney, much of the population growth occurs in nodes which benefits the local property prices. There are always markets within markets always be suspicious of generalisations which grab attention. They sell newspapers and books.

The tax cuts you mention are interesting. When I lived there a couple of years ago there were a lot of hidden state taxes that tended to offset apparent federal tax reductions. My comparative net income in NZ was actually higher than oz. Also beware of the impact of tax cuts on inflation....

rmbbrave
08-11-2007, 12:17 PM
Low unemployment is a key cause of high house price in my opinion.

And it don't get any lower than this.

Unemployment falls to record low
New Zealand's unemployment rate fell to a 20-year low of 3.5 per cent in the September quarter putting New Zealand's jobless rate among the lowest in the world.

Unemployment is down from 3.6 per cent in the June quarter, Statistics New Zealand (SNZ) said today, a fall of 2000, driven by a drop in female unemployment.

But actual employment fell by 0.3 per cent, or down 7000 during the quarter against economists' forecasts of a 0.4 per cent increase.

The number in work was 2.15 million in the September quarter, the second highest level since the survey started in 1986.

In the past three months, 6000 more people moved into part-time work, but 10,000 full time jobs disappeared.

Lower unemployment had been expected to leave Reserve Bank governor Alan Bollard deeply concerned about potential inflation, but the figures present a mixed picture because of the drop in full-time job numbers and a lower participation rate, down to 68.3 per cent, down from 68.8 per cent in the previous quarter.

The central bank had forecast unemployment to remain at 3.6 per cent, the same as the average market pick for the September quarter.

Maori unemployment remained at 8 per cent, with Pacific Islanders on 4.9 per cent, and at just 2.4 per cent for European New Zealanders.

Southland had the lowest unemployment rate at 2.4 per cent, but that was up from 2.0 per cent in the June quarter.

It was followed by Taranaki, down to 2.5 per cent from 3.9 per cent and Canterbury, down to 2.6 per cent from 3.2 per cent and Tasman/Nelson/Marlborough/West Coast, down to 2.6 per cent from 3.3 per cent.

Northland had the highest rate – up to 5.3 per cent from 3.3 per cent, followed by Manawatu/Wanganui, at 5.0 per cent from 5.1 per cent.

Unemployment in the Auckland region rose to 3.7 per cent from 3.3 per cent.

http://www.stuff.co.nz/print/4266247a13.html

rmbbrave
15-11-2007, 12:03 PM
Brian Fallow: Housing's high-water mark
5:00AM Thursday November 15, 2007
By Brian Fallow

The housing boom is over and from the standpoint of the average household's finances, it is about time.

Given how stretched the measures of housing affordability have become, it is remarkable that the boom has been as long and as strong as it has.

Over the past 10 years, the share of the average household's disposable income required to pay the mortgage has climbed from 9 per cent to 14 per cent. In Australia it is 12 per cent.

That may not sound like much but it is an average across all households, two-thirds of which either rent or have paid off the mortgage. The burden on the third which have mortgages is correspondingly higher.

And it is 14 per cent of the average household's combined after-tax income, not the average person's income.

Debt has been rising significantly faster than the incomes from which it is serviced.

The ratio of household debt to disposable income has risen from 90 per cent in 1997 to 160 per cent now. It is 140 per cent in Australia.

The average house price has climbed to six times the average household disposable income (Australia is 5.7 times).

"While a range of factors may have driven this," the Reserve Bank says, "some of which may not be expected to reverse, its rapid climb strongly suggests that house prices may be overvalued leading to a correction at some point."

To return the ratio to its long-run average of 3.4, incomes would have to rise by 80 per cent while house prices flatlined, or house prices would need to fall by 44 per cent.

Meanwhile, rental yields have been falling even as interest rates have been climbing.

The weighted average mortgage rate is now twice the average gross rental yield.

So why do people still buy investment properties? Look no further than the tax laws and the ability they afford to shelter income in the short term and derive untaxed capital gains longer term.

No wonder property investors have taken like a cat to water to the idea of ringfencing losses on property investment, so that they could no longer be used to shield other income from tax.

Some economists have attributed the doubling of house prices over the past six years at least in part to the increased value of that tax shelter since the Government introduced the new top tax rate of 39c in the dollar in 2000.

The Reserve Bank warns that "sustaining cash flows could become problematic if economic conditions were to weaken. Also capital gains are becoming increasingly uncertain as a means for investors to break even".

Interest rates are at an eight-year high and even if the official cash rate goes no higher in this cycle, a lot of borrowers face higher mortgage bills as fixed-rate mortgages come up for an interest rate reset - by an average of a full percentage point over the coming year, the central bank reckons.

It also notes, no doubt with some satisfaction, that there is little sign of a repeat of the mortgage wars where banks sacrificed interest margins in the contest for market share. That helped to frustrate earlier attempts by Governor Alan Bollard to cool the market.

Interest margins have increased to more "sustainable" levels over the past six months, it says, though they are still a full percentage point below their levels in the early 1990s.

In the face of these headwinds it would be little wonder if the housing market was going nowhere fast.

Pundits' confident predictions that the market was running out of steam have been wrong before, of course, but this time the statistical evidence is pretty compelling.

The Real Estate Institute's median price has been going sideways for the past six months.

Turnover on the other hand has been dropping like a stone. Sales last month were 23 per cent down on October last year.

For properties worth less than $400,000, turnover was down 30 per cent compared with a year earlier.

"This suggests the squeeze is coming most of all where cashflow is paramount - for investors and low-to-middle income households," Bank of New Zealand economist Craig Ebert said.

The average number of days it takes to sell has been creeping higher - 34 last month compared with 28 in May.

ASB's quarterly survey of housing market sentiment reflects the shift from a seller's to a buyer's market, with fewer people expecting prices to rise over the year ahead.

History suggests they are right.

If the past relationship between housing market turnover and prices holds, then house price inflation, which has been in double digits for the past five years, will have dropped to around 4 per cent by early next year.

The flattening off of house prices is likely to turn off the wealth effect, which has turbocharged consumer spending over the past few years.

The wealth effect occurs when people borrow and spend some portion of the increase in the value of an asset, notably the equity in their homes.

It may only be a few cents in the dollar of the paper gain, but past Reserve Bank research would suggest that the 15 per cent rise in house prices in the year ended June - $80 billion - explains almost 40 per cent of the increase in private consumption over the period.

Firms selling to the domestic market will miss that.

But the increase in housing wealth delivered by the boom has come at a social cost. Like other forms of inflation it creates both winners and losers.

Losers are those young couples (the single can pretty much forget it) who cannot scrape together the deposit on even a heroically geared starter property. How much more likely are they to emigrate?

Or those who do manage to get a foot on the property ladder but have to defer having children for years.

Then there are middle-aged people who face a shrinking window between getting out from under the mortgage and retirement in which to accumulate a nest egg.

Last year's census found the proportion of households with mortgages almost unchanged on 2001, at just under a third.

That tells us nothing, however, about the composition of those households and how it may have changed. It will take a lot more data and analysis for that.

One suspects, a priori, that they have got older.

rmbbrave
17-11-2007, 07:15 PM
Inflated home prices are here to stay

House prices are grossly overvalued, by as much as $90,000 on average and prices could stay flat for five years, according to Westpac Bank economists.

The house price boom is over and a long-expected housing market downturn is under way, they say.
But a strong economy, unemployment at a 20-year low, high job security and growing wages meant there was not likely to be a big fall in house prices.

National median house prices have not moved for the past seven months, stopping dead in April after rising about $8000 a month earlier in the year.

Prices are expected to "wallow" a few points either side of zero and in five years prices will be much the same as they are today, Westpac forecasts. Prices were flat for four years till 2001.

This year the market was hit by rising fixed-term interest rates and there is no relief in sight.

Mortgage rates were expected to move even higher next year, putting even more pressure on the market.

For investors, rents are averaging just 4 per cent of a property's value while interest rates are about 9 per cent, making property less attractive.

On Westpac's "investor value" of housing measure, the average home is worth about $260,000, slumping from $328,000 at the end of last year. The investor value of property has been dragged down sharply by rising interest rates. That value is based on interest rates, marginal tax rates, rents and expected capital gains. While the value to investors has fallen sharply, the median price rose to about $350,000 earlier this year but has stagnated since then.

Westpac stressed that the investor value was not a price forecast. "We are not saying the median house price will fall to $260,000," Westpac's latest market report said.

But that value would exert slow and steady pressure on the market price, so the overvaluation could persist for many years.

The big jump in interest rates has also made housing much less affordable this year.

The cost of servicing an 80 per cent mortgage on a median home, based on a five-year fixed mortgage rate, has risen from 34 per cent of average household disposable income to 39 per cent this year. The historical average is just 25 per cent of the average household disposable income.

If house prices remained steady, it would take eight years before affordability returned to normal levels, based on incomes rising 5 per cent a year. If house prices stagnated or fell slightly, it would take four or five years for house prices to come back into line with the return from rents for investors.

http://www.stuff.co.nz/print/4275367a13.html

JBmurc
07-12-2007, 08:37 PM
Looks like I might be new holder of some lovely southland sections have an accepted offer of 45,000 for 2000sqm of land two titles G.v 68,000

Arbitrage
08-12-2007, 12:28 PM
What are you going to do with them? Sections produce no rental returns.

JBmurc
11-12-2007, 08:33 PM
I'm not after rental returns atm I'm not going to have to get a loan at 45k- may transport some cheap houses later -There not making anymore land atm certainly not at 22500 per qutr arce 5mins walk to the beach

MrDevine
12-12-2007, 09:19 PM
Where are you buying JB? Otatara or something? I'm a Southern Man myself.

MrD.

JBmurc
13-12-2007, 08:09 PM
at riverton certainly not the best of sections still not 100% sure if I will buy need to do some more investaging when time allows ,also keen on keeping some cash in high interest deposit and just wait for bargin in Qutown major pressure on some sellers atm BUYERS MARKET

rmbbrave
21-01-2008, 08:48 AM
NZ houses world's least affordable
5:00AM Monday January 21, 2008
By Anne Gibson


New Zealand has the least affordable houses in the world.

It scores worst in an international survey of the world's six most expensive housing markets, passing Australia for the first time.

Demographia, an international survey business run by Hugh Pavletich of Christchurch and Wendell Cox of the United States, today issued its fourth annual report, showing New Zealand has slipped drastically on an international scale.

The United States, Australia, Britain, Ireland, Canada and New Zealand were studied, and the results reveal NZ house hunters face the biggest gap between earnings and house prices.

Wages are so low and house prices are so high that it takes 18 years and six months of a household's entire annual income to pay for a home, Demographia found. That measure is based on median house prices compared to median wages.

Australia had been the least affordable country of the six, but New Zealand has overtaken it, partly because of high mortgage interest rates.

But in Aucklanders are no longer the worst-off New Zealanders. Tauranga is now the country's most expensive city compared to its wages, ranking 20th of 227 cities in the survey, followed by Auckland in 31st place and Christchurch in 34th.

"New Zealand has the highest-cost housing among the surveyed nations in relation to incomes. It also has the highest interest rates," the study said.

Houses in Los Angeles remained the world's most expensive, and California was the most expensive area.

The most affordable houses are in Canada's remote Thunder Bay, followed by Youngstown in Ohio and Fort Wayne in Indiana.

Demographia's authors say town planners should solve New Zealand's housing crisis by freeing more land on city fringes.

Mr Pavletich and Mr Cox cited former National leader Don Brash, who in an introduction to the study called for the abolition of urban limits.

"Despite all the evidence, governments continue to pretend they are powerless to make housing more affordable or, worse still, implement futile interventions which make the situation worse as the New Zealand Government is proposing," Dr Brash said.

He was referring to Housing Minister Maryan Street's Housing Affordability Bill, which would require developers to include cheap houses in new estates or to make compulsory gifts of money or land to councils.

The bill, introduced to Parliament last month, aims to stimulate the provision of affordable housing for first home buyers and low-income families.

But the Property Council and Master Builders Federation say the proposed law would push up the cost of houses. Other homebuyers would pay the price as developers put up the cost of mid- and upper-range homes to compensate for profits lost in building the cheaper homes for first-time buyers.

Real Estate Institute national president Murray Cleland said he was shocked to hear of New Zealand's ranking. First home buyers were being hardest hit.

He said tax rates were too high - "and that's an area that needs to be looked at" - but territorial authorities also had to take a good share of the blame.

Councils had restricted land supply unnecessarily at a time when people desperately needed more sections for building.

"You look at small provincial towns where the councils have freed up land - it's been swept up."

As well, exorbitant council fees and charges were making new housing developments unaffordable.

"A large part of this problem is the cost of getting building permits," Mr Cleland said.

Property Council national director Connal Townsend said yesterday he was not surprised by the Demographia survey and he criticised the Auckland Regional Council for its growth policy which restricted city limits.

No one wanted urban sprawl, he said, but "if people can't afford to live in the city, what's the point of the policy?"

Stranger_Danger
28-11-2011, 10:36 AM
I don't mean to put the boot in, but after reading http://www.stuff.co.nz/business/money/6047322/Investor-bankrupt-after-empire-collapses take a look from post 60 or so when this bloke comes in.

2006/2007 were, indeed, crazy times.

I suspect we're not done in terms of realising just how crazy.

Lizard
28-11-2011, 03:45 PM
HI srotherh. My equity in a fire sale of my properties would see me with over 2 million in the bank so can I weather any storm? absolutely.
In relation to the capital growth rates I'm happy to supply some samples. NOTE: I only buy property not requiring work so I have done no capital improvements on any of the following.

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

I could go on. My worst performing property is achieving way over 10% PA increase. This 5.7% growth stuff is only true if you don't know what you are doing. Buy well in the right areas and 10% per annum is conservative.
Get a good education in property and nothing beats it IMHO!!


Hi Dean,

Firstly, well done. Secondly, and not wanting to be a cynic, but the figures you quoted were

AREA Year bought P Price Current RV
Scott RD Papakura 2004 173000 250000
Waterview Dr Papakura 2005 320000 415000
Burbridge Mangere 2004 410000 505000
Clyside Pakuranga 2005 700000 850000
shool Rd Rotorua 2005 810000 1550000

Note how the numbers get steadily bigger?

I suggest you read Bob Jones's latest book, in particular the hilarious (and true) chapter "Why Developers Go Broke".

In it he talks about the human nature element, in this case about development - ie, if you're successful at a lower level, it would deny human nature to persevere at that level, so they keep doing bigger and bigger deals, all debt funded. He calls it an addiction.

Whilst I realise you're not a developer, I hope the same forces are not at play - esp given that you're not adding any value to the buildings (as you say) - you're basically just leveraging up increasingly larger purchases.

Could your ego adjust to different market conditions? Could your finances?


Hi Stanger. I'm not leveraging up at all on my properties. I trade properties as well so my rules are very strict. I buy property at minimum of 15% below valuation and put in 20% deposit. I use profits from trading to fund the deposits. So my portfolio is currently geared at 63%. No fear of getting hurt in a slump. And my portfolio pays me cash every week in addition to the capital growth and huge tax benefits. Only a war would affect me and that would affect us all!! Gotta love property!!


Hi Dean,

I have to admire your enthusiasm, but frankly it kind of scares me.

The main problem I have with your approach is it all sounds so incredibly easy and indeed, the only risk you seem to forsee is war.

I've read through your website and the only comments I have are

(a) Your philosophy, indeed your website name, is basically "massive action". In my experience, massive action is not the way to good investment returns (in any asset class).

Personally, I prefer a risk averse "slow but decisive action" approach, one based on trying to look at the future rather than the present, or, even worse, the recent past.

Whilst running around doing a deal a day sounds terrific fun, the more "action" I tend to have in my life, the less money I make. Less is often more.

(b) From reading your website, you don't make improvements to the properties, tax minimisation is a key part of your strategy and you use property managers to look after the properties.

In other words, the bank provides most of the money, the taxman chips in, you don't improve the properties, and someone else looks after them.

In this context, I get why you're so enthusiastic!

The flipside as I see it is that you are literally "riding the market".

In good times, your strategy of "maximum action" makes sense. In a different market, the cynic in me says you have a whole lot of unmaintained buildings looked after by apathetic third parties that you really have no intrinsic interest in (the buildings themselves, not the returns).

If property prices are not going up, do you REALLY care that Mr Jones has a major problem with his rented house? With the middlemen involved, do you even know?

The only thing as I see it that you can bring to the table is building selection and negotiating skill and in this market, winning that war is the easy part - just pay more.

In a different market, this strategy will probably work differently, regardless of what you ultimately record on your spreadsheet (which, as you point out, changes based on the tax outcome you want. Hmmm)

Anyways, don't mean to be over-critical. I suspect we just have very different styles, and there is more than one road to the pot of gold so best of luck.


Sorry stranger but I can't stop laughing long enough at the above to answer properly. Taking consostent action IS the way to succeed. If this hasn't happened 'in your experience" then you were not adequately educated or didn't really take enough action.

An earlier post by another also stated that I might be "in IRD's radar for CGT". I pay plenty of tax on my trading. Any professional property trader who was not paying tax deserves to be in jail.

I guess sometimes it takes time to prove who is "right" in an investment debate....
http://www.stuff.co.nz/business/6047322/Investor-bankrupt-after-empire-collapses

Stranger_Danger
28-11-2011, 04:18 PM
Lizard,

I wasn't going to say that. But, thank you for doing so :)

Kaspar
28-11-2011, 04:53 PM
Stranger_Danger > Letfus

patsy
30-11-2011, 07:42 PM
Reading this thread from post #60 when Leftus appears has made me realise that he hasn't been the only 'expert' (read 'property investment buffoon') participating in the debate of how easy of to make money with other people's money.

lissica
30-11-2011, 11:46 PM
All these articles point out the obvious really. The baby boomers are getting ready to retire and the biggest boom in NZ's history is around the corner.
All we have to do is accumulate property as fast as possible and get ready to retire around 2012.
I love property


As I'm not familiar with this chat room I don't have a good feel for it's members yet but many of the posts indicate a lot of intellectualising (spelling?). But are you guys achieving your goals? Are you living the life of your dreams or at least taking some action to head towards them. I can tell you that property has been very good to me. It is not rocket science. With a decent education and hard work it is not difficult to retire in 3 to 5 years or even less. Don't over analyse yourselves into doing nothing

I remember cringing when I read this, and wondered why Dean had strayed from property-talk.

Anyway, five years later, it seemed a pretty good indicator of market peak.

Speaking of property....Rents seem to be slowly catching up with property prices, and ahead of cash in the bank atm. Might be a good time to go shopping.

D B Cooper
01-12-2011, 01:39 AM
From Massive Action.tv

The culmination of that education was Raewyn and I getting a proper education at a 3 day event in October 2004. I finished work and decided I would either succeed or fail by giving property my full attention. I was able to amass a portfolio of over three million dollars in property in 4 months and to begin to build a passive income stream that would enable us to give away more than we could ever earn.


By 2006 we had over seven million dollars worth of property and had traded over double that amount.


By 2008 that had become 20 million dollars of buy and hold property and Dean had traded hundreds of millions of dollars in NZ and overseas.

and by 2011..................BUST

seems to have bought $13m at the top of the market 2006-08

PS I wonder how much Dean gave away to Charity?

Stranger_Danger
03-12-2011, 09:52 AM
On your figures, $13 million - to the previous owners of the properties.

skid
22-12-2011, 08:46 AM
This seems to be the era of the boring property investor who slowly acquires investment property [saving-saving -saving]and makes sure a large percentage of the value is payed of Its not high flyer,get rich quick,but we are still standing.
Its alot harder to do nowadays...but im glad now I did it that way when i could.

Halebop
23-12-2011, 07:40 AM
This seems to be the era of the boring property investor who slowly acquires investment property [saving-saving -saving]and makes sure a large percentage of the value is payed of Its not high flyer,get rich quick,but we are still standing.
Its alot harder to do nowadays...but im glad now I did it that way when i could.

Imagine that. Methodical, manage cash flow, modest gearing, repay debt. Who'd have thought that would work in the long run?

fungus pudding
23-12-2011, 08:13 AM
This seems to be the era of the boring property investor who slowly acquires investment property [saving-saving -saving]and makes sure a large percentage of the value is payed of Its not high flyer,get rich quick,but we are still standing.
Its alot harder to do nowadays...but im glad now I did it that way when i could.

Agree. I did it the same way. Although my original plan was to keep expanding, I had a change of heart and paid off all mortgages when I realised how pointless it is to keep earning money that you couldn't send in a thousand years. Dropped all residential stuff, kept commercial properties - unencumbered. My philosophy nowadays is, once you've acheived a good income and lifestyle with minimal input - why take a risk?

skid
24-12-2011, 07:53 AM
i agree 100% Ive done the same thing with residential and most years we go to a third world country because we not only love to travel,but it puts us back in touch with why we dont need the extravagance that some aspire to

fungus pudding
24-12-2011, 09:39 AM
i agree 100% Ive done the same thing with residential and most years we go to a third world country because we not only love to travel,but it puts us back in touch with why we dont need the extravagance that some aspire to


Don't miss the first world ones either.. I don't mean abandon earning altogether.Just when income gets ridiculously high. 100k is not enough - but 200k probably is for most, sort of thing.

skid
26-12-2011, 12:10 PM
We visit some of the first world countries as well.[my wifes from Montreal]
My point was that I think its good to be reminded how fortunate we are to have been born into such a prosperous part of the world and that perhaps in the not to distant future we may have to learn how to live on much less than we take for granted at this time.
Having said that,some of the less fortunate countries in economic terms are rich in other ways-they are less regulated and tend to have strong family bonds.

fungus pudding
26-12-2011, 02:31 PM
We visit some of the first world countries as well.[my wifes from Montreal]
My point was that I think its good to be reminded how fortunate we are to have been born into such a prosperous part of the world and that perhaps in the not to distant future we may have to learn how to live on much less than we take for granted at this time.
Having said that,some of the less fortunate countries in economic terms are rich in other ways-they are less regulated and tend to have strong family bonds.

True. I've often noticed in some places, borneo is a close example, the locals have no possesions of any value at all, yet wear a grin from ear to ear - all day long. It's certainly not universal though - some places they'll slit your throat cos you've got a wrist watch and they haven't; and they can't even tell the time.

skid
27-12-2011, 08:32 AM
yes,Its certainly not universal.
Ive often wondered what that majic ingredient is that makes the difference.
Im sure its very complicated,but id love to be able to bottle it.
We havent been out of the airport in Borneo[might check it out sometime] but last trip,we loved the people in Cambodia.

skid
30-12-2011, 01:07 PM
i havent found what you say to be the case.Smiles aside,we have found that the people interact very differently in the countries we have visited and Im sure there are many reasons for this.
A sociologist could probibly do a major study on this.
i used to sit in a hidden part of the street and observe life in India simply because i needed a break from the constant input.It was ''in your face''pretty much all the time.
But Southeast Asia ,especially Cambodia was completely different.
They seem realitively happy in general,with or without us.[no offence to India intended]
I remember being surprised with their dark history{Kymer Rouge]
Im sure that us being in the mix,does often make a difference,as you say,but I think there are major differences between peoples nature according to the country they live in.
But aside from all this-my point was that its easy to lose track of how good we actually have it in our respective western countries,economically,until you get out and experience life in some of the less fortunate counties.

skid
01-01-2012, 02:06 PM
I should add that we get well out of the major tourist areas[often out on motorbikes] which makes a big difference in terms of interaction with the people. Example: I almost always find the Thai people exceptionally friendly,but last year it was most convenient to fly into Phuket so we went in for a few days to have a look OMG! [I coudnt get out fast enough][sorry to those that love Phuket].
but once we got out in more remote areas[or even a little less touristic] AHHH! -thats better

voltage
19-05-2012, 08:34 AM
NZ can now be divided in 2 areas growth -Auckland and Christchurch and non growth really the rest of the country. I am seriously looking at selling my properties in Rotorua, stagnant pop growth and find something in Auckland. It is interesting how investors from auckland buy say in rotorua. I know the yield is better in property you make the money from capital gain. if there is none it is a waste of time. Maintenance is always underestimated.

golden city
29-12-2012, 08:01 AM
central auckland is the area you should look for.., for captial gains

POSSUM THE CAT
29-12-2012, 11:51 AM
Golden City and huge capital losses if you buy the wrong property.

In4a$
07-02-2014, 07:10 PM
Or when you get hit with a capital gains tax rental wont look so good, It will come eventually.
Leave the houses to home owners

Valuegrowth
23-02-2014, 06:40 PM
We are paying tax for income earn through employment. We also have to pay tax for other earnings. Do you think is it reasonable to implement capital gain tax for property? Will there be capital gain tax for second home if somebody sells it in the future? What about Auckland property market? Can we expect correction there in 2014 or 2015? Can we also expect slowdown in housing market in Australasia in the coming years? Thanks in advance.

Aaron
03-11-2016, 08:14 AM
We are paying tax for income earn through employment. We also have to pay tax for other earnings. Do you think is it reasonable to implement capital gain tax for property? Will there be capital gain tax for second home if somebody sells it in the future? What about Auckland property market? Can we expect correction there in 2014 or 2015? Can we also expect slowdown in housing market in Australasia in the coming years? Thanks in advance.

No correction in 2014 or 2015 maybe 2016 is the start of a correction but I doubt it after reading this on Bloomberg this morning.

http://www.bloomberg.com/news/articles/2016-11-02/the-rich-have-found-a-place-to-escape-the-horrors-of-the-world

An across the board capital gains tax implemented after the next financial crisis, no exemption for your own home. Keep it as simple as possible much like our GST regime. If we can be hard on poor people with a regressive GST with few exemptions then we should be able to do the same for a progressive capital gains tax.

It might even discourage some of those super wealthy immigrants. I think 4million people is enough for a country our size.

Valuegrowth
12-11-2016, 04:46 PM
No correction in 2014 or 2015 maybe 2016 is the start of a correction but I doubt it after reading this on Bloomberg this morning.

http://www.bloomberg.com/news/articles/2016-11-02/the-rich-have-found-a-place-to-escape-the-horrors-of-the-world

An across the board capital gains tax implemented after the next financial crisis, no exemption for your own home. Keep it as simple as possible much like our GST regime. If we can be hard on poor people with a regressive GST with few exemptions then we should be able to do the same for a progressive capital gains tax.

It might even discourage some of those super wealthy immigrants. I think 4million people is enough for a country our size.

Thank you for the link.

Lewylewylewy
15-11-2016, 09:44 PM
...An across the board capital gains tax implemented after the next financial crisis, no exemption for your own home. Keep it as simple as possible much like our GST regime. If we can be hard on poor people with a regressive GST with few exemptions then we should be able to do the same for a progressive capital gains tax...

An across-the-board capital gains tax effecting home owners would be a really great way to increase the rich-poor divide, as home owners sell their houses, get taxes on the difference (tens of thousands of dollars) and find themselves in a position where the only home they can buy is smaller than the one they just sold. Great for really kicking growing families and others trying to work their way up the property ladder in the balls lol.