NZ 1st homebuyers are ScReWeD...

[cantab]

quote:Originally posted by Shrewd Crude
cantab... I have regigged my portfolio of late to include NWE (to increase my exposure to the PUFFin announcement coming up)..... other stocks are AED, URA, 30k of UOGO...
tried to push out all my NZOOD at 13.3 ... pushed out 70% or so at 13.3... and now only hold 20 something k NZOOD.... thats all.....
I can answer that question now on how much the bank will lend me.... zero leverage....
It doesnot deter me on my path to cut that 30year loan to 10years...
and two years sideways / falling market shall be enough...
I hope that the one's going against my thoughts will be around in two years!
the risks of holding out two years vs 30year loan is defintely worth it...
[8D]
.^sc


Shrewdie, you've done fantastically well and I can understand your thinking as far as the timing is concerned, especially if you can continue to do well in the sharemarket. You may have seen a few weeks ago in the Press, a comment by the president of the NZ Property Investors Federation (a Cantabrian), that smart investors are sitting on piles of cash and waiting for the right time to buy which will be when the yields rise to a point where it makes sense to invest. He expected a rise in rents over time but no major fall in property prices.

For what it's worth this is what I would do, firstly I'd find a good wife - this is the number 1 rule - someone who thinks the same way as you - investment, spending, travel, kids, etc, divorce is expensive, it helps a lot if she has a good income - bank mangers love this. BTW I like your taste in Chinese girls - some pretty hot numbers walking around town [:p]

Second I wouldn't buy a house to live in, when the time is right you can own a lot more property = more leverage, using that equity built up in the sharemarket, if you buy rentals.

IMHO, the property market leaves the sharemarket for dead as a safe and sure way to create wealth and therefore income using leverage - the banks' money.

[cantab]

quote:Originally posted by Mick100

Successful investing doesn't depend entirely on picking the right shares - money managment is also quite important in my opinion.
.


Mick, would be interested to know your thoughts on money management.

Thanks

[Crypto Crude]

quote:cantab Posted - 24/01/2007 : 10:38:36 PM
quote:
1....Shrewdie, you read that wrong buddy,
2....I sincerely hope you get a home
3.....You wrote off linwood - walking distance to Cathedral Square!
4......Shrewdie, you've certainly started something interesting.
5......Aranui or Fendalton - your call


cantab I have picked out the nice chunky bits....
1.... my apologies...
2...... I hope I get a house aswell, I have been thinking about housing since I was 15...
I have only been in the position to be able to do something about it in the last one year...
( i have never had a full time job for more than a few months other than for 6 months when I first left High school...)
I am not stupid enough to turn an opportunity away when It comes in my favour... Its not in my favour, and I will wait
3.....The beauty of Chch is that most areas are walking distance from town... If im out and about hittin it hard on a sat night... I usually walk home to Avonhead... takes me 1.5hrs... its that or taxi at 20 something bucks... clean chch fresh air.... why not...
when I was young there was 300k people in chch... now there is 400k.... it makes sense that these extra people have increased demand on the chch housing market...
4.....[8D] <sc
5..... something in the middle I reckon.... how about a new area called fendanui....
(cheaper houses with expensive land prices)


quote:
Mick100 Posted - 24/01/2007 : 7:33:41 PM
Successful investing doesn't depend entirely on picking the right shares - money managment is also quite important in my opinion.

no.... Money management is not quite important....... but rather it is the most important thing...baggers mean nothing if you spend profits up... I have only ever aloud myself to put into shares what I can afford... and have never taken out....
I have far to many stories to tell but... In my generation the number of kids with flash cars which represent like 80% of their assets makes me cringe..if you want a depreciating asset (thats fine) but get a million first, (I actually call them depreciating liabilities)... in 5 years theres always the next gadget....
I have buddys that have been working full time for 5 years and still live from week to week...
Mick100, the way I sum it up is.... you could either buy a flash XYZ now.... or forgo short term pleasure and some time in the future get two XYZ's.... If that XYZ means that much to you, then im sure you will put the hard yards in to get there...
[8D]
.^sc-hard yards now... short term pain equals long term gain.... Its hardly short term pain when you get such a buzz from studying shares as I do...

[Crypto Crude]

cantab...
sorry didnt mean to leap the gun, but I had already written up what I had to say before I saw that you had asked that question....
Micks statement stood out for me aswell.... so I addressed it....
I would also be interested in Micks thoughts....
[8D]
.^sc

[duncan macgregor]

quote:Originally posted by Shrewd Crude

cantab...
sorry didnt mean to leap the gun, but I had already written up what I had to say before I saw that you had asked that question....
Micks statement stood out for me aswell.... so I addressed it....
I would also be interested in Micks thoughts....
[8D]
.^sc
He is IRISH you know dousnt think much.:D:D:Dmacdunk

[cantab]

Aspex, agree that there are some unique advantages with shares, clearly you have found a niche and are good at what you do, however as a safe and sure way to generate a passive income in retirement, property is the way to go for the average Joe.

[Halebop]

There is no such thing as "safe and sure". The nearest proxy is "I don't fully understand the risks I am taking but am unaware so everything is OK".

From 1980 to 2005 the Capital Stock Value of residential real estate rose 9.7% per annum. This can be adjusted by:

-1% due to increased housing numbers (Although in 2005 this would be -2% due to higher value new dwellingsand a building boom).

Inflation accounted for -5.3%

Maintenance (my estimate) probably needs to be around -1.5 to -2% to sustain a dwelling, perhaps just -1% to wallpaper over bad maintenance budgeting.

Operating expenses like rates, insurance maybe another -0.4% or -0.5%

Rents "saved" by owner occupying vary according to region but in our most populated area of Auckland might now gross around +6% but historically may have been +7 or +8%.

Floating interest rates for the period averaged -12.4%

If we do the math the Average Joes "made" all of their money by enforced saving of mortgage principal (which over 25 years on a 25% deposit would average 3%pa although in practice be a little more balloon shaped).

The benefit of inflation adjusted mortgages is eroded as the mortgage is paid down. And other forms of saving like equities still benefit from Inflation adjusted wage rises which is the real "benefit" of the inflation adjusted mortgage (i.e. there would be no benefit if wages didn't rise by at least the rate of inflation).

I can do a lot better than 3% by saving my rent differential. Most people choose not to. Attributing their wealth to "anti saving" via an expensive mortgage is proof only of financial literacy levels, not property outperformance.

[JoeKing]

quote:Originally posted by Halebop

There is no such thing as "safe and sure". The nearest proxy is "I don't fully understand the risks I am taking but am unaware so everything is OK".


Halebop
BOLLOCKS! Pull your head out before you get lost in the dark.
Cheers
JK

[vivins]

I have been reading this thread from the start, and it has been an excellent read :).

I decided to sign up to give my view on the matter.
I am in Shrewds position, looking for a way into the property market, but thinking its not the right time. With my little knowledge I have looked at several area's and crunched the numbers, but things still dont look so good. My main goal right now is to gain as much saving/capital within the next 3-5years, then maybe.. I will think about buying a house.

My ideas are also like Shrewds. I am holding off buying items which will not increase in value over time (car/electronics) and saving that money to be spent in assets which will earn me money.

Maybe if I find a partner in crime who share's the same ideas of saving and investment, then I will be more keen on property but with a single income, shares are looking more attractive.


p.s. Its inspiring to hear storys of experience's in the property market, namly JoeKing


Thanks,

[JoeKing]

Hi Vivens
THANKS! for the compliment. There are more inspirational people than me. I did not wake up till I was 43, and broke.
remember this post by Canatab a few pages back?
" The Star 29/09/06
Steve Brooks is not old enough to go to the casino, but the 19 - year - old has been playing the property market since he was 14. Last week he signed up his biggest deal yet: a 3800m2 block of land on Buchanans Rd and now owns nine houses in Christchurch. He has recently set up his own business and is getting a book published, A Young Punter's Guide to Property Investing."

Now there is a young man to be inspired by... why not give him a call? Successful people love to share, its an attitude thing.
I would say Cantab, if not already there will one day be very wealthy too, his/her positive attitude is obvious. I'm sure even ole McDunk (successfuly retired choosing his own lifestyle), ditto Foodee, and others would be only too pleased to offer a wealth of experience if asked.
Unfortunately threads like this can become inhabited by frustrated wannabees while the real go getters are out there "go-getting" but those with positve, success orientated attitudes are here to... ya just have to draft them out.
Read on... there is some good stuff here.
Cheers
JK

[foodee]

quote:
posted by vivivns

..I am holding off buying items which will not increase .....

Well I think you are on the right track already.

My own observation is that a lot of 1st home buyers have never been in the share market. Doesn't matter as long as you're working your money and your money is working for you.

cheers

[Crypto Crude]

vivins.....you are welcome here....


quote:
cantab
Advanced Member
2224 Posts
Posted - 24/01/2007 : 11:27:09 PM
quote:
1...... You may have seen a few weeks ago in the Press, a comment by the president of the NZ Property Investors Federation (a Cantabrian), that smart investors are sitting on piles of cash and waiting for the right time to buy which will be when the yields rise to a point where it makes sense to invest. He expected a rise in rents over time but no major fall in property prices.

2......For what it's worth this is what I would do, firstly I'd find a good wife - this is the number 1 rule - someone who thinks the same way as you - investment, spending, travel, kids,


1..... This man has every incentive to give a biased view.... Its like asking your real estate agent if he thinks prices will fall, and if you should buy that house now.... is the salesman pushing for a sale or not!...
2...... Im only 22, im not looking for a wife just yet... boy, its hard enough finding the right girl, let alone finding one that is financially astute...
its now becoming a monster tick list....The way I look at it, a woman with the financials is just a bonus... a quick lesson on money management will sort things out...
[8D]
.^sc

[duncan macgregor]

quote:Originally posted by Shrewd Crude

vivins.....you are welcome here....

its now becoming a monster tick list....The way I look at it, a woman with the financials is just a bonus... a quick lesson on money management will sort things out...
[8D]
.^sc
JEEZE crude one have you got a lot to learn. :D:D:Dmacdunk

[Crypto Crude]

<center>[u]OCR STAYS PUT AT 7.25%</center></u>
The reserve band has left the official cash rate unchanged at 7.25%...

But it is warning of a possible increase when it next reviews the rate in March, at the release of its quarterly monetary policy statement...

Govenor Alan Bollard says domestic demand is rebounding, putting further pressure on inflation in the medium term...
quoted off teletext

High five vivins... good news for us...Its amazing oil prices had fallen from $62 and was under $50 for a short while... in that time petrol prices at the pump only fell 4 cents a litre... Oil prices are now back over $55... go the OCR and inflation go you good thing...

Mackdunk, you have always taken what I have said and thrown it back at me with negativeness... my last statement was abit of a joke, but true in many ways...and yet You are the ones talking about dual incomes and how important it is... you have never agreed with me on anything... surely there are things you do agree with me on, but I would never expect you to admit it...

Mick, thanks for the margin info and all... I do want to get into margins and CFD's but still feel like im not quite there...shares and call options now... next step will be margins

[8D]
.^sc

[duncan macgregor]

quote:Originally posted by Shrewd Crude
Mackdunk, you have always taken what I have said and thrown it back at me with negativeness... my last statement was abit of a joke, but true in many ways...and yet You are the ones talking about dual incomes and how important it is... you have never agreed with me on anything... surely there are things you do agree with me on, but I would never expect you to admit it...
SHREWD CRUDE, I might agree with you more times than you think. I have been into property ,share trading etc etc all that means is that i have made a lot more mistakes than you up to this point. We all learn from each other, the wise ones learn from other peoples mistakes. You are on the right path, dont allow macdunks reverse humour to put you off. Even mad mick 100 might get something right sooner or later. Pay attention, do it your way i will try and keep my funnies to myself. macdunk

[Mick100]

quote:Originally posted by duncan macgregor
[ Even mad mick 100 might get something right sooner or later. Pay attention, do it your way i will try and keep my funnies to myself. macdunk


I'll say this much - shrewd is a hell of alot wiser that I was at 22 yrs old. What I like about the sharemarket is that you learn something every day. With regards to finance/investing I'v learn't more the the past 5 yrs than I had learn't in half a lifetime. I think property investing would be dull and boring - for me anyway. (I do like dull and boring share though)
.
Macdunk, I get things right far more often than I get it wrong in the sharemarket. As i'v told you before - I put alot of effort into it including some formal study in recent yrs.
I want to be still involved in this sharemarket business in 20-30 yrs time - I enjoy it. I don't plan on doing anything that's going to wipe me out and put me out of the game.
.

[Halebop]

quote:Originally posted by JoeKing

Halebop
BOLLOCKS! Pull your head out before you get lost in the dark.
Cheers
JK


I now consider my darkness illuminated. Blessings to the well reasoned and rational. [:X]

[rmbbrave]

quote:Originally posted by duncan macgregor

MICK, With property you can borrow more at cheaper rates so why would anyone wish to borrow for shares?. I would mortgage the homestead if i were into that, but would much rather buy more property with the money. It might be different for our young friend SHREWD CRUDE to risk the lot at the start of his investing career.
Property leveraged to the hilt gives a capital gain of 10 pc in my experience on a fixed mortgage of 8pc. Add the rent deduct the expences get all your own money back in three years start again double your size.
Why would anyone think that a 2pc gain is good when you can do that?.
I would rather have hundreds of thousands in mortgages on properties, than borrow five bob to buy shares. Buying shares involves greater risk than property. macdunk


Is Duncan finally getting his throw away lines correct?

"First it was property has gone up 10% per year from 1066".

Next it was

"property doubles every 7 years and will in the future":

And now its

"Property leveraged to the hilt gives a capital gain of 10 pc."

Finally Duncan has a throw away line that is close to reality.
But even that is only correct if property prices keep going up.

They will fall as NZ's Population falls (from 2050) if not well before that.

[Halebop]

quote:Originally posted by aspex

Bollard is woolly woofter.
The Bank of England showed the way by slugging another quarter percent over there.
What we really needed here was an extra half percent mid 2006 to send the message.
By now we would have a realistic exchange rate down by 15% to the level needed to grab some extra exports.
Bollard is likely to be overtaken by relative tightening elsewhere and this country will stagger on well into 2009 with the ever present danger of melt-down which no one needs or wants.


I think he's missed his mark by several quarters as well. Any Petrol pump savings will just flow into the consumer economy anyhow so I suspect this just shows a flaw in their consumer basket calculations rather than a break on inflation.

Rising interest rates would hurt equities more quickly than property but it's pretty obvious we are a bit out of wack and something needs to be done (or something will give all on its own). Problem is with our rising mortgage interest payments to overseas creditors and Aussie banks, it would probably hurt our balance of payments before it helped it. I really think there needs to be a different weapon in the reserve bank's ****nal because lowering interest rates could conceivably have a beneficial impact too if foreign investors were turned off and the $NZ dropped. So a better tool might not directly revolve around the OCR / interest rates.

[rmbbrave]

quote:Originally posted by Shrewd Crude

vivins.....you are welcome here....


quote:
cantab
Advanced Member
2224 Posts
Posted - 24/01/2007 : 11:27:09 PM
quote:
1...... You may have seen a few weeks ago in the Press, a comment by the president of the NZ Property Investors Federation (a Cantabrian), that smart investors are sitting on piles of cash and waiting for the right time to buy which will be when the yields rise to a point where it makes sense to invest. He expected a rise in rents over time but no major fall in property prices.

2......For what it's worth this is what I would do, firstly I'd find a good wife - this is the number 1 rule - someone who thinks the same way as you - investment, spending, travel, kids,


1..... This man has every incentive to give a biased view.... Its like asking your real estate agent if he thinks prices will fall, and if you should buy that house now.... is the salesman pushing for a sale or not!...
2...... Im only 22, im not looking for a wife just yet... boy, its hard enough finding the right girl, let alone finding one that is financially astute...
its now becoming a monster tick list....The way I look at it, a woman with the financials is just a bonus... a quick lesson on money management will sort things out...
[8D]
.^sc


You've got it Shrewd.

Marring a woman who is only interested in spending your money is the biggest mistke you'll ever make. It'll virtually guarantee that you'll work until your 65 and retire with nothing more than your own house.

The next biggest mistake you'll make is having too many kids. Over 18 years raising a kid costs the same as buying a house.

[JoeKing]

quote:Originally posted by rmbbrave
Is Duncan finally getting his throw away lines correct?

"First it was property has gone up 10% per year from 1066".
I don't know about 1066, wasn't that when magnacata was signed? but certainly over the past 100 or so years in NZ wouldn't be far off on average

Next it was

"property doubles every 7 years and will in the future":
Historically using "rule of 72" would give 7.2 years... not far off. No one really knows the future but is there a valid reason why trend should not continue? AND exponentially which makes it faster..?

And now its

"Property leveraged to the hilt gives a capital gain of 10 pc."
same as above, but don't need "to the hilt". I'll sure vouch for that! 10% profit on banks money can't all be bad?

Finally Duncan has a throw away line that is close to reality.
But even that is only correct if property prices keep going up.
They will fall as NZ's Population falls (from 2050) if not well before that.

RMB, property prices have climbed steadily since Adam bit the apple, I note in Genises that his "shares" went down dramatically about the same time ;-(( (ahem, that was a figureative joke for you over serious buggers)
Do you forsee NZ population falling from:
1. Global warming
2. dissapearing coastline
3. GE meddling causing potato crop failure... cause the greenies were too slow.
4.I.R. radiation because fart tax was not implemented.
5. Shrewdie owns all the rental properties and high rents are causing mass starvation.
6.rock snot has clogged the waterways and dams and citizens die from lack of electric heating in winter and frustration cause they can't wash any of their 5 cars in summer.
7.NZO flood the world markets with cheap oil causing a world economic crash and major depression.
ok getting a bit frivolous but 2050 really is a long ways off.

Cheers JK

[Crypto Crude]

quote:
duncan macgregor Posted - 25/01/2007 : 5:18:57 PM
quote:
SHREWD CRUDE, I might agree with you more times than you think. I have been into property ,share trading etc etc all that means is that i have made a lot more mistakes than you up to this point. WE ALL LEARN FROM EACH OTHER, the wise ones learn from other peoples mistakes. You are on the right path, dont allow macdunks reverse humour to put you off. Even mad mick 100 might get something right sooner or later. Pay attention, do it your way i will try and keep my funnies to myself. macdunk

"we all learn from each other"
learn from this one buddy... NWE a 1 month pick....
mack dunk....I can be cheeky aswell... [:p]
[8D]
.^sc

[rmbbrave]

Joe King,

Read the first post of this thread.

http://www.sharetrader.co.nz/topic.asp?TOPIC_ID=23675

[vivins]

quote:Originally posted by JoeKing

Hi Vivens
THANKS! for the compliment. There are more inspirational people than me. I did not wake up till I was 43, and broke.
remember this post by Canatab a few pages back?
" The Star 29/09/06
Steve Brooks is not old enough to go to the casino, but the 19 - year - old has been playing the property market since he was 14. Last week he signed up his biggest deal yet: a 3800m2 block of land on Buchanans Rd and now owns nine houses in Christchurch. He has recently set up his own business and is getting a book published, A Young Punter's Guide to Property Investing."

Now there is a young man to be inspired by... why not give him a call? Successful people love to share, its an attitude thing.
I would say Cantab, if not already there will one day be very wealthy too, his/her positive attitude is obvious. I'm sure even ole McDunk (successfuly retired choosing his own lifestyle), ditto Foodee, and others would be only too pleased to offer a wealth of experience if asked.
Unfortunately threads like this can become inhabited by frustrated wannabees while the real go getters are out there "go-getting" but those with positve, success orientated attitudes are here to... ya just have to draft them out.
Read on... there is some good stuff here.
Cheers
JK


Thanks JK, theirs been a lot of good information in this thread, yours just stuck out :)

In terms of population falling by 2050, I find that hard to believe. All the people over sea’s have told me "your so lucky to be living in such a beautiful place, I wish I can live/retire there one day" and I agree with them, I have not traveled much of the world, but I would be happy to retire here, when I’m much older.

[JoeKing]

RMB
Thanks, I read the post and you probably already know my reaction. I'm on McDunks side.

It is a fact that no matter where you live you have to pay to use the roof over your head, and someone has to own it. Either:

1. You, in which case you have had to pay someone to buy the exclusive use of that roof and have ability to set outgongs and maintain some control, or,

2. a Landlord, in which case you have to pay increasingly for the temporary right to use the roof but have no control.

Both have their advantages. It really is a matter of choosing what is best for you! aren't we lucky!

In the first case if you decide you no longer want that roof you can sell the exclusive use to someone else and recover some, all, or even more than the original cost.
In the second case you recover nothing that you have paid and have to find another roof to rent, with probability of increased rents.

With this in mind, I fully agree with the idea of long mortgage terms. I know it works because when I did my WRAP deals that is exactly what I did. I sat with my buyer and worked out how much they could COMFORTABLY afford each week, then worked the numbers to suit. So long as the payments covered my mortgages and included a reasonable weekly cash surplus for me after rates and ins. In more than one case we made the term 35 years.We did not expect them to take 35 years to pay. I promised all my WRAP buyers that if they fulfilled their part of the bargain they would qualify for a bank loan within 3 - 5 years. Thats how confident I am in a 8-10% p.an. increase in values for the forseeable future.
Here is a real life example. He was 64, she was 56. and desperate to own their own home. Both worked, had good incomes but not enough savings history to satisfy the banks. I bought a modest 3 br house for $95k Rotorua,(used 100% bank finance (will explain how if anyone interested) fixed 3 yrs 6.8%) sold it to them $135 on a WRAP on $9k deposit (plus $12k gst refund) 9.5% int. 35yr term.
Their repayments $274 pw (the same house is rented today for $300pw) my outgoings $152 (P&I), cash surplus $122 pw. They completely refurbished the house, and resold 2 years later $195k. Added an inheritance to profit bought a couple of rentals as prices were rising Rotorua, used equity to buy nice home, rental incomes from 4 properties to pay for it, and send me a nice Xmas card and bottle single malt each year. Can't all be bad. Remember I had not paid one penny for this property gross profit $52,000 plus satisfaction of helping someone achieve their dream (priceless!) everybody wins.

As for your comment "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." I think this is a typical case of "zero-phobia", afraid of zeros. I have already given examples of inflation effects on property... why do you think our coinage recently changed and there are no more 1c 2c 5c pieces?.
Hell the changes in my own life time are scary.
Petrol for my first car cost 1/3d (about 12c) a GALLON! about 3c a litre? My wages were 6 quid a week! about the cost of a packet of fags today... The farm I dreamed of owning when a 28 year old station manager, was less than the cost of 1 bedroom in our new apartment.

Viven
I have travelled a lot and believe me we are fortunate to be living in such a beautiful place. Unfortunately it has been discovered and the very things that make NZ special are being compromised so fast.
Every piece of NZ is owned by some one. You can be one of those owners if you so chose. You have a right to own a bit of this Paradise if you want to, don't be put off! Winners are winners, it dosn't matter if you are talking property, shares, business, relationships or whatever. Winners, even in this thread, are obvious.. Coge, Clips, YOTT, Tim, Cantab, Foodee, McD. If you find a winner that have succeeded because they have something that you don't - don't be frightened to ask them what it might be and where/h

[Mick100]

JK, I think when you deal in property, either as a landlord or doing these wrap deals as you have done, you need to have certain qualties that not everyone has - ie, you have to enjoy dealing with people. From my experience, as a renter, I would say that 2 out of 3 long term renters are total losers - certainly not the kind of people that I would want to do business with. I'v seen enough of long term renters to put me off ever wanting to have any involvment in residential property in any way whatsoever. The only property that I would consider investing in would be industrial - which means your tenants are business people, which for me, would be people that I could deal with.
,

[duncan macgregor]

Whatever side of the fence you sit on the facts are these.
1, Landlords make money and seem to buy more properties.
2, Some landlords have low paid jobs, lack the skills of higher employment, yet end up filthy rich from humble beginnings.
3,It is false economy to rent anything that is in continual use, other than for tax reasons, or for short periods of time.
4, Most rich people own properties most poor people dont.:D
5, Most rich people think property is a good investment.
6, most poor people find reasons to say its not.
Those are the facts as i see them but i am only a simple lad that owns properties, and plays the sharemarket for a bit of excitement.
MACDUNK

[vivins]

quote:Originally posted by JoeKing

PS
If somebody can explain how to post a XL spreadsheet program I will put up my WRAP calculator free. (or you can buy a similar, but not as good) one from KPI for around $400).



I'm not 100% sure, but you could use a site like http://www.filefactory.com/ to upload a file, then post a link to the download? I would be very interested in having a look at that calculator :)

Thanks,

[Mick100]

quote:Originally posted by duncan macgregor

Whatever side of the fence you sit on the facts are these.
1, Landlords make money and seem to buy more properties.
some people make money in the sharemarket and buy more shares
2, Some landlords have low paid jobs, lack the skills of higher employment, yet end up filthy rich from humble beginnings.
Most successful share investors start from humble beginnings also and develop the required skills to make investing profitable
3,It is false economy to rent anything that is in continual use, other than for tax reasons, or for short periods of time.
Is it? What if you could make well above average returns in the sharemarket does it make sense to sink $300,000 into a house which has zero returns

4, Most rich people own properties most poor people dont.:D
I agree - most poor people don't own much of anything
5, Most rich people think property is a good investment.
Most rich people who own property think property is a good investment
6, most poor people find reasons to say its not.
From my experience, I would say that most poor people would love to own property, but they're poor - so they don't
Those are the facts as i see them but i am only a simple lad that owns properties,
How many properties do yopu own macdunk - apart from the house you live in that is
and plays the sharemarket for a bit of excitement.
I'v been watching your antics in the sharemarket for close on 4 yrs now and it's obvious to me that you don't make much money at it, if any - so, yes, I agree, you must be playing in the markets just for a bit of fun
MACDUNK

[JoeKing]

quote:Originally posted by Mick100


JK, I think when you deal in property, either as a landlord or doing these wrap deals as you have done, you need to have certain qualties that not everyone has - ie, you have to enjoy dealing with people. From my experience, as a renter, I would say that 2 out of 3 long term renters are total losers - certainly not the kind of people that I would want to do business with. I'v seen enough of long term renters to put me off ever wanting to have any involvment in residential property in any way whatsoever. The only property that I would consider investing in would be industrial - which means your tenants are business people, which for me, would be people that I could deal with.
,

Hi Mick
Totally agree Landlording is not for everyone. One of the reasons I got into WRAPs was I got sick of being a Landlord. I had a real problem asking tenants to mow the lawn cause the neighbors were sending me nasty letters, asking how they were going to pay the 3 weeks rent in arrears, requesting they tell their kids to stop swinging on the (broken) clothes line I replaced just last week etc.
I even had a tenant phone me 10.30 at night to replace the bathroom light that just blew as her kids were in the bath, and drove 1/2 an hour across town to replace it :-((
My first WRAP was a "problem" tenant. I discovered that a lot of renters look upon their landlord with disdain and even go out of their way to be difficult. Often they are envious, jealous, and even hate their landlords who they consider "priveledged" and "leeches" getting fat on their tenants rents. In rare cases this may be true but in most cases not. Most landlords are responsible and provide a good service and shelter for their tenants. Any way, when I offered our problem tenant the opportunity to own their home the whole familiy's attitude changed immediately. Within 2 weeks the property went from being one of the worst houses in the street to by far the best. Instead of being greeted with "mumble mumble Oh shi-t its the landlord" I got a hug and a handshake and "Hey come see the new vinyl in OUR! bathroom, or the new wallpaper in OUR! bedroom." or something similar. The transformation in that family was unbelievable! Soon they shamed the neighbors into being tidier. I was able to buy and WRAP another 2 houses in the same street. Eventually the whole cul-de-sac of about 18 homes improved. Landlords and home owners did up adjoining properties and got better quality tenants who were prepared to pay higher rent to live in a "nice" street, again every one wins... Every Xmas we give 2 bottles of wine (red/white) to the tenants in all our rental units. Every year we GET (usually a bottle of something) and a card from each of our WRAP Purchasers, most of whom are X tenants, and an invite for coffee and "to see OUR! new kitchen or...." . All our rentals are now handled by good professional managers and we have very few problems. I would recommend anyone comtemplating getting into rentals to do the same... can save a lot of headaches.
After the total success of my $$ goal at the time I turned my attention to an industrial investment... it was a total absolute disaster, but that story can keep for another time.
Just a thought for you Entreprenuers out there after reading over a few of my past posts on this thread. Perhaps someone might like to put all this information into a book form and publish it. Seriously!
The sun is now out, bite time is in 1 hour so... I'm going fishing
Cheers all
JK

[Mick100]

quote:Originally posted by JoeKing
[
,
I discovered that a lot of renters look upon their landlord with disdain and even go out of their way to be difficult. Often they are envious, jealous, and even hate their landlords who they consider "priveledged" and "leeches" getting fat on their tenants rents.






I'v got a couple sets of neighbours at the moment who speak quite openly to me about what they think of the landlords and your above remarks are right on the money JK. These people just despise their landlords for no apparent reason. The rent is reasonable, the properies are well maintained and the landlords are genuinely good people in my opinion.

The fact is that most long term tenents seem to resent the fact that they have to pay rent but they are not prepared to do anything about except ***** and winge about the landlord.
./

[duncan macgregor]

quote:Originally posted by Mick100

I'v been watching your antics in the sharemarket for close on 4 yrs now and it's obvious to me that you don't make much money at it, if any - so, yes, I agree, you must be playing in the markets just for a bit of fun
MACDUNK

What a pathetic little person you are MICK. You cant even put forward a reasonable arguement on the subject without reverting to personal attacks. When have you ever said i will buy this or sell that as i do:D:D. I have doubled my money Invested on the sharemarket in the last four years and given out my buys and sells in advance. I never defend my position but will say this you are not big enough to do the same. My last statement was sold TPW ,CEN bought MCR at $2-15 on 3rd of jan after a two year hold :D:D.
You are pathetic try again sometime. MACDUNK

[wns]

quote:Originally posted by Mick100


JK, I think when you deal in property, either as a landlord or doing these wrap deals as you have done, you need to have certain qualties that not everyone has - ie, you have to enjoy dealing with people.


For being a landlord, I disagree with your statement - that's what property managers are for. They deal with the tenants so you as the landlord don't need to. I've had two rental properties since late 2003, and I've only met the tenants once, back in 2005 when I saw the properties for the first time. The properties are 600km from where we live and we incorporated an inspection into part of a holiday we had. As much as anything I was curious to see what the houses looked like on the inside. Both our tenants were nice people and were renting the houses before we purchased them.

Putting vendor finance deals together is different though and a lot more involved. You're dealing with people, selling, qualifying, seeing if there's a way to make the deal work.

If you're a money partner on vendor finance deals (which is what I did), then all you have to do is arrange finance for your purchase of the house, sign some papers and watch the money come in each month.

[trackers]

quote:Originally posted by vivins


quote:Originally posted by JoeKing

PS
If somebody can explain how to post a XL spreadsheet program I will put up my WRAP calculator free. (or you can buy a similar, but not as good) one from KPI for around $400).



I'm not 100% sure, but you could use a site like http://www.filefactory.com/ to upload a file, then post a link to the download? I would be very interested in having a look at that calculator :)

Thanks,




I could host the file on my webserver if it was emailed to me :)

[Halebop]

quote:Originally posted by duncan macgregor

[quote][i]...I have doubled my money Invested on the sharemarket in the last four years...

Doubling your money in 4 years is worth bragging about but remember that there is a degree of hitching your boat to rising tide rather than personal brilliance in this sort of result. Since it's forumlation on 3 March 2003 (About 3.9 years ago), the NZX50 Gross index has risen 119%.

[Mick100]

[/quote] What a pathetic little person you are MICK. You cant even put forward a reasonable arguement on the subject without reverting to personal attacks. When have you ever said i will buy this or sell that as i do
[/quote]

Seems I'v hit a raw nerve macdunk. I sometimes read your posts and I get the feeling that something doesn't add up. Years ago you wrote (on numerous ocassions) about buying a property from housing corp and selling it to your daughter at a profit. If you were doing such deals reguarly I'm sure we would have heard about it. Your trying to give readers the impression that you have a property portfloio. Thats why I asked the question - how many properties do you own other than the house your living in.

I often declare my hand on the ASX forum as regular readers will know
The reason why I don't often post on any changes in my NZX portfolio is becaause I very rarely make changes to that portfoio. Last yr I bought PGW which you and other followers of that thread know. I sold CDL and bought ABA the year before which I also announced on that thread - go and have a look at the thread. I havn't made a secret of the fact that I hold NZO, while GPG and CEN have been in my portfolio since the 1990s - thats it Macdunk - no secrets there.

You constantly claim that your the only person who declares his hand - if you read more carefully you will find that plenty of people declare what they are holding.
It's a bit like when you claim that your the only person on this forum who uses his real name - I could name 4 others, off the top of my head, who use their real names.
,

[Heavy Metal]

quote:Originally posted by duncan macgregor

I have doubled my money Invested on the sharemarket in the last four years

A very mediocre performance on the stockmarket given the likes of the ASX200 has generated more over the same period in capital gains alone.

Some of the better investors that post on Sharetrader have probably doubled their money EVERY year in the past four years.

[wns]

quote:Originally posted by JoeKing
One of the reasons I got into WRAPs was I got sick of being a Landlord. I had a real problem asking tenants to mow the lawn cause the neighbors were sending me nasty letters, asking how they were going to pay the 3 weeks rent in arrears, requesting they tell their kids to stop swinging on the (broken) clothes line I replaced just last week etc.
I even had a tenant phone me 10.30 at night to replace the bathroom light that just blew as her kids were in the bath, and drove 1/2 an hour across town to replace it :-((


That's so different to my experience as a landlord!

My tenants have no idea where I live or how to contact me, let alone my tenants' neighbours!

Actually one of my investment properties is surrounded by a shopping centre carpark so they have no neighbours other than cars and shopping trolleys. :)

I get maybe four calls per year from my property manager to discuss a maintenance issue, that's about it. And they aren't highly priced or new properties either. I purchased them for $85k and $92.5k respectively in Nov 2003, and now they are worth about $210k each and rent for $160pw each.

We bought our own house four years ago and are only now doing some renovations. Its exciting! The inside of the house is being painted and next we're getting the floorboards polished, then new curtains/blinds etc (haven't decided yet). Already it looks a lot better.

Our initial outlay of roughly $13k (approx $20k minus $7k first home owners grant) to buy our home has now grown to about $440k of equity between the three properties, in just four years.

Property has been very good to us and that's why I'm quite passionate about it.

Our two major financial goals are to own our home outright and have investment income more than cover our living expenses. Its very satisfying to make progress towards those goals.

We've lived a modest lifestyle compared to what it could be, because those goals are more important to my wife and I than having flash cars and other "doodads". I drive a car worth $3.5k while most of my work colleagues drive BMW's etc.

Anyway, gotta go. Hope this has been helpful and encouraged someone.

[JoeKing]

Hi Vivins
I did as you suggested, here is the link http://www.filefactory.com/file/f4ab34/ I originally made the spreadsheet in Excel 2000 and it works fine on my old machine, but does not like Excel 2003 on my laptop when I tested the link. If you are familiar with Excel you can probably fix. Have fun, lets know what you think.
Cheers
JK
edit: Thanks Trackers, I think the filefactory thing will work

WNS, Initially we did our own rental property manageing, now we use Professionals. You mention 7k home grant so I presume you are talking Aust. We used to have such assistance about 40 years ago but no more. I did buy 2 properties in Blenhiem unseen a few years ago, and took my wife down a couple of years later to auction. It was a real fun weekend, getting (well!) paid to do the Marlborough wine trails after property auction.
;)) JK.

HEY! Mick/McDunk c'mon guys take a breather!

[Halebop]

quote:Originally posted by cantab

The same thing could be said about the sharemarket.

I guess the 80/20 rule applies anywhere. 'Cept with the sharemarket I'd avoid 99%+. But that 1% can do nice things...

[Crypto Crude]

quote:
Mick100
Advanced Member
New Zealand
1657 Posts

Posted - 26/01/2007 : 8:25:25 PM
Seems I'v hit a raw nerve macdunk. I sometimes read your posts and I get the feeling that something doesn't add up. Years ago you wrote (on numerous ocassions) about buying a property from housing corp and selling it to your daughter at a profit

One thing that I strongly believe in is to not profit from family or friends... and to not get into business to sell to family and friends...

joeking, does that mean vivins gets your wrap calculator for free?
[8D]
.^sc

[Crypto Crude]

<center>Kiwi flies on rates decision </center>
the promise of a March Interest rate rise has pushed the NZ dollar up against its major trading partners... This is despite almost a year of threats, but no action from the RBNZ....
THE MARKETS ARE NOW PUTTING THE CHANCE OF A MARCH INCREASE BY THE rbnz at 90%...
He also warned the govt over its spending, saying it could push up inflation, house prices and consumer spending this year and next...
quoted from the chch press

I will have to crunch some numbers but Im easily on track to double my share market portfolio within two years... from janurary last year...

some of you talk as if returns on housing are guaranteed... there is NO such thing as a guaranteed return... no such thing as a sure bet on any investment....(guarantees in housing are less certain than ever before)
the only business that guarantees returns is the TAB (they win if any team wins or loses or draws)...
ask the British what their returns have been for the last 10 years on houses....
we had a friend who could not give their house away (almost I say).... they had an open home and no-one turned up....
There has been great storys, but factual info and guarantees in the same sentence is bull....
If I felt it was guaranteed then I would sell the shares buy a house... and not care too much about a short term falling market....
I hope very much that the likes of JK, and others are here in 2.5 years so we can go through where I will get my first house...:D
[8D]
.^sc....

[Mick100]

Marc Faber suggests that all asset prices may decline this yr including shares, housing and commodities

http://www.financialsense.com/transcriptions/2007/0120.html


MARC: I think that all asset prices have gone up dramatically since, you know, depending 2001, 2002, 2003, but basically we’re up everywhere. If I look around the world there are very few assets that are not expensive. And the big surprise for this year could be that liquidity tightens even if the central bank tries, say, to keep monetary policy easy, because if you look at the Middle East, suddenly all of the markets are down between 50 and 60%. There’s still plenty of liquidity. But the issue there is that liquidity growth slowed down – it didn’t accelerate anymore. And if I look at international reserves in the world they’re still growing at 18% per annum, but they’re no longer growing at an accelerating rate. So it could be that at some point in 2007 liquidity tightens.

I’d also like to make the point that when markets go up they create liquidity because [when] an asset goes from, say, 100 to 200, it increases the borrowing power of the owner of these assets. And when asset prices go down (and we’ve had an appetizer of that in April, May 2006 when suddenly the markets went down – suddenly liquidity dwindled)…And I think the big test for liquidity will come once there is a correction. And I think we’re by historical standards in one of the longest bull markets, which began in October 2002; we’re in a bull market that by historical standards is about average length in terms of magnitude; and since July 13th 2006 when this latest leg in the bull market started we haven’t even had a 2% correction. Now, I lived through the 70s. In the 70s the markets moved sideways but every year the Dow went up and down by about 25%. And here we are and we haven’t had a 2% correction since last July. Something big is going to happen one of these days. And I would not rule out that markets may continue to go up, but as a buyer the risk now is actually quite high compared to the potential reward. It’s as John Hussman recently wrote that there are so few bears (from converting these very few bears into bulls) that the market will not get a lot of ammunition on the upside. But if suddenly so many bulls turn cautious or negative then obviously the downside can be quite substantial because people will liquidate their positions. [8:56]

JIM: Marc, it’s interesting though you’re talking about this liquidity and some of the disruptions that we have seen in various asset markets, the well respected Bank Credit Analyst in their forecast issue for 2007 has the headline which is Another Year of Riding the Liquidity Wave. Can central bankers pump out enough liquidity that maybe we can postpone this for another year or do we really get that lucky?

MARC: Well, I’m just writing about this in my Gloom, Boom & Doom report because basically the theory of the Bank Credit Analyst is that we are in a debt supercycle. Let’s say you take the debt supercycle you could say started in the early 80s when debt to GDP was 130%, we’re now at 330%, and this would be by accounting standards of the government – let’s say private accounting standards would put the debt of the US government at much higher levels because of the unfunded liabilities. But let’s say we’re at 330% - yeah, it’s possible we go to 400%, maybe to 500%. My point is – and I have here to also point out to another report that was written recently and titled Apocalypse Now. This report makes the point that this year we are in one of the most dangerous financial situations and that we could experience very serious setbacks: a) in the global economy and b) in asset markets. And to that I have to say, I don’t know when the supercycle in debt and credit will end. It will end one day. And one day you will have apocalypse. So if someone came to you and said, “Look, the brakes on your car are going to fail one day you have the option: do you want to fix them or doing nothing about it.” My view as an investor is it gradually doesn’t pa

[cantab]

We are in the final phase of the Bull market - [u]rampant speculation phase</u>

http://www.smh.com.au/news/investment/happy-landings/2007/01/22/1169330826284.html

[cantab]

quote:Originally posted by cantab

Amazing, a 3br house in Christchurch on a 837m section, street facing, for neg over $175,000!

http://www.realestate.co.nz/363612




Listing gone! Block construction, tile roof, not surprising.

[Halebop]

quote:Originally posted by cantab

We are in the final phase of the Bull market - [u]rampant speculation phase</u>

http://www.smh.com.au/news/investment/happy-landings/2007/01/22/1169330826284.html


The funny part is they can talk increased prospects of asset value meltdown and then tip which shares to buy... [:0]

[duncan macgregor]

Its a good topic to sort the wheat from the chaff. We have the lot on this thread. Business minded people, other mens lackeys, no hopers, genuinely interested people plus the what have you got jealous brigade. The last lot are probabely all living in another mans house:D:D:D. I must admit that the property that i live in i placed in a family trust, but then thats another story. The cream always rises to top, i feel sure that young SHREWD CRUDE will take on board who the winners and losers are and go from there.
macdunk

[Halebop]

Gotta love demographics.

The pro property "winners" here are mostly Boomer or older. Perhaps unsurprising that I'm also an X'er althugh I've probably been share and business investing longer than many Boomers. Also worth remembering that the pro property opinions voiced in this thread are from those in the business of property rather than those who just want to occupy their own home. The economics are very different when one stance makes you cash and the other costs you. Something their arguments failed to address is Shrewd's original question focussed on "1st homes". The bulk of 1st home buyers are owner occupiers. And don't let me start on tax policy. A flick of the switch and it could be all over red rover. Boomers beware when the X'ers are in charge. Just maybe the old imperatives will not have the same pulling power.

[wns]

Halebop, you've mentioned on this topic that you're sitting on a pile of cash many times the average house price, so I'm guessing $1m+. And from memory you're about 35 years old or so??

I'd be interested to hear some specifics of "your story" - what you did and what you invested in to be in such a position.

[Heavy Metal]

quote:Originally posted by wns

I get maybe four calls per year from my property manager to discuss a maintenance issue, that's about it. And they aren't highly priced or new properties either. I purchased them for $85k and $92.5k respectively in Nov 2003, and now they are worth about $210k each and rent for $160pw each.


To get those sorts of returns on such cheap purchases I presume you live in a WA mining town! Great timing.

[Heavy Metal]

quote:Originally posted by cantab


quote:Originally posted by cantab

Amazing, a 3br house in Christchurch on a 837m section, street facing, for neg over $175,000!

http://www.realestate.co.nz/363612




Listing gone! Block construction, tile roof, not surprising.


The only offers you got were well below $175,000 and you pulled the sale?

[Halebop]

WNS I'm not particularly ambitious or driven. Just tend to plod along doing things I like. Without even knowing why got it in my head one day as a kid that shares and investing would be cool. Still remember opening my first "sharemarket page" in the Newspaper and trying to work it all out. Comes back to me that a teacher once asked us what we wanted to do when we grew up ...earned a laugh when I said I wanted to work behind a desk. Doesn't quite compare with all my jet flying and fire fighting peers. Wonder how many of them actually came through?

Had many of the middle class advantages the set people up to get ahead: Dad a lawyer, mum a serial "start-up" entrepreneur. Education. 3 Square meals (Not sure what a "square" meal is). Although it shouldn't be I think I had the advantage of being white too.

Fell into insurance by accident after Uni. Like so many in the industry it was something I was going to do until I worked out what I was going to do. The analytical side appealed to my personality so although have left "never to come back" several times I keep an interest in one form or another ... these days tend to consult on one project or another and then leave before working for a living becomes a grind again. (For the record, if you can get past entry level, insurance pays quite well if you are happy to work for someone else's dreams).

Have started several businesses with mixed success. One was quite successful and one was not but sold for more than it was worth during the tech boom (it no longer exists but became part of the technology that went into a high priced Australian dot.com float around 2000 - wish I'd have thought that through a bit more when they offered me "free money" for my stupid business plan and flawed technology).

Most of my wealth has come from share investing. Been investing actively since around 1983. I'll happily admit that early successes were luck and timing (including such "notable" investments as Bruce Judge's Ariadne Australia and a number of gold offerings that were later flattened by the '87 share market crash). Luck had a big roll to play in early years - I had a really appalling portfolio of shares and had began to read books on investing. Just 1 trading day before "The" crash sold the lot in a housekeeping exercise when I realised what a bunch of poop the portfolio was. ...of course later claimed it was my brilliance and market insight. In all the years of investing I've earned returns at least in the teens, have outperformed both the ASX and NZX and have never (yet!) had a down year. I'm very close to being beaten by the indices this year (my trading has been average in absence of making out-sized investments) so there is always opportunity for a first.

Biggest % winner over the years: Baycorp (also I'm pretty sure my longest hold - something for passive investors to take heart in). Worst Investment: Too many to mention but I don't allow myself the leisure of holding them long enough to find out how much "worst" they can become. Mostly my time frame is shortish but not in obvious trading territory - anything from 6 months to maybe 18 months. Mostly looking for re-rating of the under-appreciated or fallen angels. Outsized returns in this category require patience to sit on cash and then the balls to take action and spend it all. Returns typically don't take long to start materializing (or perhaps I don't have the patience to wait for them). When a bad decision is made or the market turns sour - selling without regret is usually the best choice to make.

I take a Buffett approach to valuing a company but a more active approach to investing. Also kid myself that I use technical signals but I'm not as disciplined as someone like Phaedrus in this area. My net worth is more than $1m and that's all I'm willing to say about it. It's literally all in cash but that can change in an eye blink - mostly $A and a portion in $NZ so I can pay bills and not worry about the next pay cheque. For the last 4 or 5 years I've rarely stepped outside of the ASX

[wns]

quote:Originally posted by Heavy Metal


quote:Originally posted by wns

I get maybe four calls per year from my property manager to discuss a maintenance issue, that's about it. And they aren't highly priced or new properties either. I purchased them for $85k and $92.5k respectively in Nov 2003, and now they are worth about $210k each and rent for $160pw each.


To get those sorts of returns on such cheap purchases I presume you live in a WA mining town! Great timing.


Thanks Heavy Metal, I'm from SE QLD and the rental houses are both in Rockhampton in central QLD. I was going to buy four houses in Rockie at the same time but the building inspections showed some problems with the roof etc on the other two, so I just bought two instead of four. In hindsight I would have been better off buying all four but ah well. :)

[wns]

Thanks for sharing Halebop! :) Congratulations on your success!

Have you ever thought of writing a book? You present your ideas & thoughts well.

[Heavy Metal]

quote:Originally posted by wns


quote:Originally posted by Heavy Metal


quote:Originally posted by wns

I get maybe four calls per year from my property manager to discuss a maintenance issue, that's about it. And they aren't highly priced or new properties either. I purchased them for $85k and $92.5k respectively in Nov 2003, and now they are worth about $210k each and rent for $160pw each.


To get those sorts of returns on such cheap purchases I presume you live in a WA mining town! Great timing.


Thanks Heavy Metal, I'm from SE QLD and the rental houses are both in Rockhampton in central QLD. I was going to buy four houses in Rockie at the same time but the building inspections showed some problems with the roof etc on the other two, so I just bought two instead of four. In hindsight I would have been better off buying all four but ah well. :)


Ah, forgot about Central QLD - a combination of increasing tourism, seachange and the mining boom make for an extremely tight housing market and rentals as scarce as hens teeth.

[Crypto Crude]

halebop... great story....
Your story proves that you don't have to have property to be successful...(or much of it)
contrary to what mackdunk says...
I too have all my holdings now on the ASX... I see the exchange rates at unsustainably high levels over the medium term period...
I prefer to create wealth in a stronger currency...
for the next two years im comfortable with what I do...
if housing goes up 10% this year....say 30k.... and my share investments make 30k, then I'm no better or worse off in dollar terms...
but better off because theres no skill in housing... house investment is boring...
just boring house maintenance jobs... no excitement... no added upside other than increased selling value. biggest excitement for a housing buff is an OCR announcement[:p]
and that sure turned out be a sizzler for the barbe last thursday
there is satisfaction in making money... Wondering if there is true satisfaction when you dont have to do nothing for it...
I look forward to this next week... I have some big public announcements due...
could be one of my biggest weeks yet... could be just another week...
danger is my middle name... SDC....
[8D]
.^sc- prefers to live life on the wild side....

[Hommel]

I am interested in the statement I have read on here "Residential property goes up 10% pa on average". I have done some calculations on a couple of properties that I know well in Hamilton and that I know the history of for the last 25 -30 years. On bald figures they both compounded out to about 9% pa. BUT if you factor in the not inconsiderable sums spent over the time period on renovations, improvements, new roofs, painting, landscape work, the TRUE increase was about 6.5% pa on both properties. So yes they went up about 9% pa but alot of money had to be spent on them to get this to happen. I think alot of people grossly underestimate the money that gets spent on houses over a 20 to 30 year time frame.

[George]

Been reading this thread with interest.
Just bought the magazine 'Investigate' solely for the article 'Rich man, poor man' - p24 - which is about the 'Uridashi timebomb or Yen carry trade' and wondered if any ST people have comments about the subject and how it may affect property in NZ ad Aus.
Basically, Japanese investors borrow yen at about 0.3% and then buy kiwi dollars around 7%. Over 10b of the 40b invested here are due to be redeemed in 2007 with US29b vulnerable in Aus.
One factor that could scare some Jap investors to take their money out is a change of policy at the Bank of Japan to tighten money, and evidently it's already starting, although very slowly.
One consequence of any problems here would be a rise in our interest rates according to the Reserve Bank and a drop in equity markets.
This happened in Iceland when Fitch downgraded their sovereign debt in March partly because of concerns about the carry-trade. The money promptly fled, the stockmarket plunged 20% and the krona collapsed 8% in 48 hrs. I think there was news recently but not mentioned in this article that Iceland had raised interest rates to 14%.
With my partner and I in our fifties and having to borrow up to 270 grand for a crap, crosslease hole in West Auckland, news like this only re-inforces my opinion to wait.
SC, like you I am hoping to parlay my new found TA skills at trading to increase my net worth over the next 2-3 years and perhaps get into a home then.
George.

[Halebop]

Although Inflation is a bit of a subjective measure at times, I find the RBNZ inflation calculator useful for back-testing real performance:

http://www.rbnz.govt.nz/statistics/0135595.html

[Halebop]

quote:Originally posted by wns

Thanks for sharing Halebop! :) Congratulations on your success!

Have you ever thought of writing a book? You present your ideas & thoughts well.



quote:Originally posted by Shrewd Crude

halebop... great story....
Your story proves that you don't have to have property to be successful...(or much of it)


Thanks guys! No book in the offing - it would be about as entertaining as one of those scrap booking shows on the living channel. And to put things in perspective - I started investing during the greatest (near unbroken) economic expansion (perhaps ever?). A profitable combination of both Boomer consumption and savings, mostly benign interest rates and inflation and (until recently) soft and falling commodity prices. Anyone investing over such a long and profitable period should have something to show for it. ...my boat was hitched to that rising tide. The same things our erstwhile property investors have done. [Same Sh!t, different Bucket, a friend used to say to me]


quote:Originally posted by Shrewd Crude

I too have all my holdings now on the ASX... I see the exchange rates at unsustainably high levels over the medium term period...

...but better off because theres no skill in housing... house investment is boring...
just boring house maintenance jobs... no excitement... no added upside other than increased selling value. biggest excitement for a housing buff is an OCR announcement[:p]

I agree the NZ dollar is too strong but it's stubbornly proved me and quite a few others wrong so far.

Not sure about no skill in housing. I've got several friends who either trade or invest in both residential and commercial real estate. Suspect there is a lot of skill in picking up "bargains" in a market where you are competing against a lot of bank financed amateurs. Skill again in making them look like +$80,000 on a +$20,000 budget. At the more passive end I personally look for boring companies on predictable paths so maybe that isn't so different either?

[Steve]

Another "feel good" property story. As an aside, does anyone know REINZ's reasoning for preferring MEDIAN over MEAN other than trying to make prices sound better?

Property boom set to continue (http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10421228)
And now for the good news: New Zealand's property market boomed again last year, is still booming now and looks set to continue into 2008.

[Heavy Metal]

quote:Originally posted by Hommel

BUT if you factor in the not inconsiderable sums spent over the time period on renovations, improvements, new roofs, painting, landscape work, the TRUE increase was about 6.5% pa on both properties.


And when you factor in inflation over the past 30 years at 6.5% the TRUE return is then zero!

[Halebop]

quote:Originally posted by Heavy Metal

And when you factor in inflation over the past 30 years at 6.5% the TRUE return is then zero!


In fairness it's about +1.5%, which in the scheme of things isn't that bad. After all, it grows by 1.5% just for being there. Although you'd expect a business or share to do better in real terms, it has to be worked on a lot harder by the employees. A business doesn't make money by just having a foot print.

[Heavy Metal]

quote:Originally posted by Steve

As an aside, does anyone know REINZ's reasoning for preferring MEDIAN over MEAN other than trying to make prices sound better?


Using the MEAN would actually make prices sound better! This is because the value would be skewed by including all the $1000000+ properties.

Say for example there are three properties worth $10000, $100000 and $1000000. The mean is $370000 yet the median is $100000 (the mid-value house).

[Heavy Metal]

quote:Originally posted by Halebop

After all, it grows by 1.5% just for being there.


I suggest you need to factor in maintenance and renovation costs to achieve your 1.5% real return. If these are not done the real return for 'just being there' is probably more like zero.

[Crypto Crude]

quote:Halebop
Advanced Member
2065 Posts
Posted - 28/01/2007 : 09:52:59 AM
1.....I agree the NZ dollar is too strong but it's stubbornly proved me and quite a few others wrong so far.

2......Not sure about no skill in housing. I've got several friends who either trade or invest in both residential and commercial real estate. Suspect there is a lot of skill in picking up "bargains" in a market where you are competing against a lot of bank financed amateurs. Skill again in making them look like +$80,000 on a +$20,000 budget.

3......At the more passive end I personally look for boring companies on predictable paths so maybe that isn't so different either?
1..... I hope exchange rates stay higher for longer, and the OCR aswell.... the higher and the longer they are up there, then the bigger the fall off when the market swings...

2....."suspect there is alot of skill in picking up bargains"... my mum seriously looked at 100plus houses before she found the right one... (it took her over 6months)... she was no property buff...
its all about timing, luck, patience
I know exactly what to look for, and I have been told zilch... what I am looking for is...
a four bedroom house, spacious, land area (maybe enough to sub divide), the location and the neighbourhood....
yes their is skill in buying the right house, fixing it up, flicking it off for a profit...

3..... a companys outlook changes all the time... you have annual reports, AGM's, quarterly statements, public announcements, public commentary, Mergers and acusitions,
market statistics which effect your stock,
In stocks you can watch the value of your portfolio change daily... I just love it...
The only real way to keep revaluing your house is when you either sell it... or a government valuation....
[8D]
.^sc

[wns]

quote:Originally posted by Halebop


quote:Originally posted by Heavy Metal

And when you factor in inflation over the past 30 years at 6.5% the TRUE return is then zero!


In fairness it's about +1.5%, which in the scheme of things isn't that bad. After all, it grows by 1.5% just for being there. Although you'd expect a business or share to do better in real terms, it has to be worked on a lot harder by the employees. A business doesn't make money by just having a foot print.



There's been a lot of talk about "on average". The average % return of investing in property & shares etc.

I personally don't find 'thinking in terms of averages' as very helpful. Instead look at specifics - specific listed companies or a specific property that you could invest in.

I'm surprised there hasn't been more interest in getting JoeKing to explain his wrap stategy. You can typically earn 40%+ on your money - or infinite returns on your money if you structure the deal so that none of your money is in it.

[Halebop]

WNS an average is the basic building block of benchmarking. Benchmarking is a basic building block of performance excellence. This is why I often comment on market "average" performance benchmarks like share indices. Knowing an average score is a key criteria for recognising, determining and emulating out performance. Something as simple as a control chart using a single standard deviation above average can help identify the out-performers.

Because with wraps you are taking operational and leverage risks, I'm not certain that knowing you might earn 40% is actually an acceptable risk / reward trade. What is the benchmark? For me it could be my own returns during this bull market phase. They have "averaged" above 40%pa without any leverage.

[Mick100]

specifics

Buy $100,000 worth of GPG shares on margin

ie borrow $70000

average annual return on GPG over the past 10 yrs is 18% pa

thats $18000 return on your 100000

interests expence is 7000 @ 10% pa

that gives you an $11000 return on tour $30000 money invested

Thats 37% pa - not too bad aye

In reality you would want to give yourself a buffer on your margin account. So you put up $35000 but leave the investment at the same size of $100,000

11000/35000 * 100 = 31% return

other advantages:
- you can liquidate you position in under 30 seconds unlike a house which would take weeks or months to sell
- don't have to deal with loser tenants
- don't have to do wrap deals with people the banks consider unsuitable borrowers.

,

[cantab]

Vacancy rates in OZ are incredibly low, take Brisbane as an example, vacancy rate is 1.7%, BIS Shrapnel expect rents to rise 20 to 25% in Brisbane over the next two years. People are forced to rent so pushing up demand.

[wns]

quote:Originally posted by Halebop

WNS an average is the basic building block of benchmarking. Benchmarking is a basic building block of performance excellence. This is why I often comment on market "average" performance benchmarks like share indices. Knowing an average score is a key criteria for recognising, determining and emulating out performance. Something as simple as a control chart using a single standard deviation above average can help identify the out-performers.


Halebop, I agree with everything you've said here, and I use comparisons to the average all the time in my share-market investing.

What I was trying to say with what prompted your comment is that discounting a whole asset class (eg. residential property) as an investment option, because of its historic, inflation adjusted, maintenance adjusted AVERAGE returns isn't very empowering or profitable.

Looking at specific properties, specific market situations etc is what's profitable. There's always profitable bargains to be found.



quote:Originally posted by Halebop
Because with wraps you are taking operational and leverage risks, I'm not certain that knowing you might earn 40% is actually an acceptable risk / reward trade. What is the benchmark? For me it could be my own returns during this bull market phase. They have "averaged" above 40%pa without any leverage.



Posted by JoeKing...

Here is a real life example. He was 64, she was 56. and desperate to own their own home. Both worked, had good incomes but not enough savings history to satisfy the banks. I bought a modest 3 br house for $95k Rotorua,(used 100% bank finance (will explain how if anyone interested) fixed 3 yrs 6.8%) sold it to them $135 on a WRAP on $9k deposit (plus $12k gst refund) 9.5% int. 35yr term.
Their repayments $274 pw (the same house is rented today for $300pw) my outgoings $152 (P&I), cash surplus $122 pw. They completely refurbished the house, and resold 2 years later $195k. Added an inheritance to profit bought a couple of rentals as prices were rising Rotorua, used equity to buy nice home, rental incomes from 4 properties to pay for it, and send me a nice Xmas card and bottle single malt each year. Can't all be bad. Remember I had not paid one penny for this property gross profit $52,000 plus satisfaction of helping someone achieve their dream (priceless!) everybody wins.


JoeKing has none of his own money in the deal, therefore his return is infinite. There's a number of ways to structure these type of deals so that you have none or very little of your own money in the deal... or to get your money back very quickly.


In this particular deal, he gets their $9k deposit up front and a cash-flow profit of $122pw (x 52 weeks = $6344), so $15,644 back in the first year. I don't understand the GST part, that's different to what I experienced with the deals I was involved with.

Even if he was to put down a 10% deposit of $9.5k for his $95k purchase, and say $6k to cover closing costs (stamp duty, legals, mortgage insurance), he's gets all his money back in the first year, then $122pw profit until they refinance, at which point he gets his back-end profit which is something like $37k... $135k minus $9.5k deposit minus whatever their reduced the principal by (say few $k) minus $85.5k (his loan). For the particular deal detailed above, this happened within two years, which is fairly typical.

[b]
The average person would only need to have about 6 or 7 of these deals going and they would have their living expenses covered. Shrewd Crude (for example, since he started this topic) could pay

[Mick100]

quote:Originally posted by wns
[


The average person would only need to have about 6 or 7 of these deals going and they would have their living expenses covered. Shrewd Crude (for example, since he started this topic) could pay cash for his house if he did 5-10 of these deals. Worth considering in my opinion. But most people won't consider it, for such reasons as "property ON AVERAGE only goes up x% per year" - which is the point I was making in my last post.





Sounds great doesn't it
As someone else on this thread has already mentioned, these wrap deals are only going to work while nominal property values are increasing or at least holding steady. What happens if you have half a dozen wrap deals on the go and property values fall by 5 - 10%.
Remember your dealing with marginal borrowers who have very small deposits on the properties. If values decline you may find some of the people hand you back the keys and walk away. They don't have much to lose - only the meager deposit and your left with a 200 - 300,000 mortage and an empty house. - think about it.
.

[Mick100]

Another thing you should think about wns;
What JK is talking about has worked well in the past 5 yrs - I don't doubt that JK has been very successful at pulling off these wrap deals.
Unfortunately, just because something has worked well in the past, that's is no garantee that it will work in the future - ask JK what he's doing today - is he still doing these wrap deals?

It's a bit like reading a buffett book - you find out what worked for buffett five yrs ago but you don't find out what he's doing today or what his plans are for tomorrow.
I read my last buffett book in 2003 (i think) and it had a whole chapter on the reasons why Warren does not invest in commodities - guess what - in 2003 buffett was investing in commodities (oil)

I'm interested in what people are doing today - not these stories of unbounded success from the past.
.

[Halebop]

WNS we all understand the math. JK is operating a property business. He is not a "first home buyer". He does however have a vested interest in first home buyers buying first homes. The "average" statistics show that first (and beyond) home buying is not particularly profitable. In direct contrast to property wisdom espoused here, home owning is most profitable without a mortgage and the "average" 12%+ cost of capital. While interest rates now are well below that average, rental "savings" have also fallen markedly.

If you want to make a business of buying property, cool. A business can be made out of any product. But property is not a free ride or a sure way to wealth for either "operators" or 1st home buyers. Infinite returns can only be achieved with leverage (and infinite returns are a statistical illusion - there is still an absolute number involved and a limit on how much can be borrowed). Leverage only works in a rising market. And debt costs money.

I've come close to buying an owner occupied home several times. Around 2001 although it was a close piece of math, it was a fairly neutral transaction and I almost convinced myself to buy because the market was obviously due a bit of a rise. Comparing from the bull market period of 2003+ the cost of that rise (to me) would have been 650+ % of share market gains and reduced flexibility to go where and do what I feel like (Thanks to a conservative stance my returns this year are tracking a little over 20% and might actually be beaten by the "average").

The irony is that now I can afford to buy something without a mortgage it makes far more sense. My 4% (ish) rental yield gain plus inflation adjusted appreciation after capex and expenses of maybe 1.5% puts property much closer to the average real performance of equities (my main problem is I'd expect to beat the average performance of equities or I should otherwise have someone else doing it for me). The driver to buy in the end will be an emotional one I'm certain. And maybe like everyone else I'll kid myself on what a great investment it makes...

[JoeKing]

quote:Originally posted by Mick100


Another thing you should think about wns;
What JK is talking about has worked well in the past 5 yrs - I don't doubt that JK has been very successful at pulling off these wrap deals.
Unfortunately, just because something has worked well in the past, that's is no garantee that it will work in the future - ask JK what he's doing today - is he still doing these wrap deals?
...
....I'm interested in what people are doing today - not these stories of unbounded success from the past.



Mick, I am not doing any WRAP, or any other deals deals today, except selling 2 no longer needed properties. I have them listed on trademe fyi.
http://www.trademe.co.nz/Browse/Listing.aspx?id=83189009
http://www.trademe.co.nz/Browse/Listing.aspx?id=83162732
We are selling the apartment because we have bought the 3 b/r one next level up (1 mil cash) and the section (paid $70k cash r.v. now $120) because we have no intention of doing anything with it and it is just sitting there growing long rank grass- a fire hazard.
Now back to the subject.
Vendor finance deals have been around forever. In the years pre-80's when finance was hard to get, nearly every real estate deal involved 1st-2nd 3rd, sometimes even 4 or 5 mortgages. As the number of mortgages increased so too did interest rates as mortgage holders security lessened. In many cases "vendor finance", where the vendor agreed to "leave so much in" at a predetermined rate, or even zero rate, till the Purchaser was able to refinance (usually agains capital gain), was necessary to get the deal completed.
Today finance is a lot easier to get but 99% of property deals still involve the purchaser borrowing money from somewhere. If for some reason the purchaser is unable to get bank finance and the vendor has the ability to borrow the money, then lend it to the purchaser and charge a mutually agreed upon increased rate for the use of his credit why not?? The bank holds the mortgage so it is covered, the vendor holds the title so he is covered, the Purchaser is happy to pay a little premium to get what he wants... everyone wins. Very simple! until some of the clever Dicks that write on these threads complicate things and get tangled in technicalities :-((
There is no reason vendor finance deals will not work at any time! Finance is finance irrespective of who provides it.

Mick... the reason I am not doing any more (WRAP) deals?
1. As you have read (probably several times ) elsewhere I set out to prove to me that I could make $1 mil. in property starting with just $20k equity in our own home. (note NO! money!)in 3 years. Honestly it was so easy!!!! the challenge was met and so...
edit: I have absolutely no doubt whatsoever, I or anyone with a fraction of a brain could do the same thing today, next year or, unless there are some real drastic changes in world economy in 10 years time.
2. I moved onto my next challenge to make $1 mil on share market in 3 years starting with $40k. (Again I borrowed against equity then paid back the borrowed amount, so I have actually used none of my own money). In a little over 2 years my portfolio is worth (opening ASX ths morning) over $450k. I will even copy my portfolio page for you doubting Thomases. ref. copy of screen below.

Code Qty Cost Price Cost Value Mkt Price Mkt Value Unrealised P/L Mkt Value (NZD) Unrealised P/L (NZD) % of Portfolio
PPP.NZX 16,000 15 2,400.00 17.5 2,800.00 400.00 2,800.00 400.00 16.7% 0.62%
[movements]
NZX Subtotal 2,800.00 400.00 16.7% 0.62%
AGM.ASX 80,000 51.563 41,250.00 68.5 54,800.00 13,550.00 61,010.91 15,085.73 32.8% 13.47%
[movements]
AGS.ASX 102,445 72.203 73,968.58 226 231,525.70 157,557.12 257,766.31 175,414.30 213% 56.9%
[movements]
BOW.ASX 40,000 25.5 10,200.00 17 6,800.00 -3,400.00

[Mick100]

quote:Originally posted by JoeKing

There is no reason vendor finance deals will not work at any time! Finance is finance irrespective of who provides it.

[I remember an uncle of mine sold a block of land (40 ha) off the back of his farm at a very good price back in the 80s, providing vendor finance - land prices subsequently declined - the purcher got into financial difficulty - in the end my uncle's family got only a fraction of the agreed price for their land

Mick... the reason I am not doing any more (WRAP) deals?
1. As you have read (probably several times ) elsewhere I set out to prove to me that I could make $1 mil. in property starting with just $20k equity in our own home. (note NO! money!)in 3 years. Honestly it was so easy!!!! the challenge was met and so...

If I had such a winning formula that's going to provide me with infinite returns I would stick with it - I wouldn't be looking for new challenges - unless I thought that my winning formula had passed it's "used by date"
2. I moved onto my next challenge to make $1 mil on share market in 3 years starting with $40k. (Again I borrowed against equity then paid back the borrowed amount, so I have actually used none of my own money). In a little over 2 years my portfolio is worth (opening ASX ths morning) over $450k. I will even copy my portfolio page for you doubting Thomases. ref. copy of screen below.

Why did you need to borrow 40k to start a share portfolio when you have a multi million dollar property portfolio



Yep, nearly half way, and I have absolutely no doubt that I will reach my goal.

Why stop at a million - are you afaid your luck is going to run out. I must admit that I had my share of good luck too when I moved into commodities - the important point here, being, that I am aware that some of my success was due simply to good luck, not my exceptional ability to pick shares
I do get a little frustrated reading some of the drivvle in these forums, and seeing that many of the hopefuls that come here looking for good advice get side tracked by losers.
Winners are winners, no matter what they set out to achieve. Its all attitude.

I find it interesting that some people can so easily classify another person as either a winner or a loser ,ie, those that deal in property are winners and those that don't deal in property are losers. As you mentioned JK , 20 yrs ago you were broke - so someone gave you a break - someone didn't classify you as a loser and you were able to get back on your feet. Even a drug addict can turn their lives around - I'm not so quick to "Wright a person off". It wasn't so long ago that I could have been written off myself - in fact I'm sure I would have been by the likes of macdunk and yourself

It has been said before, but I will say it again:
There are 3 kinds of people.
1. Those that MAKE things happen
2. Those that WATCH things happen..
3. Those that just wonder what the fark happened...
You can put yourself in whatever group you chose. Irrespective of age, educational or social background. Cheers

I'v just finished a paper in development economics and I can assure you that social backround, cultural beliefs and values,and education levels have a huge impact on how people live their lives. Many of the worlds people cannot choose what they do with their lives.
Their lives are predetermined from the day they are born.

[JoeKing]

Geez Mick you sure have the uncanny ability to take any little thing and turn it into an arguement....
With negative thinking like you have, I would wonder how you get through each day.... lighten up man!
"Their lives are predetermined from the day they are born." If this is the kind of rubbish they teach you in your developement economics course I would strongly recommend a new tutor, or paper. And it is a complete contradiction to "Even a drug addict can turn their lives around " in your previous paragraph.
I am going out to talk to my cockatiel, he makes more sense....
Cheers
JK

[Mick100]

Yeah, a child born in Sub saharan africa today probably has less opportunities in life than a heroin addict living in NZ.

Anyway I would rather focus the disscussion on wrap deals and sharemarket dealings - neither of which were addressed by you in your previous post.
.

[JoeKing]

Mick
I think I have covered my experiences with both property (wraps) and share market dealings openly and honestly... ahem anyone else prepared to post their ACTUAL portfolio??? Or explain in detail how to put a vendor finance property deal together, information that wannabe property investers can spend $thousands to get? Both have been successfull to date.
All you have done is try and tear eveything I say to pieces and create silly arguements. If you think I am all bull that's fine but don't go screwing up the chances of some one else who could possibly benefit from the real life true experiences and information I am prepared to share. We have all heard of the half full half empty glass thing, but to be in the running you gotta have your glass with the hollow side UP! try it.
If you ever get a chance to see the DVD called "Darwins nightmare" get it. It is a classic example of what greed can do.
Cheers
JK

[Halebop]

quote:Originally posted by JoeKing

...ahem anyone else prepared to post their ACTUAL portfolio???

I did already, 100% cash ...and really who cares what you or I say we do or don't own?


quote:Originally posted by JoeKing

Or explain in detail how to put a vendor finance property deal together, information that wannabe property investers can spend $thousands to get?

We heard you. I knew it already without hearing you. Simply talking to friends in the property business gets you that for free too. The information is useful and with timing and effort can pay great dividends as it has so far with yourself. The angst seemed to arrive when myself and others pointed out that the strategy was not risk-less. That it really works best in a rising market so timing is important. Then all the name calling, winners versus losers and glass half empty slurs began. We all make decisions on incomplete information. That's the risk, challenge and even enjoyment of investing. But to shout someone down because they disagree is pretty small. Your counters to rational data have consisted of words like "bollocks" and intimating that heads were stuck in un-natural places.


quote:Originally posted by JoeKing

If you think I am all bull that's fine but don't go screwing up the chances of some one else who could possibly benefit from the real life true experiences and information I am prepared to share...

...All you have done is try and tear everything I say to pieces and create silly arguments...


Its very altruistic and without injecting any irony I don't doubt your sincerity. But without understanding a persons circumstances, without having traded your wrap business through a downturn, without balanced input that a debate in this thread creates, how useful is your information really? You could just as easily be arming someone with the courage to commit financial suicide.

That you freely share what you have learned is great. But I will do the same, sometimes on the same thread, sometimes with a different view-point. We all have our personal paradigms. I'm not risk adverse but I am debt adverse and I do carefully manage my risk through quality of decision making. Your advice is not useful to me. My advice is not useful to you. Someone else will find something in each of our views.

[Mr_Market]

Here's something to think about. Let's get this thread back on topic.

Auckland market pips Big Apple
http://www.stuff.co.nz/3942865a13.html

The real cost of new homes in Auckland and Christchurch is higher than in New York, Dublin and London, even though a recent report into the steep costs of property around the world says otherwise.

The third annual Demographia International Housing Affordability Survey ranked Auckland's housing market only marginally behind cities like Los Angeles, Hawaii, central London, and New York, using figures which compared the median house price in locations around the world with median household income in those areas.

But when costly local mortgage lending rates are taken into account, the true cost of New Zealand homes is revealed.

Calculations show home-buyers in Auckland on a median income buying a median house on a 95% mortgage fixed for two years over 30 years would expect to pay 62% of their incomes on mortgage repayments each month.

That compares to 52% in New York, 57% in Vancouver, 46.5% in greater London and 33% in Ireland.

And the New Zealand situation could worsen. Reserve Bank governor Alan Bollard decided not to raise interest rates last week, but he threatened to do so later in the year if the housing market did not ease.

And it's not just Auckland - new home-buyers in Christchurch on the median income would now be paying 54% of their income out on mortgage repayments.

Wellingtonians, who are on average better educated and better paid than Aucklanders or Cantabrians, would fork out 49% of monthly income on the mortgage for a median home.

Hugh Pavletich, a Christchurch property developer and one of the authors of the Demographia survey, said the report probably understated the costliness of New Zealand homes because of the differences in the cost of borrowing here and overseas.

"Economists have been irresponsible in telling people that interest rates are low. In real terms they are anything but," he said.

Jeff Matthews, of financial planning firm Spicers Wealth Management, said the figures showed how stretched house prices had become as speculators buying multiple homes had driven the market skywards.

He said "hot" property areas like Gisborne had seen prices pushed up by speculators from other cities chasing higher yields than they could get in the already popular Auckland, Wellington and Christchurch markets.

Based on such figures, Matthews said New Zealand's property market looked overcooked and ready for a correction or stagnancy while wages caught up.

Many investors, however, remain convinced house prices do nothing but rise.

Matthews said that if a 7% annual house price growth was to continue, by 2026 the average house would be worth more than $1 million on household incomes of around $60,000, which was a highly implausible outcome.

But should buyers not in the market wait and gamble on prices to drop?

"It is a dangerous strategy," Matthews said, "and one people were advocating two years, ago. And look what happened."

Matthews recently sold his Remuera home and is renting while his new home is built. The yield on the house he is renting is probably 3% or less, but the proceeds of his house sale are gathering more than 7% interest.

Things might be bad on this side of the Tasman, but they are even worse in Australia. Sydney-siders looking to get into the market would expect to pay 70% of median household income in mortgage payments when buying the median home on a 95% mortgage.

[duncan macgregor]

Its pointless saying i own this sold that or whatever, people with closed minds on any subject are blinded to reality by their own stupidity. The only people that will gain anything from this discussion are the people with open minds who are normally the young.
The negative people on this thread are the people that have never done it themselves, so come out with all the what ifs. I am a builder that has built hundreds of houses for all sorts of people in NZ. Property has been very good to me, as an investment it cant be bettered. I taught my family property management set it up, showed them how. They now have properties that are easy to run, and might be mortgage free if they wished. Thats all we can do is to educate and set up your families future and let the what if people worry about down turns. I myself own very little property i placed most of it in a family trust a great number of years ago. Good on you JOE KING getting people on the property ladder, the country needs people like you. If there is a downturn in property it would suit me just fine. MACDUNK

[JoeKing]

quote:Originally posted by duncan macgregor

Its pointless saying i own this sold that or whatever, people with closed minds on any subject are blinded to reality by their own stupidity. The only people that will gain anything from this discussion are the people with open minds who are normally the young.
The negative people on this thread are the people that have never done it themselves, so come out with all the what ifs. .....
I myself own very little property i placed most of it in a family trust a great number of years ago. MACDUNK


Well said McDunk.
I am only too pleased to help anyone who wants to pick my brain, about anything from property investment to skinning possums.(Oh forgot to mention 2rd in world possum skinning champs 1977)
I have currently 9 people in a mentoring program, my fees are good. A "success pass" from each of them is all I require/demand. ie when each has surpassed their program goals by at least 50%. 100% success rate from 18 graduates so far!
FYI All our major assets too are in trusts or private Company entities for a number of reasons that posters on this thread would do well to learn about.
My time can be better spent coaching success people rather than argueing here.
Good luck Shrewdy I hope you and others like you make it and don't end up bitter disalusioned posters on forums like this. There are enough here already.
Cheers
JK
edit. For those hoping to make a million in the sharemarket, I would suggest have a good look at my share portfolio already posted. I have never believed in the "high risk high reward" theory, apart from the neooa options I would say the rest are NO! risk high reward. I will repost my portfolio in six months for comparison
Cheers
JK

[Mick100]

quote:Originally posted by JoeKing
[
edit. For those hoping to make a million in the sharemarket, I would suggest have a good look at my share portfolio already posted. I have never believed in the "high risk high reward" theory, apart from the neooa options I would say the rest are NO! risk high reward. I will repost my portfolio in six months for comparison
Cheers
JK



I hope your not mentoring anyone in sharemarket speculation JK
I'm vaugely familiar with most of those shares - do any of them have any earnings? I would describe that portfolio as being right on the outer edge of speculation. With a good dose of luck you may get your million with that lot - could just as easily be down by 50% in 6 months time though - who knows. Even the 20 somethings will recognise your portflio for what it is.
.

[Crypto Crude]

great article mr market...

quote:JoeKing
Senior Member
New Zealand
760 Posts
Posted - 29/01/2007 : 8:48:01 PM

Good luck Shrewdy I hope you and others like you make it and don't end up bitter disalusioned posters on forums like this. There are enough here already.


Don't you worry about weather I will make it... I will be just fine... I have no worrys...
As Mackdunk said, and it fits me like a glove.... I have an open mind to everything...
I am not bitter about nothing just that the timing to enter housing now is all wrong...
I am not a loser because I am not happy with 30yrs, $512, 799k....
I am a winner because I have addressed these problems, and have said this can't be the way I want to go forward... 52yr old man and all... If I cop flack then thats that...
If I get put in some category which I no that I don't fit, then so be it...

Joeking had a goal of turning 40K into 1mill in shares...
I have a goal of turnin a 30year loan into 10years.... through shares and a sideways or falling house market over the next two years...
Im currently only holding URA, NWE, AED...
(lost about 1k on UOGO, panic buy panic sell), I have learnt from that...
URA had an unexpected trading halt today... the other two have big announcements due...

The property buffs have been quick to address the historic performance of their property holdings, but they have dared not give us a view of what they think the market will do over the next two years... I addressed it one other time, and Macdunk commited to nothing...
I am interested in the next two years...
I cannot get the same returns in property that the buffs once got... eg the example on page 13 where I would need a 700% increase on my house in dollars terms to be equal with Joeking... (1st house return comparision)....
remember, because my house price is a way higher price, compounding has to work extra hard to get the same increases than that of 20 years ago...
I have a question.... can I possibly match some of your returns in property going forward?...
[8D]
.^sc

[Crypto Crude]

when I mentioned 30years to pay loan off, $512 payments per week, 799k in toal dollars paid....
these were some of the responses I got
-but but, its Other Peoples Money
-just find one reason why you can
-stop and listen, OPM !!!
-don't dwell on it taking 30years
-toughen up

its as if none of the three figures have any importance.... as if a house should blind all else and the figures dont come into any equation of costs vs benefits
the best one was don't dwell on it... 'yeah, don't worry about it mate, you will be just fine, now sc trust me on this one'...
I can find one reason to buy a house, infact I can find more than one reason to buy a house....i can find many....

but then I picture myself as a 52 year old man, with my one house, probably a wage earner because I cannot take risks and have to keep the 512 payments weekly coming, midlife crisis when im 30-40 when I want kids but can't afford them, because I need their rooms for the rent...

mackdunk, theres no way I could put the kids through uni if it was like this....
As many of you now know, I want more than a house at 52yrs...
I am prepared to take risks, I donot want to be tied down, I am not unsuccessful because I don't have a house... I am successful because I have not given up on the three figures and just how crummy they could make my life...
[8D]
.^sc

[The GrandMaster]

Well done SC, stick to your guns. The righteousness from some posters on this site can be overbearing at times.

Good luck

[JoeKing]

quote:Originally posted by Mick100
I hope your not mentoring anyone in sharemarket speculation JK
I'm vaugely familiar with most of those shares - do any of them have any earnings? I would describe that portfolio as being right on the outer edge of speculation. With a good dose of luck you may get your million with that lot - could just as easily be down by 50% in 6 months time though - who knows. Even the 20 somethings will recognise your portflio for what it is.


No Mick I am not mentoring in sharemarket speculation. I am mentoring in success! physical, emotional, financial, phsycological (sp), whatever.
Mick, re your last post. Honestly mate youve got me buggered for a reply!
I thought the reason why people invest was to make money.
I have shown you how I invested no money (of my own) in property to make a million plus$, you pick holes, and argue.
I have shown you how I invest no money (of my own) in the sharemarket to make a million $.. you say "With a good dose of luck you may get your million with that lot - could just as easily be down by 50% in 6 months time though - who knows."
Mick, I could well be down by 10,000% whats a few zeros? or conversly up 1,000% I DO NOT BELIEVE IN LUCK! Further more you say "Even the 20 somethings will recognise your portflio for what it is."
Well I ask you... what is it?? So far it is a portfolio that has evolved and gone from $40k to $450k in just over 2 years.. THATS WHAT IT IS! And I have openly posted its progress as well you know. C'mon that can't be all bad?
I have a broker friend that bombards me with books on share trading, systems, charting techniques, cycle annalysis..... hell what about some plain old common sense! Losers spend time on these threads spouting.."it cant be done". Winners are out doing it, I correspond with them every day.
Anyway we are way off subject, which is "NZ 1st homebuyers are ScReWeD..." and I will say again YES!
By their own inability to say YES I CAN!
Cheers
JK

[JoeKing]

quote:Originally posted by Shrewd Crude

I have a question.... can I possibly match some of your returns in property going forward?...
[8D]
.^sc


Shrewdy, the answer is YES!!!easily ... IF YOU! decide.

And to prove it, I am prepared to enter into a little experiment.
If you would be prepared to put up a small wager on this thread, proceeds to a worthy cause, I will bet you I can buy a home, with no money down, and have the house unencumbered within 5 years.
Now theres a challenge!
Cheers
JK

[trackers]

quote:Originally posted by JoeKing


quote:Originally posted by Shrewd Crude

I have a question.... can I possibly match some of your returns in property going forward?...
[8D]
.^sc


Shrewdy, the answer is YES!!!easily ... IF YOU! decide.

And to prove it, I am prepared to enter into a little experiment.
If you would be prepared to put up a small wager on this thread, proceeds to a worthy cause, I will bet you I can buy a home, with no money down, and have the house unencumbered within 5 years.
Now theres a challenge!
Cheers
JK







With a wrap? [:o)]

[wns]

quote:Originally posted by Mick100
Sounds great doesn't it
As someone else on this thread has already mentioned, these wrap deals are only going to work while nominal property values are increasing or at least holding steady. What happens if you have half a dozen wrap deals on the go and property values fall by 5 - 10%.


Not much. Mostly the buyers will continue to pay on time each month and you make a nice cash-flow profit.

How many home owners with bank finance do you know who go and sell their house because property values have fallen a bit? Hardly any of course, because its their home. What makes you think someone who borrowed from an investor as opposed to a bank, is going to be any different?

[Crypto Crude]

quote:
JoeKing Posted - 30/01/2007 : 02:51:21 AM
quote:
Originally posted by Shrewd Crude
I have a question.... can I possibly match some of your returns in property going forward?...

Shrewdy, the answer is YES!!!easily ... IF YOU! decide.

And to prove it, I am prepared to enter into a little experiment.
If you would be prepared to put up a small wager on this thread, proceeds to a worthy cause, I will bet you I can buy a home, with no money down, and have the house unencumbered within 5 years.
Now theres a challenge!
Cheers
JK


The question was CAN I match returns in property going forward.... and not CAN YOU match returns in property going forward....
I am looking at my housing potential compared to historical performance...
I am skeptical that I could...
100k to 200k yup.... 300k to 600k... hummm....same return, totally different numbers something doesn't quite add up here...
Id have to be looking at a super cycle...

Joeking.... but joeking you would have to do it as if you were in my position...
you would have to start off from scratch with 40k.... none of this cheating with using your super large profit column as collateral... your bet would have to be something that I could
do aswell... because we are looking at newbies and their potential to match historic performance....
a wager would involve spending an afternoon with this cool cat SC...
gift me to the charity of your choice... haha
[8D]
.^sc

[duncan macgregor]

If this wager ever gets off the ground Madunk will back JOE king with a bottle of the good stuff to anyone out there.
One of the reasons is leverage, Joe would borrow a lot more on property than SHREWDY could with shares. SHREWD would only have a chance of winning by buying penny dreadfulls where leverage is out. What amazes me is people that have never done it try and prove to the people that have, why it cant be done. I think however Joe will find that he is wasting his time trying to teach the blind how to see.:D:D macdunk

[Crypto Crude]

quote:duncan macgregor
Guru
New Zealand
2810 Posts
Posted - 30/01/2007 : 1:31:44 PM
What amazes me is people that have never done it try and prove to the people that have, why it cant be done.


arghhh... I'm not trying to prove nothing... just that in comparison to historic returns
future returns look alot more difficult to achieve than in the past....
it is a simple idea mackdunk....
The future returns have to increase far more in dollar terms than historic because we are dealing with a much larger number now... (for the returns in both periods to be equal)....
as I said earlier i need a whole 300k for a 100% return.... when Joeking bought his first house he only needed 79k for a 100% return... big difference huh?

Joeking.... I would surely be interested If you could teach me how I could buy a house with no money down... (or say 40k for me).....and have the house unencumbered within 5 years?
[8D]
.^sc

[Dazza]

me too :D

teach me as well JK

esp with relevence to auckland thanks

taa
dazza

[Steve]

JK, I have already expressed my interest earlier in this thread as it is always good to learn another way of doing thigs...

[Mr_Market]

Fundamentals will rectify splurge
http://www.stuff.co.nz/thepress/3944355a6430.html

Serious questions need to be asked about housing and farm values, and debt servicing, in relation to incomes, 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 the year 2001.

And in just the last few years the annual increase in household borrowing has more than trebled.

Similar indications of overindulgence have emerged in the rural sector, with the ratio of farm prices to land-based incomes doubling too over the last five years, give or take.

These are all clearly unsustainable trends. But even where these matrices sit right now – in such wildly uncharted territory in relation to New Zealand's longer-term history – serious 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 does not mean it is justified. We are reminded of 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 nosedived to around 1200, returning price/ earnings ratios closer to long-term norms. Fundamentals won the day, as they tend to do in the end.

Admittedly, that is 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, even though the tipping point for a correction does not appear imminent.

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

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

To our mind, the drivers have been much more overwhelming and persistent – most notably an overly low New Zealand interest rate curve established by the Reserve Bank – rather than any occasional 0.25% discount from the curve, in an admittedly competitive mortgage market (which, incidentally, now includes a state-subsidised bank).

All the while asset valuations have also doubled over the last five years or so. This has been obvious for homes (with no sign of any let-up even now). But it has 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 near a similar proportion. But they have not. Indeed, according to the latest income and outlay accounts, published a few weeks ago by Statistics New Zealand, gross household disposable income increased just 23% in the five years to March 2006.

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

It also includes a measure of gross farm income, which actually moderated to around $2.9b in 2005/06 according to Statistics NZ data, from $4.5b in 2000/01. Incidentally, the peak was $5.4b 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, as an example, is income from trusts and other tax structures that have ballooned over recent years for various reasons (including inve

[Steve]

This analysis shows the difference from the point of view of an investor vs home-owner.

Also a good statistic with regard to the branch of this thread that got into shares vs property etc

Housing overvalued by 32%, says analyst (http://www.theindependent.co.nz/story2.html)
Griffiths’ model valuing the median New Zealand house since 2003 shows the actual price is a close fit with the discounted cashflow value to a property investor using 95% gearing, and mortgage interest payments as a tax shield on income.

But from the perspective of an owner occupier, who receives neither rent nor tax breaks, prices began to outstrip value in 2003. Griffiths ’ model puts the current gap at 32%.

That level of overvaluation is supported by various affordability ratios, such as rental yield and the ratio of price to household disposable income.

Even for an investor using 95% gearing, prices are at a level that has become difficult to justify.

Griffiths also argues housing hasn’t provided returns as high as those from New Zealand or US equities, over time.

A $100 investment in US equities in 1960 would now be worth $1020; in New Zealand equities, $951; and in the New Zealand house market, $635.

[duncan macgregor]

When you work out the sums renting is only for conveniance.
Let us make presumptions giving the financial benefit in each case to the renter.
1, The price of a new house increases in value by at least as much as the interest cost of a loan. That is a fact.
2 If you stand still for 12 years the actual cost is halved to pay back in real terms.
3, When you have the house you can borrow much cheaper money for other things like cars shares etc than you might otherwise.
4, When you are an oldie you can reverse mortgage the bloody place and travel the world to come back to paying no rent, and stuff all to leave the kids.
5, Never forget that when you do this your rent remains forever at that rate.
6 Then the sky might fall, in Bush will press that red button having a fit, or you might even be smart enough to work it out for yourself.
7, Money is a promise to pay, material things leave all your promises for dead.:D:Dmacdunk

[Crypto Crude]

Joeking,
you at least owe me, dazza, steve an answer...
you offered to show an example, and I was just hoping you could work an example through that would be suited to a newbie (say 40k down)


quote:JoeKing Posted - 30/01/2007 : 02:51:21 AM
quote:
I will bet you I can buy a home, with no money down, and have the house unencumbered within 5 years.


could this example work with 40k down?.... or do you need to have alot of property (or cash) for it to be able to work... If not, I'm hoping you would show your example regardless...
[8D]
.^sc

[patsy]

I've noticed that the concept of "property investment" is usually promoted like any pyramid selling, network marketing or personal development workshop. It's always about unlimited wealth, wealth mastery, success, turning lead into gold... usually with form 1-level maths that pretend to demonstrate that law of gravity can be defied. I'm not talking about the cunning, ruthless investors capable of finding arbitrage opportunities in property assets but the whole Anthony Robbins-type of industry targeting drooling morons - much worse than brokers promoting FTX.

[Halebop]

quote:Originally posted by Steve

This analysis shows the difference from the point of view of an investor vs home-owner.

Also a good statistic with regard to the branch of this thread that got into shares vs property etc

Housing overvalued by 32%, says analyst (http://www.theindependent.co.nz/story2.html)
Griffiths’ model valuing the median New Zealand house since 2003 shows the actual price is a close fit with the discounted cashflow value to a property investor using 95% gearing, and mortgage interest payments as a tax shield on income.

But from the perspective of an owner occupier, who receives neither rent nor tax breaks, prices began to outstrip value in 2003. Griffiths ’ model puts the current gap at 32%.

That level of overvaluation is supported by various affordability ratios, such as rental yield and the ratio of price to household disposable income.

Even for an investor using 95% gearing, prices are at a level that has become difficult to justify.

Griffiths also argues housing hasn’t provided returns as high as those from New Zealand or US equities, over time.

A $100 investment in US equities in 1960 would now be worth $1020; in New Zealand equities, $951; and in the New Zealand house market, $635.


Without drilling down to the specifics of making a +32% call, I think this is obvious to anyone who has done even some cursory math. An irony that Labour continue to support a tax policy that most directly harms their constituency. That home ownership continues to slowly concentrate shows investors making rational decisions surrounding an irrational and counter productive tax policy. Interesting that the government should feel so positive about typically higher wage earners paying less tax while they think DIY super investors and many managed scheme investors should pay more.

My wish list:

A low (10%?) but universal capital gains tax (and capital loss credit) at time of sale on all asset classes except for designated owner occupied dwellings. Forget any complexities like risk free rate of return or inflation.

A clearer definition of capital gains versus trading.

Interest and cash expense deductions for operating real estate but no depreciation deductions.

Deferred capital gains on registered superannuation schemes (both DIY and managed) until time of withdrawal.

[skinny]

Well I'd put some weight on 1 of the wishes at least ;)

[Halebop]

quote:Originally posted by skinny

Well I'd put some weight on 1 of the wishes at least ;)


I'd rank it 1 quarter of 1 of those wishes at best. [xx(].

...Welcome back to the sharetrader fold too. Slow day in economics?

[Crypto Crude]

I can't say that I speak for the others, but I will answer what patsy has bought to our attention (in my opinion)....


quote:patsy Posted - 01/02/2007 : 6:22:39 PM
1.....I've noticed that the concept of "property investment" is usually promoted like any pyramid selling, network marketing or personal development workshop.

2..... It's always about unlimited wealth, wealth mastery, success, turning lead into gold...

3....usually with form 1-level maths that pretend to demonstrate that law of gravity can be defied.

4....I'm not talking about the cunning, ruthless investors capable of finding arbitrage opportunities in property assets but the whole Anthony Robbins-type of industry targeting drooling morons - much worse than brokers promoting FTX.

1....this is no pyramid scheme or network crap.... those here that are prepared to help others gain nothing from their shared knowledge, They donot stand to loose anything if there is no-one that takes on what they say (that totally goes against pyramids and NM)........ "personal development"... yes I want to develope personally!....

2...."unlimited wealth"...show me an asset class where wealth is limited, If you portray it as unlimited wealth then I hope you own everything that ever existed!.... "wealth mastery", I would like to think that those at the top of their game have some extra skills above the rest of the pack...
"success", yes I want success as many others do... success is hard to define.... I may define success as if I could turn a 30 year loan into a 10year loan eg.... you may laugh at that... "turning lead into gold"... I think you have the wrong thread, try investment strategys...

3......"defying gravity" doesnt seem to me like theres any magic tricks in property.... simple sit hold and wait....
"form 1 maths".... well thats a joke... You would not find loan amortisations in 7th form maths, or wraps, or present/future values.... of any year of highschool.... you would in any finance course!.... im not saying that you need finance, I'm just saying that in costing projects, debt management, money management, seeing potential and creating returns has nothing to do with form 1 maths

4....."drooling morons"....I like to think that I have some mana about myself but thats just dribble, you need a bib, patsy you are foaming at the mouth.....

1.... just to quickly touch back on personal development.... Everybody has different ideas to others, if you are set in your ways and to stubborn to listen to new ideas then you are funked even before your've begun....
[8D]
.^sc

[cantab]

quote:Originally posted by Heavy Metal


quote:Originally posted by Hommel

BUT if you factor in the not inconsiderable sums spent over the time period on renovations, improvements, new roofs, painting, landscape work, the TRUE increase was about 6.5% pa on both properties.


And when you factor in inflation over the past 30 years at 6.5% the TRUE return is then zero!


Sh!t, the missus ain't gonna like it when I tell her we made nothing holding over the last 20+ years. :(

[cantab]

quote:Originally posted by patsy

I've noticed that the concept of "property investment" is usually promoted like any pyramid selling, network marketing or personal development workshop. It's always about unlimited wealth, wealth mastery, success, turning lead into gold... usually with form 1-level maths that pretend to demonstrate that law of gravity can be defied. I'm not talking about the cunning, ruthless investors capable of finding arbitrage opportunities in property assets but the whole Anthony Robbins-type of industry targeting drooling morons - much worse than brokers promoting FTX.


I'm not, and don't want to be a cunning, ruthless investor, ruthless is for the Crusaders, not even remotely interested in "finding arbitrage opportunities in property assets" [:X]

Was good at arithmetic - recall classroom speed duels in form two reciting the times tables.

Still hold first investment property from 20+ years ago.

[cantab]

Talking about [u]ruthless</u> does anyone recall the Crusaders vs Waratahs in 2002 - WOW, we were up 96 - 0 I think it was - Crusaders were playing like the Harlem globetrotters - final score 96-19 [:p]

[trackers]

quote:Originally posted by cantab

Talking about [u]ruthless</u> does anyone recall the Crusaders vs Waratahs in 2002 - WOW, we were up 96 - 0 I think it was - Crusaders were playing like the Harlem globetrotters - final score 96-19 [:p]




I recall getting a hiding from the Blues a couple hours ago [V]

[cantab]

Knight estimated that about 8% of the tenancies on professional property managers' books were so far in arrears they should be terminated - for private landlords it would be closer to 12%.

http://www.stuff.co.nz/sundaystartimes/3945282a6445.html

[Halebop]

quote:Originally posted by aspex

http://www.stuff.co.nz/sundaystartimes/3950572a6445.html


I don't necessarily agree with all of the viewpoints expressed but politicians and Baby Boomers should take note. Sentiment will drive outcomes faster than fact. Feedback like this has been obvious to demographers and marketing departments for quite a few years. With the front end of BBs in their 60's, both their numbers and economic influence is now beginning to dwindle after 20 years of economic growth. It's no accident that companies like Wizard are publicly shifting the focus to a younger generation - their own data will be showing BBs as a less important source of new business.

The good news for addressing housing is that governments don't even need to specifically attack Baby Boomers to help tackle home affordability. Changes to taxation laws on residential property investment that make property investment tax neutral to other forms of investments would create a significant shift in equilibrium. Tweak the RMA at the same time and the supply side could be augmented as well.

Not doing anything may seem an easy alternative until the backlash shifts from customer surveys to electoral process. I'm pretty certain BBs want healthcare and other benefits when they retire.

[Mr_Market]

It appears that property is now so expensive that it is cheaper to send your kids to a private school than buy in a public school zone!

http://www.stuff.co.nz/3950743a10.html

This is getting ridiculous. I find it mind-boggling that a LABOUR govt has let the country get into this situation. So much for the Kiwi dream of affordable housing for all.

[JoeKing]

quote:Originally posted by Shrewd Crude

Joeking,
you at least owe me, dazza, steve an answer...
you offered to show an example, and I was just hoping you could work an example through that would be suited to a newbie (say 40k down)


quote:JoeKing Posted - 30/01/2007 : 02:51:21 AM
quote:
I will bet you I can buy a home, with no money down, and have the house unencumbered within 5 years.


could this example work with 40k down?.... or do you need to have alot of property (or cash) for it to be able to work... If not, I'm hoping you would show your example regardless...
[8D]
.^sc

Hi Shrewdy,
I am not ignoring you, been outta town and going to be busy for next week or so.
At this point I do not have any particular property or plan in mind, but every day I see opportunities, it is just a matter of picking one, and putting together a plan to suit.
Ordinarily I would use equity in existing property as deposit, then borrow the diff, but I agree as you are not in that position (yet) that would be unfair, so will work on your $40k. I believe we will work out a deal whereby you can even hang onto your cash. Meantime if you check out parants, friends, rele's who might be prepared to use some of their equity as colateral, you are part way started and a relationship with a bank is already established.
Cheers
JK
PS. I will not be wasting time on stupid arguements from sideline tyre kickers, who as Dunk rightly points out have never "done it themselves", know all the reasons why it can't be done, telling those who have already dunnit that it cannot be done.
Remember when Roger Bannister broke 4 minute mile they said "it could not be done!" Kiwi John Walker alone ran sub 4 minutes over a hundred times. 4 minutes is now the standard.

[Steve]

New Zealand gets its first female billionaire (http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10422363)
With the exception of Erceg, whose billion-dollar wealth reflected what people were prepared to pay for a top-notch firm with no clear successor, the list candidates hadn't made their millions overnight, he said. "The common ingredient has to be property."

[Mr_Market]

Looks like the Labour Goverment would have us be a nation of renters rather than make home ownership affordabe.

Housing heads for NZX float
http://www.stuff.co.nz/3950766a13.html

Government eyes a sharemarket solution as home prices soar, writes Greg Ninness.

New Zealanders may soon be renting homes from corporate landlords listed on the stock exchange.

The Sunday Star-Times understands a significant player in the property market is preparing to launch a listed managed fund which would invest purely in residential properties. The move comes as homes become increasingly unaffordable and as more Kiwis rent for life.

The government wants to find out whether more corporate involvement in rental property would help meet housing needs.

Real estate investment trusts (REITs) are a potential solution, and the Department of Building & Housing wants some research done on them.

A background report for consultants interested in pitching for the research job indicates the government has accepted growing numbers of New Zealanders will never own their own homes. REITs are seen as a way of increasing the supply of rental properties to cope with growing demand.

"If current trends continue, many New Zealanders may never be able to purchase a home and will be life-long renters," the report says. This means rental investment must rise significantly.

"To ensure New Zealand households have access to the stable long-term housing they need, the better approach for the government to take is a combination of of the complementary strategies of home ownership schemes and REITs.

"In other countries, institutional investment in rental housing helps provide affordable, good quality, secure-tenure housing for long-term renters.

"(T)he department thinks that REITs have the potential to contribute to the development of NZ's private rental sector."

A project team is studying the proposals. But one player is a step ahead and is already planning a listed real estate investment vehicle.

The company has been working on the proposal for the past two years and expects to launch the new fund in the next two months, the Star-Times understands.

Investors would buy shares or units in the fund, which would own houses and/or apartments and rent them out. The fund would collect rent from tenants and distribute its rental income to shareholders as dividends, after deducting expenses for managing and maintaining the properties.

Investors would trade their shares on the NZX and the price would likely rise or fall in line with house prices and rents.

Several of this country's largest fund managers and property investors have been looking closely at REITs.

Marcus Jacobson, a principal with AMP's alternative assets team, said AMP was keeping a "watching brief" on the concept. "It's quite unique and we have looked at it in NZ to see if we could acquire residential properties and hold them."

However, for REITs to work they must attract investors willing to buy the shares.

Investment adviser Brent Sheather, of Private Asset Management, said in the late 1990s, he advised many clients to invest in REITs in the US, where they are a common form of investment. Prices were then relatively low, and dividend yields were up to 8%.

Sheather had proposed a local REIT to invest in residential property, but the idea failed through lack of support from the financial sector.

[Halebop]

quote:Originally posted by JoeKing

I will not be wasting time on stupid arguements from sideline tyre kickers, who as Dunk rightly points out have never "done it themselves", know all the reasons why it can't be done, telling those who have already dunnit that it cannot be done.

Is it disingenuity or genuine reading comprehension issues? Who has said it can't be done? Some like myself have highlighted the risks and shortcomings and apparently that has got your bile rising, to the point you don't even appear to understand the argument if you think anyone has said it can't be done.

[Halebop]

quote:Originally posted by Steve

"The common ingredient has to be property"

Hardly first home buying stuff. The property element tends to be: Commercial Property Investment, Commercial & Residential Property Development, Property Management, Property Trading. Real Estate is also a store of value rather than the road to riches. Many millionaires and billionaires who sell their businesses or invest their cash flow surpluses put some towards real estate (and equities, and venture capital, and private equity and...) But the source of their cash flow is almost exclusively not from property investment. The author's verdict on commonality is flawed. Very few rich-listers make the list without either owning a substantial business or investing the proceeds from the sale of one. Residential property investors are notable only for their absence.

[Steve]

You make a valid point, Halebop

[rmbbrave]

2 jobs, 3 cars and they can't get a loan to buy house?

Are they serious or is it some kind a politcal stunt dreamed up by the National party?

The Sunday Star-Times later took Key to meet Steven Zhou and his wife, Susan. He is a mechanical design engineer; she works as a dental nurse and is a qualified forensic pathologist. They have three cars, including a Mercedes, but told Key they cannot afford to enter Auckland's inflated housing market, no matter how hard they save.

http://www.stuff.co.nz/3950754a11.html

[Steve]

quote:Originally posted by rmbbrave

2 jobs, 3 cars and they can't get a loan to buy house?

Are they serious or is it some kind a politcal stunt dreamed up by the National party?

The Sunday Star-Times later took Key to meet Steven Zhou and his wife, Susan. He is a mechanical design engineer; she works as a dental nurse and is a qualified forensic pathologist. They have three cars, including a Mercedes, but told Key they cannot afford to enter Auckland's inflated housing market, no matter how hard they save.

Sell the Merc to get a deposit???

[Crypto Crude]

quote:Meantime if you check out parants, friends, rele's who might be prepared to use some of their equity as colateral, you are part way started and a relationship with a bank is already established.
talking to my old man a while back, and he even suggested to me out using his equity as colateral....
not to sure about the relationship with the bank though... I have an interest free student loan account.... the overdraft went into shares :D...
[8D]
.^sc

[trackers]

quote:Originally posted by rmbbrave

2 jobs, 3 cars and they can't get a loan to buy house?

Are they serious or is it some kind a politcal stunt dreamed up by the National party?

The Sunday Star-Times later took Key to meet Steven Zhou and his wife, Susan. He is a mechanical design engineer; she works as a dental nurse and is a qualified forensic pathologist. They have three cars, including a Mercedes, but told Key they cannot afford to enter Auckland's inflated housing market, no matter how hard they save.

http://www.stuff.co.nz/3950754a11.html


Oh dear... "If you work hard enough you could be the next John Key"


geez John...

[JoeKing]

quote:Originally posted by Shrewd Crude


quote:Meantime if you check out parants, friends, rele's who might be prepared to use some of their equity as colateral, you are part way started and a relationship with a bank is already established.
talking to my old man a while back, and he even suggested to me out using his equity as colateral....
not to sure about the relationship with the bank though... I have an interest free student loan account.... the overdraft went into shares :D...
[8D]
.^sc

Hi Shrewdy
If a bank already holds your Dads house as loan security, ie a mortgage,it will probably be quite keen to lend against the equity, especially if it can also include another property. Thats how banks make their money.
If your Dads house is unencumbered then you will have more bargaining power when approaching a bank for a loan.
Meantime have a look at this. The article is over 3 years old but still relevant.
http://www.listener.co.nz/issue/3314/features/1021/house_of_the_rising_sum.html;jsessionid=7F9698B39D 58C0852909189D34B2B20D

I bought into one of Dolf's property developements, after meeting him at a Robert Kiosaki seminar. He has a very interesting history, is one of NZ top property investors, and a nice bloke.
Anyone who knows how Bob Jones made his millions will recognise this bit
"You can buy one property, get it revalued, use the equity to buy another property and then buy another and another. “And you do it all with OPM. Other people’s money. OPM. It’s like being high on drugs!” What’s more, the wonder of depreciation claims on the building and contents means “the government subsidises your investment! It’s delightful!”

(off subject, but if you have used OD for NZO, sure hope they improve SH consideration)

Halebop,
1. my bile is not rising.
2. All property is an investment, even the family home. It has income, and expenditure. It is (unfortunately) an unrecognised family business, that can make money, or take money.
Cheers
JK

[SEC]

quote:Originally posted by Mr_Market

New Zealanders may soon be renting homes from corporate landlords listed on the stock exchange.

The Sunday Star-Times understands a significant player in the property market is preparing to launch a listed managed fund which would invest purely in residential properties.


They're kidding, right?

As everyone knows, the current yield from residential properties is dreadful - perhaps 5% gross. Then deduct costs such as insurance, rates, R&M, management fees and taxes, you might be lucky to achieve 2% net for any dividend. Compare that with 5-6% for commercial property or 4% for cold hard caaaaash - just no contest.

I can't see how the vendors can make it more attractive. If they saddle the IPO with debt (aka mortgaging to the hilt) the cashflow becomes negative. Where's the dividend going to come from? Even with tax efficient instruments such as the Macquarie funds you can make ongoing losses but you need positive cashflow to pay the dividend.

The only other way to make it more attractive is to offer the IPO at a price well below NAV. That just ain't going to happen. Would a landlord sell a rental property well below NAV in the current market?

Finally, CGT will be an issue. Since the only decent return from residential rental property is capital gain I'm sure the fund managers will want to churn as much as possible to try and get a decent return. In which case the capital gain may well be deemed taxable.

Perhaps this might be a worthwhile investment based on rental income if the gross return was more like 10 - 12% (a slight premium over commercial property since commercial landlords don't have to pay for many expenses a residential landlord has to). But current returns aren't even close to that.

I can see the only beneficiaries in this IPO being the vendors, the brokers and the property managers. Buggerall for shareholders. If the vendors pull this IPO off it'll be the greatest con job since Feltex.

SEC

[Crypto Crude]

Hey JK, not sure what you mean by this....
"off subject, but if you have used OD for NZO, sure hope they improve SH consideration"

... I red that article, pretty interesting.... yes my dads house is unencumbered....

JK, I am well OVER the fact that my house value will have to increase in dollar terms by 700% more than yours... I am slowly coming around on the property thing....
Lately I have been talking to a few property buffs that have made a living off property in CHCH... I have been told that I should hold off for a year or two, and then make my charge!
the general consensus is that in the next few years house values are uncertain, but over the next 30 years house values will be well up.... and a 600k chch home is guaranteed over the long term!... (in their words)....
[8D]
.^sc - over and out...

[SEC]

quote:Originally posted by SEC

Perhaps this might be a worthwhile investment based on rental income if the gross return was more like 10 - 12% (a slight premium over commercial property since commercial landlords don't have to pay for many expenses a residential landlord has to). But current returns aren't even close to that.


Perhaps I was a bit harsh. Perhaps the IPO is meant to fund the construction of cheap & nasty high rise apartments in derelict areas where land is cheap. Then the apartments in these ghettos could be rented out at up to 10%pa. The banks wouldn't lend against such a hair-brained scheme nowadays, but a sucker shareholder might.

SEC

[Crypto Crude]

Does anyone have any figures on what percentage of foreign ownership makes up the NZ property market?....


quote:aspex Posted - 05/02/2007 : 08:30:04 AM
With respect the above all depends on keeping the ratio of affordability (average prop value/income levels)at its current high rate.

foreigners own ours companies, foreigners own NZ, if vast foreigners own our houses then low NZ wages may not concern then too much (7:1)...!...
[8D]
.^sc

[Crypto Crude]

Does anyone have any figures on what percentage of foreign ownership makes up the NZ property market?....


quote:aspex Posted - 05/02/2007 : 08:30:04 AM
With respect the above all depends on keeping the ratio of affordability (average prop value/income levels)at its current high rate.

foreigners own ours companies, foreigners own NZ, if vast foreigners own our houses then low NZ wages may not concern then too much (7:1)...!...
[8D]
.^sc

[duncan macgregor]

quote:Originally posted by Shrewd Crude

Does anyone have any figures on what percentage of foreign ownership makes up the NZ property market?....
if vast foreigners own our houses then low NZ wages may not concern then too much (7:1)...!...
[8D]
.^sc
Thats a worry SHREWDY The bastards might ship them out before they turn of the light. It might not enter your mind that foreigners paid builders like myself with money earned overseas. People coming here are an asset in funds brought into the country plus services provided once they are here. MACDUNK

[Cooper]

He's talking about NZ house prices not being tied to affordability, Macdunk. Which means traditional methods of measuring affordability would be pretty redundant... they can just keep going, driven by foreign demand.

SC, that's a good point. I really don't know.

[cantab]

Last year I spoke to someone who was convinced it was all the foreigners fault. She was evicted because a foreigner purchased her rental to live in and she ended up paying a lot more rent.

The internet must have had an impact - local NZ properties are listed globally and would appear cheap as chips to some expat living in a shoebox in London. So much easier to buy now - look through the photos, buy subject to the usual reports, do it all over the net.

NZ incomes might be low however construction materials are based on international prices - timber, copper, pvc pipe, stainless steel.

There is only a finite amount of land where most people desire to live - close in, therefore land prices just keep going up.

Look at the chargeout rates of plumbers, builders, electricians compared to what they were.

Local body fees keep increasing.

Look at the prices of basic new houses even in areas such as Wainoni in Christchurch. It costs a lot more to build a house now than it did 5 years ago.

From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

[Steve]

As in "wanting the best, right now"?

[Crypto Crude]

quote:Cooper
Advanced Member
Posted - 05/02/2007 : 1:29:28 PM
He's talking about NZ house prices not being tied to affordability, Macdunk. Which means traditional methods of measuring affordability would be pretty redundant... they can just keep going, driven by foreign demand.
SC, that's a good point. I really don't know.

hey cooper, yeah yourve got my point... for example in australia they earn something like 40% more income on average than us Kiwis do (taking into account exchange rates)
35,000 * 1.4=49,000 .... is in NZ dollar terms they earn something like 49k on average per year...
300,000/49,000 = 6.1
so 6/1 for them 7/1 for us....
anyway, incomparison to western property, im sure that NZ housing is considered cheap...
foreigners see NZ as a safe haven, they see our beauty, they see our cheap housing compared to what they are used to...
This example has characteristics of Purchasing power parity...(not perfect PPP).... but still, if their domestic housing is more expensive to foreign prices... then foreigners will invest in a cheaper market... drive up prices to a point where there is no difference between domestic or foreign investment....
[8D]
.^sc

[Crypto Crude]

quote:cantab
Advanced Member
Posted - 05/02/2007 : 2:43:32 PM
From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

Cantab....What makes our expectations for a first home too high?
with a 300k home, and 8% interest rates... then expectations of a rising house value by over 24k should be expected should they not? (24k breakeven point)
[8D]
.^sc

[Cooper]

quote:Originally posted by Shrewd Crude


quote:Cooper
Advanced Member
Posted - 05/02/2007 : 1:29:28 PM
He's talking about NZ house prices not being tied to affordability, Macdunk. Which means traditional methods of measuring affordability would be pretty redundant... they can just keep going, driven by foreign demand.
SC, that's a good point. I really don't know.

hey cooper, yeah yourve got my point... for example in australia they earn something like 40% more income on average than us Kiwis do (taking into account exchange rates)
35,000 * 1.4=49,000 .... is in NZ dollar terms they earn something like 49k on average per year...
300,000/49,000 = 6.1
so 6/1 for them 7/1 for us....
anyway, incomparison to western property, im sure that NZ housing is considered cheap...
foreigners see NZ as a safe haven, they see our beauty, they see our cheap housing compared to what they are used to...
This example has characteristics of Purchasing power parity...(not perfect PPP).... but still, if their domestic housing is more expensive to foreign prices... then foreigners will invest in a cheaper market... drive up prices to a point where there is no difference between domestic or foreign investment....
[8D]
.^sc


If you were looking at, say, housing affordability from an Aussie perspective in both NZ and Australia, and comparing the two, then it wouldn't be a straight 1:1 ratio... you'd have to factor in a few other things... for instance if the aim is to buy and live in NZ, you'd have to factor quality of life and potential earnings differentials.

If you're looking at NZ as a rental investment from overseas you would be tied to affordability in some respects as you'd be tied to what the rental market able/willing to pay (for any given level of elasticity). Also you'd have management/upkeep costs that you wouldn't necessarily incur if you lived in NZ. If you weren't interested in renting the place out there would be no such constraints, but you'd obviously want capital gain, an income stream or to eventually live there.

Also with PPP you're usually comparing a fixed basket of goods... arguably Real Estate in one country is different to Real Estate in another, so while you're still comparing apples with apples you're actually comparing Granny Smiths with Pacific Rose. But you've already acknowledged that yourself...

There's also possible regulation to factor in... imagine the furore if foreign ownership of NZ land passed a certain level.

So I guess the question is whether that is the case, and if not, why not?

[Steve]

quote:Originally posted by Cooper

If you were looking at, say, housing affordability from an Aussie perspective in both NZ and Australia, and comparing the two, then it wouldn't be a straight 1:1 ratio... you'd have to factor in a few other things... for instance if the aim is to buy and live in NZ, you'd have to factor quality of life and potential earnings differentials.

If you're looking at NZ as a rental investment from overseas you would be tied to affordability in some respects as you'd be tied to what the rental market able/willing to pay (for any given level of elasticity). Also you'd have management/upkeep costs that you wouldn't necessarily incur if you lived in NZ. If you weren't interested in renting the place out there would be no such constraints, but you'd obviously want capital gain, an income stream or to eventually live there.

Also with PPP you're usually comparing a fixed basket of goods... arguably Real Estate in one country is different to Real Estate in another, so while you're still comparing apples with apples you're actually comparing Granny Smiths with Pacific Rose. But you've already acknowledged that yourself...

There's also possible regulation to factor in... imagine the furore if foreign ownership of NZ land passed a certain level.

So I guess the question is whether that is the case, and if not, why not?

Cooper, have you been studying 'Open Economy Macroeconomics'?;)

[Cooper]

quote:Originally posted by Steve

Cooper, have you been studying 'Open Economy Macroeconomics'?;)


About a year and a half ago :D

Are you involved with Otago or studying Steve?

Edit; actually if you're talking about Econ 316 then I haven't... that's one I'm going to take to finish my Comm.

[cantab]

quote:Originally posted by Steve

As in "wanting the best, right now"?


Yes along those lines Steve, although I wouldn't say "best" - take our friend Shrewdie - he wants a $350,000 home first off, anything less would not be "decent" enough to live in.

[cantab]

quote:Originally posted by Shrewd Crude


quote:cantab
Advanced Member
Posted - 05/02/2007 : 2:43:32 PM
From reading this topic I've come to the conclusion that the real problem for first home buyers is not that houses are unaffordable rather their expectations for a first home are too high.

Cantab....What makes our expectations for a first home too high?
with a 300k home, and 8% interest rates... then expectations of a rising house value by over 24k should be expected should they not? (24k breakeven point)
[8D]
.^sc


Shrewdie, what I was trying to say, if $350,000 ( your definition of the amount required to buy a "decent" home in Christchurch) is unaffordable why not buy something less expensive so as to get on the property ladder. The Aranui cheapie at $175,000 or the Hornby special at $250,000 then come into play.

This desirable Fendalton property would make a great second home but perhaps it would be more realistic to aim for this one to be your third home.

Just a thought. :)


http://www.open2view.com/Property/141526#

[Crypto Crude]

cantab... in my opening argument on this thread I used 330k.... the average house price in NZ is 350k....
I use that round figure, because it is the average.... and most people on this thread can relate to that figure....

I dont want the best... but I dont want a squallor like, drug dealing, rat infested, cave like that one in Aranui....
The best returns in property that I will get are a four betroom house, with land base to sub divide... cant imagine that I can get that for 200k....
you are quite right... around the 250k mark is where I sould be looking at...
[8D]
.^sc

[Crypto Crude]

hey cooper,
I'm studying economics at canterbury on the side of my other major...
I wanted to be an economist until I realised that there were no jobs...
in my opinion a career with economics is only useful in conjunction with another major...
I know of six economics students (reasonably close friends) from my year that have already graduated, I know of 0 economists...
[8D]
.^sc

[JoeKing]

quote:Originally posted by Shrewd Crude

Hey JK, not sure what you mean by this....
"off subject, but if you have used OD for NZO, sure hope they improve SH consideration"
I was suggesting that if you have used an over draft to invest in shares, presumamably your "beloved" NZO, their history/reputation for shareholder consideration is abysmal.

... I red that article, pretty interesting.... yes my dads house is unencumbered....

JK, I am well OVER the fact that my house value will have to increase in dollar terms by 700% more than yours...
Not too sure where you are coming from?. Are you talking inflation? Can you ever imagine paying 3c a litre for petrol at a pump? I have.

I am slowly coming around on the property thing....
Lately I have been talking to a few property buffs that have made a living off property in CHCH... I have been told that I should hold off for a year or two, and then make my charge!
the general consensus is that in the next few years house values are uncertain, but over the next 30 years house values will be well up.... and a 600k chch home is guaranteed over the long term!... (in their words)....
[8D]
.^sc - over and out...

Shrewdy at least you are beginning to look at property scenarios with a more open mind. GREAT!
AND you are seeking advice from dunnits.
The property cycle is normally 5-7 years and we are about 1 o'clock on a new cycle. However there is always a good deal available.
I think it was Dolf DR who said "the opportunity of a lifetime comes along every day" you just have to be able to recognise it.
In 1992 whilst travelling in Montana USA I tried panning gold in Judith river. There were old gold camps and diggings all along the river from 1800's. Never found out if they found much gold, but the area turned out to be rich in saphires. I panned 1/4 cup in about 4 hours, the biggest about 1/2 the size of my thumb nail. The "yogo" saphire is one of the most valuable saphires.
check http://www.littlebelt.com/yogo/
I appreciate not everyone will understand the signicance of this detour.
Cheers
JK

[Crypto Crude]

quote:JoeKing
"off subject, but if you have used OD for NZO, sure hope they improve SH consideration"

haha I get you... thought you were meaning NZOOD.... as in the options...:D
[8D]
,^sc

[Mick100]

Shrewd
What are you studying
How far have you got with it?
How far do you plan to go with your studies?
What sort of job could you expect to get when finished studying and what salary?
,

[Crypto Crude]

1.....What are you studying
Finance, economics.... have done management papers but will now just drop in on mgmt entreprenualship course.... I donot consider myself an expert in any of these areas... Work experience will be more useful for me than the studys... need the degree to get the job!

2.....How far have you got with it?
started during a half year, have completed 3.5 years... I only need a few more subjects to get my degree... going part time 1st half of year, fulltime 2nd half... spending most of my time studying shares... and loving it.... I continue to save, continue to invest, well on track to get my house first year out of Uni....

3.....How far do you plan to go with your studies?
just want to get my B com, double major.... thinking about a CFA...
astute finance students can earn far more than any other degree...
for one reason, grasping the idea of employer rather than employee....

4.....What sort of job could you expect to get when finished studying and what salary?
I would like a job at AED :D... nar, but seriously....
anywhere in the finance sector, I would like to own my own business one day, weather that to be my own start up, or to buy a stake in a small listed company, get a set on the board and go from there... im not sure which route I will take... I'm looking at 35k first year out...
my mate got that salary and 10k rise after two years... short term wages will be lower...
[8D]
.^sc

[Cooper]

quote:Originally posted by Shrewd Crude

hey cooper,
I'm studying economics at canterbury on the side of my other major...
I wanted to be an economist until I realised that there were no jobs...
in my opinion a career with economics is only useful in conjunction with another major...
I know of six economics students (reasonably close friends) from my year that have already graduated, I know of 0 economists...
[8D]
.^sc


Yeah... I wanted to be an economist until I realised I was absolutely crap at econometrics :D! But I agree with you... I'm also doing an Honours degree in Political Studies, which works in well with Econ (the beauty of Econ is that anything works in well with Econ). I think you have to be very good at Economometrics to make a career for yourself as an Economist, and I just don't have the ability (or interest for that matter). Finance and Econ is a good combo though... you enjoying it?

[Crypto Crude]

"you enjoying it"....
absolutely mate.... Finance is something I have been searching for all my high school life, and only just found it in the last two years or so... I originally thought that economics was what I was searching for, but discovered that economists cant make arbitrage profits...
I wouldnot be as focused on shares as I am if I didnt get a kick out of it...
I am prepared to give up some property gains in exchange for sharetrading, even though property may be more lucurative... sharetrading s far more exciting, knowledgeable, thought provoking, stimulating...
Property smashes shares, but when the stockmarkets are red hot as they are and have been, then shares smash property... (in the short term)
shares gains will flatten out, and the multibaggers will be harder to find...
[8D]
.^sc

[steve fleming]

Hi Shrewd – seriously you need to get out of NZ

I have two uni-mates that battled to find any decent work in Akld after graduating with econ degrees – both now have very successful roles as M&A(competiton) economist and as a bank economist here in Sydney….also know just so many other guys in both law and finance that have prospered either in Sydney or London considerably compared to previous roles in Akld

In Sydney a CF analyst/graduate out of uni would be looking at a 60k starting package plus bonuses….this package would easily double ($100k - $150k (AUD) within 5 – 8 years as you reach associate level…. you should have absolutely no trouble reaching this sort of level by your late 20’s…if you are on this sort of disposable income then it really opens up your investment horizons

Anyway, for me best move I ever made was moving to Syd after uni….now just turning 30, own with my partner a 3 bdrm federation house in a decent part of Syd (Thank you SSI) plus shares etc

[trackers]

quote:Originally posted by Cooper


quote:Originally posted by Shrewd Crude

hey cooper,
I'm studying economics at canterbury on the side of my other major...
I wanted to be an economist until I realised that there were no jobs...
in my opinion a career with economics is only useful in conjunction with another major...
I know of six economics students (reasonably close friends) from my year that have already graduated, I know of 0 economists...
[8D]
.^sc


Yeah... I wanted to be an economist until I realised I was absolutely crap at econometrics :D! But I agree with you... I'm also doing an Honours degree in Political Studies, which works in well with Econ (the beauty of Econ is that anything works in well with Econ). I think you have to be very good at Economometrics to make a career for yourself as an Economist, and I just don't have the ability (or interest for that matter). Finance and Econ is a good combo though... you enjoying it?


B.Com mgmt, B.A Pols from UOC here :) small world... And shrewdie I've done that 3rd year Entrepreneurship and Small Business paper, its quite good

[trackers]

quote:Originally posted by cantab


quote:Originally posted by Steve

As in "wanting the best, right now"?


Yes along those lines Steve, although I wouldn't say "best" - take our friend Shrewdie - he wants a $350,000 home first off, anything less would not be "decent" enough to live in.


I was looking at a nice 3 bedroom house on a full size section in Papanui the other day, 239,000.... Unfortunately I pissed around and would have had to taken a spot as backup-of the backup-offer [:I]

[Crypto Crude]

thankyou for your advice steve f...
at the moment the govt is dangling a carrot for me to stay, with an interest free student loan... If I stay I will save 3k per year on interest charges.. and free up approx 35k for investment...
If I go, then I pay my loan off, and have much less for investment...
you said im looking at 60k starting package....
well if I stay earning 35k... and free up my student loan for investment, aim for 20k return... (would like to think that I could make that easily this year)... 55k in total... in opportunity cost terms I may be indifferent to go or stay...
If I go, then I have to sell all my shares...

Trackers.... not sure if you still at uni, but you may have read in the canta mag last year about my story... some uni guys got real pissed at the foundary, and smashed my car up, (car was written off)... they got dobbed in by their mates, they wanted to become lawyers so they eagerly paid me out, and I made a tidy profit... just abit over 1k...
I put the bit over 1k, along with some other cash and bought AED... that 1k is now worth $3544 australian dollars... Best Uni story that I have!...
.....this year I am attending classes on mgmt 320,321... Im not sitting those exams, just going to Lec's... Im soon going to find out if those classes will give me any bright ideas
[8D]
.^sc

[Steve]

quote:Originally posted by Cooper


quote:Originally posted by Steve

Cooper, have you been studying 'Open Economy Macroeconomics'?;)


About a year and a half ago :D

Are you involved with Otago or studying Steve?

Edit; actually if you're talking about Econ 316 then I haven't... that's one I'm going to take to finish my Comm.

Always studying...just to keep the mind active!

[wns]

quote:Originally posted by Shrewd Crude
4.....What sort of job could you expect to get when finished studying and what salary?
I would like a job at AED :D... nar, but seriously....
anywhere in the finance sector, I would like to own my own business one day, weather that to be my own start up, or to buy a stake in a small listed company, get a set on the board and go from there... im not sure which route I will take... I'm looking at 35k first year out...
my mate got that salary and 10k rise after two years... short term wages will be lower...
[8D]
.^sc


Hey SC, if you'd like your own business, learning to sell is a valuable / essential skill to develop somewhere along the way.

[Crypto Crude]

WNS.... yes, selling and people skills are essential...

Trackers.... that property for 239k sounds pretty damn good...
two years from now, and something similar like that, and Im in...
[8D]
.^sc

[cantab]

quote:Originally posted by trackers
I was looking at a nice 3 bedroom house on a full size section in Papanui the other day, 239,000.... Unfortunately I pissed around and would have had to taken a spot as backup-of the backup-offer [:I]


Sounds cheap Trackers for a suburb close to Merivale!

[trackers]

quote:Originally posted by Shrewd Crude

thankyou for your advice steve f...
at the moment the govt is dangling a carrot for me to stay, with an interest free student loan... If I stay I will save 3k per year on interest charges.. and free up approx 35k for investment...
If I go, then I pay my loan off, and have much less for investment...
you said im looking at 60k starting package....
well if I stay earning 35k... and free up my student loan for investment, aim for 20k return... (would like to think that I could make that easily this year)... 55k in total... in opportunity cost terms I may be indifferent to go or stay...
If I go, then I have to sell all my shares...

Trackers.... not sure if you still at uni, but you may have read in the canta mag last year about my story... some uni guys got real pissed at the foundary, and smashed my car up, (car was written off)... they got dobbed in by their mates, they wanted to become lawyers so they eagerly paid me out, and I made a tidy profit... just abit over 1k...
I put the bit over 1k, along with some other cash and bought AED... that 1k is now worth $3544 australian dollars... Best Uni story that I have!...
.....this year I am attending classes on mgmt 320,321... Im not sitting those exams, just going to Lec's... Im soon going to find out if those classes will give me any bright ideas
[8D]
.^sc


2 years out of uni now...mgmt 320 and 321 were exactly the papers I did... I loved Strategic Mgmt (mainly focussed on working on, and keeping, a competitive advantage). Haven't read the canta or visited the foundry in tooo long :(

[trackers]

quote:Originally posted by cantab


quote:Originally posted by trackers
I was looking at a nice 3 bedroom house on a full size section in Papanui the other day, 239,000.... Unfortunately I pissed around and would have had to taken a spot as backup-of the backup-offer [:I]


Sounds cheap Trackers for a suburb close to Merivale!




Yeah indeed...I'm in Papanui too at the moment so its 'home turf'...2 offers on the table, ours would be 3rd, so i suspect itll go a bit higher than 229k

[Dimebag]

SC,

For someone as bright and proactive as yourself, whether you buy or rent should be a relatively straight-forward mathematical exercise in working out where you believe your capital is best allocated.

For the average joe punter who knows nothing about shares, the prospect of high property prices is much more penicious, as this has been a dead-set equity cow for the mum and dad punter who saved diligently for many a decade. It is now getting to the point where housing is priced so high that this will no longer prove to be the case. And for these people, there may be no realistic alternatives that offer similar prospects for high compound gains on their equity over time (especially given the relatively abysmal performance of managed funds over the past 10 years).

But for you, if house prices seem too high, you can simply put your money in the stock market and use the dividends to subsidise, and eventually cover, your rent instead.

To me it seems straight-forward that in the long-term, average property prices cannot increase faster than the rate of inflation + economic growth, because more rapid price growth means property is becoming more and more unaffordable. For me, this suggests assuming about 5% pa in capital growth is about as bullish as one can reasonably be. The high end is likely to grow faster than this, as it reflects the skew in income distribution whereby the wealthier are getting richer much faster than the masses, but equally, you get much lower yields in this space.

So your return is basically 5% plus the rental yield of the outfit (or the rent you save by living in it), less costs (insurance, rates etc). By my estimation that is probably about 4% for the average NZ dwelling. So you're total return on assets is 9.0%.

Borrowing rates are 8.0-8.5%, so you make a small spread gain on doing a "leveraged buyout" of a house, but not much. If you assume 10% down on a $400,000 house, you pick up $20,000 in capital gains and $16,000 in "saved rent", but pay say $30,600 in interest (@ 8.5%). You're total profit is $5,400 on a $40,000 equity investment - which amounts to 13.5%.

If you think you can do better than that in the stock market and/or with less risk, then put your money in the stock market instead - simple. That is the approach I'm adopting currently. I'm 24yo, renting an apartment in central Auckland for $215 p/w, subsidised by an annual dividend flow that averages out to about $100 a week.

The equation becomes a bit different when you add back tax benefits you can get if you rent the place out rather than live in it. In general, this pushes the IRR up to closer to 20% by my calculations, but as Halebop has intelligently pointed out, unless you keep regearing the thing to 90%, this quickly falls to the low teens. When you gear this high, it doesn't matter how much money you've made in the past - one blip which causes a 10% downturn in prices would wipe you out.

It doesn't matter how you build your wealth, just build it. Save money regularly, and invest whatever money you do have as intelligently as possible (assisted by diligence and robust investment principles), and given time your finances will be in good shape.

Dimebag

[Tim]

How much are foreign investors in property are adding to capital growth?? No data is kept on this.

[Crypto Crude]

nice meaty post dimebag....
"But for you, if house prices seem too high, you can simply put your money in the stock market and use the dividends to subsidise, and eventually cover, your rent instead."

green...I have never had a dividend... I don't chase stocks that pay dividends...
redthat 239k house in Papanui with land base 3 bedroom doesnt seem too high...

I am indifferent between shares and property in the short term...
in the long term property is far better....

all I know is that the bull market on shares willnot continue forever... the BB's will pull from the market and it will crash... It is a certainty.... It will happen... and I only have a few more years in shares maybe 5 at max....
everyones in shares, why wouldnt they be! we have been through times where picks dont matter because your shares will rise... I am not foolish enough to think that I can continue to make hot picks forever...

what property has going for it is the effect of compounding... yes it is 10% in the first year..
10 years down the track 1.1^10=2.594
1.1^9=2.358
2.594-2.358=.236 return between the years 9 and 10 even though prices only rose 10%...
becuae the effect of compounding that 10% increase has gained you 23.6% return on investment between years 9 and 10
so even though property has only risen 10% this year...
those that have been in the game for along time are making returns of ,20,30,40% return on initial investment

so when You peoples talk about yields being only 4-5% it can be missleading....
yes it maybe 4-5% on a house bought today.... but for long term holders the yields to initial investment are far more attractive....
eg. 90k house.... now worth 200k..... 200weekly rent...200*52=10400...
yield on initial investment is 11.5% .... yield on 200k is 5.2%
it is the yields in the long term that make it lucurative...
This is what I need to focus on... what property will be like in the long term
[8D]
.^sc

[Dimebag]

SC


"all I know is that the bull market on shares willnot continue forever... the BB's will pull from the market and it will crash... It is a certainty.... It will happen... and I only have a few more years in shares maybe 5 at max....
everyones in shares, why wouldnt they be! we have been through times where picks dont matter because your shares will rise... I am not foolish enough to think that I can continue to make hot picks forever..."

It's funny - one could argue that this statement applies equally to the general property market at the present time (especially per Halebop's commentary on the potential impact of BB's trading down/withdrawing equity).

Don't get me wrong- I'm not a bear on property. To the contrary, I think it very likely that a number of structural factors will keep prices marching upwards for some time. I just don't think it's cheap enough to offer a value buyer a genuine opportunity.

The key to successful investing is to be selective. Despite the frothy state of markets, I continue to find plenty of great stock market investments that are not cheap, but certainly not expensive relative to their long-term potential. It is not at all inevitable that these stocks will eventually "crash".

"I have never had a dividend... I don't chase stocks that pay dividends"

I don't "chase" stocks that pay dividends either. I have found, however, that most (but not all) high quality companies (the type you should be investing in) typically pay at least a small dividend.
...

Re compounding... I'm thorougly familiar with the concept. Remember, compounding applies equally to the capital value of shares, and dividends, as it does property values and rents.

A 3% yield on a stock portfolio ($3,000 per $100,000) should equally grow in absolute terms over time as the economy grows and the companies in your portfolio prosper and increase earnings. Based on 10% compound growth, within 10 years this portfolio would be yielding $7,800 in dividends, and have a capital value of $260,000.

If you need more proof about compounding returns in the stock market, do some research on a somewhat successful fellow by the name of "Warren Buffett".

Dimebag

[Crypto Crude]

quote:Dimebag
The key to successful investing is to be selective. Despite the frothy state of markets, I continue to find plenty of great stock market investments that are not cheap, but certainly not expensive relative to their long-term potential.

do you have any picks for me that I can watch in the oil industry, ASX stocks....?
[8D]
.^sc

[Crypto Crude]

dimebag,
what stocks do you follow and/or hold?
[8D]
.^sc

[patsy]

quote:Originally posted by Shrewd Crude

do you have any picks for me that I can watch in the oil industry, ASX stocks....?
[8D]
.^sc



CTX

[skinny]

quote:Originally posted by aspex

sc,
If you had $1000 at the beginning of January, you could have got 1400 BHP as a CFD, paid a total of about $350 in interest, contract cost of $10 to get in and have a profit of $4750 (475% 0n your $1000) after all costs in only 39 days.
Not only that but had you wanted to the interim profits could have been used to add at least a further 3000 shares to the contract to more than double the profit.
But then nobody was too sure of a 15% gain in the BHP price over that period. but be assured your total risk could have been limited to your original stake of that measly grand.


Did exactly that but screwed my timing and got stopped out losing around AUD $2,500 [B)] Still agree with you in principle [8D]

[JoeKing]

[quote]Originally posted by aspex

sc,
If you had $1000 at the beginning of January, you could have got 1400 BHP as a CFD, paid a total of about $350 in interest, contract cost of $10 to get in and have a profit of $4750 (475% 0n your $1000) after all costs in only 39 days.
Not only that but had you wanted to the interim profits could have been used to add at least a further 3000 shares to the contract to more than double the profit.

Aspex ANYone can easily find woulda/coulda/shoulda scenarios in hind sight. question is... DID YOU DO AS ABOVE??!

BTW could you do that with your real estate?

Of course! BETTER! I bought a property on friday $105k, sold it mon $130k on a WRAP ($10k deposit), recieved $13k gst refund, and $230 per week cashflow until my purchasers settled 18 months later. I can give you the address (offline) you can check sales history via QVNZ.
My ONLY outlay, $800 X2 conveyancing.

This thread is not intended to be a shares V property, both can work for the right person who is prepared to put in the time and effort.
Aspex a question for you...
Would you seriously consider any advice from someone who proudly proclaims....
I started out with nothing....I have almost all of it left.
Cheers
JK

[duncan macgregor]

quote:Originally posted by Shrewd Crude

dimebag,
what stocks do you follow and/or hold?
[8D]
.^sc
Hey SHREWD what has that got to do with the price of property[:p]. Give you something to work out since you run outta things to do. I bought a block of land for $72000 stuck a house on it lived in it for 12 years now they tell me the block of land is worth $420000 without the house and the small portion of land surrounding it. Not talking about the price of the house only the land less a quarter of an acre surrounding it. We have a few [:o)] here that think shares beats property:D. Would i have been better renting and playing the share market[?]. What i want you to do is work out since you have time on your hands.
1,Rent i would have paid elsewhere to live in an equal circumstance.
2,The value of the house i wont count as i am a builder has gone up a lot more than my 10pc pa which is average.
SHARES you must take the average rise in the market over that time some are better than others but average property beats average share investing.
To register GST requires an independant valuation Of the land less the little bit round the house which along with the house gets excluded. YOUR OLD MATE MACDUNK KEEPIN YOU OCCUPIED.:Dmacdunk

[Dimebag]

Duncan my friend - you overlook a very important point: today's investor cannot profit from yesterday's growth.

Going back to the time when the land you spoke of sold for $70k, I probably would have agreed with you that property looked like a dead set winner. That was a time when property yields often exceeded interest rates. It should have been blindingly obvious to anyone that property at these prices represented a great opportunity.

Things are different today. Tree's cannot grow to the sky. It is simply not possible for land to keep going up at 15.8% pa as it has over that 12 year period on a sustainable basis.

You are overlookign that we have had massive PE-multiple expansion in property over the past decade (equivalent to yields falling - they have followed interest rates down). This is a "one-off bonus" that has driven property returns, but is not a sustainable value driver.

Remember, property prices merely reflect the accumulated wealth in an economy. Prices cannot increase faster, in the long term, than the rate at which a country is getting wealthier.

Dimebag

[Dimebag]

PS for example, say rents increase at 4% pa, and prices start out on an 8% yield to cost.

Price $100,000; rent $8,000; yield 8%

Say over the next 10 years, rents increase at 4% pa - this chould carry the property value to $148,000 over this period:

Price $148,000 Rent $11,840, yield 8%, annual rate of apprecation = 4% pa

However, if yields fall during this period, to 4%, in 10 years it will look more like this:

Price: $296,000 rent: $11,840, yield 4%, annual rate of appreciation 11.5%

11.5% is only sustainable provided that yields continue to fall and fall, but this cannot be the case. Eventually:
(1) people will simply not be able to afford to buy, as prices grow faster than their incomes, so will be forced to rent; and
(2) people will choose to rent, as it will become more and more cost effective to do so.

This will cap price inflation, and bring it more in line with rental growth (or even worse). This is what has happened in Sydney. Since 2003, prices have not gone up and have in fact slipped back a few percent.

Studies have been done which have shown that in the very long term (centuries), price appreciation has only averaged 0-1% above the rate of inflation.

To assume anything more is irrationally optimistic. In the scenario I ran above for SC, I assumed 5% pa which I think is generous enough. This still ignores a scenario where yields actually increase, which is possible. This would most likely be achieved by years of stagnating/very graudually easing price rather than a large crash, but it could easily happen (as it currently is in Sydney).

[duncan macgregor]

DIMEBAG, Its simple economics it is always cheaper to buy anything than rent.
Cars, boats, houses,whatever unless only requiring for a short period. You would never rent a car full time unless it made economic sense with your tax position. The house goes up in value the car goes down, both require maintanance. If the house increases in value more than the mortgage interest rate, then you can borrow against it at a nil real cost. The house gives you access to cheap money from the bank, which can be used to buy a car, boat, or shares, more so than try and do it any other way. To not own a house would tell me one of three things.
1,You might move.
2, you are a financial dumbo.
3, You have very little money.
If you borrow money to buy shares and own a house mortgage free then its number two. macdunk

[Dimebag]

Duncan this is the last post I write to you until you demonstrate a greater ability to comprehend what I'm saying. You don't seem to have absorbed a single idea I've put forward. I'm not asking you to agree, but simply to debate the issues instead of re-traversing well covered territory.

I have just set out a case that argues assuming more than 5% p/a in annual property appreciation over the long term is unreasonable.

You are yet to address this point, and have simply argued that houses increase at "more than the mortgage interest rate". Yet mortgage interest rates are 8-8.5% at the moment. So you haven't addressed my key argument.

Yes, usually it is cheaper to buy than rent consumer goods, for all sorts of economic reasons. For a start the organisation leasing you consumer goods has to make a profit, and also cover its marketing & distribution costs, so obviously this will find its way into the price.

Traditionally, property has also been cheaper to buy, and of course it would be cheaper to buy property if it did increase at greater than the interest rate - a 5 year old could work that out. My argument is that this will not necessarily remain the case if prices get too high, and one assumes 5.0% p/a or less in capital growth moving forward.

For example, if a property is only yielding 3.5% after costs, adn the mortgage rate is 8.5%, it has to go up at least 5.0% just for you to pass break even. THIS, is simple economics.

If you had bought a house yielding 2.5% in Sydney 3 years ago, using 7.5% money, the price would not have increased, so you've essentially lost 5% of your asset base every year. If you put 10% down, that is a ROE of -150% to -200% (you've lost almost double your capital). People who did buy at this point in time will be making catestrophic losses at the moment, and at the moment there is little indication when conditions will improve. Rental yields are still at record lows and a long period of price stagnation to rectify this situation is a real possibility.

If you had read my posts, the first post I said I thought the IRR on buying a 90% leveraged house was 13.5%, and whether you buy or invest your money elsewhere is a simple matter of whether you think you can get more than than and/or with less risk with investing alternatives.

So you will see, the only thing we are really disagreeing about is the rate property can sustainably apprecate. You are yet to provide one compelling piece of evidence to suggest &gt;8.5% pa growth is realistic.

[Crypto Crude]

quote:Dimebag
Posted - 09/02/2007 : 2:03:51 PM
Duncan this is the last post I write to you until you demonstrate a greater ability to comprehend what I'm saying. You don't seem to have absorbed a single idea I've put forward. I'm not asking you to agree, but simply to debate the issues instead of re-traversing well covered territory.

exactly the same problem I had with Mackdunk, its like banging your head against a brick wall.... mackdunk Is just too stubborn to even take into account some of the debates against property... he is not up for negotiation....
[8D]
.^sc

[roddy]

Hi Dimebag,
I like your well presented and logical argument,more matter of fact than argument i would say!
agree everything runs in cycles and yes until peoples incomes increase its unrealistic to expect property whether it be farmland or residential to have much upside in the short term.

reports i have read quote that farmland is still selling okay,however buyers are more discerning and propperty further back is harder to move and in a lot of cases not selling to vendor expectation.
sheep and beef are yielding on average under 2% of their capital value,so like the Sydney case might be due for a correction.
my point is farmland is a leading indicator of residential and there is no way in the forseable future would i expext to see any capital gain of greater than 5%,simply because the returns arent there to justify paying more!
Great post Dimebag

cheers
roddy

[trackers]

quote:Originally posted by roddy

farmland is a leading indicator of residential

cheers
roddy


No offence....But says who?

[Mr_Market]

quote:Originally posted by duncan macgregor

DIMEBAG, Its simple economics it is always cheaper to buy anything than rent.


Macdunk, Have you ever asked yourself why most businesses lease their premises instead of buying them?

Answer - They can make a greater return on capital by investing most of their capital in their business.

[Halebop]

quote:Originally posted by duncan macgregor

...Its simple economics it is always cheaper to buy anything than rent...

Rental Gain: +6% (& surely an unispiring location if in Auckland)
Mortgage Outgoings or Cost of Capital if debt free: -8% (long term avg 11.4%)
Average Increase net of new construction last 20 years: 8.5% (Maybe closer to 8%)
Rates, Insurance: -0.5%
Maintenance, Capex: -2%
NET GAIN: 4%!*

4%! Wow, call my broker and sell those shares. By coincidence, the opportunity cost of me not buying a house is that I give up about 4% in rent (Because my financially savvy land-lord is happy to subsidise me due the tax advantages that losing real cash apparently provides). That means I have to earn a "massively challenging" 8% on funds to match what could otherwise be put towards owner occupied housing

* ...if mortgage free the gain is probably closer to +12% before factoring opportunity cost... a near'ish call if your business or share investing skills are only average. Of course the emotional return could be well above the financial results. An obvious mitigating factor when reading the cheerful disregard for fiscal physics in this thread.


quote:Originally posted by duncan macgregor

If the house increases in value more than the mortgage interest rate, then you can borrow against it at a nil real cost.

Nil real cost?
I can borrow at around 8%. That is obviously not free.
I can deduct inflation to know what the real rate is. Maybe around 4.5 to 5%? Still has a cost.
I can invest the new funds borrowed and make the expense deductible. Save another 39% of the 4.5 to 8%? Still has a cost.
I can invest the funds in something that earns enough money to cover that 8% cost, arguably meaning no real cost to me er...personally. To cover 8% and outgoings is that likely to be another house? How many would generate that sort of cash return? I'm struggling to see "no real cost". Probably find it in the chapter entitled "Borrowing More: No Real Risk".


quote:Originally posted by duncan macgregor

The house gives you access to cheap money from the bank, which can be used to buy a car, boat, or shares, more so than try and do it any other way.

Cheap is a relative thing. It might give you access to cheaper capital than borrowing on credit card, from a finance company or a local loan shark. But with some of the most expensive real rates in the world, even the mortgage is not cheap.


quote:Originally posted by duncan macgregor

To not own a house would tell me one of three things.
1,You might move.
2, you are a financial dumbo.
3, You have very little money.
If you borrow money to buy shares and own a house mortgage free then its number two.

You forgot...

4. You are better with both maths & investing than the crappy options presented here.

I'd have thought using a formerly mortgage free house to borrow to buy shares might arguably by the smartest cost of capital / cost benefit analysis available in the "have to borrow and/or own a house" argument.

Wouldn't know though, this financially dummy prefers not to borrow for the purpose of marginal economics. Probably find out how to do it in the "Why property never underperforms averages for 20 years" c

[duncan macgregor]

quote:Originally posted by Shrewd Crude


quote:Dimebag
Posted - 09/02/2007 : 2:03:51 PM
Duncan this is the last post I write to you until you demonstrate a greater ability to comprehend what I'm saying. You don't seem to have absorbed a single idea I've put forward. I'm not asking you to agree, but simply to debate the issues instead of re-traversing well covered territory.

exactly the same problem I had with Mackdunk, its like banging your head against a brick wall.... mackdunk Is just too stubborn to even take into account some of the debates against property... he is not up for negotiation....
[8D]
.^sc
SHREWD ONE. I know that i am a STUBBORN OLD BASTARD,[:I] But tell me where you can borrow cheaper money other than property?. You cant can U?. Then tell me where it is cheaper to rent long term anything than it is to own?. If you find that, you cant can U?, then stop and start to get with it.Why not buy property get cheaper money from the bank to do whatever. LOOK AT THE RENT YOU WILL SAVE.:D:D. MACDUNK

[Crypto Crude]

quote:duncan macgregor
SHREWD ONE. I know that i am a STUBBORN OLD BASTARD, But tell me where you can borrow cheaper money other than property?. You cant can U?. Then tell me where it is cheaper to rent long term anything than it is to own?. If you find that, you cant can U?, then stop and start to get with it.Why not buy property get cheaper money from the bank to do whatever. LOOK AT THE RENT YOU WILL SAVE.. MACDUNK

"But tell me where you can borrow cheaper money other than property?"
become a student and obtain a student allowance at 0%
You cant can u?.....^ ....^......^......^......^.......^.....

Then tell me where it is cheaper to rent long term anything than it is to own?
yes renting is dead money.... but for many it is about the opportunity cost of what you could do with the free-d up cash because you are not paying $512 to the bank but rather $150 in rent... you have an extra $350 to invest elsewhere.... with the 300k house at 8%, in the first year 24k is dead interest... or $461 in dead interest...
anyway, why does it always have to be about debt...Creating debt is not as pretty as you make it seem, especially in times where interest rates are as high as they are..... what about the $461 in weekly payments which dont reduce the loan but just keep it afloat??
[8D]
.^sc

[Steve]

It's all our own fault - we are just too nice!

Emotionalism of property market one of TV guru's home truths (http://www.nzherald.co.nz/section/3/story.cfm?c_id=3&objectid=10423263)
Financial adviser Martin Hawes says he's still vaguely surprised at how emotional the property market can be.

Vendors divulge unnecessary information to their agents, while buyers "nod, smile and agree" with an agent without pointing out the drawbacks of a house, putting themselves at a negotiating disadvantage.

But Hawes agrees haggling is something that "goes against our national psyche".

[JoeKing]

McDunk
You are wasting your energy here. "you cannot put an old head on young shoulders". Most of the knowall negative posters here are students who are studying hypothesies. There is a huge difference between hypothetical analysis and fact. Some will change their ideas after a few years in the real world, some will be still arguing whilst lining up desparately waiting their pension payments.

Dimebag you are very good with "lets say" situations and numbers, but numbers can be easily manipulated.
Here is an example:
"Lets say" my kid advertises a bike for sale for $200.
A family comes and decides to buy the bike. The boy has saved $100 and gives it to my wife. The parants agree to pay the other $100. Mum gives my wife $100, not knowing that Dad has also handed $100 to me. They take the bike and go on their merry way. After they have gone I give my wife the $100 from Dad and the mistake is discovered ...they paid a total of $300... $100 too much. So I instruct wifey to return $100 and give her 5X $20 notes.. On the way she thinks "if they are silly enough to pay too much thats their tough luck" (this is a hypothetical case, my wifey is very honest), and takes out 2X from the 5 $20 notes ($40) and slips them in her purse. That leaves 3 $20 notes = $60
She then gives the boy, Mum and Dad 1 X $20 each back.
This means they have each contributed $80 each towards the bike purchase... correct?
Ok $80 X 3 = $240
wifey has $ 40
Total accounted for = $280
So all you economics experts....... where is the missing $20

Shrewdy.
"Creating debt is not as pretty as you make it seem, especially in times where interest rates are as high as they are..... what about the $461 in weekly payments which dont reduce the loan but just keep it afloat??"
If you send me an email with a postal address I will loan you a very good book called "Real Estate Riches...how to become rich using your bankers money" by Dolf De Roos. It explains very clearly the difference between "good" and "bad" debt.
(alternatively go to your nearest book store, they should stock it alongside Robert Kiyosaki series and read pages 107-110)
Oh, and for those who would genuinely like to get a REAL comparison between property and share investing, you will find chapter one in the same book very interesting, I'm sure after reading the first 16 pages you will want to buy the book... if only to argue with its author LOL!
Cheers
JK

[JoeKing]

[quote]Originally posted by aspex

I do know of someone who says he has never owned a house but says he makes millions each year from trading in markets.
yeah? well I know of someone who says he makes millions each year punting on horses, he lives in a horse box ;-((

That is a bit wierd but to suggest property is the be-all-and-end-all of getting richer quicker shows tunnel vision at best and downright stupidity at worst.
I really don't think McD has ever suggested the above, don't forget he is also a share market trader/investor too

Similarly accepting that holding assets medium to longer term is the best way of accumulating wealth may have worked in earlier times but not today.
according to Aspex the expert who started with nothing-and still has most of it left? LOL!

What about Buffett? Well his elephant can now only trot and never use the fast footed techniques of us fleas.
Aspex, a BAD comparison. Ever heard of trained fleas? this is a true story.
When I was doing my sales training, my sales manager used a practical demonstration to show thought conditioning.
First he got hold of 9 fleas...(why 9? well I guess fleas ain't that easy to catch) probably from some dog stocks??, and put them in a preserving jar. Then covered the jar with glad wrap and put a few pin holes in it... even fleas need air. The average flea can jump about 4 feet high, (a metre and a bit). After 3 days he took the glad wrap off the jar and in the ensuing 2-3 days only 2 fleas jumped out. (actually they dissapeared, could've been eaten by hungry mates) The moral is it only took 3 days for those fleas to learn they could only jump to the top of that jar (prox 200mm)
Of course we might have used dumb fleas, or maybe they were clever fast learners, a matter of opinion I guess.
Oh, and if you are wondering if I am suggesting fleas can think... I don't know, but the experiment was certainly interesting.
And of course you will all know the story of the Swan who thought he was an ugly duckling, and the eagle that was reared by a chook and never learned to fly....
Cheers
JK
PS. Keep an open mind and avoid tripping over life's opportunities.

[George]

JK
There only appears to be $20 missing. Wifey has $40 of the 240 so the family paid $240, 60 back = $300. Not smart enough to figure that out myself, had to get my science teacher girlfriend to help.
Amazing how figures can be so misleading.
George.

[Jess9]

MACDUNK. I gather you have been in the property market for some time.

Assuming this, can you please comment on the comparison of the market right now, with the end of the last boom (late 90's)?

In particular, is affordability (or unaffordability) about the same now, and are the gross returns about the same again (i.e. scarce to no c/f positive properties can be found - without extreme effort?).

I ask, as I think while the current catch cry is house prices are too high and therefore new entrants are priced out of EVER OWNING etc…this I wonder has all happened before, and is simple cyclic, not a new phenomenon, and will self correct, as in the past.

Your thoughts with respect to past boom comparisons appreciated.

Also any other “multi-property cycle” investors looking on, feel free to comment also.

J9

[JoeKing]

quote:Originally posted by George

JK
There only appears to be $20 missing. Wifey has $40 of the 240 so the family paid $240, 60 back = $300. Not smart enough to figure that out myself, had to get my science teacher girlfriend to help.
Amazing how figures can be so misleading.
George.

George, "Wifey has $40 of the 240 so the family paid $240"??
has your girlfriend been taking "how to get totally confused" lessons from some posters on this thread?
There is an answer but I think your girlfriend is looking into the wrong test tube :)
Cheers
JK

[duncan macgregor]

quote:Originally posted by Jess9

MACDUNK. I gather you have been in the property market for some time.

Assuming this, can you please comment on the comparison of the market right now, with the end of the last boom (late 90's)?

In particular, is affordability (or unaffordability) about the same now, and are the gross returns about the same again (i.e. scarce to no c/f positive properties can be found - without extreme effort?).

I ask, as I think while the current catch cry is house prices are too high and therefore new entrants are priced out of EVER OWNING etc…this I wonder has all happened before, and is simple cyclic, not a new phenomenon, and will self correct, as in the past.

Your thoughts with respect to past boom comparisons appreciated.

Also any other “multi-property cycle” investors looking on, feel free to comment also.

J9

If the price of property goes down we dont sell we buy. Property developers speck builders etc want the market to fluctuate. Its how you control your finance that counts. Its like the sharemarket, we can only look at the past and presume the future. The price of property wont drop, it has an ever increasing cost of compliance to build. Some of the posters here simply do not understand finance, and how to have a very large portfolio with little or no personal money involved. Property gives you very cheap bank money. It amuses me to see people say property is a bad investment then go out and buy KIP shares. KIP pay huge salaries to management plus a decent return on dividends and sp. Dont you think its worth a lot more to cut the middleman out?. The market is controlled by supply and demand, they are even thinking about listing a house rental company on the share market. I suppose if they do the self same dumboes will be telling us to buy shares in it.:D:D macdunk
Discl have property and shares

[George]

JK
I'll hop into the same test tube with my girl any day.
Dad has the $200 at home for the bike.
Mum has $40 in her purse.
The family gets $60 back.
This equals $300 - there is no missing $20.
We must be skirting the proper economic answer to this and will be interested to find out what it is. But there is no missing $20.
George.

[Heavy Metal]

quote:Originally posted by duncan macgregor

[quote]It amuses me to see people say property is a bad investment then go out and buy KIP shares. KIP pay huge salaries to management plus a decent return on dividends and sp. Dont you think its worth a lot more to cut the middleman out?.


Dear Oh Dear, to even suggest commercial and residential property are comparable is the height of blinkered ignorance. You know full well those saying property is a bad investment on this site are referring to residential property.

Commercial property (either listed or unlisted) has proven to be a good investment that can consistently deliver dividends in excess of what cash can earn. Residential property just cannot deliver decent dividends and has to rely on capital gain, massive leverage or preferential tax benefits to be considered as a investment.

[JoeKing]

Hi George,
seems you are the only one to attempt the conundrum, good on ya! my best regards to your test tube girl! and I'm sure you will have just the right spark for her bunsen.
however...
"Dad has the $200 at home for the bike." If you are referring to ME! as DAD with $200 wrong, I get zilch.
"Mum has $40 in her purse." If you are referring to wifey as "Mum" scores 40 bucks DING!!!! and she aint gonna let it go.
The family gets $60 back." yes the happy family gets $60 bucks back. AND I think I saw the hypothetical kid on his new bike this morning... he was extatic!
2 outta 3 aint bad!
But you still have not solved the maths:
The numbers: $100 less $20 = $80
quote "This means they have each contributed $80 each towards the bike purchase... correct?
Ok $80 X 3 = $240
wifey has $ 40
Total accounted for = $280
So all you economics experts....... where is the missing $20"

Sure thought Halebop "net worth a million $$$" the academic analyser, always ready to offer figure/number scenarios from his technical abilities would have responded? Oh maybe the calculator needs new batteries??

Roddy
quote ( from Dimebag) "I like your well presented and logical argument,more matter of fact than argument i would say!"
FACT! Roddy?? or hypothetical bunkim? (how many property deals have you done?)
I have personally transacted over 60 real estate sale and purchase deals and totally dismiss Dimebag's (who has bought/sold how many properties?) well presented, but purely hypothetical numbers.
Read my past posts I will give you true, FACTUAL numbers of deals I HAVE done.

Aspex.
pleased to see you do have a sense of humour...
quote:
1. Property is great for your own home but not necessarily for pure economics.
2. Property has too much of an aura about it which is only justifiable because of ease of gearing and a preferential tax treatment.
3. There are potentially (and proven) better investments than property out there today.
You are really talking nonsense here, SIR! Bob Jones was knighted for... well, I'm not quite sure (he probably isn't either), but he started from nothing and ended up on NZ rich list AND a knighthood AND owning a large chunk of Wall st. (that's a pretty important part of New York). He was (I imagine) very much comforted by his real estate investments when his (NZX listed) Company shares fell from $4.80 to 8c. (Just a quick deviation I met SIR!! Robert on Tongiro river about 1998. I spent 1/2 hour sneaking up to my favourite (secret) hole, when CHUKA-CHUKA-CHUKA!!! this choppa lands besides me and this SIR!! steps out and sez " HEY!! WOT ARE YOU DOIN IN MY!! POOL"
I wonder if Bob would contribute to this thread? mmm methinks he has better things to do, ok someone is gonna ask again commercial V residential... My answer is property is property, every single scenario is different.
there remains only ONE question! WHEN!!(to buy)
My stock answer is always ... NOW!!!
Cheers
JK

[Steve]

quote:Originally posted by JoeKing

(Just a quick deviation I met SIR!! Robert on Tongiro river about 1998. I spent 1/2 hour sneaking up to my favourite (secret) hole, when CHUKA-CHUKA-CHUKA!!! this choppa lands besides me and this SIR!! steps out and sez " HEY!! WOT ARE YOU DOIN IN MY!! POOL"
I wonder if Bob would contribute to this thread? mmm methinks he has better things to do,

I met Bob oncehen he was having time-out in the toilets before he was due to give a speech. He was smoking a cigar while staring at the 'no smoking' sign! :D

[George]

JK
If wife had kept $70 instead of 40, family gets back 10 each so paid 90 each = 270 paid plus 70 in purse = 340 - an extra 40 from somewhere!!
If wife had only kept $10, family gets 90 or 30 each, so paid 210 for bike plus 10 in purse = $220 - so a missing $80!!!!!!.
There's an answer why the figures differ for different scenarios but I can't figure it out yet - my first priority today is to make money on the ASX - need more of a deposit for a house.
George.

[patsy]

quote:Originally posted by JoeKing

So all you economics experts....... where is the missing $20"





The "missing dollar paradox" is an accounting problem:

http://mathworld.wolfram.com/MissingDollarParadox.html

http://en.wikipedia.org/wiki/Missing_dollar_paradox

[trackers]

JK

following on from a point Jess9 made, and also after having a look at Dolf de Roos' website ("Remember good cashflow is your bottom line, not the purchase price of the property. "), just wondering:

Any recommendations on actually finding ANY reasonably priced cashflow positive rentals? Because damned if I can find a single one in ChCh at the moment (and yes, I am trying very hard, using multiple sources)... I'd even take one that was cashflow neutral!

[trackers]

So I'm going to follow on from my above point a bit, using Chch as example :)


3 bedroom average rental: $280 - $300 p/w or $15,600 p/yr (very generous)
Less,
Rates: $1000, or $20 p/wk
= $14,600 p/yr INCOME

This means, at a 7.5% interest rate (very very low at todays rates), you'd need to have an interest only mortgage equal to, or less than $192,000 to break even.

Average house cost: $330,000
Low-end 3 bedroom house cost (in semi-decent area): $230,000

$230,000 on a 30yr mortgage at 7.5% = $371 p/week
+ rates $20 p/wk
= $391 p/wk

I know the thread's general theme is renting vs first home, but I feel that people supporting residential property (the classical way) should front up with how the average joe could spin the wheels given the current market

[George]

So according to Patsy's link, the 240 is of no importance.
Wifey has $300, she keeps 40 and gives 60 to family.
Nett 200. Simple, so how come my headache.
Are we close JK.

[Jess9]

Hi Trackers. Same problem.

I can find a few passive cashflow (after tax breaks etc) properties - but these generally need much "deferred maintenance" sorted ASAP, and are already multi-income properties. Also if only getting a passive c/flow at this stage of the market (with less chance of ongoing short term cap. gain etc) and if the idea is to reduce reliance on salaried income, then such properties really do not fit such an investment plan anyway.

For positive cashflow, I think we simple need to wait for rents to rise and prices to be eroded by inflation going forward, then genuine positive c/flow should re-emerge again.

Heard on the radio this morning that USA banks were taking mounting losses on their residential loans, as stretched borrowers crumble under stagnating/falling prices and increased interest rates. That sounds like the slump biting over there, maybe "middle stage" of their slump??

The NZ boom started later (than US) so maybe we are 2-3 years behind this stage. I see from past stats, previous NZ slumps seem to last about 4 years after the boom quickly tapers off. Of interest QV today showed national prices falling below 9% (increase) today, so I guess NZ boom is winding down.

I've read real estate is a get rich slow game - I think this is the hardest part, sticking to a plan - through the ponderously slow property cycle.

[Steve]

quote:Originally posted by Jess9

I've read real estate is a get rich slow game - I think this is the hardest part, sticking to a plan - through the ponderously slow property cycle.

Which is part of the reason why the last few years of being a 'get rich quick game' is expected to come back and bite some of the more leveraged newer entrants...

[limegreen]

quote:Originally posted by Steve
Which is part of the reason why the last few years of being a 'get rich quick game' is expected to come back and bite some of the more leveraged newer entrants...


Steve, I have sent you an email via ST (just in case it goes to an address you don't check often).:)
Cheers,
Limegreen

[Serpie]

Residential property is no different from any other investment. Do your own research, know your market, and buy assets that are undervalued (in the market of the day).

The best thing about rentals are the tax breaks - especially the ability to re-finance your own house, load up the rental properties, and claim the tax rebates on (what would have been) your own mortgage payments.

One thing that the so-called experts actually get right (IMHO) is the need to diversify. Rental properties and trees are not as exciting as the sharemarket, but they keep churning away, day in - day out.

Before we know it 25 years will have flashed past before our eyes, and you'll have a huge asset that someone else has been kind enough to pay off for you.

[Steve]

So the speculators could be saved by the 1st home buyers...?

Houses 'way above value' (http://www.stuff.co.nz/3960872a13.html)
House prices have ballooned to a record 42 per cent above what they should be worth, New Zealand's biggest money manager says.
...
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.

[Steve]

quote:Originally posted by limegreen

Steve, I have sent you an email via ST (just in case it goes to an address you don't check often).:)
Cheers,
Limegreen

Got it, will reply...

[Heavy Metal]

quote:Originally posted by Steve



Houses 'way above value' (http://www.stuff.co.nz/3960872a13.html)
House prices have ballooned to a record 42 per cent above what they should be worth, New Zealand's biggest money manager says.



And from the same article:

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

[cantab]

and from the same report on that article on Mr AMP in The Press p2

Bank of New Zealand chief economist Tony Alexander said house prices were likely to continue to climb above 10% a year "for a while yet."

Mr AMP says house prices are 42% overvalued, he says "That is unprecedented....they are massively over-valued"

Over valued in relation to what? Replacement costs? Land and building costs have increased massively.

The RBA expects rents to rise significantly - the same will happen here.

Reserve's warning: rents are too low

http://www.smh.com.au/news/australian-capital-territory/reserves-warning-rents-are-too-low/2007/02/13/1171128935880.html

[onlinesid]

I do feel house prices are very high here in New Zealand and it is definetely much cheaper to rent. But after thinking about buy vs rent for a while, in the end I bought a house together with my younger brother. We split the mortgage in half.

Ok so it probably isn't as nice as having my very own house, but this way [my bro and] I can afford a decent house in a decent area that is quite close to where we both work (and relatively close to CBD).

As my brother moved, the rental property he was previously in has increase the rent around 25% for the next tenant.

As for the future, the worse thing can happen is that I could go bankrupt, back renting or become a homeless bum. But at least now I know I have half a house and a mortgage to pay.

In the meantime I put my thinking into starting a business and learn other type of investments and hopefully making healthy profit in the process.

This could be a foolish decision, I guess only time will tell.

[EDIT: typo & grammar]

[quote]quote:Originally posted by Shrewd Crude

New Zealand is at the beginning of a first homebuyers crisis...
lets assume NZ median house price is $330,000 .... and you pay a piddley deposit of $30,000
-also assume interest rates are 8%
-number of years to pay the loan off are 30 years
-loan amount is $300,000, after deposit is paid

you therefore get....
Year 1 2 3 4 5 6
Beginning principal bal 300,000 297,352 294,492 291,403 288,067 284,464
payment 26,648 26,648 26,648 26,648 26,648 26,648
interest component 24,000 23,788 23,559 23,312 23,045 22,757
principal component 2,648 2,860 3,089 3,336 3,603 3,891

-and so on, for 30 years
-in the first year you are paying $24,000 in interest only... wow... and only $2,648 is coming off the loan balance at the end of the first year...
-so, your house value has to increase 8% in the first year... (24,000/300000) just to break even and cancel out payment for interest only (8%)
-year 2 opening balance is year 1 beginning principal balance less principal component
and so on...
-so for 30 years you are paying $26,648 per year or $512 per week, every week.....
-total amount paid to the bank after 30 years is $799,440 ...[:0](26,648 * 30)
-the above example doesnot include the benefits of what you save in rent by having your own house

I have only ever been told to buy a house, by parents, friends, every single person I have gone to, to ask for advice has told me to buy a house... The housing success stories are all to common for people who are 5plus years older than me and beyond...

but yet, I look at the above loan amortization table... and cannot see a path...
I am 22, student, without a house (of course)... and cannot allow myself to be a 52yr old man, and have a house only... so I looked for another means... I spent two years just looking at shares, and the last 2 years playing high risk shares, with much success I add... I applied a simple strategy where I invested in high upside, low downside... trouble is finding a share with these characteristics... any way....
It is always a goal of mine to have a house... but It will have to be paid largely in cash...

Or I will need a combination of a few events happening...
-house price falls dramatically
-interest rates to drop, (not likely in the next year) but interest rates will drop in the medium term
-rental rates to increase dramatically, so house buying becomes more attractive
-wages to go up massively (yeah right)
-large govt incentives...

we are due for a housing fall... If you are a first time house buyer, dont be fooled into housing by others... let the numbers speak for themselves...the only way to make house buying at

[Crypto Crude]

quote:Dimebag
Guru
New Zealand
2504 Posts
Posted - 07/02/2007 : 6:24:55 PM
SC,
For someone as bright and proactive as yourself, whether you buy or rent should be a relatively straight-forward mathematical exercise in working out where you believe your capital is best allocated.
Dimebag, you have clear arguments that hold up, and you are wise....but....

The housing situation is by far the toughest decision I will ever have to make in my life...
mathematics willnot determine the most effective distribution of my wealth.... but rather looking forward to see what the future of housing may offer me (IMO)......
after initially being against housing.... I am starting to have an open mind to the idea...
and I am at least waying up both sides of the arugement and looking at costs and benefits.... rather than the others here that either all look at benefits.... or either all look at costs.... there are no middle men here... This thread is full of Bulls or Bears....
Both have helped me for sure... both have equal arguments...both are passionate about their beliefs... good to see... I am away for a few weeks...
see you all around....
[8D]
.^sc

[Halebop]

quote:Originally posted by JoeKing

Sure thought Halebop "net worth a million $$$" the academic analyser, always ready to offer figure/number scenarios from his technical abilities would have responded? Oh maybe the calculator needs new batteries??

Awww JK, it's nice to be missed! I've been to Australia on an academic experience so hopefully I can live up to your expectations. Lucky my calculator has new batteries for the occasion too...

...not sure I need the calculator though. Hope the average punters real estate economics is better than the double entry book-keeping in your example? Seems debits have been mixed with credits. The family has paid $300, comprising $200 for the bike, $40 has been "taxed" by the wife and $60 refunded. Total $300. No missing cash.

In the example $60 total or "$20 each" was repaid by the Wife, inferring that Mum/Dad/Son have paid $80 each for the bike ($100 each paid in less $20 refund each back out). $80x3=$240. However, this is deducting from the wrong layer of the equation, something many modern day property investors and home owners do when they conveniently forget how much real cash flow was required to buy the susbsequent capital gain. In total they paid $300. In total they were refunded $60. In total the wife taxed $40. In total the Bike cost $200. It all adds up.

Perhaps this does prove that a certain class of "investor" is rich in semantics? I'm sure this is one rich list that would be well represented by residential property investors.

[cantab]

Inner Sydney rents predicted to rise 42% over the next 5 years.

http://www.smh.com.au/news/national/mean-streets-where-rent-will-bite/2007/02/18/1171733612764.html

[cantab]

Tale of two Sydneys as property divide widens
Michelle Singer
February 18, 2007

An Australian Property Monitors rating of the growth of property values of about 700 suburbs in 2006 shows the city's affluent enclaves surged ahead, while areas in the west and south-west languished.

"There's a lot of young money coming in," he said. "I spend so much time out of Australia and I can see that we just take what we've got for granted. Foreigners come in here and can't believe the prices."

Source: The Sun-Herald

http://www.smh.com.au/news/national/tale-of-two-sydneys-as-property-divide-widens/2007/02/17/1171405504238.html

[MrDevine]

I'll add my two cents to this discussion.

I just brought my first house in Auckland last week – and yes the numbers are daunting (we paid 100% more than the vendors did 5 years ago). I had a very small investment the 'scary markets' for about 18 months which returned enough to put down a tiny deposit (5%). Yes I'm a 'low equity buyer'.

For first home buyers its a tough call. But I believe there isn't a good time to enter any market, you have to have skin the game. Yes property prices will fall, so you must ride out the cycle. I've got a 30 year mortgage, paying $500 pw which is steep I know, so you can see it as a sort of savings plan. Bottom line is, I'm sick or renting and dealing with landlords, paying their mortgages.

The other thing is, do you think I'm going to be in this place for the next 30 years? Average mortgage rollover is 7 years, we like to move around a bit in NZ eh?

You're damned if you do, and damned if you don't.

[duncan macgregor]

quote:Originally posted by MrDevine

I'll add my two cents to this discussion.

I just brought my first house in Auckland last week – and yes the numbers are daunting (we paid 100% more than the vendors did 5 years ago). I had a very small investment the 'scary markets' for about 18 months which returned enough to put down a tiny deposit (5%). Yes I'm a 'low equity buyer'.

For first home buyers its a tough call. But I believe there isn't a good time to enter any market, you have to have skin the game. Yes property prices will fall, so you must ride out the cycle. I've got a 30 year mortgage, paying $500 pw which is steep I know, so you can see it as a sort of savings plan. Bottom line is, I'm sick or renting and dealing with landlords, paying their mortgages.

The other thing is, do you think I'm going to be in this place for the next 30 years? Average mortgage rollover is 7 years, we like to move around a bit in NZ eh?

You're damned if you do, and damned if you don't.
Look on it this way. The price of the house will increase as fast or faster than the interest on your mortgage. This is your compulsery savings scheme. Look at the past history of your house it doubled in price in five years. Lets suppose it takes 15 years to double again, add to that rent to equal your accomodation you are on to a winner for sure. If you are a normal kiwi battler you wont save money like that renting. The price of houses wont come down long term, the price of rents will sky rocket. The cost of building compliance is going through the roof [ask any builder]. The prices of homes will rise faster in the future than they did in the past nothing is more certain than that. macdunk

[Steve]

quote:Originally posted by MrDevine

You're damned if you do, and damned if you don't.

At the end of the day its better to be in, than out on the sidelines watching...

[Crypto Crude]

quote:MrDevine
Junior Member
8 Posts
Posted - 24/02/2007 : 10:21:32 AM
I'll add my two cents to this discussion.
I just brought my first house in Auckland last week – and yes the numbers are daunting
For first home buyers its a tough call. Yes property prices will fall, so you must ride out the cycle. I've got a 30 year mortgage

I just don't understand why anyone would want to invest any asset if they think the price will fall...(unless they went short) :D
why not just wait it out... and get the house when the price is lower?
yes property has made many a fortunes... certainly not by choosing investment in expensive areas, or into falling asset value....
[8D]
.^sc

[MrDevine]

Thanks for the encouragement shrewd.

You're not a landlord though are you? Cos' I thnk there is building resentment towards property investors (baby boomers like my parents) who have helped to screw up the market, ditto the banks. Rents haven't increased much yet, but many people are getting weary of paying them. (sweeping generalisation, excuse me).

MrD.

[Crypto Crude]

Mr devine. I am no landlord.... I am just bambozzled by what you said...
it would be different if you bought a house because you thought the price would rise...
wrong time buddy.... all the best to you...
I'm currently in the US at the moment and they have had a falling property market for two years now...
although property is falling, the economy is still holding up, and has not impacted on consumer spending as first thought (IMO due to Baby boomers).... But none the less, there are plenty of contract foreclosures and many banks that were taking on high risk property investors are being liquidated... initially these banks were setting higher interest rates on their loans, to compensate for the higher risk... it is now backfiring on them...
those that got into housing here in the US within the last 5 years are now getting shafted...
and are now finding that the banks are re-possessing their houses,
ads, for quick sales from liquted banking firms, are on the tv all the time....
Govt has ads for quick cheap property selling....
will the same happen to NZ... hum hum....
reverse mortages are now starting to hit here as a reverse mortgage can only be taken out once you turn 62years old in the US.... and the first big wave of BB's is one year away from that age....interesting times ahead with the BB's
ignore the BB issue, ignore the fundamental idea about what such a market force will create....
If you follow the markets then don't ignore this most important senario that will
unfold which will be the most important issue in my life other than the environment...

quote:
Steve
At the end of the day its better to be in, than out on the sidelines watching...
steve, sitting on the sidelines watching, (well not for me because of opportunity costs)
is not a problem at the moment.... ask US first property investors if it is currently better to be in the market at the moment than out....?
[8D]
.^sc

[MrDevine]

Thanks for your views Shrewd. Guess we'll all just have to wait and see how this all pans out, there are some interesting vaiables (like reverse mortgages) that haven't played out before.

My main concern is geopolitical tensions in the Middle East, and what effects any action there will have on economies worldwide. Markets look well priced too, but the bulls keep on running.

[Dimebag]

Cantab,

Typical of bull market frenzy, you have conveniently omitted several more bearish points from that article. For example:

By contrast, houses in Grays Point are expected to drop between 8 and 5 per cent, while Carss Park and Monterey are set to experience falls of up to 7 per cent. APM operations manager Michael McNamara summed up 2006 it as a "tale of two cities".

Overall Sydney's median house price increased 1 per cent in the 12 months to December 2006 - from $524,000 to $526,000 - while the median unit price dropped 3 per cent to $352,000.

The median house price in East Hills, near Bankstown, dropped 16 per cent last year to $420,000. Although the area is predicted to drop another 5 per cent this year, PRD Nationwide Riverview's Jerry Kurzveil said business was up on 2006.

"I think prices will be stable this year but I can't see them going up before 2008," he said.

"There's a possibility they will go down because there's a lot of mortgagee possession sales coming on."

This is precisely the risks people like me point to. Can you imagine what your equity position would look like if you had bought a property in East Hills with 5% down a year ago? The price is now down 16%. Mortgagee sales abound of aspiring up & coming property investors who have been wiped out in this "low risk" investment class.

Yes, the high end is still doing well. Palm Beach up 35% for the year. This is consistent with a well documented world-wide trend, driven by huge strength in financial markets leading to outrageous bonuses in the financial elite and other upper echelons. This is finding its way into premium property.

If one wants to speculate as to the continuation of this trend, be my guest. But you will need a huge deposit to get in, you will take enormous cash-flow losses during the holding period, and there is a risk that if the economy slows & financial markets tank, these properties will suffer a correction.

The average punter cannot afford to play in this market. Those buying/investing in less prestigious suburbs in Sydney over the last 3-4 years have been absolutely crucified - fact.

I'm not a huge bear on property. I'm just temporing people's tendency to be irrationally exhuberant and assume that property is exempt from the laws of economics. That kind of mentality has always preceeded the subsequent unwinding of a boom, whatever form that may take. In property's case, typically via an extended unwind over decades to correct past excesses.

Dimebag

[cantab]

quote:Originally posted by Dimebag

Cantab,

Typical of bull market frenzy, you have conveniently omitted several more bearish points from that article. For example:

Dimebag





Dimebag, I haven't conveniently omitted anything. My post was as follows:

Tale of two Sydneys as property divide widens
Michelle Singer
February 18, 2007

An Australian Property Monitors rating of the growth of property values of about 700 suburbs in 2006 shows the city's affluent enclaves surged ahead, while areas in the west and south-west languished.

"There's a lot of young money coming in," he said. "I spend so much time out of Australia and I can see that we just take what we've got for granted. Foreigners come in here and can't believe the prices."

Source: The Sun-Herald

I provided the link to the article as well. What I was getting at was that sometimes people make the mistake of assuming that there is one big property market when in fact there are a whole lot of markets. That applies to Christchurch as much as it applies to Sydney. Recently there was a table in the Press that compared the performance of Christchurch suburbs over the last 6 years and the performance was not uniform, far from it, there were major differences. My post had nothing to do with being a property bull. You yourself made the mistake of treating Sydney as one market.

On 9 Feb you posted (an extract):

"This will cap price inflation, and bring it more in line with rental growth (or even worse). This is what has happened in Sydney. Since 2003, prices have not gone up and have in fact slipped back a few percent.

Studies have been done which have shown that in the very long term (centuries), price appreciation has only averaged 0-1% above the rate of inflation.

To assume anything more is irrationally optimistic. In the scenario I ran above for SC, I assumed 5% pa which I think is generous enough. This still ignores a scenario where yields actually increase, which is possible. This would most likely be achieved by years of stagnating/very graudually easing price rather than a large crash, but it could easily happen (as it currently is in Sydney).

Another post from you on 9 Feb (an extract):

If you had bought a house yielding 2.5% in Sydney 3 years ago, using 7.5% money, the price would not have increased, so you've essentially lost 5% of your asset base every year. If you put 10% down, that is a ROE of -150% to -200% (you've lost almost double your capital). People who did buy at this point in time will be making catestrophic losses at the moment, and at the moment there is little indication when conditions will improve. Rental yields are still at record lows and a long period of price stagnation to rectify this situation is a real possibility.

[Dimebag]

Cantab,

Point taken. That is something I'm guilty of doing - assuming there is only "one" property market.

Agree that in the right spots, there has still been plenty of money made in Sydney property in recent years.

Cheers,
Dimebag

[Dimebag]

PS long time no debate Cantab. Where have you been. You still holding a few ATR?

[cantab]

Hi Dimebag, I do like your PE approach to property investment. It doesn't make sense to buy a property on a 5% gross yield. Over the next couple of years I'm neutral however over a longer period of say 10 years I'm extremely bullish about property investment. I think rents will increase significantly. NZ is going to continue to attract immigrants because it's such a good place to live and it's safe. I recently heard that 400 people move to Christchurch each month.

There was a graph in the Press comparing the rise in Christchurch land prices with the total property value over a number of decades. Land values are increasing at a much faster rate than building costs, although it doesn't feel like that.

Yes still got a few ATR. I miss your comments. :)

[cantab]

Aspex, they may chip away at depreciation allowances although the latest reduction had no affect. Too many voters own a rental compared with those owning over $50,000 of overseas shares which makes shares an easy target.

Foresters aren't too happy either.

[Steve]

quote:Originally posted by cantab

Foresters aren't too happy either.

Being involved in a forestry partnership, I don't like the way that the rules could be changed half way through the game.

Take nothing for granted...

[cantab]

quote:Originally posted by Steve


quote:Originally posted by cantab

Foresters aren't too happy either.

Being involved in a forestry partnership, I don't like the way that the rules could be changed half way through the game.

Take nothing for granted...



I agree Steve, one couldn't be sure that some way down the track a deforestation tax wont apply to post 1990 forests, or even that permission wont have to be sought to cut down the same trees. The carbon credits proposed to be confiscated from foresters amount to something like $13,000 to $20,000 a hectare. The foresters are fighting back by refusing to allow the government to enter private forests to measure the carbon credits. Officials calculated that NZ would be a net beneficiary under Kyoto, they got their sums wrong and now foresters have to pay for the officials stuff-up and the governments decision to sign up for Kyoto. The government plans to give incentives for new planting but based on their track record of moving the goal posts when it suits them how could anyone be confident over a 28 year timeframe?

[Steve]

I haven't even tried to quantify my proposed "loss" yet. Better to wait and see what eventually passes...

[Crypto Crude]

<center>OCR RISE WIDELY EXPECTED </center>
"the reserve bank of NZ is widely rxpected to increase interest rates this week....
The offical cash rate will be reviewed on Thursday as part of the banks quarterly monetary policy statement.....
Business correspondent Roger Kerr says it is inevitable that the bank will increase the OCR quarter of a percent, after months of threats, That would see the OCR rise to 7.5%"....

After last OCR announcement there was a 90% chance that OCR would rise this time, and was factored into exchange rates back then....will see exchange rates higher for longer....
This is good because when it swings the other way then it will be more severe....
Looking forward to a close certainty on thursday....
This could start the downturn in property that I and many others have been expecting for along time...
bump it up.... bump up those debt payments....
[8D]
.^sc

[duncan macgregor]

SHREWD CRUDE, I expect most people have a fixed rate mortgage if they have half a brain. All it will do is give all you anti property owners a rent hike. Property price is ruled by the cost of replacement, you should know that. The price of land wont drop {they dont make any more][:o)]. The price of material wont drop or the cost of building compliance. The most you can hope for is a forced sale. The govt is screaming out for more houses to rent from landlords to sublet to the poor. Perhaps you think builder developers are screwing the public?. They are listed very high up in the bankrupsy listings along side lawyers that gamble.:D:D
macdunk

[Crypto Crude]

not everyone is on fixed rate mortgage....
eventually they will come off their Fixed rate term, and have to reset at higher rate.
[8D]
.^sc

[Mick Jagger]

To Duncan and other property bulls who refuse to accept that land/housing/property ever does anything but go up...

Putting the numerous benefits of property investment to one side - such as the ability to borrow cheap money for other assets, keep your wife and kids happy, the tax advantages due to no CGT in this country etc...

and thinking about whether it should continue to rise or not, I'm interesting in your reasoning as to why this boom is so different to the others in the past... in real terms long term house price inflation has only been 2% per annum... and anytime this has ever got severely out of whack, like in the 50's, and again in the 70's.. the price either fell strongly in a short space of time (70's), or pretty much stayed flat for a long period of time (in the 50's where it didn't move in real tersm for 15 years)... I really would like you guys to tell me why this boom is different? What is different about the current environment that should mean that what has happened every time in the past will not occur again? the reason I ask is that whenever people get really bullish and say things like "but its different this time, its not overvalued" the alram bells start ot ring for me...

also, with comments like "land will only ever go up because they don't make any more of it" - isn't that true of every commodity on earth that is useful to humans? Gold, minerals, oil, copper, alumina etc... Does that mean that no matter what price any of these rise to we shuold blindlessly buy more of them because "since there is a finite supply, it is impossible for them to ever be overvalued?"

[Bling_Bling]

Hold on tight guys, we gonna have a bumpy ride. The property market will be affected by the equities market. If the stockmarket drops some more so will the property market. Credit squeeze will come soner or later.

[vivins]

Slightly off topic. But my mother is a real estate agent and she said the other day "I have seen more mortgage sales in this past month than in the last 12 years in the business". I have a feeling things could get very interesting in the next few years :)

[Steve]

quote:Originally posted by vivins

Slightly off topic. But my mother is a real estate agent and she said the other day "I have seen more mortgage sales in this past month than in the last 12 years in the business". I have a feeling things could get very interesting in the next few years :)

That's what the astute buyers are waiting for...

[A J]

I would'nt want to buy a house till maybe towards the end of this year, do you people think more will be revealed in that time frame? Perhaps if so I can then make a better decision at that point in time.

Cheers
A J

[Bling_Bling]

quote:Originally posted by vivins

Slightly off topic. But my mother is a real estate agent and she said the other day "I have seen more mortgage sales in this past month than in the last 12 years in the business". I have a feeling things could get very interesting in the next few years :)


Tell your mum to enjoy the party while it last. Once the party stops, everyone is gonna have a huge hangover they will never forget. Alot of NZers still have nightmares from 1987.. LOL

[vivins]

quote:Originally posted by belgarion


quote:Originally posted by vivins

Slightly off topic. But my mother is a real estate agent and she said the other day "I have seen more mortgage sales in this past month than in the last 12 years in the business". I have a feeling things could get very interesting in the next few years :)


Is your mother selling appartments? I.e. is this accross the board or on specific property types?


She sells all types of residential housing. I believe she has a few apartments (3-5) and 2 houses up for a mortgage sale. Of course this isn’t fact, simply what she has noticed. This is in the Kapiti area btw.

[coge]

In terms of Kapiti, it's all a bit of a small town.
One time there were a number of mortgagee sales that all belonged to the same party.

[small fish]

Its probably not surprising when you consider the market has been going up for several years and for many years previous the market had been flat.

[Crypto Crude]

quote:A J -I would'nt want to buy a house till maybe towards the end of this year, do you people think more will be revealed in that time frame? Perhaps if so I can then make a better decision at that point in time.
Cheers


If you ask us that question at the end of the year, and you will get the most accurate answer....:)
at the moment I'd be prepared to wait a year or two....and no specific time period to wait....
whats good now, may not be good at year end
AJ- it is near impossible to time the market to the point where you get the cycles absolute minimum.... wait for market to drop.... see it rise.... then make entry....
my point is if you get it on the down and it keeps falling then you are a worried soldier
if you get that same point on the way back up, then your ride is more secure......
watch it drop... watch it start a new cycle...see it rise alittle... entry.... this is my strategy...

yes of course more will be revealed in that time period.... your exposure to year end market info will be greater at year end... im expecting OCR to be at peak year end....
does anyone have any ideas about house price stickiness? and the fact that Long run prices are flexible.... compared to short run where prices are slow to adjust....
such as OCR announcement thursday where house prices wont exactly drop that day... but surely must over a following period....
could this OCR announcement start to factor in previous ones.... hum....
its a wait and see game...
all I know is that I'm not prepared to take 30yrs to gain a 300k asset now... which may be worth a mill in 30 years.... think I can do better by another means....
[8D]
.^sc

[Steve]

quote:Originally posted by aspex

Bollards latest:
Dr Bollard signalled his frustration by revealing it, and other government agencies, are looking at other measures to support the OCR.


Was there any indication on the next rate review?

[Crypto Crude]

yup OCR up to 7.5%....
average house price in NZ is 350k
350k * .075 = 26,250
350k * .0725= 25,375
For the average NZ homeowner this will add $875 to debt payments per year...not totally accurate as bank borrowing rate isnot the OCR rate...!...
... havn't heard anything about the next rate review steve...
IMO next review....75% chance hold..... 23% chance rise..... 2% chance fall.
[8D]
.^sc

[patsy]

quote:Originally posted by Shrewd Crude

this will add $875 to debt payments per year[8D]
.^sc



Yup, just less than the cost of one long black per day for a whole year. Unless there is a serious attempt to absorb the overwhelming liquidity in the market, nothing will really change. And he doesn't have the balls to do it (as clearly shown).

[Halebop]

quote:Originally posted by aspex

Easy Dr Cullen - you know how to do it.

:D

Seems to be a lot more will power to tax "rich" share owners than the media spin connotations that taxing dwellings risk providing.

Kieran Trass offered that there were 250,000 residential property landlords in NZ, I suspect as an implicit threat to their political power? With the Cullen Fund, Super/Pension Savers, Unit Trust Investors, Direct Share investors and mortgage free oldies worried about their grandkids, aggregate share investors and non property investors and owners would top the number of landlords by multiples. Where would the votes really lie I wonder?

[cantab]

Equity trade-off for bigger home loans
Matt Wade Economics Writer
March 14, 2007
SMH

A NEW mortgage has been unveiled that can boost a home buyer's spending power by a quarter, but the lender keeps 40 per cent of any capital gain.

Australia's first shared equity mortgage in mainland capitals was launched by Adelaide Bank yesterday. Under the scheme, up to 20 per cent of the purchase value of a new home is funded by an "equity finance mortgage".

In contrast to a traditional loan, the lender gets 40 per cent of any future capital appreciation, or 20 per cent of any capital losses, on the borrower's property as a substitute for a traditional interest rate.

The home buyer must have a 5 per cent deposit and the remainder of the purchase price - up to 75 per cent - is funded by a conventional home loan.

Dennis Orrock, from the consumer information firm Infochoice, said it was the most innovative product to hit the mortgage market in the past decade. "It's a product that will have a very broad appeal, especially to middle-class families wanting to upgrade to a bigger home or move closer to work or schools," he said.

The chief general manager of Adelaide Bank, Stephen Small, said the product would target first-time buyers lacking the full finances for entry into the home-owner market. "Equity finance mortgages can be used by borrowers to buy homes that are up to 25 per cent more expensive than they might have been able to afford using a traditional home loan," he said.

But the most important market for the new mortgage may be second-time buyers who want to purchase a more expensive property, or existing borrowers who refinance to reduce their monthly loan repayments.

"Equity finance mortgages can also be used to help existing home owners lower their current monthly mortgage repayments by more than 20 per cent, reducing their ongoing debt servicing costs," Mr Small said.

Under the scheme, the equity finance mortgage lender never owns the borrower's property: the borrower always retains 100 per cent legal equity ownership and title to their home. The equity finance mortgage can be repaid in full by the borrower at any time.

Mr Small expects the equity finance mortgage to account for 10 to 20 per cent of its new lending over the next two years.

The new mortgage was developed with a real estate fund manager, Rismark International, which developed and patented the product.

The equity finance mortgage loans are only available to individuals buying a property to live in. About 80 per cent of properties in mainland capital cities will be eligible.

The equity finance mortgage is based on recommendations made to the 2003 Prime Minister's Home Ownership Task Force, chaired by Malcolm Turnbull - who is now the federal Environment Minister - before he entered Parliament.

The governments of Victoria, South Australia and Western Australia have announced shared equity schemes.

Last week Labor's housing spokeswoman, Tanya Plibersek, said it would consider a federal government role in shared equity schemes to assist low-income earners enter the housing market

http://www.smh.com.au/articles/2007/03/13/1173722471210.html

[cantab]

A bit more on EFM's

http://www.theage.com.au/articles/2007/03/13/1173722467796.html?from=top5

[Steve]

quote:Originally posted by aspex

That hardly a patentable idea. Just by changing the mix, you can drive a truck through it.
On the overall effect, it just contributes to further exacerbating the problem that exists.

Yes, but those new 1st homebuyers will fell better having something that they can call their "own"...

[Jess9]

One comment for the market spin yesterday was the rising mortgage defaults in the US. The slump has become reality over that sea...How far behind is NZ? Just wait till that bites here, and banks reduce lending criteria and their exposure to house loans, then all those investors purely in for immediate cap. gain, will have to wait several years... while paying outcashflow each week...less buyers more sellers...what does that mean?;)

[srotherh]

Looks like it popped in the US
Foreclosures May Hit 1.5 Million in U.S. Housing Bust
By Bob Ivry

March 12 (Bloomberg) -- Hold on to your assets. The deepest housing decline in 16 years is about to get worse.

As many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit may go under, according to realtors, economists, analysts and a Federal Reserve governor. Financial stocks also could extend their declines over mortgage default worries.

The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month.

``The correction will last another year,'' said Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania. ``Fewer people qualifying for mortgages means there will be less borrowers, and that will weigh on demand.''

A five-year housing boom that ended in 2006 expanded home- ownership to a record number of U.S. households. Now it has given way to mounting defaults, failing subprime mortgage companies and an increasing number of unsold homes.

[Crypto Crude]

Christchurch Press weekend Business Section article
House-Price bubble will burst and it will be ugly
David King

The good Dr Alan Bollard, in his never ending search to cure housing market fever, looks to have put his figurative stetho-scope on the problem last night.
The RBNZ governor has pointed the finger to blame, in part at least, at the banks
Rightly so. Where would the housing market be without a friendly banker?....
If the junkies are the everyday property speculators who have ramped up the market by buying two, three or even more rental properties, the dealers are the banks who have kept up a never ending supply of money...
Consider this: House prices have doubled in the last 5 years, while real incomes have risen about 15% in real terms.....
Has that set any alarm bells ringing at the banks? have they stopped lending? whoever heard of a bank that said no?
As if. They smell the profit, and, as one banker admitted, they know it feels like the 1980's sharemarket boom again, but they dont want to get off the train while its going fast.....
Thats because banks love to lend in a hot market, but watch them back off when it cools. If they stop, someone else will eat their lunch for them.....
Theres a fundamental im-balance in the housing market. You dont have to be a rocket scientist to work out what the upshot is. People cant afford the house prices that they are paying.....
Bollards musings about changing the rules on capital requirements covering banks need careful thought though.....
Bankers are already grumbling about them, saying the idea smacks of "Muldoonism".
A concern is the likelihood that tightening rules for the trading banks will open a new market for the already healthy non-bank lending sector.
Just watch the building societies rub their hands together with glee as they watch Bollard truss up their big competitors.....
The banks agrue it is not their fault, and the blame for the housing boom is the Governments. No effective capital gains tax on property, no stamp duty and attractive depreciation rules add up to make property a great investment. as long as the market contiunes rising.....
Economists say Bollard should have raised interest rates much earlier. But wherever the blame lies the fact remains that we appear to be in a bubble.....
When someone pricks it, it is going to be ugly....



SC-I dont generally like the idea of trying to control asset values, but rather prefer open market supply and demand, uncontrolled housing market operations!...

at the moment the margin requirements for the banks is 7%... this means that the bank has to hold 7% of the value of the house in liquid assets....
the bank also has margin requirements on customer cash deposits as it is a liability to the bank....

By simply raising this margin requirement will increase bank costs and they will push this expense onto customer debt payments....
You change the OCR, your impact is far greater than just the housing market...
eg OCR effects exchange rates also....
changing the margin requirement impacts directly on housing....
[8D]
.^sc

[cantab]

Following a massive housing boom in Brisbane there now appears to be another boom looming on the horizon.

Housing market boom
By Leigh Lalonde
March 09, 2007 11:00pm

THE property market is showing all the signs of an impending boom, with auction clearance rates at their highest level in years and houses selling within hours for thousands above the asking price.

.......

http://www.news.com.au/sundaymail/story/0,23739,21355733-5011140,00.html

[patsy]

quote:Originally posted by Shrewd Crude


The RBNZ governor has pointed the finger to blame, in part at least, at the banks
Rightly so. Where would the housing market be without a friendly banker?....



And who the f*ck has been feeding banks and borrowers an environment of low interest rates? Where would the housing market be without a friendly RBNZ governor?

[cantab]

quote:Originally posted by patsy
Where would the housing market be without a friendly RBNZ governor?


In the same position as just about every other housing market in the world bar Mugabe's.

[Bel]

Prices are set by supply and demand.

House price demand comes from 2% population growth - number of new houses built per year.

House prices have climbed 9-10% per year for 6? years INCLUDING suburbs with a negative population growth.

In 2001 you could buy a house for on average ~400 ounces of gold. In todays market the average price is... ~400 ounces of gold. In fact houses are more affordable today than they were 30years ago.

When property investors are counting there gains, what is it they are actually counting? Items of value or a valueless IOU with a picture of the behive on it?

PS: CPI Does NOT measure inflation. Repeat untill understood. Inflation = monetary inflation. That's it. Nothing else. Zip nada. Just purely the ammount of $$$ in circulation.

CPI measures (by fudging figures i might add) items of value in comparison to valueless IOUs. A result influenced by, Inflation (+ fudging of figures "oh you can't call that a price increase, the car now comes with a new type of radio") worker productivity, new sources of supply (Chinese slave labour anyone?)compitition, supply and demand (seasonal, technological etc) OMG the list goes ON!

So whenever i see someone says that the the house they bought in Bluff has increased by 400 quad trillion Klingon credits, or monopoly dollars or NZ IOU's i just laugh. (like a loon)

When someone says that the price of there house rose by X ammount of barrels of Oil, bushels of corn, ounces of gold over what they paid because of rezoning, local investments in infastructure and business. THEN i take note and get excited for them.

The rest of them are just full of shiite since as far as i'm concerned there just suckers in the worlds biggest scam.

i.e inflationary tax. Which is why i get annoyed when people recommend taxing the so called gains on inflationary growth.