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  1. #1
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    Default nz shares or property

    Have been around looking at another investment rental. Cannot believe the numbers attending open homes, shortage of stock and the urgency created. Herd instinct concerns. Values are all moving up. Would I be better off gearing into a some NZ dividend growth stocks?

  2. #2
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    The average New Zealander because they have never experienced a property market collapse in the last 30 years or so (yes values went down by like 5 or 10% in 2008, but nothing massive), many New Zealanders "hate" shares, and wouldn't consider it an investment after the 1987 crash... because of this many have their money tied up in property, and many more "want there money tied up in property" as it is on a seemingly endless road to success with no downside/risk...

    The next paragraph is mainly relating to Auckland... One leading economist described Auckland's property market as "a giant Ponzi scheme" as residents (and investors) pay each other to get in and drive prices up and up, once these new apartment buildings "come online" and unusually strong migration drops off, Auckland property may not have the big double digit increases it has enjoyed, on average, for decades (I am a bit wary of the medium term fundamentals...)
    If you are going to do something, do it before the RBNZ new regulations come into affect 1 October (I think?) and this will require 30% gearing instead of the current minimum of 20%... be aware of the new regulations brought in by the government as well (not sure on these or when they are being implemented)

    I am not sure either how NZ shares will go over the next year, but as always, on average shares generally make a better return than property, which shares will do better than others is always a better question.
    Last edited by trader_jackson; 30-08-2015 at 08:06 PM.

  3. #3
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    If you're talking about Auckland property I suggest you have a look at my recent post in the AIR thread.

  4. #4
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    Quote Originally Posted by voltage View Post
    Have been around looking at another investment rental. Cannot believe the numbers attending open homes, shortage of stock and the urgency created. Herd instinct concerns. Values are all moving up. Would I be better off gearing into a some NZ dividend growth stocks?
    The billionaire Sir James Goldsmith had some very salient advice about a firm rule he had when investing .

    " If you see a bandwagon never follow it, its simply too late."

    As far as Auckland goes, SELL NOW.
    Last edited by Sgt Pepper; 30-08-2015 at 11:39 PM.

  5. #5
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    Quote Originally Posted by trader_jackson View Post
    The average New Zealander because they have never experienced a property market collapse in the last 30 years or so (yes values went down by like 5 or 10% in 2008, but nothing massive), many New Zealanders "hate" shares, and wouldn't consider it an investment after the 1987 crash... because of this many have their money tied up in property, and many more "want there money tied up in property" as it is on a seemingly endless road to success with no downside/risk...

    The next paragraph is mainly relating to Auckland... One leading economist described Auckland's property market as "a giant Ponzi scheme" as residents (and investors) pay each other to get in and drive prices up and up, once these new apartment buildings "come online" and unusually strong migration drops off, Auckland property may not have the big double digit increases it has enjoyed, on average, for decades (I am a bit wary of the medium term fundamentals...)
    If you are going to do something, do it before the RBNZ new regulations come into affect 1 October (I think?) and this will require 30% gearing instead of the current minimum of 20%... be aware of the new regulations brought in by the government as well (not sure on these or when they are being implemented)

    I am not sure either how NZ shares will go over the next year, but as always, on average shares generally make a better return than property, which shares will do better than others is always a better question.
    Im not so sure either would be a sure winner these days---im just wondering which share if I had put my $64000 in (1984) would be worth 1.3mil now--cant say the cash flow is great though(rent-expenses)---it will still be there in X years though and there is no executives with their noses in the trough
    Last edited by skid; 01-09-2015 at 01:52 AM.

  6. #6
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    Quote Originally Posted by skid View Post
    Im not so sure either would be a sure winner these days---im just wondering which share if I had put my $64000 in (1984) would be worth 1.3mil now--cant say the cash flow is great though(rent-expenses)---it will still be there in X years though and there is no executives with their noses in the trough
    That is a great return.
    You have underlined why NZ has such a small proportion of wealth in financial investments (shares and bonds) compared with residential real estate. When people can get such good (mostly untaxed) returns from leveraged residential housing investment, it is natural that they will tend to park and accumulate their wealth there. It also helps explain why our stock exchange is small in proportion to our GDP and why our houses are expensive in relation to our incomes. NZ is going back to the future of a nation of wealthy landlord families (some absentee and foreign) and inter-generational tenants, who work for foreign-owned companies.

    It would take a courageous government with vision to introduce a tax regime which increased the tax take from investment residential real estate, so that the proportion of total returns (capital profit and income) paid in tax equaled the proportion of returns(capital profit and income), from investment in shares, that are paid in tax. The ease at which investment in residential real estate can be leveraged enables large (currently untaxed) capital gains for the owner's equity.
    Last edited by Bjauck; 01-09-2015 at 07:56 AM.

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  8. #8
    The Wolf of Sharetrader
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    Why property or shares? Why not both?

    Deep.

  9. #9
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    agree gearing into both does make sense, shares more volatile, however in nz we are fixated on property

  10. #10
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    If you are thinking of property why not have shares in property? PFI ARG GMT PCT all good returns.

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    i suppose it is easier to borrow 500000 to buy an investment rental, but to do the same with shares even property shares isn't it higher risk.

  12. #12
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    Quote Originally Posted by Deej5 View Post
    If you are thinking of property why not have shares in property? PFI ARG GMT PCT all good returns.
    Another property investment with good returns is The Mutual Superannuation Fund.There returns before tax for the year ending 30/6/14 was 9.11% and for 2013 5.7%.
    I think they own freehold 5/6 commercial buildings in the Auckland area and all are tenanted.
    May not be suitable for everyone but it's quite inexpensive to invest into.

  13. #13
    The Wolf of Sharetrader
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    Here's an interesting stat that may prove useful, in the 24 months following Black Tuesday, the market cap of public property companies in NZ fell by nearly four fifths!

  14. #14
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    Quote Originally Posted by Bjauck View Post
    That is a great return.
    You have underlined why NZ has such a small proportion of wealth in financial investments (shares and bonds) compared with residential real estate. When people can get such good (mostly untaxed) returns from leveraged residential housing investment, it is natural that they will tend to park and accumulate their wealth there. It also helps explain why our stock exchange is small in proportion to our GDP and why our houses are expensive in relation to our incomes. NZ is going back to the future of a nation of wealthy landlord families (some absentee and foreign) and inter-generational tenants, who work for foreign-owned companies.

    It would take a courageous government with vision to introduce a tax regime which increased the tax take from investment residential real estate, so that the proportion of total returns (capital profit and income) paid in tax equaled the proportion of returns(capital profit and income), from investment in shares, that are paid in tax. The ease at which investment in residential real estate can be leveraged enables large (currently untaxed) capital gains for the owner's equity.
    Your right its a great return,although there has been no return,except managing tenants--It started out as our family home and something I could put my energy into--I didnt leverage as some do--and agree with some of your points,but so far Ive been taxed just like with shares--but the market HAS gone a bit crazy and it cant continue --Thats why at this point its a much harder decision(although at the time we didnt know this was going to happen with prices)--It could also crash as well..who knows.
    I got lucky with prices ,but if you saw the house before ,you wouldnt recognize it --there are still places where houses are relatively cheap,but you would have to adjust your lifestyle to be in a different area....well..gotta go ..Ive just lost a tenant,and the other one doesnt knoiw how to change a light bulb.

  15. #15
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    Quote Originally Posted by skid View Post
    Im not so sure either would be a sure winner these days---im just wondering which share if I had put my $64000 in (1984) would be worth 1.3mil now--cant say the cash flow is great though(rent-expenses)---it will still be there in X years though and there is no executives with their noses in the trough
    By my rough calculation it works out out at 20% compounding return/yr
    Infratil is close to that

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