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  1. #1771
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    Quote Originally Posted by minimoke View Post
    Three year anniversary shrewdy.
    mm
    Since 20/20 hindsight is a marvelously generous tool, perhaps you would instead care to predict Jan 2011.
    I would not deny the current position except that maybe the median price is sc(r)ewed by more liquid higher price buyers doing their thing.

    http://www.interest.co.nz/ratesblog/...ng-term-trend/ which may explain better than many of us can how the future may pan out.
    Also
    http://www.interest.co.nz/ratesblog/...ncome-tax-cut/ may have an effect.
    2010 may be an interesting year

  2. #1772
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    Quote Originally Posted by minimoke View Post
    Three year anniversary shrewdy.

    Remember you were looking at a $330k median property and a 9.5% floating rate back then and you didn't think it was a good time to buy.

    REINZ figures out today show a median of $360,000 - the highest property values have ever been. Thats a 9% increase in value from your original question - despite all the doom and gloom and the "market will drop by 30%" and "we are due a housing fall...."

    We still can't get 100% mortgages but you could get a 90% one now - but banks are probably stil going to prefer a 20% deposit.

    Interst rates are at around 5.79% for a floating rate now or 7.20% for a two year fixed.

    During the last few years we've seen dozens of finance companies go under and $b's in investor funds lost. A first home buyer would be in deep poo if they had parked their deposit and savings there over the last few years.

    As for the equity market, not too many IPO's; a few listed companies no longer around and the NZX and back in Jan 07 teh NZX All index was at 4106 gross (1094 capital index or a market cap of $41,370m) wheras for December 09 it was at 3247 (773 cap index and market cap of $33,431m). Again if a home buyer hopeful had put their money into equities, hoping for a an imporovement in their housing postion I think they will be a bit disappointed.

    So in summary we've seen property go up, deposits go down, equities go down. Perhaps back in Jan 07 first home buyers weren't screwed after all.
    So interest on 330k at 9.5% = 31350 x 3 years = 94,050. allow rates of 4,500 at a guess.
    Maintenance allow 5000 per annum (cos that's the minimum to keep value up)
    Insurance $500.
    Totaql outgoings over 3 years = 99550.

    So as long as your rent has been 638.00 per week you have made a profit of 30,000 over 3 years. Not a good investment. If you have received less than 638 per week it's a terrible investment. That's assuming the median prices are somewhere near the market prices.

  3. #1773
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    Quote Originally Posted by fungus pudding View Post
    So interest on 330k at 9.5% = 31350 x 3 years = 94,050. allow rates of 4,500 at a guess.
    Maintenance allow 5000 per annum (cos that's the minimum to keep value up)
    Insurance $500.
    Totaql outgoings over 3 years = 99550.

    So as long as your rent has been 638.00 per week you have made a profit of 30,000 over 3 years. Not a good investment. If you have received less than 638 per week it's a terrible investment. That's assuming the median prices are somewhere near the market prices.
    Sorry a bit rough with the maths there.
    Should be interes 31350x3 = 94050
    Rates 1500x3 = 4500
    Maintenance 5000x3 = 15000
    Insurance 500x3 = 1500.
    Total = 115050
    Weekly rental required = 737.50

  4. #1774
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    Quote Originally Posted by fungus pudding View Post
    Sorry a bit rough with the maths there.
    Should be interes 31350x3 = 94050
    Rates 1500x3 = 4500
    Maintenance 5000x3 = 15000
    Insurance 500x3 = 1500.
    Total = 115050
    Weekly rental required = 737.50
    There has always been a good argument for renting. But in this scenario Shrewdy was of the view it was not a good time for first home owners to buy as values would drop.

    If we go back to his original figures he had a $30k deposit with interst at 8%.

    So your figures need to be:
    Interest $24,000x3 = 72000
    Rates 1500x3 = 4500
    Maintenance 5000x3 = 15000
    Insurance 500x3 = 1500.
    Total = 93,000
    Weekly rental required = 596.00

    Now Shrewdy was a young chap then and its likely his money would have bought him a three bedroom house so he could have got a couple of flatmates in at $120 a week. That would have brought him in $37,440

    Like it or not Shrwedy would have needed some where to live so lets say even if he flatted with someone, to have a roof over his head was going to cost him $120 a week - money down the gurgler some may say. Thats a $18,720 offset.

    So lets take the 93,000 less the 37,440 rent income and the 18720 offset then Shrewdy needed to find 36,840. So the peace of mind of owning your first home has probably cost him $6,840 (thats the $30k in increased property values over that time less the $36,840).

    Now lets go back a step. If shrwedy had a $30k deposit and a spare $36,840 thats $66,840 cash. If he had done what many NZ'ers did and invest it in a Finance Company theres a good chance he would have had none left - or SFA.

    If he did (which is what he probably would have done) put it into NZ equities he would have lost 19% or $12,700 of his investment leaving him $54,140. (Thats how much the NZ Index has dropped)

    That $54,140 would be a 20% deposit on his first home today - which means he could now buy himslef into a $270,700 house.

    So whats it to be. Still happily in a $360k home or buying a $270,700 home. Or remain renting and hoping that properties drop 25% to get him back into the $360 home now devalued to $270K?

  5. #1775
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    Quote Originally Posted by loofa View Post
    mm
    Since 20/20 hindsight is a marvelously generous tool, perhaps you would instead care to predict Jan 2011.
    I would not deny the current position except that maybe the median price is sc(r)ewed by more liquid higher price buyers doing their thing.

    http://www.interest.co.nz/ratesblog/...ng-term-trend/ which may explain better than many of us can how the future may pan out.
    Also
    http://www.interest.co.nz/ratesblog/...ncome-tax-cut/ may have an effect.
    2010 may be an interesting year
    Loofa, with respect, the first thing I can suggest is take more time and choose a better source of information. Bernard Hickey (interest.co.nz) is the "Houses will fall in value 30%" man. You'll see that all through this thread some of us here think that is a crock of shi#e. In that time propertys have actually moved form $330 to $360. Theres few articles I'll read of his which get me past the first paragraph - its all self marketing on the same broken record. I'll even go as far as saying that he's the current incarnation of the Doug Somers Edgar critter!.

    Median values are screwed - it just depends which argument you want to listen to as to what has caused that screw. If you read throug this thread and other on these boards you'll find lots of reasons for it. And you'l see we've even had teh discussions on Median vs Average.

    But these figures are being used as an Index and the Index has essentially gone up.

    So my prediction for Jan 2011 is that values will be UP. Again, throughout this thread you'll see my reasons but in the short term there are several key drivers. Interest rates wil remain relatively low. Jobs will become more secure and the "skills shortage" will begin to bite later in the cycle driving some wage increase. This means people will be more comfortable buying. More demand = higher values. Our population continues to rise. The governement is spending on home improvements - especially for the Special People. Costs are going up and will contine (tradesmen are getting harder to find - and where you get a decent one from who knows?) and BRIC countries will start fuelling global demand again. The government is working at keeping the aged in their own homes which will anchor those values rather than see a glut of property come on the market - until these folks die (but thats getting harder given the drugs and care people get to keep them ticking over longer. And I don't see Bird Flu decimating the population creating a deluge of property on the market).

  6. #1776
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    Quote Originally Posted by minimoke View Post
    There has always been a good argument for renting. But in this scenario Shrewdy was of the view it was not a good time for first home owners to buy as values would drop.

    If we go back to his original figures he had a $30k deposit with interst at 8%.

    So your figures need to be:
    Interest $24,000x3 = 72000
    Rates 1500x3 = 4500
    Maintenance 5000x3 = 15000
    Insurance 500x3 = 1500.
    Total = 93,000
    Weekly rental required = 596.00
    Fair enough if he wants a roof over his head - but these things no longer stack up as an investment. They are quite an effective compulsory savings scheme. That's all. One point though. It matters not what the deeposit is-it doesn't affect the costs. If 30k is his own cash, he's borrowed it from himself rather than the bank. So he's losing its alternative earning potential, which will be a bit less than the rate he's paying the bank, but it's still a cost. That's a point often overlooked by those purchasing small businesses. I have seen several cases where purchasers would be earning just as much by staying in bed - aka buying an income. The same often applies to residential property 'investors'. Most of them could do so much better.

  7. #1777
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    When the cost of an essential item exceeds the cost of replacement, then it becomes a bargain. The cost of property over the last fifty years has increased at a higher level than the average trade person renting, and supporting a family could save to buy into at retirement. The smart people learn that at an early age, and climb on the band waggon.
    The real dumb ones argue the point, then get caught out in get rich quick schemes risking their future well being.
    Four or five years down the track it becomes much cheaper to pay a mortgage than it is to rent in normal circumstances. The really smart people learn how to use the banks money and not their own to increase their property portfolio.
    The cost to replace property or in other words build from scratch has increased at a much higher level than the medium price level.
    That is the facts, like it or not, we are now in a position where property will increase in price at a much higher level than general inflation.
    A few things to to think over that has happened in the last few years that some of you might be unaware off that will hit your property values shortly.
    1,Septic tanks now cost four times as much to install thanks to the greenies.
    2,double glazing and over the top insulation rules that pushes the price of new homes to ever higher levels.
    3,Engineer reports and resource consents at every turn simply because councils are so incompetant that they now wont make decisions.
    4,Plans have to be detailed down to extraordinary levels costing twice as much.
    5, Developing property at reasonable prices for the future mum and dads is a thing of the past simply because of cost increases before you even start to build..
    In ten years time the price of property will be more than double, just like it has always been Macdunk

  8. #1778
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    Quote Originally Posted by duncan macgregor View Post
    When the cost of an essential item exceeds the cost of replacement, then it becomes a bargain.
    That doen't sound like a bargain to me. I'd go for the cheaper brand new replacement one every time.

  9. #1779
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    Quote Originally Posted by fungus pudding View Post
    Fair enough if he wants a roof over his head - but these things no longer stack up as an investment.
    But this thread wasn't an "investment" thread. It was about owning your home - which is quite a different proposition.

  10. #1780
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    Quote Originally Posted by minimoke View Post
    But this thread wasn't an "investment" thread. It was about owning your home - which is quite a different proposition.

    True. Sorry, forgot where I was. A problem I used to have every Friday night without fail.

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