A profound inflection point?

[wns]

Hi TGGG,

How much did you put down on your 8 purchases?
Are the rents covering your loans?

[The Great Gold Guru]

Over the whole portfolio the equity is around 36% ... 64% debt at a weighted cost of 8.25%. I can't cope with interest only loans so I have the mortgages on a mix of 20y and 25yr repayment schemes. I sub the whole portfolio about $1200 per month after rates and insurance which is about the amount of capital I repay off my loans each month ... so you could argue the whole portfolio just about ticks over ( excluding any maintenance needed ). Not a great cash return on the significant amount of equity ... but at least it is ticking over and hasn't all been in Pumpkin Patch or Fisher & Paykel Healthcare/Appliances over the last two years !!! Three of NZ's leading companies whose shareprices have roughly halved in the last wee while.

PS.

We received an offer on our own home on Sunday , have agreed a sale price of $825,000 ... we owe $400k on it to the ANZ and will repay that. Have decided to move to Auckland and rent a villa in Stanley Bay / Devonport / Cheltenham area. You can get a beautiful villa that would sell for around $1.2-$1.5m for around $800-$1000 per week which seems a bargain to us ... I was paying more than that for a studio flat in Notting Hill in London 8 years ago !! Say we pay $900/week that would be $46,800 per year .. take off say $1000 for insurance and $2000 for rates that we save by renting and we are down to a net cost of about $44,000 per annum. At 9.60% that $44k would pay a $458,000 mortgage so to buy and live in the same house would require about $800k-$1m of equity .... that sort of money deposited at Westpac at 8.8% would earn some serious moolaa ...

You could argue therefore that renting in Devonport is "dirt-cheap" ... so we will put our equity into more rentals ( probably Nelson and another Dunedin property ) and shares on the stock exchange like PFI,KIP and ING which are all selling far far below NAV.

Anyway , offer on house subject to finance,building and LIM so a bit of work to do yet , fingers crosses till Friday 4th.

[Arbitrage]

Good to hear from someone chasing the rental yields in provincial nz TG3. Good luck.

I heard a rumour that interest rates may be lowered sooner than later, hence the weaker dollar and sharemarket surge. Has anyone else heard anything?

[The Great Gold Guru]

Sale of house went thru , $ 825k in the bin ... so move over all u jaffas, look out for the Great Gold Guru movin into Devonport early May time. We will be renting for a few years I think and will look to buy around early 2010 , flick out of some of our dairy farm investments around that time, ( after the equity in them has doubled or even tripled from current levels hopefully ) and buy something near Cheltenham Beach mortgage free ... will keep adding to residential portfolio in meantime when I see some distressed sellers around ... Auckland apartments ( yield 12% minimum ) , Nelson , Dunedin , Wellington and also 3 bed 1940's/50's homes in Te Atatu, Mangere Bridge and Sandringham.

KIP up 5% from recent purchase ... easy money eh ???

[lakeys]

Having been an agent for 9yrs now I have never come across anything like the current slow property market. The gap between the market and the venders exspectations seems to be getting bigger each week. I have just done 3 different open homes today with over $1000 of adverts to get buyers in and i have to say no real buyers turned up. Ive just told a close friend just meet the market and sell now because in 6 months time you will deffinatly be able to buy the same thing back way cheaper.
Although not reported buy the media yet our market, Wellington has come back 5% since last year and there is heaps more down side to come.

Dimebag, have you still got your large ATR holding?

[srotherh]

Seriously
I have to say this is one of the best, factual, unemotive threads I have ever read on Sharetrader. Congrates to all contributors (esp Dimebag for starting it) with well thought out posts.
PS.
TGGG , You are not Nele under a different handle ????

[Sideshow Bob]

TGGG, with 500+ jobs gone in Dunedin this week it will obviously have an effect on the market here. This is just going to add significant more pressure to the market.

[moe]

TGGG, with 500+ jobs gone in Dunedin this week it will obviously have an effect on the market here. This is just going to add significant more pressure to the market.

SSB, on the realestate.co.nz site, have a look at the first few pages of the Dunedin listings. About half of them are for Mosgiel, have popped up within the last week. Its going to be a killer for Mosgiel (the closure of F&P).

[Yossarian]

nothing to contribute, just a thank you to Dimebag for a very interesting and thought-provoking thread. cheers

[Arbitrage]

Mr Bollard has left interest rates on hold, although a hint of dove-ishness suggests they may reduce them before the end of the year.

While this gives him plenty of room to move when the economy slows, I think he will need to reduce them sooner than later. My reasoning is that economic stats are retrospective and the current slow housing market, reduced private retail spending levels, and high cost of borrowing for productive purposes, already have the economy heading south. Even the banks are indicating (see ANZ's comments today) that their costs of borrowing mean that interest rates will remain high or increase.

So hopefully we will see a reduction of 0.25 points next month....!