Now is the time to buy property

[duncan macgregor]

The economy is in dire straights with the only likely out come being, high inflation. To take advantage of this depressed market, and low interest rates means that now is the time to lock in for as long as you can get, that mortgage, at these low rates on self supporting properties.
Most western economies are at a point of no return, whose only answer is to print more money to pay the interest bill. The end result is either total economic collapse, or high inflation. Money in the bank or the share market are all high risk with the only safe investment left is property.
What ever eventuates will see property as todays wisest investment.
Macdunk

[peat]

you heard it first on Sharetrader from mcdunk , if his other calls are anything to go by we should take note.

certainly hasnt been any pullback in the long term mortgage rates since the OCR cut.

Colin twigg (from incrediblecharts) noted in his latest commentary on inflation that long term bond yields were starting to rise - however he still saw deflationary forces as strongest right now.

perhaps a bit off topic but gold (comparable to property in that it is perceived as an inflation hedge) closed above 930 last week.

[Jake]

with the only safe investment left is property.
What ever eventuates will see property as todays wisest investment.
Macdunk

Myself, owning a residential construction company. I certainly hope people take your words onboard.

[Brut]

Macdunk,

I agree it is a good time to buy (there are some great bargains out there) but you were also telling everybody back in July 2008 that they should be buying & locking into a 3 year mortgage when the OCR was 8.5%. I think if you keep saying the same thing you will eventually get it right?

[minimoke]

Macdunk,

locking into a 3 year mortgage when the OCR was 8.5%.

And when at the time Fixed 3 year was around 9.0% and the floating rate was around 10.6%. The OCR is now 2.5% with floatingt 6.5% and 3 year fixed at 6.6%

[duncan macgregor]

Macdunk,

I agree it is a good time to buy (there are some great bargains out there) but you were also telling everybody back in July 2008 that they should be buying & locking into a 3 year mortgage when the OCR was 8.5%. I think if you keep saying the same thing you will eventually get it right?

BRUT Only a fool gambles on what mortgage rates will do when it comes to risk in the business world. Always and i mean always do the numbers sometimes you win some times you lose but you never risk being in the position of looking at a losing position bankrupting you to try and time the market. Come back in three years time it might be you with a 20% mortgage.
I once paid 16% i think on a block of land and made good money with the banks money, so dont worry about percentages, think about the numbers. Keep it at understandable affordable levels.
I also said the market would downtrend leading up to the olympics, then crash and got ridiculed for that. I now say the western economies are in great danger of collapse, or at least rampant inflation, and to stick your money in material assets.
Most western economies would be declared bankrupt if it were you and I. NZ for instance with its rush into free trade agreements with poorer nations gaurantees us that our factories move overseas to slave labour countries where the trades person gets paid less than the guy sweeping the floor here. America another example imports cheap cars yet spends billions propping up its own industry. A friend of mine relocated his furniture factory overseas simply because in order to compete here, he had to move over there.
The rich countries get poor, and the poor countries get richer, then one day we end up in an equal state where we all work for nothing in order to buy goods for nothing.
If you think i Jest try phoning up telecom, or air NZ, and ask what country the operator is in, or ask AIR where the planes get serviced.
Money is printed on a bit of paper with a promise to pay, thats all its worth, a polititions promise to pay up, I think the the piper will come along, and demands payment sooner rather than later. Macdunk

[ynot]

I do see the inflationary asset [ property values] senario as a possibility, but the other side of this argument is rising unemployment, dumping more property on the market as highly leveraged property owners, unable to meet their mortgage commitments are forced to sell.
Especially as nervious banks are looking hard at owner equity ratios.
The way i see it, the outcome to all this is dependant on just how high unemployment rises, and looking forward, its not looking that rosey.

[ananda77]

...about the New Zealand Housing Market:

The New Zealand Zinger

Though the local housing market looks unlikely to pose an existential threat to Australian banks, New Zealand's housing market may give some banks a run for their money. Australian banks own most of the banks in New Zealand, where the housing market is undergoing a deeper correction as immigration to New Zealand slumps. With HOUSING ASSETS 5.7x HOUSEHOLD DISPOSABLE INCOME, NEW ZEALAND PROPERTY MARKETS ARE EVEN MORE LEVERAGED THAN THEIR US COUNTERPARTS. As the Australian Financial Stability Review states: “As at December 2008, the Australian banks’ overseas exposures accounted for around 30 per cent of their total assets, with New Zealand and the United Kingdom together accounting for about two thirds of these foreign exposures.” Considering the relative outlooks for housing markets in Australia and New Zealand, external assets are a more significant danger to Australian banks than domestic assets. This could be the hidden dragon that swallows up Australian banks in the years ahead despite its ostensibly more comfortable position versus European and American banks.

Kind Regards

[Mick100]

. I now say the western economies are in great danger of collapse, or at least rampant inflation, and to stick your money in material assets.

I think your on the right track macdunk
But i'm not sure if realestate is the best material asset to buy right now
I think property prices will remain flat for a few yrs yet
I prefer gold and commodities as an inflation hedge
I wouldn't be surprised to see $1500 gold this time next yr (50% increase)
your not going to get that sought of increase in property in the short term.

[lakedaemonian]

The economy is in dire straights with the only likely out come being, high inflation. To take advantage of this depressed market, and low interest rates means that now is the time to lock in for as long as you can get, that mortgage, at these low rates on self supporting properties.
Most western economies are at a point of no return, whose only answer is to print more money to pay the interest bill. The end result is either total economic collapse, or high inflation. Money in the bank or the share market are all high risk with the only safe investment left is property.
What ever eventuates will see property as todays wisest investment.
Macdunk

I'll go on record and bet a case of decent beer or a decent bottle of wine/spirits that you've got it wrong.

On average, property tracks inflation......then you subtract rates, insurance, and repairs as it slowly rots.

There are periods of time where buying into property is a no-brainer to use easy leverage to produce capital gain......2001-2007 would be a great example of where property prices exploded on the back of historically easy credit access following a LONG period of property price stagnation.

I believe we will face up to a decade of real estate doldrums in real terms........AT BEST.

At worst, I think we could see further and possibly substantial downward legs with big flat patches in between.

I agree that a period of substantial inflation is on the way........I believe it's only a question of how soon it arrives and how nasty it gets.

The majority of folks will only own or co-own one property at a time in their lives.

You have to live somewhere.......if you sell a home, you have to either buy another, rent, or move in with family.

The LAST place I would invest ANY of my money right now is real estate.......New Zealand's investment culture is overweight property...which requires leverage.....which requires savings...which NZ does not produce enough of.......sourcing the credit required to pay these still very high property prices is going to be a BIG problem.

The average multiple of the average wage for buying the average house is still too high according to my cocktail napkin...especially if credit is further tightened combined with rising unemployment keeping wage inflation in check.

Think about it.......all the paper printing so far has yet to even STOP the real estate price decline.....the biggest chunk of paper printing in history hasn't even halted the destruction....what's it going to take to get it even moving slightly north again?


Coincidentally, I have been putting my money where my mouth is......my family's financial plan has recently achieved it's minimum property exposure target of just our family home and our dairy farm.

NO residential investment property and definitely NO commercial investment property.

Property is far too illiquid in the best of times....we are most definitely NOT in the best of times...nor will we be for a good number of years.

I'm going with inflation protected liquidity.........gold/silver/energy/agriculture is the end state for it after making a very BIG exit out of the NZ dollar at approx .60c

My target for going back into property BIG is roughly 2014-2019, repatriating funds once the next "currency commodity" payoff has occurred.

In REAL terms, I don't know if I will see substantial gains...in NOMINAL terms I think I probably will......at the end of the day...if I can effectively shelter my family's capital/purchasing power longer than most everyone else....we will win by purchasing assets at possibly high nominal prices, but low real prices.

Equities, bonds, and Real Estate are zombie asset classes for the foreseeable future, barring very rare exceptions.

I'm not expecting to outrun the bear.....but I am expecting to outrun you.

Just my 0.02c.....and I've put it where my mouth is.