Obviously the reaction from property investors has been vigorous. They expect that the investors will leave the property market in droves. One commentator said it would make the lives of 1.4 million tenants miserable. Privately owned rental properties,according one estimate, are around 460,000 and valued at $165 billion. HNZ manages 69,000. Currently 3500 out of that are privately owned but leased and managed by HNZ.

Whether the working group looked at the overall impact on the tenancy market or they were looking at only the tax aspect I am not sure. What I am sure is that the likes of Bernard Hickey (one of the self anointed expert who gets plenty of media space)  are definitely blinkered. Just consider  what he said when asked where the tenants would live if there was a shortage of rental properties. He said they will live with their families and friends!!!. Imagine nearly a million people wanting to move in with their families and friends. I hope Bernard has a big house. There may be a queue outside his house.

Everyone seems to be taken up by the  tax dollars that the property investors are apparently not paying the Government. Nobody is considering the impact of investment property industry on the domestic economy. We are a nation of builders, plumbers, electricians, chippies, earth movers, painters, tilers etc. All these trades people are gainfully employed by this industry directly and indirectly all the real estate agents, mortgage brokers, valuers,accountants, solicitors,city council workers and many more are employed. There must be thousands and thousands of people who fall in these categories. I know most of these will find another livelihood over a period of time if this industry bites dust. But pray why do this when this is a thriving industry? Just to satisfy some academics of Victoria University and some moth-balled journalists who call this 'tax reforms'. In fact Bernard says that if John Key and Bill English do not accept the recommendations they will be considered as not interested in reforms. Just consider that the current value of the houses under home lease programme of  HNZ is a couple of billion dollars. Where will the Government get money to provide housing to the needy who cannot afford their own home? Where from except tax payers money. Several billions are already channeled into benefits and now if these recommendations are accepted government has to find more moeny.

In 1990 I moved from Wellington to Auckland. I used to go generally on Friday nights to The Cossie club in Takapuna. I used to see a number  of chippies, electricians etc. At that time there was a down trend in the property market and these guys finding it difficult to find work. You could get them to do job for $10 per hour when the going rate was more like $25 per hour. I have seen most of them slowly prosper with the increase in the construction activity. I would hate to see the day when most of them are again twiddling their skilled thumbs doing nothing. Most of them had a difficult 2008 and 2009. Only towards the end of 2009 have the things started picking up and now these so called experts are trying to nip the momentum in the bud. The experts (?) expect that the average Joe Bloggs are going to invest their money in industry if the rental property industry is killed off. Wake up guys, it is never going to happen. Show me one brave man who is going to borrow $100,000 against their home and invest in share/bond market. Grow up guys and more importantly shut up!

If majority of the renters are supported by the Government (HNZ is the biggest landlord) where does the GST money come from? Should more taxes  be collected to pay for this levy? If pigs do fly and Brian's suggestion is implemented it might concievably dent the investment market. However it begs a question–what happens to those thousands of people on the property waiting list of HNZ? Who provides housing for them?

Brian says that the property prices have gone up hugely between 2002-2007 and that, is a mis-allocation of resources. This is not new. Property has gone up in every single decade from the time Kiwis started buying and selling properties. We still believe buying rental properties, preferrably rent guaranteed investment properties is the best hedge against having a retirement that is goverment-handout-dependent (if it is still there!!!). I vehemently resent the half baked suggestions that do nothing but raise doubts in the minds of the average investors. It does get some space in the media though for the publicity seeking writers.

Let me explain…

I read an interesting article in the NZ Herald this morning — all about a well-known listed property trust's 'struggle for survival' due to rising vacancy rates and falling rents.

The Listed landlord National Property Trust has declared a 2.2 million dollar loss in rental revenue due to the under-renting scenario it's experiencing in the current climate. Roughly half of this amount is due to vacancies, with the balance due to depressed rents.

The total portfolio value (around $269 million) has lost just under 10% of it's market value over the past 12 months - that's a whoppping $28 million!

Plus, they expect their vacancy rate to climb to an ominous "11.1%" within 12 months - hardly an exciting prospect for the thousands of Kiwis currently invested in the Listed Landlord National Property Trust.

I think this scenario serves to highlight the frailties and 'hidden risks' associated with investing passively in property - you simply don't have any control over your own investment! Plus, there are no guarantees in place as far as the rental streams are concerned - you're literally at the mercy of the property markets.

At Compass Property Investments we steadfastly encourage our clients to invest DIRECTLY in residential investment property, as long as the property is well-managed and protected with both rental guarantees and landlord protection insurance.

This way, no matter how ugly the New Zealand property market becomes in the short term, your cash-flow is preserved with the market-aligned rent guarantees… and every aspect of the day-to-day, week-to-week, month-to-month management of the property is handled by our property management division.

I think that there is a place for passive property investment - but certainly not the way it is structured in New Zealand.

If you'd like a more in-depth discussion on this and/or other property investment issues - and perhaps an "inside look" at how we can help you remove a huge chunk of the risk from rental property ownership, call me directly on: 09-966-2860… I'd love to hear from you

According to an article in the NZ Herald on June 2nd, written by Graeme Hunt, "the housing market, which has been depressed for the past 18 months, appears to have bottomed out - at least in Auckland".

Graeme, who is an excellent property journalist in my opinion, goes on to say that "although prices remain soft, the number of reported sales has risen in the past month and far fewer properties have been passed in at auction".

Graeme, like myself, firmly believes that the apparent change of heart reflects not so much the state of the economy but a slow turnaround in consumer confidence brought about by record low interest rates and greater housing affordability, especially for first-home buyers.

This is reflected in the latest ASB housing confidence survey, which shows that in the past nine months those surveyed have become increasingly attracted to the housing market. For the most recent quarter - the three months to April - 59 per cent of respondents felt it was a good time to buy a house, compared with 53 per cent in the previous quarter.

ASB chief economist Nick Tuffey says the improved sentiment appears to be closely linked to the dramatic fall in interest rates in the past year.

According to Auckland's largest real estate agency, Barfoot & Thompson, the region's housing market continued to surge in April, following better-than-expected performances in February and March. The average house price was $502,726, up 2.2 per cent on March. The number of sales at 809 was 79 per cent up on those for the same month last year.

"Traditionally April sales volume and prices can fall away markedly compared to March," Barfoot & Thompson managing director Peter Thompson says. "It is a seasonal factor, so to get an increase in price in April with only a modest fall in homes sold compared to the previous month is heartening.

He is optimistic about the housing market but says people sometimes confuse the performance of investment housing with houses people buy to live in.

"The biggest issue we are facing is the lack of stock," he says.

The lift in consumer confidence is good news for the real estate industry which, in the past year, has shed many salespeople and closed many offices.

Top Harcourts agent Gary Thomas, who is based in Ellerslie but sells houses all over Auckland, says there has been a marked increase in activity and inquiries this year.

"This has been very evident in the past two months. Out of the inquiries there are people who are making decisions and buying. Eighty per cent of my deals have been on multiple offers. The market is almost turning on a coin."

Thomas, who has been selling houses for 14 years, says the turnaround could be attributed to realistic vendors and lower interest rates. Recent buyers had been in the market for up to 18 months.

Thomas warns vendors not to view the renewed activity as an opportunity to hike prices. "Some vendors are going to get excited and put prices up. This is a sure way for the market to contract."

The improved fortunes for urban housing seem to have kick-started the dormant beach-property market.

In Mangawhai Heads, north of Auckland, there has been a pick-up in sales of lower-end baches - those between $200,000 and $300,000. Harcourts agent Susan Woodhead says she is having to work harder for sales but people who have been looking for baches for up to two years are now buying".

NB: ("which reminds me, I'd better secure that bach I've been promising Sharon for the past 23 years BEFORE the prices go on the next upward rampage!")

All in all, a positive outlook for property - particularly in Auckland - by any standards. And if you've finally reached the point where you'd like to chat about the best way to own investment property in this part of the world, why not visit our main website over at Compass Property Investments - and then give me a call, personally (Mike Hackett - Ph: 09-966-2860). I do try to keep this blog impartial, but we've got some absolutely superb property available for a very limited time at present - all rent guaranteed - all professionally managed.

Call me now: 09-966-2860

Joseph goes on to say…

QUOTE:

"Two new reports, one from the Real Estate Institute and one from Crockers Property Group, offer the first signs that house prices may be rising.

The NZ Property Report, published by the Real Estate Institute and a group of big estate agencies, shows a sharp decrease in the number of properties listed for sale around New Zealand, an indication that the buyers' market of the past year may be turning to favour sellers.

And the Crockers report shows stronger sales in March, especially in Auckland, aided by population growth and expats coming home.

The reports come after Tony Alexander, the BNZ's chief economist, told buyers they shouldn't risk holding off in the expectation of lower prices.

The trends are far from certain, and most experts agree it's too early to confirm an upturn.
A dramatic decrease in the number of properties listed for sale in April suggests New Zealand could be turning to a sellers' market says the monthly NZ Property report released by www.realestate.co.nz.

However the report's conclusions has been refuted by some property experts saying it's too early to tell.

The Real Estate Institute report shows 10,453 properties were listed in April, a decrease of 21 per cent from March and 34 per cent from the same time last year.

The New Zealand property market has been a buyer's market for 18 months; however this is a significant drop in new listings," said Alistair Helm, chief executive of realestate.co.nz.

Glenda Whitehead, Auckland valuer for QV Valuations, said the market was a happier place than it had been in the past 12 months, but, it's too early to suggest a dynamic shift.

Buyers paying too much

Mortgagee auctions are no longer the steal that buyers hope for.

Mortgagee sales have exploded in recent months as more struggling homeowners are pushed into selling, but experts say buyers are paying too much at the auctions.

A Barfoot & Thompson mortgagee auction this week attracted more than 70 people to the sale of four Auckland houses, and one North Shore section.

The Browns Bay section didn't sell, and the four houses sold for barely $50,000 below their official valuations - hardly the fire sale that first-time buyers may expect.

Despite the large turnout, the auction room was eerily silent as the first bids were called for a four bedroom home in Dannemora.

The bidding slowly crept its way up to sell at $450,000 $60,000 under the official valuation.

The second property, another four-bedroom Dannemora home, sold for $445,000, while a third house just down the street sold for $415,000.

The fourth property, a one-level rear unit in Avondale, sold for $252,000."

END QUOTE:

If you take the time to look at where we are in the economic cycle you'll quickly realise why I am so confident of avoiding a purple rinse.

Home loan interest rates are at historic lows; we're past the half-way mark in the recession; immigration figures are starting to increase; real estate listings are at their lowest in more than a year; house sales are on the increase; property prices are currently experiencing their first real sign of stability in more than 18 months.

At the end of the day, the signs are there… a gradual upturn in property prices is almost certainly confirmation that the long-awaited recovery in the New Zealand housing market has begun.

Hell, I'll bet my aging Welsh locks on it!

I think it's disgusting that major banks who were - not that long ago - stampeding businesses like Olly's and mine for "home loan referrals", are now 'crushing the life out of many of them' through unfair business practices.

Take for example, a client of Olly's who unwittingly used their home as security for a business loan. They borrowed 90% against the value of the family home. The bank treated the loan as a business loan and charged them business rates of 22% pa + fees and charges, bringing the total to 24% per year!

Those poor people had to sell their home to relieve the pressure!

When are New Zealanders going to say "enough is enough???"

Forgive my frustration and term of phrase here, but… we're a lame bunch of $#@!*& when it comes to standing up to monopolistic institutions like banks in this country. We bitch and moan over a quiet cup of tea to our other halves…and that's the end of it! Yet, there are many countries in other parts of the world where sheer, unabated anarchy would result from the application of usurious interest rates on business loans, overdrafts and the like!

I couldn't agree more with Olly when he said that "Dr Alan Bollard and the politicians need to come to grips with the fact that a low interest regime must benefit everyone - businesses as well as home owners".

If you're in business for yourself and feel the same way as I do - or perhaps have a different view - post your comments below - I'd love to hear from you.

QUOTE:

Real estate agents' charges 'too high'

4:00AM Sunday Apr 05, 2009
Heather McCracken

Homeowners are paying too much to real estate agents who have a stranglehold on the industry, a property expert has claimed.

Massey University senior property lecturer Dr Susan Flint-Hartle said the big firms' stranglehold was stopping fees from reducing.

The comments came as a Wellington agency, charging half the standard commission rates, defied the property slump by expanding into the Auckland market.

Flint-Hartle said real estate fees were far too high for the level of service rendered.

"There are some very good sales people and agents but there are a lot of not-so-good ones, as well. Like any established industry, there's a stranglehold on the way things are done."

As well as commission of 4 per cent of the selling price, owners can pay advertising costs of up to 1 per cent. For a $400,000 home, that could mean an extra $4000 on top of a $16,000 commission.

Flint-Hartle said the advertising, paid for by the home owner, promoted the agency as much as the property.

Wellington-based Borders agency, set up three years ago, charges property owners a 2 per cent selling fee, with agents working from home using an in-house computer system to keep overheads low.

Founder David Graves said his company has struck a chord with budget-conscious clients.

"Effectively, we increase the value of people's property. If we can take $10,000 off the commission, we increase the seller's net take by that amount."

Under the Borders' system, the 2 per cent fee - paid only if the property sells - includes a $1000 advertising package, and vendors can walk away from the "rip it up" listing contract at any time.

But other cut price agencies have failed to establish themselves in New Zealand. Last year The Joneses, which charged a flat-fee commission, folded after just 18 months. Last month the Albany branch of Australian-based Go Gecko became the latest to close its doors, though agents in Tauranga, Cambridge and Howick were still working.

Established real estate firms said the cut-price agencies couldn't provide clients with the same level of experience, service or results.

Peter Thompson, managing director at Barfoot and Thompson, said a lower fee might look appealing, but people needed to be aware of what they got for the money. "Like anything, you get what you pay for," he said.

"If you sell your house for say $20,000 less or it takes longer to sell, then that lower rate might actually have cost you.

"Now is not the time to be experimental when selling your most valuable asset."

Mike Bayley, managing director for Bayleys Real Estate, said providing quality resources, analysis and training had a cost, but resulted in a better service.

LJ Hooker general manager Keith Neiderer said agents were working harder than ever to sell properties. "It's not easy, it's long hours and it's all very well for other people to comment who aren't doing the hard slog.

"It's a tough market and at the moment it's not a matter of putting a sign up and it's sold. There's a lot of time and effort and research and open homes."

END QUOTE:

Well, after reading that - unless you're a real estate agent yourself - you're probably like me in as much as you're not exactly 'shedding a tear' for these big real estate companies! $16,000 commission + $4,000 additional advertising costs to sell a $400,000 property? I can't help but think that our own $6,500 + GST brokerage fee on the sale of any rent guaranteed investment properties we sell is far too cheap!

Ninety-six percent of all fears, worries and concerns in life are baseless'.  

Yet, from your earliest childhood - long before the concept of investing money even occurred to you - you found yourself immersed in unimaginable horrors of every conceivable making.

There were those terrifying dreams and nightmares that woke you and everyone else in your household at ungodly hours of the night.

There was that heart-stopping, jaw-dropping moment when your mum turned and left you in the care of your school teacher on your first day at primary school.

Then there were those dark and sinister nights when you lay in your bed, staring into the blackness like a demented cat in an effort to determine if those demonic-like shapes on the far side of the wall were, in fact… the 'faces of evil' … or just harmless curtain shadows.

Fears, worries and concerns have been a part of your life since the day you were born. It's a part of being human - and perfectly normal

Here are just some of the many fears we've all had at some point or other:

Scary stuff, huh?

What's even more scary is that NOT ONE of the above-listed "fears" has ever resulted in physical harm to anyone - because 'fear alone' is harmless!

Lets look at each of these, one by one…

Fear of Spiders: There are approximately 100,000 species of spider on the planet. Only 12 of these are venomous. This would suggest that you have a mere one chance in 9,000 of being bitten by a poisonous spider.

Fear of Sleeping Alone: It's safer, both physically and from a 'room-oxygen content' perspective, to sleep alone.

Fear of Masks: It would be most unusual for a piece of sculptured rubber, PVC, plastic or cardboard to lead to the demise of anyone.

Fear of School Exams: The act of studying for and then sitting an exam is not readily renowned for it's potential to cause lasting emotional and/or physical harm.

Fear of Taking Action: To be "scared of doing something" is, by the equal and opposite argument, to be "comfortable with doing nothing". Since when was "doing nothing" beneficial to your financial future? And since when was "doing something about it" a reason to panic?

Fear of Success: It's 'sad but true'… there really are some folk who are literally terrified of success! They often feel they don't deserve it or that success will alienate them from their firends. The reality is that "success never hurt anyone". Failure on the other hand? I think you know the answer to that  already.

Fear of "fear" itself: Fear is an emotion. It is not a physical or physiological threat (unless of course you've got a dicky heart!).  

Fear of Public Speaking: Despite the 'terror' involved with standing up and speaking to a large crowd; to the best of my knowledge, nothing nasty, harmful or sinister has ever resulted from such an action.

Fear of Heights: One of the most common fears amongst humans. Ironically, but hardly surprisingly, it's not the "height" that hurts - just the impact from the fall (if you are unlucky enough to have fallen from whatever 'height' you were at). 

Fear of being Stared At: It can be quite disconcerting when someone stares directly at you for any length of time. However, it neither harms you physically or emotionally.

Fear of People Talking About You: "Sticks and stones may break your bones but words will never hurt you". Enough said.

Fear of the Dark: Technically speaking, darkness is simply a 'lack of light'. This in itself should not be cause for spine-chilling fear. I'm sure that science will back me up when I claim that "a lack of photons is not considered lethal and is not therefore a reason for prolonged shivering, heart palpatations or screaming!"

Fear of Mice: I've seen what a mouse-trap can do to a mouse. I've also seen what a cat can do to a mouse. But I'm yet to see any evidence of carnage left over from a rampant attack by mice on humans or cats!

Fear of Separation from Parents: Even "I" recall being in a heightened state of dismay when my mother left me in the care of my very first teacher at my very first school. I also know of children who have complete emotional meltdowns each and every time their mother pops outside to hang the washing up! But at the end of the day, neither I nor those 'temporarily abandoned children' suffered lasting harm from the well-intentioned acts of our respective mothers.

Can you see a pattern here? Can you see how the fears stated above, although vividly real in the minds of those who experience them, are completely unjustified?

Now take a look at your OWN fears. If you're really honest with yourself, can you genuinely justify the reason/s for having them?

No, of course you can't. 

And this leads me to rationalise a "fear" that many of my would-be clients have… a "fear" that stops them dead in their tracks when it comes to purchasing an investment property through us. It's the actual "fear of investing!"

This "fear" can be broken down into many sub-fears including: the fear of taking action; the fear of losing money; the fear of being ripped off; the fear of having a large mortgage; the fear of not being able to find tenants; the fear of tenants trashing the property; the fear of having their cashflow tied up; the fear of losing their job/s and finding the investment unaffordable; the fear of a property crash; the fear of rising interest rates; the fear of what the economy might do; etc., etc., etc. 

If only these same would-be clients realised that by allowing "fear" to get in the way of wealth creation, they are setting themselves up for something far more terrifying than anything they'd imagined i.e. a bleak and poverty-stricken retirement.

In my next article I will examine "The Fear of Taking Action" and how it can cripple any chance you might otherwise have had to become wealthy and successful.

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