Market observers are saying: The Auckland housing gold rush is coming to an end. There’s a hard landing coming. The party is almost over. House prices are going downhill from here.
Are they right? — Actually, that’s not the question to ask.
WITH INCREASING VOLUME AND FREQUENCY, a ‘chorus of doubt’ is raising concerns about the state of the Auckland residential housing market. Once again, property investors (foreign and domestic) are being painted as the bad guys.
‘Their’ activities are pointed to with negativity – ‘they’ are making it worse, we’re told, putting home ownership beyond the reach of young Kiwis etc etc.
Economists from the left, right and centre – trading banks, investment banks, ‘think tanks’ and union groups – as well as senior Reserve Bank of NZ figures warn ominously that the Auckland market is ‘over valued’, ‘poised for a correction’, and prices just won’t keep going up. (I haven’t observed the line “irrational exuberance” deployed yet, but I may have missed it.
According to the RBNZ deputy governor Grant Spencer, investor activity in Auckland makes up 41 percent of the market at present. Does that sound high? Think about that: out of every five houses/apartments bought or sold, two are being bought/sold by an investor. (You can read Mr Spencer’s recent speech notes here: Investors adding to Auckland Housing Market risk – PDF 179K)
Once thing is for sure: the “experts” say the current situation just can’t continue, and given the reported level of house price inflation (rise in ‘average’ market price – whatever that means) over the last year — cited in the RBNZ speech as 24 percent, maybe they have a point. 24 percent in a year does seem strikingly high. Unless you consider previous booms.
“Who would buy at these levels?” the question is asked. Who indeed? Well, let’s discuss that.
Click for details and to order your copy.
Olly Newland’s book Climbing the Property Ladder — Tales of Profit and (mis)Adventure in the Real Estate Jungle is available now.
“This book covers some of Olly’s amazing adventures as the purchaser, landlord, or vendor in a property deal or as a consultant for others. The stories have the common threads of real estate and property investment and the common human failings of greed, fear, naivety, carelessness and envy. Some have happy endings, some do not. Many are about raw human emotion — property just happens to be involved along the way.”
Instead of a column, here’s a 10 minute audio programme outlining 8 simple rules: Strategies for Success in Commercial Real Estate Investment.
Feel free to share this link with people who might be interested in it. (But please contact us for permission before you distribute the file or embed it in a website.)
Property investing is a game you win by beating averages
There’s a lot of ‘secret sauce’ and bunkum sold in the ‘How-you-can-get-rich-investing-in-property’ game.
Property spruikers and salesmen of all kinds will try to sell you on their Ten Step Magic Programme to Profits.* Some will promise you the sky — basically, they will say anything to get your money (and ‘Strictly no refunds’).
Some of these ‘Millionaire by Monday’ hype merchants are very slick and motivational. Others seem more genteel, less rubbery, and more down to earth. But frequently (always?) they come up short on specifics, or they’re a one trick pony, pitching the same approach (e.g. do-ups in a low rental area) for everyone. Be wary. Avoid them. I mean it.
Years ago a friend of mine taught me that property investing is a game you win by consistently aiming to beat the averages.
For example, say you’re looking for a rental property, it works like this:
If you can buy a house in a better than average area (defined by a record of better than average capital growth, therefore better than average prospects), and you negotiate a better than average deal** or finding a ‘twist’, then you do what it takes to get a better than average rent, selecting a better than average tenant — and you make sure to manage the property better than average …. well, you get my point:
You’ll do better than average.
That just makes sense.
A fun board game teaching the principles of successful sharemarket investing. Learn how to succeed in the sharemarket.
INVESTOR Sharemarket board game is designed to teach you how the sharemarket works… and how you can succeed as an investor!
Full details here.