Latest column:
Keeping a cool head in a volatile market
The property market has been in the headlines with increasing hysteria since before Christmas. A lot of the bad press has surrounded the collapse of numerous finance companies, the rise in mortgage interest rates and, increasingly, the Blue Chip fiasco (with which I have become regrettably all too familiar -- see below).
The credit crunch continues to bite overseas and here, with some big name banks and, of course, finance companies coming under more heat than is comfortable.
One commentator has stuck a flag in the ground and called a 'property crash' in 2008 or thereabouts as 'inevitable'. Naturally, the news media were all over that with relish. Is he right? What's the real position? And how might any such event affect what you want to do in property now?
Just ask the poor BlueChip investors. They have been among the first to feel the downturn. Many of them could write a book on their nightmare-ish experiences. Regrettably, there will be many more who will yet go through the pain that these folk are presently experiencing.
I first got involved in the saga when I was approached to help some investors who had signed over a large chunk of their equity to a Blue Chip scheme where three years later the promised apartment still hadn't been built.
With a bit of arm-twisting, number-crunching and lateral thinking I managed to get Blue Chip to cough up and refund their deposits -- several hundred thousand dollars. For another couple I arranged to have a Blue Chip contract cancelled putting them out of harms way.
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The Brakes Go On
THE BRAKES GO ON -- BIG DIVE IN HOUSE SALES
(NZ Herald 5/10/07)
October 2007
As usual the news has come months after the rest us in the business were very well aware of the facts already. Facing the facts early -- not late -- and taking defensive action are just some of the ways you can dodge the worst in a falling market.
I know from my own property trading that the market had already turned in the middle of the year, months before the current headlines -- which always come too late to be of any use.
At that time I noted the subdued response I got from a renovation project I was involved in, which told me that the time of bug-eyed panting investors buying everything in sight had truly come and gone.
As I've said before, 95% of the market does not have to buy or sell. They may want to, they may love to to, but if push comes to shove they don't have to. This leaves only the people who must sell or must buy -- and the must-sellers by far exceed the must-buyers.
At this time the rest of the market just decides that the froth has gone, the party is over (for now) and trying to juggle from one property to another and catch a once-in-a-lifetime profit is just 'too hard' ... so they stay put.
It is the urgent sales (one might even say 'forced' sales) by nervous and determined vendors, which will drive the market from now on.
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Are we on the edge of Credit Armageddon?
August-September 2007
The past few weeks have been nerve-wracking for investors and property owners. The ongoing problems with the subprime bad loans in the USA -- not to mention the huge volatility in the world stock markets -- do not bode well.
Couple this with the extraordinary rise and fall (and rise, etc) of the NZ dollar, and general financial stress, and it's no wonder there is some sense of doom and gloom around.
But is it really all bad? Is the doom and gloom really just confusion?
As I write this column, the world stock markets are recovering (subject to change without notice). So is the NZ dollar, and the subprime market problem seems to have calmed down a bit -- for now anyway.
Of course we keep hearing about the tremendous Fonterra pay-out for dairy farmers. Some of this will hopefully will trickle down to the cities. But in reality I would expect farmers to reduce debt rather than splash out.
Unfortunately, thrown into the mix are imploding finance companies -- casting a shadow over a billion dollars of Mum and Dad's money. It seems that it may get worse.
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Up She Rises
May 2007
Up She Rises
What shall we do with the drunken sailor?
What she we do with the drunken sailor?
What shall we do with he drunken sailor early in the morning?
Hooray-up she rises, Hooray-up she rises
Hooray-up she rises early in the morning. etc etc
(18th century sea shanty)
This catchy song stuck in my mind when Mr Bollard Governor of the Reserve Bank once
again raised interest rates another quarter percent. This gives me the impression that
all who work in the RB must be smoking or imbibing some strong stuff if they believe
that interest rate hikes will achieve much if anything to dampen the housing market.
What a waste of time and effort. Does he really think that the property market gives a rat's bum whether or not he raises interest rates?
Property owners and investors alike have been having a non-stop wild party for years
now and the band keeps playing on.
What can a small rate increase possibly do to stop the music?
Nothing!
Work it out for yourself...
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Look behind the hullabloo
March 2007
What a hullabaloo we had about the Minister of Finance Dr Michael Cullen's recent musings out loud about the taboo subject of Government intervention in the over-heated residential property market.
His suggestion on Morning Report there was some merit in looking into a 'mortgage levy' system to cool the market rattled a few teacups, to put it mildly.
As we know this was rapidly poo-pooed by Helen Clark and the idea soon disappeared in the face of widespread opprobrium; then gales of laughter from all sides -- apparently leaving the red-faced Michael Cullen right up the proverbial.
But it should come as no surprise to investors that finally the subject of government intervention has been raised at such a high level with the market being as strong as it is. The housing market's strength and longevity has, by the way, confounded all the pundits ...
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Half a century of Avoiding Dodgy Deals
December 2006
The end of this year marks my my 47th year in the property business ... having bought my first investment way back in 1959.
Admittedly it was only a 300 pound section in Titirangi but not bad at aged nineteen. My first house purchase was a home bought in 1962 in Aberfoyle Street Epsom for my new wife and me. It cost 4,000 pounds (roughly $8,000 in decimal currency which didn't come in for another five years). My first investment property was a house in Astley Avenue, New Lynn bought in 1963 at a cost of 3000 pounds.
I got into property because I found I was sickened by the thought of a 9-to-5 job. Fearing nothing (as is common with red blooded young men ... and young women too, incidentally) I wanted to be independent.
Yes, I determined pretty early that property was the future for me. If you are going to make money an important objective in your life then you might as well make it BIG and not mess about with nickels and dimes.
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