All Topics / Overseas Deals / NZ Property “DOOM AND GLOOM?

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  • Profile photo of Kiwi-FullaKiwi-Fulla
    Join Date: 2002
    Post Count: 371

    Hey all…. there are lots of interesting reports in NZ at the moment of impeding recession and drastic market shifts in the NZ property market and share markets… including a rapidly dropping NZ exchange rate and uncertainty in the mortgage interest rate industry.
    Check it out and give us your opinions if you like!
    Cheers Kiwi

    Profile photo of Don NicolussiDon Nicolussi
    Join Date: 2005
    Post Count: 1,086

    hi Kiwi – in think keiran trass has explained it quite well in a recent somersoft thread – here is a bit of it

    I’ve heard/read that NZ is now in the recession and that NZ currency is fast falling in value vis-a-vis other international currencies such that the Australian $ currency was also being dragged down recently. Can you, please confirm that and also further share your assessment on how bad the NZ economic recession is going to be this time and its related implications on the NZ housing price with us, by posting a new thread on this subject in the forum, please.

    I would love to know why you think we have a recession? We don’t and the NZ dollar has been known to be badly overvalued for about 2 years now so the drop is no surp[rise and is great for our export industries.

    We still have extremely low unemployment, good wage growth, positive net migration and whilst business and consumer confidence is down the reality is very different to the perception.

    In saying that we may see a small contraction in our economy as a result of lower property price growth rates slowing down the wealth effect (ie less spending) but no real recession.
    I have been saying for 2 years now that NZ will not have a property price crash (some isolated potential exceptions being Aucklands CBD apartment market which is now crashing!, small towns and some coastal areas which may still crash)
    Kieran Trass
    Author “Grow Rich with the Property Cycle”


    I Buy Property

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    Profile photo of Nigel KibelNigel Kibel
    Join Date: 2005
    Post Count: 1,425

    If the market is retracting a little in New Zealand, thats great news it will mean more opportunity for investors. It is a little harder to buy well but even in cities like Christchurch you can still buy at 8-9% and of does Don can talk about Invercargill.

    A slowing in the economy should create more buying opportunities. People will always need a place to live.

    Nigel Kibel

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    Profile photo of sydneysmartsydneysmart
    Join Date: 2005
    Post Count: 10

    Nu Zulland will always be the poor sister to Australia ,until it reverts to being part of NSW as it was in the past, Auckland is being overdeveloped in the cbd ,and dont rely on asian students as they abandon their units as soon as uni is finished and your unit is empty for three months,Auckland cbd units are butter boxes and most aussie financiers wont touch them as they are quite often under 50 square mtrs, i have seen a 4 bedder at 40 sqr mts,there are some good properties on the nth shore, especially to reno and resell,anyway why invest there when there is always somewhere in australia on the boil, do your research if still hot on NZ, talk to agents reselling units for example not agents representing developers to get the real story, and at least go there and inspect the market personally,no you cant trust anyone .DO it yourself, in finishing have you heard all the kiwis are drinking from saucers since they LOST all the CUPS regards Sydneysmart [offtopic]


    Profile photo of MiniMogulMiniMogul
    Join Date: 2002
    Post Count: 1,414

    Interesting how you can read the article and get doom and gloom and I read “8 per cent ahead of a year ago”…..
    ….”Listings for the rest of the North Island and the South Island were also on the rise, with the number of properties for sale in Christchurch in February up 63 per cent. “

    Recent capital gains figures say that Taranaki has gone up 29 percent so far this YEAR. That is (almost) more in 3 months than Manly did in a whole year which was the number one capital gains suburb in Australia at the height of the boom! I think I remember reading that NZ has gone up 14 percent this year so far. Don’t quote me but I am sure I read that!

    With the disclaimer that I am not an economics whiz and I’ve sort of picked this up as a property investor, by gaining a better understanding of how everything links with everything else, here’s my thoughts/explanation. If you get a weaker dollar, half of NZ cries HURRAH! i.e. farmers, exports, and so on. Foreign investment. Then you have a period where everyone does well (in NZ) and exports prosper and everyone has lots of money. Fast forward to Taumarunui mid 2003, where you couldn’t get a tradie because (in my project manager’s words who is a local and does all the plans, drafting, resource consents etc) ” Farming has been doing really well and people have some money, so there’s 20 years pent-up demand for new kitchens!!!” NZ dollar goes up…people spend…invest…do up….prices go up…unemployment is at a 19 year low…NZ is economically growing at , what, 2.5 percent a year, and some regions at twice this rate. NZ is hot baby! Interest rates were low. Suddenly the dollar starts zooming up and capital gains etc and WHOA!!! suddenly the government starts worrying that if it goes up tooooo much tooooo fast, then exports will suffer, etc etc so they (in their infinite wisdom) do what they can to ‘control inflation’.
    First thing is that they stop the number of people who they let into the country. i.e. slow immigration. This does not mean that suddenly nobody wants to come to NZ any more, on the contrary, there are queues around the block to get it, I’ve known a few Germans etc who have tried, and it’s not easy! High immigration causes growth/demand/inflation as more people put more demands on housing, services etc, so the Government cuts this back. Now if you don’t have an understanding of this basic economics stuff you read an article that says ‘Immigration at 6 year low’ and you might think ‘doom and gloom! Nz is losing favour!’ but not at all, it’s just a way of trying to stop the growth going toooo fast because while half the people want the NZ dollar to go up up up up up and never stop, ditto property investors who already own, half the people don’t want it to (i.e. exporters, people who haven’t bought yet and are ttrying to buy homes on an average income, etc.)

    So…. then the government does a bit more because by then a tsunami of ‘NZ is hot, let’s buy up large!’ feeling is happening and so they hike interest rates, a little, a little more, a little more, trying to stop the crazyness, and the banks have to do it too, until you get 8 percent and TALK of doom and gloom.

    now the other thing to remember is though investors feel that they are oh so important, sophicticated and they probably believe that they ‘are’ the market because they buy and sell more than the average person, the truth remains that the housing market is dominated 80 PERCENT or more, by homeowners!!!!!!!!!!!!
    Who don’t really think like investors, they are emotional buyers, who buy the best house they can afford, when they can afford it. Sure, rental accom is a growing trend in NZ (that should be an upside enough to buy there!!!)….but anyway I digress, so you get to this point where property prices are high and rents although they have risen heaps, haven’t risen as fast as prices, i.e. yields are down.

    OK, so let’s say that prices might ‘slow’ in growth for a while. (everyone knows that property trends upwards and always has done, despite war/famine/recession/stock market crashes) since property prices were recorded!!!! Ask the Queen of England if you don’t believe me!!!! (hahah)

    then what’s going to happen? Well rents will rise, this is a predictable phase of the cycle. Then our cashflow yields will be stupendous! With all that surplus, what are you gonna do, but what a good time to subdivide, renovate, build minor dwellings, add value in general, to refinance and keep buying (because flat markets with rising yields are The Perfecto Time To Buy!!!! – you are counter-cyclical, remember! -)

    And remember Dolf De Roos who bought his first cashflow positive property when interest rates were a WHopping 27 percent!!!!! And the rental return was way more than that!!!! Because he started in a part of the cycle when returns were through the roof. Basically NZ is not going to go away, it’s a country of people most of whom are going about their business, going to work, going home, renting houses, doing up their bathrooms, buying a home, moving to a better home, selling their home and buying a unit, or moving out of
    a unit and buying a home. Anyway… so on we go buying more great deals. My favourites are ‘under value when you buy’, add value, high yields, and just pretty cute tidy nothing to do buy and holds, I have all of the above in my portfolio and I’m still buying everything I can.


    Profile photo of Kiwi-FullaKiwi-Fulla
    Join Date: 2002
    Post Count: 371

    Mini…. Great Post…. I am still smiling and I read it about 15 minutes ago! I like your style and I like your perceceptive view on this… you are most certainly not one of the investing sheep and you gain my deepest respect…. great passion!
    Keep it up …
    Any more comments?

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