The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘Property Investing’ Category

15

Buying your first property? – a new book offers valuable insight & advice

Posted on: August 3rd, 2008 | Filed in Buying / Selling a home, Money Matters, Property Investing

When it comes to the moment that you decide that you should take those first tentative steps on the property ladder, what you want is sound advice ideally from someone that you can not only trust – but also someone who understands what people of Gen Y really want and expect!

The answer to your questions, together with a “blow by blow” account of how to get started with investing in property is all detailed in a great new book “The Young and Singles Guide to Property Investment”. The book written by Jodi Cottle is a NZ book written to help young and single NZ’ers better understand buying a house / apartment / rental; it doesn’t really matter what your first step is going to be – you will be better off reading the book.

Jodi is a very smart young person who’s bought and sold close to half a dozen properties and she is yet to celebrate her 25th birthday. In addition she runs a mortgage advisory service (Sable Mortgages) based in Auckland with a spearate business supporting ex-pat kiwis based in London buy property in NZ. We have partnered with Jodi and Sable Mortgages to provide the realestate.co.nz mortgage advice service on the site – who better to advise and support prospective buyers than someone who has this kind of track record under their belt!

The book is written without the bluster of some of the books claiming to make you a millionaire by lunchtime – it is simple – yet at the same time comprehensive, but above all it is honest.

“I certainly don’t regret any of the decisions I have made, albeit that some have cost me money. I don’t regret anything because each occasion has taught me priceless lessons.”

The book charts in detail the process for the buying of her first 6 properties – again a candid sense of empathy pervades her descriptions

“I was so pleased to get rid of this property as the tenancy issues just continued to go from bad to worse. Again, this was another good lesson for me as I got to go through a mediation process with the tenants”

The book is currently for sale in most Whitcoulls around the country or you can buy a copy online from Jodi’s website for $24.99 – a great investment or gift for someone starting out on the property ladder.

Special Offer

Now we have secured 5 copies of this book to give away for free!!

What you have to do to win one of these copies is to submit a comment to this post with your recommendation of a property currently featured on the realestate.co.nz website that would be a great first home – just post the listing number or link. The first 5 to posts with suitable properties will recieve a copy of the book.

5

Is buying a house really twice as expensive as renting? – observe the wisdom of the crowd

Posted on: July 23rd, 2008 | Filed in Buying / Selling a home, Property Investing, Renting

To buy or to rent – a perplexing question at the best of times, and as with most western societies we are conditioned largely to see home ownership as a logical path to passive investment. Whilst there is much to debate on the subject and mixed opinions, I was taken by the demonstration of balanced feedback presented on the NZ Herald website today in response to the article “Buying house – more than twice as dear as renting“.

The article quoted Property Investors Federation vice-president Andrew King with figures saying to buy the median house in NZ cost $745 per week as compared to the median rental price of $305 per week – on the face of it a bit of a no-brainer! However firstly isn’t this a clear case as “he would say that- wouldn’t he” as representing Property Investors.

However for me the most powerful element of this story is the clear demonstration of the collective The Wisdom of Crowds which is shown in the feedback comments on the Herald’s your “view section” – to provide a smattering of these comments:

Nigel Pinkerton from Lower Hutt:

With respect, F symonds is also not comparing apples with apples.
Say I took out a $400,000 mortgage and payed an average of 7.5% for the rest of my life, not reducing the loan’s value. Bear in mind that mortgage rates are currently at the top of their cycle.
I would be paying about $575 a week for the rest of my life, and by the time I retire $400,000 would not be a lot of money to pay off (prices and incomes keep increasing).
If I am renting, even at say $400 a week. This rent will keep increasing with the cost of everything else and in ten or twenty years time I may be paying $800-$1000 a week or more with nothing to show for it.
Generally, if you are covering more than 75% of your landlord’s interest payments, you are making them richer on paper (which they can cash in by selling up in the future). This applies even if you are not contributing to paying off the principle (book value) of the loan.

Shaun from Karori:

The quoted figures are misleading in the following ways.

1. Most home owners will be on fixed rates. In the worst case where a mortggage has recently been refixed, these rates will still be over 1% lower than the quoted floating interest rate of 10.4%. Many home owners will still be on fixed rates which are even lower.

2. The quoted mortgage repayments figures include repayment of capital – which means that over the term of the 25 years the 90% mortgage ($310,500) is completely repaid. This savings part of the mortgage needs to be taken out in order to compare like with like.

Taking these two factors into account and using an a current bank 3yr fixed term rate of 8.8%, gives an actual annual interest cost of $27324. This is around $7500 less per year ($150/week) than the quoted figures.

Still cheaper to rent, but lets be accurate in the figures so as to make the comparison valid.

ILNZ of Howick:

There is one major point missing here: rent increase every year, 7-12%? so it will possibly takes only 5- 6 years for your current rent to match your mortgage payment, and the rent still goes up in the years to come, but not your mortgage payment

If you do not own a house when you can afford it, then you will forever miss out.

And when you are old, say after 25 years, paying off your mortgage, you have a house that worth a fortune by then, but not those renters.

KatieR of Point England:

Got reminded this week of the benefits of ownership. Renting in the current climate is great financially but terribly disruptive to your life. Theoretically you pay your rent and don’t have to pay another bill other than power and phone. In real life, I am hassled to pay water bills without notice and worry about lawns. I rent so I don’t have to worry about this crap.

In addition, I now only deal with property agents and will not rent from owners- and recently learned that this needs to be written in the tenancy agreement as some owners know this and have it managed by agents for the first two months then start doing it themselves. Agents are contactable 24 hours and get things done quickly. Owners expect me to put up with things not working for their convenience. I don’t pay rent to put up with a broken toilet and pay rent for my convenience.

I am thinking about buying next year as I am sick of the crap- six week evictions because their son is getting back from overseas, landlords visiting at all other than a six month property inspection (I am paying for privacy) and the terrible state of most rental properties – plumbing, electrics alarm and paint matter to tenants.

The key point here is that with the feedback mechanisms of blogs and the all pervading power of Google – so called experts need to be aware that people will seldom take their version of the truth at face value – people are encouraged and rewarded to dig a little deeper and hear the “wisdom of the crowd” before making up their mind.

2

Insulation subsidy to assist rental landlords .. and tenants!

Posted on: June 13th, 2008 | Filed in Green, Property Investing, Renting

With only 2 weeks of the winter behind us we know that there are going to be many cold days and nights ahead – depending upon which part of the country you live. Statistics keep telling us that kiwi houses are amongst the draftiest and least well insulated of any houses in the world and this brings with it significant health issues.

Add to this not only the looming threat of a power crisis (not a word apparently the government wants us to use!) and the spiralling costs of food and fuel and you can see why many people are going to be cold this winter.

Insulating rental property - government subsidies availableThis need not be the case as the government has schemes to encourage the insulation of pre-1978 houses that are being rented. Now there has to be a fair stock of these around the country and we can all image how cold and drafty they may well be.

The scheme run by The Energy Efficiency and Conservation Authority is offering landlords a subsidy of up to 55% on a full house retrofit of insulation and other energy efficiency measures for any of their rental properties occupied by low-income tenants. There are certain conditions and the work must be carried out by one of two organisations (Eco Insulation or EECN) dependent upon which part of the country you are in.

Insulating these houses has to be a must – good for the tenant, good for the environment and good for the property value.

Update June 2009

Government announce grants of up to $1,800 to insulate NZ Homes – Warm up New Zealand .. Heat smart

16

Property purchasing options: co-buying and fractional ownership

Posted on: March 9th, 2008 | Filed in Buying / Selling a home, Money Matters, Property Investing, Renting

The emerging wisdom of the crowd is clearly saying we are about to witness a significant correction to the housing market. (As a point of note the phrase wisdom of the crowd comes from the title of James Surowiecki’s excellent book which I coincidentally have recently read and would thoroughly recommend).

If it is any consolation – we are not alone when it comes to the property market hitting the wall in NZ. Most developed countries are to a greater or lesser extent are either about to witness this correction, or are deeply in it!. The only question is when and by how much, this useful chart from The Economist presented on Lance Wiggs blog shows the scale of some of the European property market corrections.

Whilst property is for some people a speculative investment from which to earn incremental income and establish a passive asset for retirement, the majority of home owners buy property for the pleasure of ownership and the very primal need to shelter themselves and their family.

As an option renting a property can and does meet this need. At this time there are clear arguments that renting is cheaper than buying. When you stack up mortgage repayments as well as repairs and maintenance and compare that to rental costs the incremental costs can be over $17,000 per year. However the downsides such as surety of tenure, inability to make the place your own and the thought of paying someone else’s mortgage still drive well over 60% of NZ’ers to own their own place.

Conventional wisdom always sees property purchase tied to the “nesting” mentality driving people to buy when setting up home with a partner. So with relatively low affordability the question for many is how to get on to the property ladder. Looking to trends overseas it shows that there is more people choosing for deep pragmatic reasons to buy property in partnership with friends and business partners as a means to take that first step on the ladder.

Naturally wherever there is a good idea involving the aggregation of interested parties around a shared need the web intercedes with smart functionality – this has proven to be the case with co-buying property. This concept has spawned a thriving business for a couple of UK based entrepreneurs who have taken their learning in facilitating the meeting of prospective co-buyers from their UK base to offer the service here in NZ as well as Australia and Canada. The NZ version of Co-buywithme has been operation for about a year and has over 500 members from all areas of the country and all walks of life; some looking to co-buy a first home, others looking for a shared ownership in a holiday bach; whilst others see the opportunity to explore investment property. As ever the web creates the facility for anonymous interaction – it is then up to individuals to make the buying decision, the parallels with online dating could not be more similar.

Utilising the same model of shared ownership, when people hear of fractional ownership they immediately think “time-share”. That concept may have slipped in the credibility rankings from the 1990s, but the idea of a more permanent holiday escape without the exposure to high property prices has seen this emerging segment of fractional ownership emerge over the past 5 years.

Fractional ownership is perfectly targeted to the “never-grow-old” mentality of baby boomers who fancy having a holiday home for more than a couple of weeks a year. Fractional ownership allows between 2 and 5 owner to collaborate in the purchase of a property with joint ownership rights to the title which can be sold independently and in so doing divide up the access to the property into meaningful time periods. There are a growing number of such properties being marketed in NZ’s vacation centers offering the chance for overseas buyers to grab a slice of NZ summer partnered with a kiwi family enjoying the winter activities, thereby allowing each to enjoy the benefits of a quality property for half the equity and half the mortgage and also half the appreciation in value (in time – potentially!).

0

The joys of Invercargill

Posted on: February 22nd, 2008 | Filed in Buying / Selling a home, Property Investing, Regional News

Politics brings out the worst in people, but you have to have respect for Tim Shadbolt – he is the very epitome of a walking advertising billboard for that Southland city.

Yesterdays’s challenging interjection in the government’s housing affordability inquiry to which I have referred to on more than one occasion on this blog is another classic example of this one man promotion machine capturing the headlines – this time is is “Auckland to blame for country’s housing woes”. He claims that in Invercargill many families could easily afford to buy a three bedroom house for under $150,000. This statement got me thinking as to what you could buy in Invercargill for this money – quite a bit really!

Currently there are 35 houses in Invercargill city with 3 or more bedrooms, by comparison Auckland city has zero and Tim’s former home Waitakere offers no options.

(By the way if you do a search out of interest for Auckland or Waitakere, please be aware that you will find homes in this price range, but as you will see they look to be a bit too good to be true. That is because some agents tend to send us information on pricing for which the range is a little large, we unfortunately have to take their content at their word and display it. Our role cannot reach to auditing content – we get somewhere close to 7,000 new or amended listings daily. Although having seen some of these “error” I will highlight this to the respective agents today!)

This selection in Invercargill though is very interesting, how about this 4 bedroom home in Appleby at just $142,000 this is great value – beautiful decorated, but not sure about the duvet cover!

If you don’t mind the tin fence then this one in Appleby at just $140,000 would seem to be a steal given it has a fixed tenancy paying $190 per week – that is a 7% yield! Would have looked a bit better if the tenant had made the beds before the photos were taken!

But my winner would be this fabulous art deco 4 bedroom home in Bluff – shame just the one photo but it is a classic and a cheque for $140,000 will secure.

Just before we all rush off to Invercargill with our sacks of gold to swell the local council’s coffers with due rates and licensing trust contributions, I would like to correct Mayor Shadbolts assertion that the only other countries in the world with a similar concentration of population in a single city were Uruguay, Armenia, the Bahamas, Iceland and the small African state of Gabon. I would encourage him to visit a very successful, very prosperous, very sophisticated collection of countries collectively called the Nordic region. Norway, Denmark, and Finland all have similar populations to NZ and have a dominant supersized city accounting for over 30% of the populations – the cities of Oslo, Copenhagen and Helsinki respectively!.

35

Is NZ facing an impending property crash?

Posted on: February 17th, 2008 | Filed in Buying / Selling a home, Media commmentary, Money Matters, Property Investing

As has become the norm over the past 12 months the newspapers and TV are cluttered with articles prophesying impending doom as NZ property teeters on the brink of a property collapse – the questions is – are the reports and prophecies going to become self-fulfilling or is rational sanity going to prevail?

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The facts are very clear, the property market has slowed significantly and prices are not rising as fast as we have been accustomed to over the past 2 or 4 years. However it is a fact that over 5,000 properties were sold in January so clearly there are people looking to make that step and buy property, equally there are over 57,000 properties currently advertised on this site (There are currently 53,300 homes and 9,600 lifestyle property listings on the site, within this are multiple listings of a single property as properties being sold by more than one agent are advertised separately) – clearly this indicates that there are sellers looking to move for whatever reason.

It is a well known fact of any market, be it property or shares or any commodity that in-spite of the trend there will always be buyers and sellers entering the market for differing reasons, it just may well be that the current property market is more interesting to seasoned professional investors with ready finance who are keen to seek bargains rather than a year ago when it was more likely to be less well informed opportunist seeking to “jump” on the property band-wagon.

A couple of articles have sighted the rise in the listings of mortgagee sales on websites, this is true for realestate.co.nz. Currently we have 100 properties featured as “Mortgagee Sale” – a year ago we had 63. Does that mean that we are seeing a 60% increase in the prevalence of mortgagee sales? – there is no statistical proof. Mortgagee sales happen all the time for many reasons and whilst there is no doubt many property owners (not necessarily home owners as the properties concerned may be speculative investment properties) are suffering under increasing debt it is not close to the scenario in the US. The situation in the USA was driven by the most lapse of financial systems and fueled a mega-surge in new property development which is mostly where the pain is being felt right now.

Rather than look to the US for the prediction of where the NZ property market might end up, I think it is better to examine the UK market as the picture there is surprisingly similar to NZ – possibly a few months ahead of us.

UK house prices fell for the third month in January by 0.1% to 180,473 ($451,200) (as stated in a recent Bloombergs report), however they still show a 4.2% increase over this time last year (NZ year on year prices are up 3.97%). Already interest cuts are being predicted of between 0.25% and 0.5% over the next 6 months as the credit crunch has impacted on the economy as a whole and property in particular.

Despite this situation, the UK market is predicted to see prices to drop by around 5% in 2008 – a realistic picture given credit tightening and the current trends. This I would judge to be a rational prediction rather than the NZ snake oil merchants parading as property market experts who talk of 25% falls in prices. The UK property market is underpinned by the same foundations as the NZ market – their economic outlook remains strong, demand for property far outstrips supply and they have low unemployment. Just last week the Royal Institute of Chartered Surveyors stated :

“In the near term, the housing market will continue to be shielded from significant price falls while employment conditions are strong”…”if mortgage lenders filter the recent interest rate cuts into the market, demand should begin to increase”.

For NZ we face continuing high interest rates, it is unlikely that we will see cuts in these rates until the 2nd half of the year when there will be a fierce competitive battle again as large component of fixed term mortgages come up for renewal, this however will be in the middle of the election campaign which traditionally is a slow time for property sales.

So as ever interpreting all this information is difficult as just with Lotto if we knew the future we would win every week! – however it is realistic at this stage to say that the indications are for a very slow property market in 2008 – sales well down on 2007; with the likely hood of property prices of property ending the year at or just below the levels today.

0

The growing proliferation of Property Developer TV shows

Posted on: December 21st, 2007 | Filed in Media commmentary, Property Investing

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As the fad of Big Brother and Survivor reality TV shows wains, we seem to be being bombarded with a flood of property developer style TV shows replete with budding millionaires all hell bent on proving that they can do what others can’t.

Not satisfied with the terrestrial operators portfolio of Property Climbers, DIY Rescue and A year to pay off the mortgage; coupled with Sky’s portfolio of Property Ladder, Renovation Rescue and Takeover my Makeover; we now have the new kid on the block of “How to be a property developer“.

This time we are no longer just flys-on-the-wall of other people’s nightmare renovation at their own cost (I always suspected that the TV stations inputted some money?), the latest offering decides to up the stakes to a whopping 250,000 pounds (c.$700k) for each of 2 couples to spend to see who can accumulate the most in a year from property speculating and/or renovation.

Now clearly choosing 2 couples who had a modicum of practical ability and a couple of brain cells would be just too dull for TV, so the selection is a perfectly targeted Gen X couple with the baby-on-the way matched to a couple of “air-head” middle aged friends who have no appreciation of what paint is let alone how to do any DIY.

Now I don’t actually have a problem with the programme or the participants as clearly there is a market for such programming or TVNZ would not have invested our hard earned tax dollars in it – and clearly I watched it! – no what really amazes me is the fact that despite this type of programme there are still people in this day and age who treat property buying with less respect in terms of background research than they do buying a TV.

This show let alone any of the TV shows never seem to show people using the best source of information available in our modern age – the ubiquitous personal computer linked up to the internet. How would anyone with any desire to succeed in real estate not approach the market from the best source of information – real estate websites? – well these TV shows clearly do as they portray their guinea pigs aimlessly walking into a real estate office as the best means of assessing what is available to buy on today’s market.

Why is it that the TV channels never want to show the reality of so many of our daily lives – our use of the internet to search out information before buying anything?

Could it be that TV companies believe that their very future – like that of the newspapers is in serious jeopardy from the encroaching power of The Microsoft / Apple / Google triumvirate?

1

Property investors – podcasting brings wisdom from US to NZ

Posted on: December 16th, 2007 | Filed in Online marketing, Property Investing

Real Estate GuysI just wanted to share this link with you if you are an existing or prospective property investor looking for advice and wisdom from those who have been in the business for a good while.

The Real Estate Guys is a syndicated weekly radio programme that is available through iTunes. It delivers a fast paced discussion forum of topical issues and advice surrounding investing in real estate in the US market. Whilst this might not be at first glance a great use of your one hour; all I would say is it is worth a listen as before long you may be like me addicted. Best of all it is free, and there is a sense of being a part of a conversation with people who are as passionate about property investing as you are.

The content is as relevant to NZ despite the references being to the US – although of late the focus of many of their programmes is international real estate investing – including a programme recently highlighting investing in Melbourne.

Technology advances bring this world ever closer. This podcast is for me a great example allowing me to choose what I listen to and when I listen, and as for the ads – well they are fun, but you can always fast forward!

As for property investing in NZ well at this time there are over 600 listings on the site under the search of property investor – everything from a $75,000 ex state house in Dannevirke to a development opportunity in Dannemora, Auckland for $3.5m

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