Archive for December, 2008

Good on yer mate!

I have never met Andrew Krukziener, embattled developer of the Metropolis, as I am from Wellington but I do admire his pluck. Metropolis AucklandThe auckland developer is interviewed in a NZ Herald article titled ‘Developer Rises from the ruins’*

The closing extract of the article follows:

And what does Krukziener think the opportunity is in the property market today?

“It’s simple really. You buy what no one else wants. At the moment, that’s inner-city apartments. They are very cheap, prices are low, there’s an over-supply of them. You buy today on what they will be tomorrow.”

And he hopes to build more beautiful buildings, adding that he doesn’t do ugly buildings no matter what the profit.

“I feel a moral responsibility as a developer. You are creating the city in which you live. If you’re going to do it, do it properly.”

Love them or hate them, our cities would be poorer without our developers, the colour they bring, the wealth they create (not just for themselves but usually their purchasers) and the buildings.

* ref: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10549083&pnum=3

December 21 2008 | Uncategorized | No Comments »

7 Advantages to a downturn in the property market

What goes up must come down right?

According to articles I have read recessions don’t last long, certainly not relative to the booms that precede them. I have noted that typical human behaviour seems hardwired to regard change as a bad thing. The media seems to think we are addicted to bad news, they do rather love serving it up and more fool us we buy their papers and watch their bulletins at 6pm.

It’s true agents and investors alike don’t like downturns but for those of us who are not up to our necks in debt and the bank still returns our calls there is always an upside to the current property cycle:

1. This is an opportunity to learn about real estate cycles, remind yourself of the signs and develop a cycle for your existing portfolio. Don’t be caught by the next downswing, plan your exit strategy now.


2. A good time to look at maturing your property, does it need future-proofing? This is a good time to get building work done, upgrading, refurbishing and the tradesmen need the work!
3. A good time to look at upgrading your portfolio! If your LVR is ok it’s a very good time to trade up! If you are going to buy a new building at a high yield and you probably can because so there are fewer buyers out there brave enough to step into the market then remember you are going to have to sell in the same market too!
4. This is the best time to buy when vendors are motivated to sell!  You have choice out there!
5. Interest rate pressure is downwards so the outlook for finance cost is getting better!
6. The yields are at realistic levels, namely your cost of capital or interest plus a risk premium. So this risk premium should deliver you a cash flow positive property!
7. The market slows down, many of us have less work on, time to address your work/life balance! So maybe you can’t afford to upgrade your gas guzzling luxo-barge this year, enjoy our little luxuries, have they become the norm?

So things are no longer the way they were…. we now have time to consider the sustainability of our expectations, things couldn’t go on the way they were in 2006-7… the property market or our motoring habits….

Merry Christmas!

December 16 2008 | Uncategorized | 2 Comments »

“Be fearful when others are greedy and greedy only when others are fearful” Warren Buffet

“Most people get interested in stocks when everyone else is. The time to get interested is when no one else is.” Warren Buffet

Local solicitor Gordon Wong used this quote from investment guru Warren Buffet recently and I thought how apt it was. As an observer of the Wellington commercial property scene for a little while now I can say we have seen the excesses of both market greed and fear within the last 12 months. Markets go up and...The severity of the swing in confidence has taken many of us by surprise. Myself included most of us seem to be hard wired to regard change with fear rather than opportunity. Many look at their 2007 valuations and wonder why they can be so different in 2008. Am I  being fair to owners if I let them think they can  still achieve 2007 values today? Simply put the ground has shifted, the world has a different outlook now and you will get what amounts to 2008 prices and we can’t be sure when if ever old values might return. Our attachment to the past cause us pain. So where in the present is the opposite of this? I believe it is in the acceptance of the present and in the looking at the future as opportunity.

Certainly most people I have spoken to lately prefer to stay on the sidelines of the market and wait for things to improve. There are only a few brave souls out there who are buying and they all seem happy with the market the way it is, they know they have little competition.

A market is simply defined as a structure which provides for people to transact on goods and services. Without people the market doesn’t really exist! Market sentiment is simply a perception of people’s realities. You are the market, I am, and in this we are all connected to each other!

December 15 2008 | Uncategorized | No Comments »

Planning our Suburbs – for everyone

The latest Wellington City Council initiative invites public consultation on proposed changes to the District Plan which will shape the look of our city for the next 10 years.

The major issue the city planners must address over the next 10-20 year period is where will the an estimated increase in population actually live. Most of us would prefer not to trek north to the only substantial available green fields housing sites being north of Upper Hutt and so that means that most of the 10,000 new citizens (over the next 20 years) will wish to be housed in the CBD or suburbs from Miramar to Johnsonville. I am rather going from memory with that number (and am entirely open to correction by someone) and I am surprised that the councils own brief does not mention this because I think it places the need for the need for changes to the District Plan in greater context.

According to council planners I have spoken to this rather modest population expansion (compared to Auckland’s population growth over recent years) will require an additional 8,000 housing units because it is expected that the average household size will fall to about 1.2 people per unit. Given Wellington’s limiting geography the answer to this question is clearly up. Living in greater density is going to be necessary in both the city itself and surrounding suburbs.

I am sympathetic to those who place great import on heritage and conservation values and can openly agree that numerous recent attempts at apartment blocks and infill and multi-unit housing have resulted in some ugly eyesores. The reality is that conserving this city’s older wooden villas which I find attractive and charming (and also dreadfully inefficient in energy terms) has made living in the inner city elitist as witnessed by the phenomenal growth of older houses in the inner suburbs like Thorndon and Newtown. Entry level in Newtown is now $500,000 which is certainly beyond the capacities of most first home buyers and so where will working people and newer immigrants ever hope to purchase their slice of the kiwi pavlova paradise? I don’t mind gentrification in itself, Ponsonby is charming and Newtown has been going the same way but does it suit everyone and serve the city long term?

I know I am being contentious and mischievous when I say the answer is clearly better high-density solutions. The vitality and vibrancy of the city comes from a mix of rich and poor, young and old. And if that means we have to share public gardens like they do in some of the big cities of the world like London and live in some relatively ugly tower blocks then that’s how the cities developers and planners will create 8,000 housing units. I think we have to be less precious about our older housing stock particularly around Thorndon. Avoiding change when change is required is not an option!

We have had a taste of life with high petrol process this winter. and surely you agree that the not too distant future will bring $3-4 per litre. Not all the population will be able to afford to travel to the outer suburbs and so our planners must embrace a future which provides for a wide diversity of incomes and preferences. So heritage and charming versus vitality and affordability?

So remember to have your say and download the Draft Plan Changes at:
http://www.wellington.govt.nz/haveyoursay/publicinput/pdfs/2008-12-residentsuburb/residentsuburb-brochure.pdf

December 13 2008 | Uncategorized | No Comments »