Posts Tagged ‘property market drivers’
On a stunning summer’s day yesterday at the well appointed Exhibition Hall in Waipuna Conference Centre, overlooking the Panmure lagoon, I was the keynote presenter at Property Masterclass run by NZ Wealth Mentor.
David Leon - Property Masterclass Master of Ceremonies on 27 November 2010
I covered a lot of topics as the keynote presenter, and those attending particularly enjoyed my take on the market, drawing attention to where we are at in this current stage of the property cycle and my predictions for the future in terms of the various Auckland sub-markets. I gave a thorough analysis of all of the key market drivers, showing and interpreting graphs from the economics and research of the major trading banks, Reserve Bank of New Zealand, Statistics New Zealand, Quotable Value and the Real Estate Institute.
In another segment on stage I talked about how we as investors are running a property business and the fact that we have to wear a number of hats. One of the leading property educators in the United Kingdom Gill Fielding talked about the importance of being skilled in a number of different disciplines wear you have a number of buckets to control or hats to wear. I love this analogy so I talked about the various hats we have to wear as property investors in terms of the CEO hat – managing everything in our business; CFO hat checking our bank statements, keeping accounts, monitoring the financial performance of our portfolio, paying taxes, Renovations/Maintenance hat – looking at how we maintain our very valuable assets and renovating to increase our cashflow and equity; Legal hat – when doing due diligence on properties, looking at legislation changes and ownership structures; and Property Management hat on – where you have to manage your tenants or your property manager, to ensure you minimise vacancies, charge market rent and collect your rent and take the appropriate action when tenants are not behaving, I also covered ownership structures, including the key changes in light of LAQCs losing their potency in that they lose the ability to offset losses against personally earned income. The new tax structure the Look Through Company (“LTC”) was introduced too, with Chartered Accountant and my colleague from Deloitte Tax many years ago Amanda Macdonald (Tasman Tax and Accounting Services based in Albany) also presented on this topic being the tax and accounting expert she is.
Finally I gave covered my opinions on US tax deeds and liens that have been promoted in New Zealand heavily over the past couple of years, and I covered the good, the bad and the ugly things about lease options, giving an example of the massive win-win situation created in my last lease option deal that resulted in my tenant buyers settling the property and giving me a giant hug as they achieved their dream of being home owners in New Zealand, as well as the sheer joy of meeting their goal. I also enjoyed presenting on the strategies I am using in today’s market and covered my revamped and intense mentoring programme where I take my mentoring clients out to do deals with me. I have some new clients from this event and am looking forward to training them shortly.
Other speakers
Senior Resource Management lawyer Andrew Braggins talked about the spatial plan for Auckland the Supercity, which highlit the growth areas in the Auckland region, major infrastructure and planning thoughts from the head planner and CEO at Auckland Council, who are in Andrew’s network. This presentation was enjoyed by attendees who were impressed with Andrew’s knowledge and communication skills, as he enlightened them about the hot spots in Auckland.
Andrew also briefly covered how to dispute council fees, levies and contributions both under the Building Act (including seeking a determination from the Department of Building & Housing) and also the Resource Management Act (including a judical review application he recently did on a property he rents out).
Jan Galloway then gave a masterclass in property management, including listing out the issues in relation to the Residential Tenancies Amendment Act with the fines for unlawful acts by Landlords and Tenants all covered – luckily these were included in the comprehensive bound manual we gave our event attendees.
Renovations expert Mark Trafford told attendees about a number of ways not to do renovations in a photo driven presentation.
Gary Hey, a director and shareholder of large mortgage broking firm, Mortgage People, then address the property cycle from a finance perspective. He talked about how lenders’ criteria are changing and it is much easier to get finance for property now (compared to say 6 months, 1 and 2 years ago).
Introduction
This month has been an interesting one with the market showing some signs of life, and strong demand and rent increases coming through in the desirable areas of the Auckland’s North Shore and Central and Eastern Beach suburbs (St Heliers, Kohimarama, Mission Bay & Orakei). The house prices are climbing in Auckland, albeit on thin volumes. The number of days to sell a house has improved too (down to just 30 days).
Fixed mortgage rates are continuing their ascent, but we now have extremely low floating interest rates. I cover off what I think investors and borrowers should be doing later in this article, after something that is worrying me a bit at present: New Zealand’s debt.
Government Debt
Unemployment is continuing to rise and manufacturing firms and exporters (including tourism operators) continue to do it tough. Whilst our economy is stabilising, we are not going to do an Iceland and have our sovereign nation bankrupted.
New Zealand is quite different to Iceland as whilst we have a lot of foreign debt, it is more of a hill, as opposed to the mountain that Iceland had.
If you look at New Zealand’s Financial Statements – as a registered company in the US (Company Number: 216105), we (NZ) have to file annual audited accounts, which are provided to the Securities and Exchange Commission, and stored here: http://sec.gov/Archives/edgar/data/216105/000110465909016652/a09-7159_1ex99dd1.htm you will note that NZ has $31.9 billion of direct public debt (ie. Government debt) as at 30 June 2008. Unfortunately this number is now rising and apparently the Government is overspending to the tune of $200 million per week. That’s right, New Zealand is making a ‘loss’ of over $10 billion/year, and is forecasting to make losses until 2020.
Whilst some of you may not care, for our children and grandchildren’s sake I think we should care. This is far too much. We need to ramp down Government services and stop the overspending. Obviously after several quarters of recession, the policies of the previous Government and the global financial crises, we have a greatly reduced tax take. Surely the corollary of this must be to reduce expenditure. Sure it may mean that we have to pay more in ACC premiums, more tolls on roads, to use our national parks, but doesn’t this beat having such high debt amounts to service. Or does having such high debt not really matter. There are some conspiracy theorists out there that say this doesn’t matter, the money system we have is a crock, and just a system of control designed to benefit very few. They would tell you to watch Money as Debt:
As for me I think the system isn’t that bad, and that increasing your financial and property knowledge is directly proportional to your financial and personal success. What I am uncomfortable with is New Zealanders collectively owing $303.5 billion dollars. Refer to the C3 Monetary and Credit Aggregate table shown by the Reserve Bank here:
http://www.rbnz.govt.nz/statistics/monfin/c3/data.html
This page is updated monthly with new statistics so you too can monitor New Zealand’s level of debt.
Property Market Drivers
The property market drivers that I rely on are:
- Affordability
- Interest rate levels
- Migration
- Supply/Demand balance
- House Sales and Building Consents
- Liquidity
- Global Financial Issues
I will cover off each one next week in another blog though.