Olly Newland’s Column, September 2010
Hopefully all of you were untouched by the recent events surrounding South Canterbury Finance – let alone all the other finance houses that have collapsed over the last few years.
These events are a nightmare, even to witness. As details painfully slowly emerge it quite takes your breath away to learn of the shonky lending and the unbelievable decisions made by these supposed leaders of finance.
Despite the unending use of high-powered computers, and access to top accountants, economists, lawyers coupled with bottomless pockets, they still got it wrong.
I have had to deal with many clients who have been caught by the fall-out of some type or other, either directly or indirectly, and upon hard examination we almost always find that something that can be done to lessen or sometimes completely solve any unintended consequences.
Dealing with a problem directly and not burying your head in the sand, will almost always find the solution. Life has taught me that the thinking is almost always worse than the doing.
Taking control of your future
Now is the time to take responsibility for your own financial future and stop relying on others taking your hard earned money and making crazy decisions with it.
The last five decades full time in the property business has proved to me one thing for sure: Investing in land and buildings are, in the long term, the only sure way to go.
I take comfort from the fact that what worried me five years ago doesn’t worry me now — so in five years I won’t be worrying about what is happening today.
You too can take this attitude and derive some comfort from the thought — but action is still required. The alternative is to remain sitting — staring at the wall — doing nothing and letting events roll over you.
INTERVIEW: Property investor, author and consultant Olly Newland explains in this interview with Bernard Hickey of interest.co.nz why he prefers retail commercial property. He details how leases with shop owners can be renegotiated and how ‘ugly duckling’ buildings can be turned around. He also talks about how higher unemployment creates demand for retail spaces …
Olly Newland’s Column, August 2010
The news from the front seems to be doom and gloom these days if we go by the articles and news that get pumped out by the media.
But it pays to remember this about the news media: Bad News Sells.
You hardly ever see headlines that say positive things, let alone good news. It seems that it has to be ‘shock and horror’ each time – and the more shock and the more horror the better.
Remember, all the media are jostling for attention and the headlines are designed to catch attention. Therefore — whatever the news is — many times the worst possible angle is portrayed in an attempt to make it penetrate the mind of the readers who are already swamped with messages from all sides.
So it is no different for news about the property market. There is no doubt that the market has slowed but it is not nearly as dead as the media would suggest.
There is always an argument between over-stating the downside and over-stating the upside and it sometimes takes fine judgement to decide which is the more accurate.
I have personally experience several very nasty slumps and very exciting booms both here and in Australia. (Both were costly) These experiences give me some authority to comment (you are entitled to disagree, of course).
I am also sure one day, the unpleasant experiences we have witnessed or endured will pass and we will look back and wonder why many of us were so extremely nervous without good cause.
Of course many people have been badly effected and one has to be sorry for them even if it was there own greed that put them there in the first place. Even worse are the innocent who were duped by dodgy practices or outright theft.
The fact is we live in a capitalist society and financial disasters are one of the hazards of the game.
Done Deals
One thing is for sure. I got my best bargains during downturns.
graph: Crockers
Here’s a useful summary of the main changes to the Residential Tenancies Act passed on Tuesday night.
NZPIF Vice President Andrew King has kindly given me permission to distribute his analysis to my clients… Click this link to view/download a 140k PDF file.
If you have any questions or comments, please don’t hesitate to contact me.
Olly Newland’s July 2010 column
In this column, I would like to cover a variety of topics, as the last few weeks have been crammed with ‘news’ and opinions about the property market — and much of it arrant, dangerous nonsense.
Some folk in the news media and posters on various websites have had a field day predicting the imminent collapse of the property market. They continue to be spectacularly wrong, it should be noted.
These deluded commentators seem to believe that if property prices fell by 20% to 30% (as some have predicted) then they, and their children would be able to buy a house more cheaply in the future and that would be a wonderful thing. They think a massive drop in the market would make housing ‘more affordable’.
What they cannot understand is if that really happened hundreds of thousands of Kiwis would be out of work, much of our economy and industry would come to a virtual halt, the banks would collapse and New Zealand would be reduced to a nation of ragged beggars left to shuffle through the two dollar shops and rifle garbage bins.
Jobless and with an economy in ruins it wouldn’t matter if houses were a third of their present price. They would still be unaffordable.
It will cause some consternation to these nay-sayers to learn this week, that house prices are still well up on this time last year despite the usual upside down view some in the media always make of these things.
link: http://nz.biz.yahoo.com/100711/3/k6u6.html
I always derive much amusement in the way the media portray good news through the wrong end of the telescope. The headline in this example says: “House prices fall further in June”.
It’s not until you read down further that in fact house prices are still 5.2% higher than at this time last year and the slippage (if you can call it that) is a statistically insignificant 0.4%. Put another way, it is effectively a yearly increase on the current average price of $404,715 by a respectable $21,045 (or approximately twice the rate of inflation!)
Mortgagee sales continue to soar
Olly Newland on TV3 News (click to watch video)
By Ingrid Hipkiss
TV3 News SUN, 04 JUL 2010
Watch video at TV3
When the credit crunch first hit the property market, it was developers and investors with multiple properties who bore the brunt.
Now, market analysts say the pain is more widespread.
“We’re seeing more and more mortgagee sales affecting the kind of individuals we term ‘Mum and Dad homeowners’,” says property market analyst Mike Donald.
Latest figures show an average of eight properties go under the mortgagee hammer every day, their owners unable to afford their mortgage payments.
That is down from highs of 11 per day in September 2009, but still about seven times what they were pre-recession.
“What people should be doing is going straight to the bank to make a deal,” says property market advisor Olly Newland. “The last thing a bank wants is to take your house back and have another house on its books. They’ll do anything, within reason, to make a deal.” (more…)
Olly Newland’s Column, June 2010
2010 Budget Day has come and gone and the world has not come to an end.
Finance minister Bill English spelt out how he was going to deal to ‘property speculators’ and frankly I found it hard to suppress a yawn. I must confess that I was somewhat irritated to hear him snarling about ‘speculators’.
Didn’t we leave that all behind in the 1970s when the Kirk/Rowling Labour Government clamped down on ‘speculators’ with punitive taxes … and pushed up prices by over 50% as a consequence?
The removal of depreciation on both residential and commercial property while reducing personal and company tax means a re-shuffling of the deck chairs and very little else. Any professional who has passed Accountancy Stage One will find another means to reduce tax legally — of that I am sure.
So what’s all the gnashing of teeth all about? Be content if you have to pay tax and GST, I say. It means that you are making a profit!
For years I have taught that investors should be in the market to make profits, not losses. Too often I have had people come to me seeking advice who have bought rubbish properties just to create a loss. (It beggars belief that anyone can think in this manner but there you have it. They believe what they’re told by the get-rich quick spruikers.)
I used to cringe when I read or saw adverts that said ‘Let the tax man pay off your property.’ How dumb is that? Just asking for trouble.
Of course there will be consequences. Bill (call me ‘Slasher’) English says Treasury has admitted that rents may rise by ‘one or two percent’ as a result of the new rules. Well I’ve got news for Bill and all the Noddies in Treasury: Rents will rise all right — but more like 15%-20% over the next two to three years would be closer to the mark in my estimation.
Have they forgotten the effects of the GST increases on costs? And what about the Carbon ETS due to hit all our pockets in a month or two? Rates, fuel, electricity, insurance, timber, concrete, steel, you name it — ALL will be going UP in price … and adding fuel to inflation.
The government already admits that these extra costs will result in a 6% inflation factor. It goes without saying that if they admit that much you can be sure it will be higher.
Olly Newland’s Column, April 2010
The latest statistics make interesting reading indeed. What they show is there has been a huge surge in people choosing to rent. There will be serious consequences if this trends continues … which I am sure it will.
Many have come to realise that renting is still far cheaper than owning especially while capital growth remains so elusive.
The last surge in renting was in 2008 but for different reasons. The rise in house prices and the higher interest rates prevalent at the time forced people into renting. Now the picture and the reasons have completely changed.
The following article by Mr B Hickey of interest.co.nz demonstrates what is happening in the market. (Although he and I draw different conclusions.)
Rents unchanged for 2 years despite surge in numbers renting
April 9th, 2010
New Zealand’s median weekly rent was unchanged at NZ$300 in March from NZ$300 in both March 2009 and March 2008, but the number of New Zealanders lodging bond rentals has surged in the month by more than 54% to 19,683 in the last two years as many opt to rent rather than own. …
Olly Newland’s Column, March 2010
NZ Prime Minister John Key made a fundamental blunder when he recently delivered to Parliament his views — the government’s views — of the proposals from the Tax Working Group.
Quite rightly he booted out the looney leftist ideas of land tax and capital gains tax (typical notions that arise from those whose lives are filled with envy whenever they see people other than themselves doing well).
However he caved in on one recommendation and gave a clear signal that the treatment of depreciation on investment property would be attacked in the Ministers of Finance’s Budget due out in May.
What the new measures would be was not made clear. No details were given … so the public has been left guessing about the imminent new measures.
Neither, it seems, has anyone considered what the flow-on effects may be — and what unintended consequences may eventuate.
Even more disappointingly, by innuendo the Prime Minister appeared to go along with the suggestion that property investors act as some kind of free-loading extortionists ripping of the system while swimming up to their armpits in ill-gotten gains.
It appears that he chose to be ‘the populist’ — swayed by the ignorant masses who bay for blood, revel in public hangings, while cutting everyone down to size at the first opportunity.
The government as a whole has stumbled badly this time, which is hard to understand given that the Prime Minister and the Minister of Finance, Bill English, both have a good background in finance. Surely their collective wisdom would have taught them one thing:
Uncertainty creates unease and unease creates distortions.