NELSON PROPERTY INVESTORS ASSOCIATION
AUGUST 2011 NEWSLETTER
PO Box 198 Nelson
Our next meeting is being held at the Nelson Suburban Club, Tahunanui Drive on Tuesday 9th August.
The meeting proper commences at 7.30 pm with the ever popular meal at 6pm when you will have the opportunity to chat to other investors. By popular demand we have Bob Hargreaves School of Economics and Finance, Massey University, returning to address us. He spoke to our meeting a few years ago and is one of the country’s top intellectuals on property and demographic trends.
This is what he is brewing up for us. I have been doing a bit of work looking at using hindsight to compare the actual returns on rental properties with some alternative options. I can run the figures for a Nelson average and make some comments about future prospects.
Don’t forget to book that meal in advance by emailing me.
STINKING THINKING
I have my normal writers block before urgency has forced me to the key board. The general idea about what to comment on is the above heading of a sermon Tony Barnett gave many years ago. Then I read the latest NZP magazine and discovered they have the same thoughts. Here we are in the middle of winter with snow unusually on the Grampians and more properties to let than I have had for ages. Some real estate sales people tell me that residential property investors are conspicuous by their absence in the market. The National government ministers are still chanting the mantra that they think too many people have been investing in property and think more people should be investing in productive industries. Goodness knows what particular industries they have in mind. Are they thinking of the big F’s of fishing, farming or forestry? Those of us who dabble in the share market know it is not a bed of roses at the moment. Then just when it can not get much colder and miserable, I poke my head out from under the blankets to discover we have a general election looming and the Labour party announce their policy of a capital gains tax on all investment property sales and capital gains on shares sales too. I did not even bother to read what the Labour hopefuls had in mind doing this. They obviously want to lower investment in both housing and industry. Perhaps they want to encourage more spending in social housing and welfare. Has Labour not heard the saying when in a hole the first thing you do is stop digging? Not that I, nor lots of other Kiwis, think that Labour has much chance of getting into power but surprisingly the media has given their ideas lots of exposure and some of the ideas have stuck firmly in the minds of many people.All these stinking thoughts are influencing what good decent hard working people like you and me are doing. Here we are in a trough between housing price peaks. The number of new home starts is at an all time low, meaning the supply of competing rentals is down. Immigration surprisingly is still in our favour which means the demand should be tracking up.
The Christchurch earth quake has taken out thousands of dwellings and a significant number of people have moved to Nelson with more to follow. Interest rates are at an all time low and have been down for a longer period than I can ever recall. A gradual tsunami of rent increases is swirling in a muddy stream out of Auckland and I guess this will spread out into the other growth areas of the country when the conditions are right. Goodness gracious the fundamentals all point to good times yet we are still stuck down here in the mire. What is going on?My theory is the bulk of residential investors do not buy when the numbers stack up.They buy when the feel good factors are there. They look for those little yellow fluffy ducks to see if they are all lined up. With a bit of luck lots of you have completed the annual ANZ NZPIF survey of property investors. This survey will no doubt repeat the findings of many earlier surveys. That is those investors owning one or two residential rental properties make up the vast majority of investors. Those owning more than five rapidly recede and those owning over ten are like white bait when I go fishing.I and other writers keep telling investors do your sums before buying but almost no one ever listens. People want to listen to good real estate sales persons telling them such and such a property will make a great investment. “There is always plenty of demand for family homes in Stoke. You will never lose money if you buy my hot listing right now. If you invest in local Bad Street where the returns are higher you will have all sorts of troubles. Only buy there at your peril.” Sure some beginners know better, buy their one or two in bad alley then quickly sell off when the experience is none to wonderful. Rarely does one hear in the media about lovely old investors helping out young families by housing them. Who cares if Glenn spends his weekends and every bit of time between Sundays fixing blocked drains, delivering old beds to the down and out, and picking up rubbish departing tenants have left behind. Such actions must surely be related to making more money and have nothing to do with helping people. There is no widespread appreciation of what landlords do. Sure the socialists, when they get into power, think that civil servants are the best people to be landlords. Have you ever heard of a tenant saying their civil servant landlord is far more considerate and caring than their old private landlord?
With the ongoing news releases from the current Minister of Housing continually patting himself on the back I am yet to read any good positive news about private landlords housing someone that others would not help. Well I can tell you just because politicians and economists do not place value on what we do many tenants have other thoughts. There are few investments in the world more worthy than residential homes. Children grow up in them, old people cherish their homes and young people make love in them. These things far out class offices that are full of accountants and commodity traders. Who on earth lovingly cares for their industrial workshop?No folks, as usual the people in power in Wellington have stinking thinking.I am pulling my warm hat on and heading off into my own world where I can do some good for others in spite of what others think.I will do my own thinking.I smell roses when others smell rubbish.
WHY COME TO THE MEETINGI wonder if you read Tony Alexander’s report a few weeks ago?“It pays to remember what we have been writing for over two years now. This is the most uncertain interest rate forecasting environment that we have ever seen. So don't be surprised if our forecasts and market expectations change substantially over the coming year. That in itself of course is an argument for having some portion of one's debt fixed just in case everything economic comes up smelling of roses and rates jump. We are in fact finding an increasing number of businesses undertaking their interest rate risk analysis and opting for a modicum of rate certainty rather than punting all their core debt on floating rates this coming cycle. Good luck." Clearly the experts are confused and really have no idea what the future holds. We need to study the tea leaves carefully in times like this. People like Bob Hargreaves can help us do this. Do not miss a great opportunity to be one ahead of the rest of the pack. Things are happening in our market that has me wondering. An outsider’s perspective can often see things that us locals over look.
THE NZPIF CONFERENCE
Just in case you missed it this year is off the edge location wise. They are holding it in Queenstown. It is bound to be great fun and full of inspiration. For booking head to https://www.nzpif.org.nz/events.
MORE UNLIKELY STORIES FROM GLENN
By popular demand here is another story. I was lining up an eviction last week. The tiny flat looked cold, lonely, and uninhabited. I stood outside hopping from foot to foot trying to keep warm and trying to make up my mind. Do I wait till Friday and get the bailiff or have the tenants already run off. Banging loudly on the front and back doors produced no response. The shivering neighbours said they had not seen the young couple for a few days. I unlocked the back door for a quick peek only to discover the young lovers in bed. Oh dear, that is not the way the DBH guide book says to do it. So come Friday it was off to the court house for an eviction and Order for Examination warrant.On Saturday night a loud knocking was heard at my door. I opened it to find a police officer who said the young couple had accused me of unlawfully entering their property. This is civil matter officer I said in my best authoritative voice. Not necessarily so echoed the refrain. Wait out here in the cold officer whilst I fetch my letter from the court house. I showed him the official letter saying the warrants were being served and subjected him to a long complex description of the court process for evictions. The officer took a couple of steps back took a deep breath and said. You will not be hearing again from us about this matter. We then chatted about the block of flats and how much work it created for both of us and that was that. On Monday the Eviction Day the smooth talking lout almost convinced the bailiff they could stay for a few more days. When I recounted the police story to madam bailiff her resolve was rekindled. So it was off onto the street with them where they deserved to be. So that is about all the news for the moment folks.
Remember if you have not paid then use the section below to pay to renew or join Nelson Property Investors Association.
We are neither the biggest nor the brightest association in the country but we are unique and it is you and me that make it so different and good.
Secretary Glenn.
Presidents Comments
Well, what do you know, Labour seems to be getting desperate to find a way out of the polling doldrums and has decided to give the ‘fat cat’ landlords a kicking! When you look around the room during our meetings it is hard to equate the view of landlords painted by Labour, and in particular the Greens with the reality. What I see when I look around is an overwhelming impression of hard working, sensible New Zealanders who have decided to make the effort to do something to support themselves and at the same time provide a basic but essential need in the community - housing.
As we all know the path to financial freedom is not an easy one. The trials and tribulations of the property investor are well known to those involved but strangely those who rail against us fail to make effort to understand what the industry is really about and what is involved. Once again the headlines of the last few weeks have reminded us of the importance of belonging to our Association (and thereby affiliated to the Federation). It is through our strength of numbers that we can ensure our voice is heard and can blunt the attacks against us. One thing we can be sure of – this won’t be the last move against our industry. If you are talking to fellow investors who are not members and they complain about what is happening you might like to suggest to them that they take some action and stand up for themselves by joining their local Property Investors Association.
Happy Investing Godfrey Watson
President
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