Olly Newland likes what he sees ahead for residential property investors, and advises first home buyers to jump in quick

http://www.zoodle.co.nz/cms/blog/mortgagee-property-sales-show-continued-pain-for-heavily-indebted-owners.html

"Borrow till it hurts" has to be the worst piece of advice I've ever heard.  Astonishing really.

Good to see a property article for the weekend Bernard!

I've been watching reruns of "Property Climbers" (weekdays 11.30pm on Heartland) featuring Olly Newland and his advice now seems almost prophetic.

One recently rerun programme involved a young single woman who already owned a rental in Mt Maunganui which had increased in value to $400k but now wanted to buy in a home in Ponsonby.  She had only about a further $300-400 to spend on an Auckland home (which in 2006 wasn't possibly in Ponsonby area).  Olly advised selling the rental and buying in Ponsonby (where she rented and wanted to buy eventually), she decided it was better to buy another rental in West Auckland for the $300-400k and continue to rent in Ponsonby.  Olly said this wasn't a good idea buying in cheaper areas because the inner desirable areas will improve more quickly.

He was spot on.

The two rentals are probably worth the same or even less now, while an $800k Ponsonby property is probably worth $1.2m.

Episode after episode, Olly's sage advice seems to have been spot on.

Moral is: listen to Olly, his advice is certainly worthy of consideration.

Central Auckland is certainly hot right now and prices for some properties are up $100s of thousands of dollars in just months.

In ChCh some like for like house sales in the North West are up 30 or even 40% from pre earthquake levels 2 years ago.

I wonder what the first home buyers in aus are thinking today....about the prices they paid for property....given the fall in values...and growing worldwide financial chaos...!

Newland is effectively a (previously failed) real estate agent with an agenda, caveat emptor applies. But Bernard, I do detect a volte-face on your part too in recent times. What became of "till the pips squeak"? Are you now sponsoring "borrow till it hurts"?  I Iiked you better aforetimes.

Ergophobia

Perceived capital gain + actual inflation=......................'0' regardless of bank manipulated interest rates. That's the reality these days for those that are not 'ponzi scheme' suckers!

The sooner you buy, the sooner you can pay your house off.   Why waste your 20s & wait til you're 30 something before you face the fear and do it anyway (buy first house). 

Let me know when you have a discussion point other than "you'd better get in".

That the pro-property types feel the need to continually prop up their positions, says to me their fears could be realised at any time.

Interesting, from interest .co.

These folk had a background in jourtalisn, yes? An understanding of truth, need to stick to.

So why a tout like this, at a time like this? Those wide-eyed eager target-auduience people have zero hope of paying back even a modest mortgage in even a modest time. We are in the midst of the biggest 'capital' (now there's a mis-nomer, if ever there was one) destruction phase in planetary history, and it can't stop until equilibrium is reached.

That includes income potential.

Anyone ask that question?  Why not?

I agree, a turning point for me on BHI  

In terms of eyeballs, visitors, clicks, posts, controversy, debate, opinions, Olliver Newland has to be the biggest drawcard going around here on interest.co.nz. Good for the advertising business. Wins hands down. Surprising he doesn't have a weekly guest spot.

To my mind, if you can afford the mortgage at interest rates 3-4% higher than current levels, and surivive on one income (assuming youre on two now), you might venture into the property markets - but just know that, whilst you may manage to keep your house, you probably would have had the chance to get it a hell of alot cheaper sometime in the next 5 years if you had stayed renting.

Slowly, one by one, the western housing markets are either sinking or plunging, I have absolutely no dount that NZ will do the same

He says "borrow till it hurts" just to get on to the property ladder "because prices are rocketing ahead".

For rental property investors, Newland said because of public policy pressures and a lack of new building, rents have been rising fast in central areas of our major cities, and "rents have a long way to go before they're anywhere near the top".

He sees house price falls as "very unlikely" - more likely in his opinion are rising prices in the 2% - 3% pa range. In fact, he thinks house prices could well double over the next ten years "in good suburbs

I both agree and disagree with Olly's assessment.

1. "Prices are rocketing ahead" - disagree. That is an absolute exaggeration.

2. Public policy pressures and lack of new buildings has been leading to rents rising fast - agree, sadly. Hopefully the Council will come up with decent rezoning in the Unitary Plan to address this

3. "rents have a long way to go before they're anywhere near the top". Again I believe that is an exaggeraiotn, although I think they will gradually climb

4. He sees house price falls as "very unlikely" - more likely in his opinion are rising prices in the 2% - 3% pa range. Agree. This is a conservative and realistic forecast from Olly for a change. But why do young buyers need to jump in so urgently if price gains are going to be so muted, and interest rates will stay low for some time?

5. In fact, he thinks house prices could well double over the next ten years "in good suburbs". Unlikely, but outside chance in maybe some very top end areas.

House prices in Auckland at least are on a strong upwards surge and the lower these interest rates go the higher the house prices will head. Olly is a bit low with the 2% to 3% pa though - more like 2% to 3% per quarter.

Low interest rates, not enough real estate for sale, very little new building happening or likely to happen over the next 5 years, Chinese buyers en masse and no other alternative investment options that are supported by banks - so its no wonder house prices are skyrocketing.

You are too bullish. Some in retail, tourism and construction have only just hung on, but are now giving it away. Big infrastructure projects in akld are past their peak. Whilst chch rebuild is going to stimulate the south island economy a bit, auckland is in for years of struggle. This is going to balance out the lack of house building

Rents increasing.  House prices increasing.  Where is the 30% decline in prices?  Better to have bought a house to live in than to continue to rent.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…

"He said rents would continue to rise until there was no longer a housing shortage. "People always need somewhere to live. There's a huge imperative to start building more houses.""

said like a true spruker.

poor artical and bad advice from a biased opinion (conflict of interest).

what is going to push property prices up - Income or borrowing? one wonders if the government will be able to bail the banks out again and continue to prop up a non productive speculation market.

A few people can afford to pay silly prices reported in the news, majority can not.

the necessity of shelter will force socioty to create affordable housing in order for people to invest in the community and economy to grow.

prediction - properties will become affordable like cheap electronics, buildings well be central, sustainable and energy green, with well designed landscaped common/public spaces. skilled people well be upwardly mobile and move to where employment is.

so please dont buy smething one cant afford, be stuck with a mill stone around ones neck and make the baby boomers rich from buying some 20 plus years ago; as bias wolly spruker would have the comming generations do (cause hes got the majority of his and his inheritors wealth tied up in un flexible property)

The real property bulls on here defeat their case with their own words. If low interest rates are one of the contributing factors in why property prices will go up to the extent they're forecasting (and I've no doubt from seeing people around me that it is a big motivating factor for some who haven't previously been able to afford a house), and the RBNZ as recently as the last MPS stated that the NZ economy is now unable to have non-inflationary growth above 1.5% GPD growth p.a. then interest rates will rise by much more than is currently priced into markets, and into peoples assumptions

Many of these borrowers seem to be funding themselves floating because even a 50bps higher fixed rate is tough for them, then what will happen ? One, as rates rise the flow of people into the markest will slow and hence so will the price rises, and two, many many will be forced to sell, hence either a stop in price rises, or my bet, the start of the real fall in NZ property prices.

Unfortunately, I think its a case of the last few being sucked into the market on the back of lower interest rates (forgetting that there's a reason for why they're low - the world is in trouble and jobs aren't safe), and an assumption that supply/demand can't break down for good periods of time in a crisis. I'm afraid for them as many of them are young and most vunerable, and entering something that could set them back in life 10-15 years

Olly Newland has specific predictions which others seem to criticize like its a new sport, but there seems to be a real shortage of specific predictions that disagree with him, and for good reason.  

Its easy to be a critic but its hard to make a public prediction.  For the naysayers, how about you be specific about what you see happening to Auckland prices in 1 year, 5 years and 10 years?

Then we can see who was full of it and who was right.  So far, Olly has all the points and the critics 0.

My question for Olly and others, is Newtown Wellington a leafy suburb (walking distance to downtown) or slummy?

Olly Newlands advice is bang on but he got the year wrong. It should be 1970!

Right now the world is heading into another great depression.  The domestic property bubble that has been  inflating since the WWII is bursting and property values are on the way down. How do I know?

Check out the researched based new world economics of Professor Steve Keen  and his like minded contemporaries.

In December 2005, drawing heavily on his 1995 theoretical paper and convinced that a financial crisis was fast approaching, Keen went high-profile public with his analysis and predictions. He registered the webpage www.debtdeflation.com dedicated to analyzing the “global debt bubble”, which soon attracted a large international audience.

Keen, Roubini and Baker have been voted to be, more than all others, the three economists who if the powers of the world had listened to, the Global Financial Collapse could have been avoided.

That nice capital profit you are living in (your house/s) may completely disappear in the next year or so.

House prices in Japan dropped 70% during their two decades of stagflation. That is where we are heading lets hope it’s not that bad here.

All New Zealanders should read Keen .  He has some constructive ideas on getting us out of this mess.

Keen predicts another ten or so years of depression if the current austerity and bank bailout approach continues!

Of course if you can’t face reality you can join Olly in the 1970s.

Happyfunball - easy to make predictions on here when your anonymous, that's why I respect the likes of the economists, who have to make them really public in writing unlike posters on here, and Olly who has a repuation to consider. But my guess, based upon no banking implosion (which is required for Graeme's armageddon scenario above, which is always possible), but severe recessions in Europe and probably the US over a long period; the next 12 months Akld prices up another 2-3%, then 1-5 years down at least 20-30% from there, then 5-10 years probably not much recovery and settle there - that will get affordability levels back to something reasonable which will happen somehow.

The problem is that many people just can't envisage that scenario in any circumstance because its never really happened....just like it had never really happened in the US, and yes, I admit that the US situation is different, but then I don't think we've found a bottom there yet either. They're down 35% currently on average and still falling, but suggest 40-50% may take to find that bottom. The problem is with many of these things, ones who see it least, generally are those closest to it.

the spruikers spruik low interest rates as a reason that house prices will increase strongly, without stopping to think that the reason the interest rates are so low is that the economy is so weak!!!!!

the days of full employment, regularly increasing salaries, big bonuses are over. Yes lethargic housing supply will place upwards pressure on prices, but this inflationary pressure will be balanced by restrained demand side pressures

Borrow till ye drop...pass the buck, do not pass GO....do not collect ..

Blue Chip advice...

Have I gotta deal for you...

The unitary plan may be the end of house building in Auckland.

Council have a dream for the future of the city where everyone lives in houses that would cost $600K+ to construct surrounded by top notch first world infrastructure.  I hear that they are planning on letting nothing get built unless it matches this dream scenario - even if it means there's no development for 50 years.  This dream will never happen 'cos there will never be enough people rich enough to fund it - quite the opposite.  

As a prospective first home buyer I am keeping my money in high dividend blue chip shares while I wait patiently for the market correction that must surely come.

My prediction (which is surely as valid as Olly's) is that the Chinese economy will go bang due to either political unrest or spectacular mal-investment. Demand for our products will drop, business will retrench, people will be laid off and those with large mortgages will default. The banks will hold off as long as they can before panicking and mortgagee sales will become very common.

Interest rates are now locked in low for a long time  .....  any increase in interest rates will indeed cause mortgagee sales & mortgage-stress.  Therefore the banks hands are tied.

The entire economy is holding on by a very thin thread  -  and so the banks now cannot raise interest rates even if they wanted to: their assets would devalue very quickly (property) and they don't want mortgagee sales to rise rapidly. 

So, these are great times for paying off a mortgage with cheap money.  Just make sure you keep your job or icome stream.

Keep floating .... don't lose your nerve or listen to the bank economists threatening off-shore funding increases.... You don't want to be fixed as rates keep dropping.......

Mortgage Belt - dangerous if you work on that basis because banks don't, and never have,  been the deciding factor as to whether rates go up or down. They can move their margins up or down, but that is literally at the margin and doesn't have much impact. It used to be that central banks dictated that movement, more lately its the extent of the banks liquidity margins that they're having to pay for funds both onshore and offshore that is the major influence - and that has little or no infuence on it from what the central bank does. And guess what, the offshore market doesn't give a damn if the NZ housing market can't stand higher rates.

What drives interest rates is inflation, and the percieved credit risk of the banks in the global market place. If an banking implosion occurs, it will be a case of not being able to get credit at any price, and what will be available will likely be at such huge margins that  probably even a cut in the OCR to zero might not be enough to stop rates going higher. And if we manage to avoid that, think for a moment about those of us who say, whilst inflation isn't a risk currently for at least the next year, money printing has longer-term inflationary consequences globally if you do enough of it (and they have and will be forced to continue to in my book) - and a house purchase is normally a long-term decision isn't it ?

By the way, why do you say, "don't listen to those who threaten off-shore fundings increases" ?- those funding costs have already gone up 1.5% in the last couple of years, and is the reason why the OCR's that extra bit lower.  Are you magically calling a top in the whole global crisis ?...good to hear, I'll sleep better at night 

At least Olly has an opinion. Many of the rest if you just criticize and contribute nothing. Olly never claims that he is always right. In today's news it has just been announced that listings are the lowest for years making it harder for first home buyers. Prices must rise under these circumstances and olly's opinions will prove more correct than ever . Some of you whiners

can never admit that were wrong the whole time .

...

Why do mummy and daddy not give the kiddies a free house, a free car, a free education, a free ride??.

Answers on a 100$ bill and post to .....

An Equiring Mind.

C/O Madoff & Associates,

Speculation Drive,

etc...

@ Alter Ego. Your questions may have some tongue-in-check, but when I see ads in commercial property for sale section looking for buyers of (say) prominent bank branch somewhere, with its main selling point being that the bank has the long term lease, I do seriously ask the question; Why doesn't the bank own the land its own branches are on?

On the surface it would seem a no-brainer... Cost is its own deposit rates. This is versus lending those funds to an investor at higher lending rates, having that investor work in his own margin, then lease right back to the bank.

The bank continues their operations, but at a much higher cost than otherwise. So, I may reveal my true naivety, but what am I missing?

http://www.trademe.co.nz/property/commercial-property/for-sale/auction-…

Do not buy a house as an investment. Do not listen to the property spruikers in the New Zealand press.



Olly Newland and his ilk are dangerous. One statement he made has no credibility.



"Borrow till it hurts". Now let's think about that, Olly didn't, but let us do the thinking for him. Without the vested interests. This statement is based on the presumption that, "Prices are rocketing ahead?"



OK, prices are increasing, but they are not rocketing ahead. More importantly, NOT going up in value. Look at the latest figures of housing as against gold. Ponder this, since mid-2005, house prices have decreased back to where they were valued in 1991, the start of the current housing 'boom' (read credit boom).



There is much scope left on the downside as there is much scope left for credit expansion going forward. Does anyone believe the Keynesian Central Bankers will stop printing and let this crisis get worse?



Let us also look at these salient statements from Stuff yesterday.



"The rampant cost of living means two-income families are increasingly worse off than single-income families were a generation ago – and it is threatening to put them under. "



"It is increasingly clear that two incomes have trapped many families under a mountain of long-term financial commitments," said economist Gareth Morgan.



"Borrowing in order to purchase an investment [didn't mention housing] can be a positive approach to wealth creation," said a recent Families Commission report. "Where debt is difficult to service and hampers family functioning, however, it can become problematic."



"What has buried so many families is the level of household debt. In 1980, it accounted for 47 per cent of a family's disposable income. Today, the debt mountain is equivalent to 143 per cent of disposable income."



Buried; now that is a dramatic word and one which the spruikers should be morally aware of. New Zealanders fell into the worldview that housing is an investment as house prices 'always' go up. NZers borrowed more and then believed the second lie. Leave the old house and get something bigger and better. It makes you look and feel wealthy, does it not?



Debt is a trap, the housing investors associations want to lead you into the snare with all the honey talking swankyness of a fox juicing a chicken.



With mortgagee sales on a steep curve upwards and interest rates likely to balloon soon (does Olly really think our debt is going to be this attractive to overseas buyers for the 'long term'?), buying a house will bury you.



Sure, you may get lucky, but please do not let these spruikers get an advantage from your financial death.

Do not buy a house as an investment. Do not listen to the property spruikers in the New Zealand press.



Olly Newland and his ilk are dangerous. One statement he made has no credibility.



"Borrow till it hurts". Now let's think about that, Olly didn't, but let us do the thinking for him. Without the vested interests. This statement is based on the presumption that, "Prices are rocketing ahead?"



OK, prices are increasing, but they are not rocketing ahead. More importantly, NOT going up in value. Look at the latest figures of housing as against gold. Ponder this, since mid-2005, house prices have decreased back to where they were valued in 1991, the start of the current housing 'boom' (read credit boom).



There is much scope left on the downside as there is much scope left for credit expansion going forward. Does anyone believe the Keynesian Central Bankers will stop printing and let this crisis get worse?



Let us also look at these salient statements from Stuff yesterday.



"The rampant cost of living means two-income families are increasingly worse off than single-income families were a generation ago – and it is threatening to put them under. "



"It is increasingly clear that two incomes have trapped many families under a mountain of long-term financial commitments," said economist Gareth Morgan.



"Borrowing in order to purchase an investment [didn't mention housing] can be a positive approach to wealth creation," said a recent Families Commission report. "Where debt is difficult to service and hampers family functioning, however, it can become problematic."



"What has buried so many families is the level of household debt. In 1980, it accounted for 47 per cent of a family's disposable income. Today, the debt mountain is equivalent to 143 per cent of disposable income."



Buried; now that is a dramatic word and one which the spruikers should be morally aware of. New Zealanders fell into the worldview that housing is an investment as house prices 'always' go up. NZers borrowed more and then believed the second lie. Leave the old house and get something bigger and better. It makes you look and feel wealthy, does it not?



Debt is a trap, the housing investors associations want to lead you into the snare with all the honey talking swankyness of a fox juicing a chicken.



With mortgagee sales on a steep curve upwards and interest rates likely to balloon soon (does Olly really think our debt is going to be this attractive to overseas buyers for the 'long term'?), buying a house will bury you.



Sure, you may get lucky, but please do not let these spruikers get an advantage from your financial death.

As someone who's been looking to buy a first home in Auckland the last 6-8 months with a sizeable deposit (I was saving lots as I missed the last property boom) things have gone from a bit silly to utterly crazy in the wider Auckland region. Spill-over into the outlying suburbs is now well underway with demand and prices up with bugger all choice on the market.

As such I've decided to put my wallet in my pocket. I will probably buy a house in the next year or so but it'll be out of Auckland. The price of living up here has gone utterly above and beyond what someone can bear even on a decent salary, and a decent quality of life and decent grpwth prospects are only really available if you're double-income-no-kids or have substantial inherited ealth.

I'm currently trying to see where else I'd like to live and where I can move my business to. Two of my colleagues (mid-'30s, also looking to buy their first homes) are thinking exactly the same. Don't be fooled into thinking that demand is going up and up with no signs of slowing. Quite the contrary. The outflow of people from Auckland is only going to increase as it represents ever decreasing value. A correction, and a large one at that, is inevitable and impending. Inside of two years I see the Auckland property landscape in freefall, people quitting the market in droves and moderately higher interest rates causing a tidal wave of mortgagee sales.

Graeme, very good. A 1970 timewarp! I agree there will be no pretty ending to this debt saga. There are many forces at work here and not all just economic- a perfect(self inflicted) storm. A big worry is how Oceania will treat us Proles that have real wealth, once all the hubble and bubble of current financial alchemy has failed, exhausted.

Regards,Ergophobia   

Renters have missed out again:    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10816995

Can you make $256,000 renting? In 1 year?    Or maybe take a risk, renovate & take the capital gain.... ? 

Nah,,,,,   that takes initiative & risk.

Ok I understand Chris, you're looking further ahead. Smitho's right about the recent past though, having sat on my gold for the past 5 years I can buy lot more house today than I could before which means gold has been the better investment in that period. Ongoing ? Depends upon you're preception of a global banking collapse or not. If we get one, then gold will far out-perform housing by a country mile, if we don't, I think it will just be a smaller gain.