As I have said on several occasions, property and stock markets react much faster than local businesses to the bad news.
The property sector and stock market
wear the downside of recession very quickly, as does the entire supply
chain underneath these sectors of the economy.
But right behind them are the rest of the economy, tightening the belt off tight credit and fear driving reduced consumption.
The whole of 2008 and the first quarter of 2009 has been about falling/bear markets, fear and deleveraging. Deleveraging leads to rapid devaluing of assets, because there are so few buyers relative to sellers. This will continue in my humble opinion for all of 2009 and 2010, though the biggest drop in the markets has occurred and we are approaching the floor in property markets in my view this year / right now.
2011 ( world Cup Rugby Year for NZ ) in my view is the year we will start to see it turn and 2012 will be a growth year. If I am correct in this, then we are ½ way through this nasty patch and there is no hurry to do anything aggressive on the investment front.
Flood of Mortgagee Sales Cued with the Banks
I was told last month that the big 5
trading banks have 2500 properties cued for mortgagee sale, with 12,500
property law act notices cued behind those. ( That’s 15,000 properties
on their way to be sold at mortgagee auction.) But the banks are being
smart, and not dropping them all on the market at once, - coordinating
a release of them on a budget for each bank monthly to protect the
market.
If this is true – this is very smart
on the banks part and I applaud them for not repeating the mistakes of
the 87 and 97 recessions, where the banks drove the market down by
flooding the markets with mortgagee sales.
Strangely the biggest villain I hear clients complaining about is BNZ, - their name comes up a lot as a very aggressive banker if you get into trouble. On the positive side, I keep hearing ASB are great to their clients whom are in trouble, - working through their issues constructively.
Banking Horror & Happy Stories
If you have horror stories or happy stories about your bank, I would like to hear them. Email me at mg@gra.co.nz and tell me on a confidential basis.
Opportunity Knocks In Recession
Doom, gloom and continued financial assaults flowing out of America and the World are now so commonplace, they are losing their sting when reported. Relentless media focus has desensitised us, and we now find the extraordinary financial disasters ordinary.
With the shock of it all passing, life seems to be returning to the property markets in New Zealand with March 09’s sales across the county beating any month in 2008. With good reason too – there is significant value to be gained by an informed investor on the hunt and there is a resurgence in finance applications and activity in the market across NZ.
You might have caught the New Zealand
Herald’s article on affordability of housing recently, basically
showing that for the first time since 2004 in many Auckland suburbs,
rent now covers 100% of borrowing costs. ( Looking at average rents
over average rental incomes), and if you buy at a discount ( hunt for a
good deal), you can find property that pays for interest and all
outgoings ( rates, insurance, repairs and maintenance, management, etc)
with 100% financing.
This is a function of property values
falling, interest rates falling, and rents comparatively holding up. So
if you go hunting at present, you can buy a property in Auckland (and
around the country), 100% finance it and all cash costs are covered by
rents. That means you get the tax refunds on top as a bonus, and the
capital gains in the medium term for free!
By the way while I remember, make sure you check out what we're doing in our new Property Procurement Division. If you like the idea of 'zero cost property ownership, but lack the time to learn and search for the right property youself, then we can help. There's a lot that can go wrong, and our team has the experience to remove the risk for you.
In my view this winter will be filled
with mortgagee sales by banks, bad weather and cold days. Investors
tend to get depressed on cold wet days, and not turn up to the
auctions. This winter then should reveal some real bargains on those
cold wet days in auction houses, and don’t be surprised if you bump
into me at a few, - because in this market I am definitely a buyer and
I recommend every household start to consider investing against the
public mood.
The bargains purchased this year will look very good in 5 years and if you buy right, you will get a huge discount in this environment and positive cashflow all the way through at present.
Happy investing to you. Go ahead and Request an Interview if you would like a hand getting your taxation and finance arrangements in place with our asset planning team.
Finally, If you would like to read
and comment on more of my articles to designed especially for business
owners and investors please visit my blog.
Have a good month!
Director
Learn More about Matthew
Contact Matthew at mg@gra.co.nz or call +64 9 522 7955
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