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Buy or sell?
20.03.2004
Property investment experts share their views on where the market’s heading. By VICKI HOLDER.
The point when the market starts to change is critical for property investors. Right now it’s time to take stock and listen to advice to check you’re on track for the future. Is it time to sell or to start seeking a bargain? Property experts say it’s a good time for both.
Kieran Trass, of Hybrid Property Consulting "These investors typically fail to realise the slump has historically only revealed a reduction in values two to four years after the ultimate peak of a property boom," he says. "And the current boom may not have even seen its ultimate peak in values yet. So these investors may be waiting until 2005 at the earliest, or maybe even as long as 2008, to see any fall in property values."
Where is the market heading?
Trass has been of the opinion since October last year that the cheaper suburbs in Auckland will continue to see value increases at least until June this year, maybe even longer, before values plateau. His reasons are:
1 The proliferation of naive property investors hungry to add more properties to their portfolio.
2 Properties in the lower socio-economic areas (generally) reveal higher yields.
3 The sheer volume of investors in the market means a percentage will always buy more property just for the sake of getting more exposure in case they miss out on capital gains.
4 The "bigger fool" theory is alive and well with many investors who believe "if I’m prepared to pay $X for this property, someone else will pay more".
5 Rents have only recently seen falls in the better areas of Auckland and these are yet to trickle down to some lower socio-economic areas.
6 Building costs are still under upward pressure, which puts upward pressure on the value of existing houses.
7 We are yet to experience a final feeding frenzy of investors that we traditionally see for properties at the bottom end of the market.
Is it time to buy or sell?
Trass says it’s always a good time to buy the right buy. The right buy can be bought at any time in the property cycle, although sometimes there are more and better opportunities than others. It’s just a question of what determines the right property. For some investors, it’s a matter of buying a property that delivers a strong cashflow. For others, it’s one that gives good equity or both cashflow and equity.
"Many investors spend time seeking out the right property that meets their requirements and are disappointed to find they can’t buy that property at the right price. But the right property is actually determined by the right vendor, one who is more keen to sell then you are to buy."
In light of the probable increases in values in lower socio-economic areas, he says now is the time investors should probably sell unwise investments - those which give excessive maintenance or troublesome tenants - to prepare to replace them with better properties over the next few years during the slump, when better opportunities will become apparent.
Gez Johns, editor of Kiwi Property Investor magazine, agrees now is a good time for the canny investor to get rid of properties that may be under-performing. "Although as a general rule investors should never sell, clearly it is almost certain that anything sold on today’s market will be done so at a profit. When selling, as when looking to attract new tenants, the better the property looks, the more interest you will get."
Johns says the state of the market is irrelevant and that if investors work off the numbers rather than emotion, there will always be opportunities to buy. "Except for shoebox studios, all genres of property can provide excellent potential depending on the investor’s circumstances. I’d suggest by identifying an average area that will provide a positive cashflow, you can’t go wrong."
He says no matter how many apartment complexes Auckland accommodates, the city will still grow outwards. Watch out for less-desirable areas neighbouring suburbs that have already seen big increases where there will always be bargains.
Andrew King, property coach and author of Planning for Property Success in NZ www.PropertyInvestor.Info He believes the market will gradually turn to be better for buyers. "However, if you have a good property in a good area, then it’s a good time to sell as demand is still likely to be strong."
Property investment advisor Phil Jones, of Rich Mastery, believes the market will continue to move forward, but at a slower rate over the next 12 months. "The market remains buoyant and prices are at a much higher level than a year ago, so if you are selling you can expect to make a profit."
Jones believes it’s a good time to buy if you do your homework and the numbers stack up. "Follow the rules of investment," he says. "Is it the right property, in the right location at the right price. And does it complement your existing portfolio?" Some of the best opportunities in Auckland are in the Panmure/Mt Wellington area as the values in these areas are likely to move up with the advent of the south eastern motorway. Look for good cashflow in under-valued property in good locations in Auckland and the provinces. Check the quality of construction and always get a builder’s report. Review the property pages, look at prices and compare them with others recently sold in the neighbourhood.
Local investor Lee Whiley says the market has plateaued for the moment and predicts it will probably stay that way for about 12 months, then drop back by 5 percent to 10 percent, then gradually rise back up to peak before heading up rapidly in about five years time. So, he says, it’s a good time to sell because prices probably won’t increase for five years and they’re now as likely to go down as up. He believes property will be a little cheaper in a year’s time but coastal and central city property will always be scarce, so will always be a good investment. His advice is to look for something to improve and present it well to sell.
20.03.2004
Property investment experts share their views on where the market’s heading. By VICKI HOLDER.
The point when the market starts to change is critical for property investors. Right now it’s time to take stock and listen to advice to check you’re on track for the future. Is it time to sell or to start seeking a bargain? Property experts say it’s a good time for both.
Kieran Trass, of Hybrid Property Consulting "These investors typically fail to realise the slump has historically only revealed a reduction in values two to four years after the ultimate peak of a property boom," he says. "And the current boom may not have even seen its ultimate peak in values yet. So these investors may be waiting until 2005 at the earliest, or maybe even as long as 2008, to see any fall in property values."
Where is the market heading?
Trass has been of the opinion since October last year that the cheaper suburbs in Auckland will continue to see value increases at least until June this year, maybe even longer, before values plateau. His reasons are:
1 The proliferation of naive property investors hungry to add more properties to their portfolio.
2 Properties in the lower socio-economic areas (generally) reveal higher yields.
3 The sheer volume of investors in the market means a percentage will always buy more property just for the sake of getting more exposure in case they miss out on capital gains.
4 The "bigger fool" theory is alive and well with many investors who believe "if I’m prepared to pay $X for this property, someone else will pay more".
5 Rents have only recently seen falls in the better areas of Auckland and these are yet to trickle down to some lower socio-economic areas.
6 Building costs are still under upward pressure, which puts upward pressure on the value of existing houses.
7 We are yet to experience a final feeding frenzy of investors that we traditionally see for properties at the bottom end of the market.
Is it time to buy or sell?
Trass says it’s always a good time to buy the right buy. The right buy can be bought at any time in the property cycle, although sometimes there are more and better opportunities than others. It’s just a question of what determines the right property. For some investors, it’s a matter of buying a property that delivers a strong cashflow. For others, it’s one that gives good equity or both cashflow and equity.
"Many investors spend time seeking out the right property that meets their requirements and are disappointed to find they can’t buy that property at the right price. But the right property is actually determined by the right vendor, one who is more keen to sell then you are to buy."
In light of the probable increases in values in lower socio-economic areas, he says now is the time investors should probably sell unwise investments - those which give excessive maintenance or troublesome tenants - to prepare to replace them with better properties over the next few years during the slump, when better opportunities will become apparent.
Gez Johns, editor of Kiwi Property Investor magazine, agrees now is a good time for the canny investor to get rid of properties that may be under-performing. "Although as a general rule investors should never sell, clearly it is almost certain that anything sold on today’s market will be done so at a profit. When selling, as when looking to attract new tenants, the better the property looks, the more interest you will get."
Johns says the state of the market is irrelevant and that if investors work off the numbers rather than emotion, there will always be opportunities to buy. "Except for shoebox studios, all genres of property can provide excellent potential depending on the investor’s circumstances. I’d suggest by identifying an average area that will provide a positive cashflow, you can’t go wrong."
He says no matter how many apartment complexes Auckland accommodates, the city will still grow outwards. Watch out for less-desirable areas neighbouring suburbs that have already seen big increases where there will always be bargains.
Andrew King, property coach and author of Planning for Property Success in NZ www.PropertyInvestor.Info He believes the market will gradually turn to be better for buyers. "However, if you have a good property in a good area, then it’s a good time to sell as demand is still likely to be strong."
Property investment advisor Phil Jones, of Rich Mastery, believes the market will continue to move forward, but at a slower rate over the next 12 months. "The market remains buoyant and prices are at a much higher level than a year ago, so if you are selling you can expect to make a profit."
Jones believes it’s a good time to buy if you do your homework and the numbers stack up. "Follow the rules of investment," he says. "Is it the right property, in the right location at the right price. And does it complement your existing portfolio?" Some of the best opportunities in Auckland are in the Panmure/Mt Wellington area as the values in these areas are likely to move up with the advent of the south eastern motorway. Look for good cashflow in under-valued property in good locations in Auckland and the provinces. Check the quality of construction and always get a builder’s report. Review the property pages, look at prices and compare them with others recently sold in the neighbourhood.
Local investor Lee Whiley says the market has plateaued for the moment and predicts it will probably stay that way for about 12 months, then drop back by 5 percent to 10 percent, then gradually rise back up to peak before heading up rapidly in about five years time. So, he says, it’s a good time to sell because prices probably won’t increase for five years and they’re now as likely to go down as up. He believes property will be a little cheaper in a year’s time but coastal and central city property will always be scarce, so will always be a good investment. His advice is to look for something to improve and present it well to sell.
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