Great time to Buy

[GO DO IT]

We are seeing properties in the CBD being passed in at auctions!
We are seeing subdividible properties being sold for a song!
We are experiencing the impact of a market that started to slow down in the middle of last year.

We are personally now starting to buy.

It is our opinion while everyone else is sitting on their hands waiting for the market to reach it's lowest point, that there are some exceptional bargains.

We are sure it is not the bottom of the market.

We are hearing investor after investor tell us that they are waiting until the market is at it's lowest. The key is they won't know where the lowest part of the market was until it is rising, the investors and first home buyers will be back and guess what they will be competing for the good deals.

We would suggest, if you have borrowing ability to seriously look at what you can buy now. If we had listened to all the negative advice out there, it would have cost us $millions of lost profit. People stopped buying because they were scared that they would lose on one deal, our question to them is ultimately what did it cost them? When the market turned we had a few do-up properties we were to put on the market, we simply lease-optioned them and turned it positive anyway.

It is not always easy to form a balanced opinion, when there is some much doom and gloom out there. Go against the flow, don't line up like sheep.

One day the newspapers and media are going to start reporting that the market is improving and then the best advantages will have been missed.

Just a thought on this Anzac day

GO DO IT

[brettc]

Interesting. So how does having a negative equity position in 6 months affect your future borrowing position?

[GO DO IT]

Yes, I know what you are saying. Time is the healer, if there are bargains out there now why not buy a few. Provided that you are not relying on the market coming back in the near future. We believe the opportunity to buy in great locations is achieveable now, and long term capital gains will be generally greater in those locations.

Just a thought. We know people will discuss this, probably most in a negative manner, because that is what is being focussed on.

Food for thought

[brettc]

Fair enough comment.

I guess for me, I am happier paying 5% more, but knowing what the short term future looks like.

But as I say, thats for me. Different strokes for different folks.

[PC]

Sounds like good advice to me :-)

[Don and Liz]

This is a fascinating topic for me. The whole psychology part of investing. Personally I have not bought a house in New Zealand for myself for 11 Weeks which could be the longest time in 5 years. I have bought 4 homes in OZ and started two unit developments. Then again I would doubt it would be another 11 weeks before I buy another nz property.

Lately I have had the call from agents saying that vendor needs to sell so make an offer. You make the offer and it is clear that they don't need to sell at all, they would just prefer to sell for whatever reason.


Noone knows what will happen with markets. It was julian in another thread (i think) that made a comment about not driving the car forward by looking in the rear view mirror. So true.


I do have one hunch though. Most of the stories about super deals and negotiating feats writen in books published at the start of the next boom will be about things investors did this year and next.

[Neo]

Robyn and Derrick

There are people that and sit and watch, others that sit and talk, but as your user name says - You just go do it! I commend you for what you are doing, you are right - no one knows when the market is at its lowest.
If a property offers good returns, why not buy it, in a few months time buy more.
I agree with you and look forward to your book when you write it one day!

Best Wishes

Neo (karen)

[electricky]

Your optimism is to be applauded- I firmly think that nothing gets done without decisiveness, self-belief and get-up-and-go. And as the saying goes, those who pick bottoms get stinky fingers!

That said:

We have just witnessed the greatest speculative bubble in housing ever seen in the history of NZ and the world. Prices are hugely out of line with incomes and rents, and need to fall 40% at minimum to get back to the long term trend.

the investors and first home buyers will be back

Wishful thinking.
Potential first home buyers well into the top tax bracket are now very used to renting. Rather than sacrificing 90% of take home pay to cover the interest on a depreciating asset in some far-flung gangland suburb, they are questioning the need to own at all. Most would also like to have kids one day- simply not possible with current mortgage payments. Personally I have a good and growing savings sitting there earning ~10% on safe term deposit, and I don't plan to buy until the numbers make sense, not for any frivolous emotional reasons.

The other issue is credit- if investors and FHBs now will need 20% deposit, that eliminates half the market and will definitely crush prices further. Considering most FHBs are still clearing student loans and paying rent, $50K-80K is a lot of money to come up with. In my case, the bank used to send monthly sales brochures showing how much I could borrow for a mortgage with or without a deposit. These have stopped dead!

People might not be waiting for the bottom, but they are waiting for the numbers to at least make sense, and there is just no sense of urgency to buy now that prices are falling fast. No-one wants to buy at the top of the market either!

[Green Fish]

Good work, electricky.

Anyone who buys property during the next 12 months needs their head read.

[essence]

Attitudes

My attitude is, if I can buy a cashflow +ve property which is under market value now AND YES THEY ARE STILL AVAILABLE, why would I wait until prices drop??

A good deal is a good deal, no matter what the timing.

[Green Fish]

Thta's a strange attitude, essence, when you can leave your money in the bank getting 9% (ie, double the rental return in Auckland), and buy at a lower price in two years time.

[essence]

Not Auckland

There are vendors out there who are desperate to sell and basically wanting debt relief. These properties can/are selling 30%, 40% BELOW RV.

Why would I take 9%, when I can get better returns now???

Surprisingly enough, there is life outside the Auckland region.

[Green Fish]

What's "RV"?

[essence]

Rv

Reference in this case means RATEABLE VALUE (as determined by your local Council). Sometimes confused with Registered Valuation, which is provided at a cost of $'s by a registered valuer.

Also during the time of owning the investment, you have cash-flow. If you've organised your structures correctly, you also have equity to purchase more properties and when the market starts to recover, you also have potential capital gain.

There is a distinct lack of rentals at the moment and this is only going to get worse when those investors who can't retain their investments (either through lack of interest, lack of funds or bad tenants) sell.

What does that do??? Push up rents.

I believe that we have about 3-5 months of the effects of rising petrol/food/interest rates, before most "late-in" investors are really hurting and decide to get out.


The market is not quite at tipping point, IMHO, but we are close.

[electricky]

A discount of 40% on Rateable Value (RV) would bring it into line with the long term trend. although I haven't personally heard of any falls like that - yet.

At that cost you could get a decent yield, I agree. The only reason you wouldn't buy in that situation is pure creditworthiness- do you have a 20% downpayment, in cash, to give to the bank?

The credit and economic situation if median prices fall that much will be shocking- the banks will not be able to lend because of declining capital ratios (unless BASEL II allows fudging, I don't know) Not to mention the downwards effect of mass unemployment on rents, making the yields even worse.

The lack of rentals is not reflected in rent rises- they are at best slightly above inflation. Although inflation this year is going to be somewhere around 5-6%, yikes.