Olly Newland.... Wow Gobsmacked!

[halfempty]

I've been a fan of Ollies for years, more for the fact that most of the stuff he says is really funny than for any thing else.
But after reading his latest article on interest.co I did a double take, check it out.

"Olly Newland is convinced interest rates will stay low for the foreseeable time and it makes sense for young property buyers to borrow as much as they can to get on the property ladder.
He spoke to Bernard Hickey a few days ago and said his advice to first home buyers is to "stretch as much as possible to get into a leafy suburb".
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".

http://www.interest.co.nz/property/60027/olly-newland-what-he-sees-ahead-residential-property-innvestors-and-advises-first-hom

I mean Wow that's a really bold comment.

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

I wonder if in a few years this advice will be considered as bad or as dangerous as when he called the end of the property boom a meager 4 years too early?

I also wonder what sort of repercussions there are on Oilly as an Authorized Financial Adviser in making such a statement.

[maxim]

.

Sorry mate, I totally disagree.

They are definitely not making any more land in Auckland and with the interest rates as low as they can go, house prices are only going to go one way.

Given there was 20%+ increases in the good times with high interest rates, when the problems in Europe are over, I strongly expect prices to increase by more than 25% per annum with low interest rates - its all about supply and demand.

Given that house prices are going to climb so much, its only logical that rents will climb to match them. It doesnt really matter if wages are going to increase, people will just spend less on the basics and grow their own food if they need to. You need somewhere to sleep if you want to live in Auckland.

So given rents will climb and house prices will climb, you are an absolute mug if you don't sell a kidney for the deposit, fudge the paperwork, and put it all down on a shack in Grey Lynn.

Property has made me rich and I am highly envied. Given no one makes money in the stock market, the only way that people can make money is through property so there will always be property investors trying to become rich like me so there will always be buyers.

I just don't understand poor people (probably renters) who think house prices will go down just because they are too expensive for them. Don't they realise there are people like me that can cross guarantee each new purchase at maximum leverage utilising tax benefits (and these will never ever be taken away because the tax system will never change)? No they don't they are too stupid.

As I said in another post, a return to feudalism seems to be the most logical course for the future as rich people deserve to live off poor people by giving them a place to sleep.

[TheLiberalLeft]

I just don't understand some people (probably LL's) who think no one makes money in the stock market just because they don't/can't. Don't they realise there are people who make loads in the sharemarket? No they don't they are too stupid.

[Xav]

I strongly expect prices to increase by more than 25% per annum with low interest rates

Really? Is the Reserve Bank going to cease to exist between now and then?

I just don't understand some people (probably LL's) who think no one makes money in the stock market just because they don't/can't. Don't they realise there are people who make loads in the sharemarket? No they don't they are too stupid.

Not how I would have put it (though I do see what you did there ) but I completely agree with your sentiment.

[Shane D]

Maxim,

It sounds like you have been around a while. What suburbs are you focusing on? How many years have you been investing in property?

Good to put some perspective behind the bold statements in your post above.

Thanks in advance.

Shane

[eri]

at the local level

it's looking like

house price inflation could easily outpace interest rises

but personally

i wouldn't recommend borrowing as much as you could

still too many bumps in the road

[Davo36]

Well if anything is going to get you in this game, it's too much debt.

And Olly would know what it's like to lose the lot, having done so in the '80s.

I think house prices will increase, and borrowing a lot probably will be OK. But that's assuming nothing really bad happens.

Who saw interest rates going as low as they have? Not many I reckon. So if we can't see them going quite high, does that mean they never will? What I'm saying is, high interest rates or any number of other things could occur and they're basically impossible to predict, so I'd be really careful taking on heaps of debt.

[Wiz]

Don't 'most' people 'borrow till it hurts' to get on the ladder? I know we did, and that was with additional family help. We pushed it to the absolute, got a finance guy to 'work his magic' and paid over 50% of our income on our mortgage those first 3 years.

Now people tell us how 'lucky' we are to be able to invest, and how they 'wish they could be in that situation'. Luck has nothing to do with it old chum...

Nothing is guaranteed, property - like anything in life - is a risk (as we know only too well in Chch) but what other options are there? I'm with Olly on this one - buy now, suck it up, and hope for the best. in 10 years time, you'll be telling your kids just how good a risk it was. Probably.

[drelly]

Olly's advice is basically to borrow til it hurts to get into a decent suburb... good advice I'd have thought.

[Winston001]

Mmm...

I generally like what Olly has to say and I respect his experience. Nevertheless I also remember Landmark which was Olly's publicly listed property company in the 1980s. Landmark crashed and took its investors money with it.

[mrsaneperson]

Olly you would have thought would have learnt his lesson in the 80's when he lost everything.He borrowed too much & got caught out when the tumble began. Since those times, banks have increased the deposit required usually requiring at least 20% equity.Treat his advice with big caution, especially if you want to sleep well at night.He must think he's some kind of Phoenix bird.

[spaceman]

I'm with Drelly

Cut Olly some slack.... He's talking about first home buyers/young property buyers...not investors.....and yes he did go tits up back in the day but maybe he learned a thing or two from it.

Cheers
Spaceman

[RHarris]

This to me pretty much sums up why people say property is such an unproductive sector and driving this country backwards. Everyone borrowing up to their eyes balls that they don't have money for anything else. Then you get people saying money isn't made in the stockmarket. Geez if I bought Apple shares instead of a house I would have tripled my money............. blah blah blah yes banks don't give money to buy shares......but I would rather see people adopt a balanced point of view and get some productive in this country.

[DazRaz]

How is investing in Apple more productive than property? While people need housing and is productive, buying shares in Apple does not add to Apple's investment pool. Even then, investing in Apple if there was a new share offer would not be helping NZ and would be a very unproductive investment. What would the dividends return? Would they even get 1%?

[eri]

what they want

is nz'ers buying startup shares in an nz company like rakon, makes gps chips

then rolling over those dividends into another nz startup like the martin jetpack guy

a nice virtuous investment circle

but

because nz'ers can get a more reliable return with property they sink their spare cash into rentals

so young nz companies have to sell their shares to foreigners and then if they hit the jackpot those dividends go off shore

and that's before the investors have driven housing beyond the reach of young couples out of home ownership

and locked them out of that virtuous circle