Anyone know why Wellington has stalled?

[Damap]

Agreed Wayne but the point is investors work out yield and growth and that drives their investment decisions. Ignoring either is dumb.

[orion]

Agreed Wayne but the point is investors work out yield and growth and that drives their investment decisions. Ignoring either is dumb.

Investors, or do you mean speculators and gamblers?

I'm an investor Dean, and so are lots of other successful people, and they don't base investing decisions on what might be either. Our strategy works regardless of market volatility, yours doesn't.

So saying we are dumb is rather comical, especially coming from you and your history. I guess we should all take it as a huge compliment

[Damap]

I am just pointing out the fact that investment requires assessing both. You have one little pet strategy and it works for you that is great. That doesn't make it best, good or right it just works for you. Ignoring any aspect of an investment potential is dumb yes. Investors globally factor both into investment decisions as they should.

[Bingo85]

Is yield not also speculating on a small scale? Who's to say that rents won't go down?

[Wayne]

Is yield not also speculating on a small scale? Who's to say that rents won't go down?

Life's a gamble!

[Wayne]

I am just pointing out the fact that investment requires assessing both. You have one little pet strategy and it works for you that is great. That doesn't make it best, good or right it just works for you. Ignoring any aspect of an investment potential is dumb yes. Investors globally factor both into investment decisions as they should.

Assest rich, cash poor comes to mind.
If I was wanting money (income) to live and travel, say, I would be looking to an investment that gave sufficient cash return.
Growing the asset at, say, $100k/yr won't allow me to travel the same as an income of $100k/yr net.
So what you look at depends on what you are trying to achieve.

So saying anyone is dumb ignores the different needs or desired outcomes I think.

[orion]

I am just pointing out the fact that investment requires assessing both. You have one little pet strategy and it works for you that is great. That doesn't make it best, good or right it just works for you. Ignoring any aspect of an investment potential is dumb yes. Investors globally factor both into investment decisions as they should.

In your mind Dean it may require assessing both, but in others it doesn't.
You don't know what's going to happen to prices next week, next year, in 5 years or in 10 years and neither does anybody else, so it is a totally useless argument. Kieran Trass who wrote books about it and studied markets like no other person I have ever met got it wrong over and over again, and like you also went bankrupt.
When you make your strategy based on something that firstly you have no knowledge of what's going to happen, and secondly something that you have no control over in any way, I would have thought that would be a fairly good description of what dumb looks like, don't you?

[Eugene]

Property investors can and do choose between income and growth though, or at least factor in growth, as you Graeme choose cities of over 100,000 - these cities have diversified economies so are shock proof - there is a preference for growth in choosing them surely

[orion]

Property investors can and do choose between income and growth though, or at least factor in growth, as you Graeme choose cities of over 100,000 - these cities have diversified economies so are shock proof - there is a preference for growth in choosing them surely

Only because cities with a lower population are more susceptible to huge variances in available tenants to choose from.
In places like Wairoa, Tokorua, Wanganui etc you can have a couple of industries move and the whole place can change drastically with people leaving town. Prices can be affected a lot as well, but for me the tenant supply is the main thing to be aware of.
Areas with populations over 100,000 or so people, don't have the same degree of fluctuations in available tenants.
Remember all the little towns in Australia that suddenly became popular because of mining. Prices went from under $100,000 to $900,000 or more within a few short years because of the smallness of the town couldn't accommodate so much interest and demand. The speculators that kept thinking prices would keep going up and bought near the top now have negative equity or bankrupt with the prices having dropped back down again.

[Xav]

Look at any of the worlds top investors and they all without exception factor in yield and growth.

I don't know how helpful it is to look at it that way. The problem with comparing property and forms of investment based in business is that in those other forms of investment the potential for growth in the value of the business is inextricably linked to its profit. There will be some element of appreciation or depreciation in the value of the business assets but the net tangible assets of the company are unlikely to be a major component of its value (unless it is a business that invests in property of course).

This is not to say that I disagree with you entirely because I think expecting capital gain is reasonable, but with property you do need to be mindful of the fact that you are completely reliant on market forces (unless you are creating value somehow) so if you purchase properties that are cashflow negative and/or leverage heavily then you are relying on the market to perform or you risk getting burned (as you know).

With shares (for example), while you are certainly affected by market forces you can improve your chances of capital growth by choosing to invest in companies that have good potential for improving profits and/or are investing into the growth of the company (rather than focussing on distributing profit to shareholders via dividends).

[Lissica]

We're looking for a PPOR after returning from Australia. I'm astounded at how few houses are being listed currently....the last three houses we bid for had 20-30 tenders. If it stays like this I don't expect prices to remain static for long.

It's a great place to live. Compact city, big enough to have everything you need (schools, universities, shops, mix of industries), but still be able to walk from one end of CBD to another. Good social hub, good cafes/restaurants, arts/theatre/events scene, great weather. I could head out the door and straight into the town belt for a run, or cycle into rural roads within 5min. During rush hour it takes me less than 30min to commute from the Northern suburbs to other side of town (Miramar) where I work. Gimme this to Sydney or Auckland anyday!

[Aston]

and lack of international airport?

Apart from the ignorant comment from Gary, this is a really interesting thread.

Just because the market is currently moving slowly in Wellington, doesn't mean that it is a bad place to invest. I've invested in Wellington for a long time. Now is the time to buy.

[Eugene]

At an investor meeting last night speakers were saying that it has moved significantly already even though not shown in stats yet
One thought three more years of moving

[Stevegoodey]

Steve: Where did you find the listing for the three bedroom stand alone house at such a low price?

Offered on it 3 times when it was with a previous agent and its just changed agencies this week.
The new agent has got the price down and brought it to my attention as she knows its my sort of property.

Its been sitting on Trade Me waiting for someone to make a deal out of it for 4 months.

[OneStepCloser]

I am new and haven't gone through the cycles so you guys definitely know more than me. But Graeme and Wayne, to me I see a difference in relying on capital growth for survival in property investment vs relying on capital growth in making massive gain. There is no doubt that ignoring yield and hoping for capital gain is extremely risky, but isn't it quite safe to a cashflow neutral profile in a city combined with sufficient equity?

Also, when comparing property investment with business: good properties in good areas with solid growth history - can you not view it as a successful product (well designed e.g. town planning, good fundamentals e.g. material and build quality, with track record of strong demand), that has been built by someone else already? And you are simply taking advantage of the established product?

Wouldn't you say rental yield growth and capital growth also goes hand in hand? They both indicate good strong demand?

I am not against cash flow focus at all, but I really want to understand why it has to be one extreme and taking capital growth into account is such a risking thing.