Is your LVR 70 percent or higher?

[donna]

I thought this might make for an interesting discussion given the recent quote by Glenn:

Quote:
Originally Posted by Glenn
Having a 70% LVR will not save lots of people.

It's easy to just look at the loans for the properties and ignore other loans that you may have that are also secured against your property assets (credit card, small business loans etc).

What is your LVR when you add up all debt? Ours is 58% at the moment - okay I suppose.

Cheers,

Donna

[Dean@Massiveaction]

More importantly is where those assets are. I have a 64% LVR in total with almost all of it in Auckland and Wellington. If I had that level in Invercargill, Wanganui and Tokoroa I'd be much more worried. It's teh provinces that are more prone to a hammering.

I met a former IRD analyst last week who is now full time PI. He watches population trends very closely and said it is hard to find a provincial town that is not reducing in population. That would keep me awake at night.

[xris]

More importantly is where those assets are. I have a 64% LVR in total with almost all of it in Auckland and Wellington. If I had that level in Invercargill, Wanganui and Tokoroa I'd be much more worried. It's teh provinces that are more prone to a hammering.

I met a former IRD analyst last week who is now full time PI. He watches population trends very closely and said it is hard to find a provincial town that is not reducing in population. That would keep me awake at night.

This is quite true I believe.

If I were highly geared I would much rather be highly geared in Wellington or any large centre than in some out of the way place.

However, I say that more from the position of needed to resell quickly, not from the position of finding tenants. I believe tenants will usually always be there, even in the wops, but not so buyers.

I made an earlier post about there not being any buyers at all in a down market. Although slightly exaggerated for effect I still believe my comments made a valid point. I also believe that there is much greater danger of not selling in a small town than in a larger centre. I'd much rather be stuck with properties in Wellinton than in Eltham.

xris

[donna]

Yeah good points - and probably better to focus on improving one's income - and ability to service the loans by means other than just increasing rents etc.

Cheers,

Donna

[Mark_B]

To all those naysayers

1. Invercargill's population is rising.

See> http://www.stats.govt.nz/NR/rdonlyre...argillCity.xls



2. Prices continue to rise in Invercargill

The montly median property property price has risen about from $118k in Octovber 2005 to $197k in July 2007. And yet, it is still some $70+k cheaper than Dunedin (the next most affordable city in NZ).

See> http://www.reinz.co.nz/reportingapp/...rt&RFCODE=R100



3. Southland's AWE is only 6.4% less than Auckland's, yet Auckland's property prices are 160% more expensive
Do the math on that one, people.

See> http://venture.southlandnz.com/sites...d%20Region.pdf (a Stats NZ publication, p. 21).

See> https://www.qv.co.nz/onlinereports/propertyvaluemap.htm




I don't know how it works in the NZ IRD, but I can tell you how it works when you advise the Australian Treasurer. You present facts.

No facts = no credibility.

M

[leapy]

Apparently provincial towns all look the same to you big city fellas. But Invercargill and Tokoroa in the same breath? That's a bit over-emo.

[Dean@Massiveaction]

500 people in 5 years wouldn't even cover the margin of error for Invercargill.

Stay safe, stick to the population growth areas. Auckland/Hamilton/Wellington and Queenstown!!

Small town investing is speculating at the moment.

[leapy]

Do you feel those towns are affordable for every investor? Or should they not be investing at all if they cannot afford to buy in one of those towns?

[Dean@Massiveaction]

Well I believe any investor can afford to invest in main centres. The question is how can they, not whether they can.
You can still buy in Auckland for just over 200K. I'd rather own 1/2 of an Auckland house than a whole one in a small town over the next little while.
Bear in mind also that as I speak publicly about investing I feel obligated to give "safe" advice. The fact is that some small towns may do very well. As Pitt points out look at Invercargill. But they are still more speculative and very prone to correction. So it would be foolish of me to recommend them to all and sundry. If you know how to research and do your homework you invest where ever you think the CG will be.

[Dean@Massiveaction]

You must follow the pop trends. This graph tells you where to NOT invest and where to put your money

http://www.stats.govt.nz/store/2006/07/subnational-population-projections-01%28base%29-26update.htm

[Mark_B]

500 people in 5 years wouldn't even cover the margin of error for Invercargill.

Stats NZ disagree.

They did a post enumeration survey after the census to check the validity of the results.

Overall, coverage in the 2006 Census was high, reflecting the cooperation and support of the New Zealand public, and the high quality work of field staff. The PES showed that about 98.0 percent of New Zealand residents in the country on census night were enumerated in the 2006 Census, representing a net undercount of 2.0 percent or 81,000 people. The net undercount figure results from an estimated gross undercount of 92,000 people (2.2 percent), offset by 11,000 people (0.2 percent) being counted more than once (overcount)

So, if anything, Invercargill's population is higher, not lower.

See> http://www.stats.govt.nz/products-an...ey/default.htm

Stay safe, stick to the population growth areas. Auckland/Hamilton/Wellington and Queenstown!!

Invercargill IS a population growth area!

Auckland - $490,818, / $625pw / 15.10
Wellington - $438,406 / $672pw / 12.54
Hamilton - $356,849 / $590pw* / 11.63
Queenstown - $589,162 / $565pw* / 20.05
Invercargill - $186,798 / $585pw* / 6.14

From Left to right: City / Avg House Price / Avg Weekly Income / Ratio of House Price to Yearly Income

* Avg weekly income figures for Hamilton, QT, and Invi, are based on published figures for the Waikato, Otago, and Southland, respectively.

And that's playing it safe with rising interest rates?

Refer to the QV Property Value Map (link in earlier post) and p.21 of the Stats NZ publication (link in earlier post)

Small town investing is speculating at the moment.

Dean, here's the thing....

I might take you seriously if I could recall a single instance where you have had anything positive to say about investing in regional IPs.

Since I can't, I don't.

M

[leapy]

You must follow the pop trends. This graph tells you where to NOT invest and where to put your money

http://www.stats.govt.nz/store/2006/07/subnational-population-projections-01%28base%29-26update.htm

Please Note: the Southland Regional Council area EXCLUDES the city of Invercargill.

[Mark_B]

You must follow the pop trends. This graph tells you where to NOT invest and where to put your money

That graph is out of date (dated 28 February 2005, before the census).

Run around and play oracle if you will Dean, but please use facts.

M

ps. I've just been reminded by the boss that I have better things to do with my time.

[Dean@Massiveaction]

I'm not concerned about the affordability Pitt. As an investor I am afer only 2 things, to maximise my opportunities for capital growth and to have safe exit strategies. Only population growth areas give you that. Demand for housing = exit stratgy, demand for housing = capital growth.
I've recently been offered 26 houses in Dunedin for example. Values there are already declining according to local agents. I've seen houses advertised for 169K now reduced to 125K and they still can't sell them.
The likelihood of that scenario in the main centres I have mentioned is tiny compared with a smaller town. It's simple supply and demand. Anyway you keep buying Invercargill, I hope it goes well for you. Too risky for me though.

[Commercial Dan]

I'm not concerned about the affordability Pitt. As an investor I am afer only 2 things, to maximise my opportunities for capital growth and to have safe exit strategies. Only population growth areas give you that. Demand for housing = exit stratgy, demand for housing = capital growth.
I've recently been offered 26 houses in Dunedin for example. Values there are already declining according to local agents. I've seen houses advertised for 169K now reduced to 125K and they still can't sell them.
The likelihood of that scenario in the main centres I have mentioned is tiny compared with a smaller town. It's simple supply and demand. Anyway you keep buying Invercargill, I hope it goes well for you. Too risky for me though.

I absolutely agree with Pooomba, you would have to be an idiot to invest in small towns as you won't be able to give them away in a downturn.

This is a foolish mistake by a newcomer who will dearly pay. Invest in quality, not quantity and don't measure your success by the number of properties you own, only a fool does that.