The numbers man - Kieran Trass

[muppet]

The numbers man
Page 1 of 5
5:00AM Monday June 02, 2008
By Greg Dixon

Kieran Trass denies being a property guru, saying he's just an average guy with a bit of not-so-average information. Photo / Glenn Jeffrey

It comes as a slight surprise that the prophet of property doom reads the Mahatma. On a low table in the hall of Kieran Trass' Mt Eden home, is a small selection of books by the great thinkers. This is where Gandhi sits, alongside Plato, the Dalai Lama, Edward de Bono and others. Their works are well-thumbed and many have small slips of paper tucked in them, marking favourite passages.

They're the first thing Trass sees when he comes through his door. Gandhi's influence has reached a nearby windowsill too. The word "Ahimsa" - a favourite of the Mahatma's, meaning "non-violence" - is spelled out in coloured letters leaning against the window's stained glass.

The word is the last thing Trass sees when he leaves his flat. I'll chance my arm here. It is entirely probable Gandhi - and everyone else represented in Trass' small library - knew little about the New Zealand residential property market. Trass, on the other hand, has spent much of the last decade meditating on (and, indeed, investing millions in) real estate.

The surprise, then, is the contra-diction. That the man whose business is helping himself and others to make a buck has been quietly investing in something altogether more spiritually pure. Of course, if a property market guru - though he hates and refuses the term - is going to make the sort of predictions Trass has made in the last year, it's probably just as well he's immersing himself in passivism and peace.

If Trass' recent inner thoughts have been awash in philosophy, his public ones have found him in bad odour in some quarters. Last May he warned of property price-drops within a year. Bullshit, said the real estate industry. By this February, Trass was predicting a property crash leading to as much as a 15 per cent drop in values over the next two to three years. Again the real estate industry baulked.

But then if there's one thing property buyers, sellers, investors and real estate agents didn't want to hear it's that the longest property boom of modern times might be over. And, it appears, they didn't want to hear it from the man who's taken to reading Gandhi.

Who's Kieran Trass? Murray Cleland, the president of the New Zealand Real Estate Institute, is not, if brusque tones are an indicator, even remotely joking. This is terribly curious. He and Trass have, though perhaps not by choice, appeared together in print and television news reports for some years, each spruiking often-opposing views.

A betting man would wager they've heard of each other, so I persist. You don't know who he is? I ask. "Nah," says Cleland. No? "Nooo. Well, I don't know the guy well enough to comment on him, anyway." More likely he knows of the guy all too well. You don't have to make a living flogging do-ups or have a working knowledge of indoor-outdoor flow to deduce Cleland might be playing games, because sometimes, at least, he and the real estate agents he represents don't like what Trass says.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10514137

[muppet]

Page 2
The simple equation here might be that Cleland, by not acknowledging he knows who Trass is, is avoiding giving the pesky property commentator credibility through recognition. When I ask Trass, in our first chat, about his relationship with the institute, he stands by the gentling warming fire in his flat, leans against the mantelpiece and there's a pregnant pause.

Eventually he speaks, and sounds suspiciously similar to Cleland: "... I don't really know the institute because I have no contact with them." When I later report Cleland's equivocation, Trass concludes the institute probably has him pegged as a bad influence. "I guess they see me as being dang-erous because I'm going to call it if it's looking really bad and perhaps they think I might create a self-fulfilling prophecy ... It's just reality.

Perhaps that doesn't quite suit [them]." However, Cleland isn't the only senior real estate figure who is reluctant to talk about Trass. Of two others Canvas contacted, one didn't respond to requests for comment and the other said he did not wish to talk because "we don't want to be seen as bad eggs". He did offer that "I know a lot of people who are totally anti him ... people query how accurate he is. They ask me 'who is he?' and I say, 'I don't know him, I don't know what his experience is'." Trass claims he has "successful, high-profile, real estate agents" that like and use the property market information reports he produces. "Yet the [institute] doesn't seem to acknowledge that [the information] even exists, which is strange. It suits them to have their medians and averaged data because that's all they've got, and I've got an index that's much more accurate. It appears not to be about accuracy ..." More likely, it's about message.

Still, the question remains: who is Kieran Trass? The bare bones of his story are he was born 46 years ago in Masterton, has lived in Auckland for almost as long and is the youngest of his family's one daughter and three sons. His was a working-class upbringing, his father working as a drycleaner and his mother a housewife. He recalls, when he was 7 or 8, his mother using a toilet roll to explain how the family needed to conserve its money after buying their first house.

"She reels it out and says 'we need to be careful about using what we have, so when you go to the toilet don't reel off heaps of toilet paper, just use four slips that's all you need'. I know it sounds strange, but that's a story I'll never forget because it was such a bizarre thing and as a child I started to understand we have limited resources." The family's happy life - first in Te Atatu Peninsula, then in Mt Eden and Three Kings - was sorely disturbed in the mid-1970s when his eldest brother Gerald, aged 17, joined the Unification Church.

His parents tried to stop this, leading to accusations of kidnapping by the Moonies, newspaper headlines and a decision by Gerald, at 18, to stick with his new church. Trass and the rest of his family turned to the Baptist faith for support, but his brother's defection hit Trass hard. "My older brother, I idolised him.

I aspired to be like him ... and suddenly he was gone. He came home, packed up all his stuff and ripped up a whole lot of photos. It was quite extreme. "It was like a having a living death in the family, because while he was still alive, he wasn't the person we knew." Trass says his schooling at Mt Roskill Grammar wasn't affected by the family's crisis, though he went on to sit and fail university entrance - something which still appears to give him a feeling of inadequacy.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10514137&pnum=2

[muppet]

Page 3
With school over, he figured a job anywhere doing anything would do, and he found himself toiling in a cardboard recycling factory. He soon figured, after collecting paper from insurance companies and banks, that office work, with its comfortable desks and air conditioning, was a better bet. So clearly not lacking self-confidence, he walked into the smartest banking building in his area, a Bank of New South Wales (now Westpac) and said he was looking for work. That was in 1981.

There began his 20-plus years in banking and lending, first at the Bank of NSW (which included a two-year stint in Australia), then a Lion Nathan-owned finance company and Citibank. Two years into his job lending on property and to business at Citibank, he hit unexpectedly upon a career move that lead him to where he is today.

In one week at Citibank he had two loan applications from existing clients which were declined. He couldn't work out why. "I said 'this is dumb. I can take these to the bank next door and get these loans approved'. [Then] I said 'actually I think I might do it'." His boss told him to take a holiday. He did, only to return and resign. Trass had decided he'd set himself up in mortgage-broking. "The first thing [my Citibank boss] said to me was 'if you are going to be a mortgage broker then you'd better sign this," Trass says, hooting. "It was an agency agreement - they wanted my business!"

It's hard to believe anybody could say "my passion was mortgages" with a straight face. However, Trass does and with astonishing earnestness. It's been 12 years since he went into business for himself and he still owns a broking company, Hybrid Mortgages.

However, around 2000 he realised mortgages weren't where his true zeal lay; it was with property. "I found more and more people ... would come in and ask for a loan - they'd already signed up to buy the property - and say 'what do you think of this?' We'd spend two hours talking about property and then we'd spend 20 minutes doing the mortgage application.

I realised something's not quite right about this." And so, Kieran Trass the property pundit was born. He'd begun, in a not terribly successful way, investing in property himself in the mid-1990s. When he became more serious about it around seven years ago with his property investment company Hybrid Property Sourcing, he quickly realised there was a dearth of good information about residential property investment in Auckland.

"If you look at the commercial property market, the amount of statis-tical analysis is huge. Yet in the residential market, that level of market intelligence just didn't exist. The best we had was the median price trends - and median prices are flawed. I got disillusioned with the fact that there wasn't any top quality information I could base decisions on." The entrepreneur in Trass saw an opportunity.

He'd already developed a relationship with Quotable Value (QV), the country's largest valuation and property information company, producing reports for QV using its database. He discovered the company broke Auckland into only five areas, creating a house price index for each. Trass figured a more detailed, suburb-by-suburb approach would provide a more comprehensive appreciation of the property picture. He decided to stump up his own money, create his own parameters and formulas and slice Auckland property up his way.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10514137&pnum=3

[muppet]

Page 4
The bloke who'd failed UE maths now generates his own house price index across 41 Auckland suburbs, using data he's licensed from QV. "I can tell you exactly how much [suburbs] have gone up in value at any point in time over the last 15 years. No one else has got that information. I'm the only one who's got it because I'm the one who created it."

He figured it would take six months and $60,000 to do. In the end it took two years and a couple of hundred thousand dollars after he realised he needed to backdate his index to 1990 and include Wellington and Christchurch in the figures. But it's been the basis of an ever-expanding, punditary business.

He began producing capital growth reports every three months, along with 15 different "Hot Spots" reports. However, he grew frustrated with the fixed nature of these reports and decided an interactive website was needed.

After two years of work, his subscriber site, suburbwatch.co.nz, went online in early 2007. He won't say how many subscribers it has, but claims they are growing more quickly now the boom appears over. Trass hasn't stopped there. Since 2004 he's written two books, including Grow Rich from the Property Cycle, and has even developed his own board game, called Hybrid Real Estate (it sells for $199.95), to teach property investment.

Property punditary is now his life, just don't call him a guru. "People say that and they lose me immediately, because I'm not. I'm just an average guy with a bit of not-so-average information." G

Andhi entered Trass' life not long after his second wife left it. He first married at 22. The marriage ended 18 months later, but it took him seven years to fully recover and pushed him close to suicide. He was determined, when his second marriage broke up two years ago (the marriage lasted three years this time), to handle the crisis better. He went to a counsellor for six months, but it was what he is now reading and watching that gave him a new direction.

Dan Millman's the way of the peaceful warrior has been particular inspiring, as was the film What The Bleep Do You Know!?, a controversial documentary which links consciousness to Quantum Mechanics. The breadth and New Age lean of his reading, suggests an autodidactic approach to the spiritual and philosophical. But it also means he's not boxing himself in. "The philosophy I pursue doesn't have restriction.

It's like the Gandhi thing ... He was asked at one stage about Hindus and Muslims and he says 'actually I'm a Hindu and a Muslim and a Christian ...' That's what I'm like." Trass says the last 18 months have been the happiest in his life - and it has filtered into his business world. "I used to be driven by ego. I became a person I didn't ever envisage.

When I looked in the mirror I realised this wasn't where I wanted to be. I got what I wanted to get, but this isn't where I envisaged being. It comes back to your value set and it's very easy for us in the western world to slip into the materialistic. "I don't judge people now. And I don't judge myself." TRASS, WHO has a surprisingly puckish face and boyish grin, might feel himself kinder, gentler and less egotistical.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10514137&pnum=4

[muppet]

Page 5
The Porsche might have been replaced with a sporty Suzuki. His dictum of "divide and conquer" may now have been replaced with "surrender and unite". But his public utterances in recent months have hardly engendered warm feelings from some. By mid-May, another property pundit was blaming the media and Trass - though not by name - for spooking the property market with speculative claims of a bust. The question remains.

Does Trass, despite his number-crunching, really know what he's talking about? Fellow property investor and commentator Olly Newland reckons Trass is "obsessed" with statistics. "I don't mean this in a harsh manner but he thinks the whole market works on the basis of numbers, when it doesn't. That's the flaw in his theories that I see."

However, Dr Susan Flint-Hartle, a senior lecturer in property at Massey University in Albany, believes though Trass doesn't have an academic background, he should be listened to. "I think he's informed. I think he's hands-on, he actually practises what he preaches and he has some very valuable information. But people need to discriminate, they need to form their own opinions." Gareth Kiernan, managing director of Wellington-based economic forecasters Infometrics, agrees.

"I don't always agree 100 per cent with [him] but I think he has put the thought, time and effort into it and he doesn't have a barrow to push as such. Definitely he would be one of the people I would listen to more than others." Besides, Trass has been doing himself no favours with his dire predictions. He has several million dollars worth of exposure to the residential property market, while his mortgage-broking business has slowed considerably.

His property investment company is in hibernation. Beyond his own concerns, he's mind-ful of a considerable responsibility to get his public comments right. "There is definitely a level of care. I'm very careful in what I say in the media. I do temper my message sometimes because I don't like the idea of creating huge, sudden shocks. The reality is that I see my role as a market-watcher and that's all. I'll just tell it like it is.

If it's good, bad or ugly I'm going to say so. "But I'm also conscious that whatever I'm saying is going to affect people - in a good way or a bad way." Now there's something Gandhi would understand.

PUNDIT TIPS

Last May, real estate analyst Kieran Trass made one of his biggest calls: predicting the property boom could be about to bust. A year on, with sales volumes halved and prices flat-lining or worse, it seems he was right, and then some. But who exactly is he and why should we listen to him? GREG DIXON investigates.

Trass predicts the residential property market will remain soft for the next six to 12 months. But the recent rapid drop in prices is a good thing, apparently. "It's actually better the property market takes one stab to the heart rather than dies by 1000 cuts. It's better we get it over and done with." He reckons while the market will probably soften further over winter, there maybe a small bounce-back in spring.

However, next year might be tougher than this year. A change of government is unlikely to affect matters. Trass is also cautious about the possibility of interest rates dropping next year. He points to the tightening international lending market and the likelihood local banks will increase their lending margins after 10 years of squeezing them. Trass is fixing his own mortgages at five years. Tips for the soft market: n If you don't have to sell, then don't. n If you do, sooner is better. In six months prices may be lower.

* In this market, offer no more than 75 per cent of what you think the property is worth.

* Buyers should aim to make unconditional cash offers. Get the mortgage signed off for the property before making the offer. This can flush out a seller who is tired of waiting for a buyer.

* Alternatively, now is the time to get into a home or suburb you had thought impossible, by making the offer conditional on the sale of your own home for a price you know you need to make the purchase economic. Trass says this approach requires reasonable existing equity.

http://www.nzherald.co.nz/section/8/story.cfm?c_id=8&objectid=10514137&pnum=5

[Austrokiwi]

Thanks for posting that it was an interesting read.

As an aside; I think Trass's story supports a half idea of mine( but I acknowledge I probably picked it up from someone else) If you want to know what every one else is doing in Business, ask an MBA Graduate for advice on your business ( they will spout forth the current zietgiest), If you are looking to make money.............. do something that every one else isn't!

[donna]

I felt odd reading the article - why does it contain so much personal information about Kieran? I doubt Kieran would have told me this stuff personally so it seems really weird to read it in a national newspaper.

Cheers,

Donna

[leapy]

Because it's a colour piece - a feature profile. You know - that territory between "OCR remains unchanged" and "Britney divorces hamster".

I read it with interest because the man has this somewhat one-dimensional business commentary/numerical public profile - and it's always interesting to know a bit more background behind prominent people in your field.

The reporter obviously noted the strange juxtaposition between his tranquil home environment and the fact that the man's media comments and business choices seem to profoundly goad and lacerate some people.

[spurner]

That is a brave move, 5 year rates are over 9.0%.

I recall reading the average interest rate over the last 10-15 years was 7.5%.

Time will tell I suppose...

Trass is fixing his own mortgages at five years.

[drelly]

I can understand fixing rates, even when comparatively high. There is the "peace of mind" factor in knowing what you're going to be paying rather than anxiously waiting to find out every time a mortgage is approaching review date!

[kieran]

That is a brave move, 5 year rates are over 9.0%.

Doesnt fortune favour the brave?

The POTENTIAL INCREASE of interest rates is MUCH HIGHER than any potential drop in my opinion...

[watchful]

The POTENTIAL INCREASE of interest rates is MUCH HIGHER than any potential drop in my opinion...

Wow, can I humbly ask how you arrive at this conclusion. The RBNZ's statement seems to enforce the commentary I have read suggesting the OCR will drop by up to 1.25% by the end of '09. If Dr Bollard isn't predicting sustained growth for 3 years then this will most certainly fall further.

How can fixing at 9% for 5 years be the correct strategy in this current environment?

[Tucker]

Kieran how can you say that when interest rates have just been dropped. Even Phil says they are trending down in his blog and he says "All this information plays out beautifully for those Kieran and I have educated around the counrty in the last few weeks and we see enormous opportunities unfolding in the Real Estate market."

So which is it up or down??????

[k1w1]

Also dont forget we have one of the highest interest rates in the western world, and there exists a massive difference between us and our close trading partners.

I think Bollard has realised the futility in fighting inflation by increasing local rates when the causes of the inflation are all sourced from offshore, so the rates will come down.

I'm sure the penalty interest to break those 5-year fixed loans isn't too bad, though, mate.

[Green Fish]

It wouldn't surprise me if Kieran Trass might turn out to be correct, at least in the short to medium term. Given that banks no longer charge upfront procuration fees, the interest rate is, effectively, the price the borrower pays for the money. The cost of money has risen considerably since the beginning of the 'credit crunch' in mid-2007, and there isn't really anything that Dr Bollard can do about that.