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  1. #1

    Default The returns on property donít seem worth it anymore

    With our two rentals we are getting approximately 4% net rents after all expenses (not including mortgage interest).

    I canít imagine property prices going up above inflation forever so letís assume long term appreciation of houses goes up 3% a year.

    Without leaverage and after paying tax this investment would earn 6%

    I can go an dump money into an index fund and earn 9% with no hassle

    Iím beginning to question investing in residential property in NZ it just doesnít seem viable without capital appreciation any less than 6% or so...?

  2. #2
    Join Date
    Jun 2013
    Posts
    2,155

    Default

    Quote Originally Posted by Purple Property View Post
    Without leaverage and after paying tax this investment would earn 6%

    I can go an dump money into an index fund and earn 9% with no hassle
    The sharemarket has always outperformed residential housing longer term, and requires far less work. This should not be a surprise.

  3. #3

    Default

    Quote Originally Posted by elguapo View Post
    The sharemarket has always outperformed residential housing longer term, and requires far less work. This should not be a surprise.
    Not when house price increases have far exceeded inflation and you have 65-90% borrowings at purchase

  4. #4
    Join Date
    Jun 2013
    Posts
    2,155

    Default

    Quote Originally Posted by Purple Property View Post
    Not when house price increases have far exceeded inflation and you have 65-90% borrowings at purchase
    Nonsense. Leverage can be used on shares just as much as property, and sharemarket returns exceed those of property. The data on that is clear for many decades.

  5. #5
    Join Date
    Apr 2018
    Posts
    225

    Default

    Quote Originally Posted by elguapo View Post
    Nonsense. Leverage can be used on shares just as much as property, and sharemarket returns exceed those of property. The data on that is clear for many decades.
    Id agree and Its the one thing Im glad Im into outside property.

    I think NZ investors in property have run out of places where they have used they inflation money from Key that they should have lost in the property market in 08 and instead took that as a sign to invest more, and have shuffled it around NZ and are now facing the push back line, or resistance line shares terms, on affordability. IRate rises should be interesting. I think they should stay low for 2020? But beyond that is a guess.....

    That could be the trigger for Bloombergs prediction, and it wouldnt be an unfair one. I just dont want it impacting my PPOR which is about 20% below MV in purchase price. So Im semi protected. And if anything Aucks has already had a significant drop and now a plateua. its the rest of the countries turn.

    If people cant find ways to invest outside of property then that tells me they really only got "lucky" due to John Keys rate drops and cash injection. Thats where the inflation sits. The problem is people need to either cash out and spend large on retail or the markets drop to decrease that unatural inflation caused by a PM who I think had the best intentions (although his $20m property at peak of the market hmmmm lol).

    There is a time and a place for all investment types, including cash under the mattress, but I prefer the idea of gold under there as Im a part time hobbyist prospector, so a number of bars would look cool :-)

    One of the big ones im interested in is when are we going to see the NZ dollar shift back to its 70c to 90c fluctuations we use to see prior to about 2009 to the AU. Its been high for a long time now. Is it simply Iron Ore isnt selling? Sounds like China wants to get going again with those Trump negotiations or it was just Trump "Being" a president.......
    Last edited by OnTheMove; 27-12-2019 at 10:10 PM.

  6. #6
    Join Date
    Feb 2015
    Posts
    135

    Default

    Bloody waste of time and effort dumping your spare pile of bank deposit cash into a 'shitty' piece of overpriced plot of land in NZ....The "real estate land" of 'Deadline' method of selling this garbage goes on forever....NO TRUST anymore so walk away and NO DEAL...!!!!

  7. #7
    Join Date
    Apr 2004
    Posts
    789

    Default

    Everything works in cycles those that can look outside NZ into the likes of the Australia Resources companies on the ASX will do very well last two trading days I have seen my portfolio increase over 8% I also see the AUD moving many percent over the NZD as investment around the world floods into the Countryís mining + O&G sectors.. If one only has eyes for property then some of the mining towns that boomed during the last Bull market 2000,s will do very well safest investments closer to Perth ... IMHO NZ property has had it boom next cycle to pullback to flatline for the 2020s and let NZ household incomes catch-up

  8. #8
    Join Date
    Feb 2015
    Posts
    389

    Default

    Quote Originally Posted by JBM View Post
    Everything works in cycles those that can look outside NZ into the likes of the Australia Resources companies on the ASX will do very well last two trading days I have seen my portfolio increase over 8% I also see the AUD moving many percent over the NZD as investment around the world floods into the Countryís mining + O&G sectors.. If one only has eyes for property then some of the mining towns that boomed during the last Bull market 2000,s will do very well safest investments closer to Perth ... IMHO NZ property has had it boom next cycle to pullback to flatline for the 2020s and let NZ household incomes catch-up

    The issue with buying Australian properties is the amount of stamp duty and taxes its almost not worth it.

    As for picking ASX minting stocks, few of them could do well, but speculative to buy rather than a few k's worth .
    Problem is if you want to purchase say 200K , you might as well invest in managed funds which give you 7-10 %

  9. #9
    Join Date
    Feb 2015
    Posts
    135

    Default

    Thanks for your very measured overview. With the comfort of hindsight I would concur. Present day 'vendors' expectations of unrealistic 'asking prices' are being stretched by their real estate agents. The 2020's property market will no doubt unfold where any 'success is survival'....

  10. #10
    Join Date
    Sep 2004
    Location
    Hastings
    Posts
    15,119

    Default

    I find it odd that no one has mentioned (in this thread), one of the significant reasons PIs give for being PIs: hedging against inflation.

    Or have I missed a mention of that?
    Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!


 

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