Forum Archive Index - May 2001

[Roy <baldman@internet-auditor.com>]

Malcolm,

Needless to say both you and Max have a point IMHO.
Depends how you are looking at residential investment.

Yes the 3/4 bedrooms will be excess to requirement for  US BABY boomers.
Yes lots of us  will be selling.
However most of my compatriots are not buying smaller but renting!
Why do I (and they) rent?
a) Its cheaper than owning (don't forget to take in the cost of capital, 
maintenance, rates & insurance) the later of course a deductible.
b) No worries about maintenance etc etc (my rent even covers the Gardener!)
c) If I want to go try living someplace else I have the flexibility to move 
in a very short time with no financial penalty. (ie no real estate agents 
fees etc etc)
d) In a low inflation regime leverageing on a non income producing property 
is a nonsense.(ie I pay more in interest on the mortgage than rent on a 
house & get bugger all capital appreciation
e) House construction produces more houses each year than is required (note 
net population figures of adult ie house owning population)
f) By the way most of us rent a 3 bedroom house for the economics. 
Office/Hobby room plus something for guests/visitors/returning offspring etc.

As you say an interesting discussion.

PS By the way two friends who are well respected Financial Advisors have 
joined me in renting for many of the reasons above.





Max Interesting theory,
  however.....you say "the percentage of the population over the age of 60 
will double "....... from what 2% to 4%, 5% to 10%. This may not be as 
significant as you suggest. "the cash needs of an elderly population often 
make them 'motivated vendors'"..... I disagree. They haven't been saving 
all their lives to suddenly decide to sell in such a hurry as they sell 
under market value. "These cheap houses are also going to negatively impact 
the rental market as this is the market that will suddenly be able to 
purchase." So you say there will be a whole new group of purchasers out 
there...you can't have it both ways. Supply and demand will keep the prices 
up. A couple of other points to consider. People have to live somewhere. 
Whether we rent or own we all need roofs over our heads. The market will 
never change that fact. Housing will not disappear because some chartist or 
fundamentalist says "it's not a good buy". Immigration has been given the 
green light to increase by 60%. I read in the IT news that 10,000 new 
immigrates will be granted residency because the IT sector is 
under-supplied with skilled resource. Back in 1987 the NZSE 40 was over 
4000, it is now only half that. I wonder what the return is on the average 
3 bedroom home, if purchased back in 87. Food for thought Regards
Malcolm
"I Trade therefore I am"
Zen Trader philosophy

Roy


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