Forum Archive Index - June 2001

["Breadmore, Malcolm" <BreadmoM@anz.com>]

Michael
As a matter of fact I did get out of bed on the wrong side, and agree that I
was quick of the mark. I certainly don't want to put anyone off as all
discussion on this forum, on these topics should be actively encouraged.

I am pleased however that this has raised so much feedback on this subject,
and getting the multitudes of opinions from the chatters was enlightening as
always. 


Some points to note:
House prices are still going up. Check all accurate reality statistics. 
All my investment properties are highly geared and are positive cashflow.
This means that even if there is no capital gain, my assets are still
growing because someone elses money is paying them off.
I am a chartist at heart (go Phaedrus) and regard historical trends highly.
Housing is still in an up-trend. I can't pick the tops or the bottoms, but
with housing, I won't wake up one morning and find house prices have dropped
10% over night as we often do with shares. Housing charts are not volatile.
So anyone that does a little bit of analysis can spot any danger signs
quickly.
How much effort goes into property management??How much effort goes into
analysis of shares?? Big question with lots of variables, but the more time
you spend, the better your return is.... the general rule of both investment
vehicles.
Remember even if the value of an investment property goes up 0% over
inflation, and you have a positive cash flow paying off the principle part
of the mortgage...you are still gaining capital.



regards Malcolm (disc own property and shares....prefer property :)




-----Original Message-----
From: Michael Gore [mailto:michgore@paradise.net.nz]
Sent: Friday, 22 June 2001 5:26
To: sharechat@sharechat.co.nz
Subject: Re: [sharechat] Property Vs Shares


Malcolm,
Did you get out of bed the wrong side this morning???  Your treatment of
David is harsh and a little unfair I think.  New contributors to this forum
need to be encouraged not flamed.  There is no need to start off with "I am
amazed at your ignorance on this subject".  Some points of your own could be
scrutinised.  Firstly you say that someone has to own the houses whether it
is you or an investor.  Surely though an investor will be much more cold
blooded about the price to pay for a prospective property and will not pay a
premium for the feeling of owning your own place like many homeowners.  You
say "I don't think so" in response to David pointing out that rate of home
ownership here is comparable to Kenya and Bangladesh.  So where are YOUR
figures??  True you make a valid point regarding the growth in value of
houses since 1987 compared to the NZSE but with an eye to the future not the
past, David has pointed out that many potential first home buyers are now
leaving tertiary education with significant debt and baby boomers may just
be selling out of their 4-5 bedroom homes in the next couple of decades.
These are NEW developments to consider which haven't been a factor in the
residential property market until recently and which you ignored. You say
there are a lot of self serving people in this forum actively pumping their
own interests.  Sure this has happened but I haven't noticed much certainly
not lately.  Mostly seems to me there are some very generous people in here
sharing information and ideas.  I hope David continues to contribute.
regards  Michael
P.S.  We need "newbies" in this forum.  Many an ignorant newbie including
myself has asked a silly question which has sparked of intelligent debate by
experienced contributors to the edification of everyone.

----- Original Message -----
From: "Breadmore, Malcolm" <BreadmoM@anz.com>
To: <sharechat@sharechat.co.nz>
Sent: Friday, June 22, 2001 9:44 AM
Subject: RE: [sharechat] Property Vs Shares


> David
>
> I am amazed at your ignorance on this subject. You seemed to have done a
wee
> bit of research and from that research drawn completely incorrect
> conclusions.
>
> 1. Someone has to own the houses whether it is you or an investor...they
> need to be owned.
> 2. If you don't own them, an investor must own them. If an investor buys
an
> asset they need a return on their dollar. Up goes rent.
> 3. You compare us with Kenya and Bangladesh.....I don't think so
> 4. The median house price in NZ has dropped in the last couple of
> years.....last couple of years. Tell me what was the NZSE40 back in 1987
> 4000+ what is it now 2000 (do the math on this one)......and what was an
> average 3 bedroom home worth back in 1987 and what is it worth now?????
> 5. Would you buy shares that were performing badly??...no. Nobody in their
> right mind buys property the preforms badly either. As an investor you
would
> only buy an asset that has a low cash flow if it has a high capital gain
> potential...Just like shares.
> 6. Your point about NZers not being able to afford homes is catch 22. They
> must then rent homes. Investors love this. Have you seen the cost of
housing
> in other well developed nations????? You will be surprised as to the
amount
> of "up-side" to go in NZ yet.
> 7. Shares are risky...so is property. The higher the risk the higher the
> return. But I would prefer to throw a dart at the property press and buy,
> then throw a dart at the share market and buy.....I know which would be
more
> "risky".
> 8. Have you being reading this forum for long?? There is some great stuff
in
> here and there is also a lot of self serving people that actively pump
share
> prices up..just so they can sell. IT HAPPENS IN EVERY INVESTMENT CATEGORY.
> Everyone hopes for a bigger fool sometimes. You job is to weed out the
hype
> and make sensible investments that suit you own criteria.
>
> Short sighted people annoy me too.
>
> Malcolm Breadmore
>
>
> -----Original Message-----
> From: David Mitchell [mailto:david_mitchellnz@yahoo.com.au]
> Sent: Friday, 22 June 2001 6:00
> To: sharechat@sharechat.co.nz
> Subject: [sharechat] Property Vs Shares
>
>
> I was pleased to see the recently released taxation
> proposal recommended taxing home ownership. I support
> this idea because I believe too much of our countries'
> capital is wasted in residential property, as opposed
> to the economic growth which could be generated by
> investing in growth industries.
>
> I believe this is one of the reasons why the standard
> of living in New Zealand has declined VS OECD
> countries over the last two decades. It is a
> well-known fact that New Zealand has a high proportion
> of home ownership, however, I think many people would
> be
> surprised to know that other countries with a similar
> high proportion of home ownership include very poor
> countries such as Bangladesh and Kenya. No doubt this
> has somthing to do with a lack of investment in
> economic development.
>
> I have never understood the attraction in residential
> property as an investment, (however I have no problem
> with purchasing it as a form of consumption). For
> example, using REINZ statistics, the median house
> price
> In New Zealand has fallen from $153,466 in January
> 1998 to $133,766 in May 2001, and these figures aren't
> even adjusted for inflation!! Also, the rental return
> of residential property, in major centres, is only
> around 3% to 6% before expenses such as rates, with
> investors relying on capital gains to justify their
> returns. But as has been shown, there is no capital
> gain, only capital loss!! Another thing that puts me
> off property is that the interest to pay for your
> first house is not tax deductable, whereas if you
> borrow to invest in business or shares, it is.
>
> Some of the major demographic trends occurring in New
> Zealand do not bode well for property. It is predicted
> that New Zealand's population will be stagnant
> over the next century, along with all other developed
> countries, so where is the growth in demand for
> housing going to come from ? I also saw recently in
> the
> media that around 10% of New Zealanders owe $4 billion
> in student loans. Because of this burden, many people
> will delay, or forgo altogether the purchase of
> a house. Another frightening scenario for homeowners
> in the baby boom generation is that this group has
> planned to pay for their retirement by releasing the
> equity in their home, perhaps all at the same time.
> This will have disastrous consequences for the
> property market.
>
> Well, I am a younger person who has recently completed
> uni, and I never intend on buying a house because I
> think it is a very undiversified position to be in. I
> much prefer shares because of the higher returns and
> ability to diversify. One argument is that you can't
> borrow money to invest in shares like you can in
> property, this is in fact wrong because you can
> through margin lending at similar interest rates.
> Another argument is that shares are too risky, however
> let's say you own a house near where you work and your
> firm goes out of business, affecting the local
> economy, affecting house prices. So you've lost your
> job and money in your house in one blow. How
> undiversified and risky is that !!
>
> The media says that around 70% of New Zealanders'
> assets are in residential property. 70% of our funds,
> sitting around doing nothing, hoping for a greater
> fool to buy it. Wake up New Zealanders, this is why
> our wealth is declining as shown in the Westpactrust
> Net Wealth surveys. The majority of us are borrowing
> overseas currency to buy something which is declining
> in value, employs no one and creates nothing. This is
> one sure method of wealth destruction. This is stupid,
> and New Zealanders should be discouraged from this
> behaviour through taxation.
>
> So it annoys me when short-sighted guys, protecting
> their own interests, like Rex Hadley of the REINZ say
> things like "We are encouraged to see the leaders of
> all the major political parties rule out this radical
> proposal"
>
> David Mitchell
>
>
>
>
>
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