Forum Archive Index - December 2001

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Jonboy,
>
>
> Having said that I would like, rather feebly,to ramp property shares. 
> Looking at the NZSE charts the thing that strikes me is that the 
> index has not gone up since 1988, but as Phaedrus points out, dividends 
> have made a big difference to investors. 
> In general the highest and most consistent dividends are paid by 
> property shares (OK I have heard of TTP). However recorded profits have 
> been hit by write-downs in property values and, in some cases, by 
> unleased space. 
>
>

I too have developed an interest in income shares in general, which 
excludes property shares in particular.  Why so?

In my experience a lot of property is over-hyped, and if you ever get 
a really well performed office block this is usually the queue for 
somebody else to build a slightly better one next door and steal your 
tenants!   Then the owner of the original office block reports that 
the original office block was "over-rented", and dividends will have 
to be reduced while it is refurbished to attract new tenants at a 
lower rental.  The reduction in yield produces a corresponding 
plummet in share price as yet another property share goes bad.

I am sorry to be so cynical, but I have seen it happen too often.  
Think back to the Auckland power crisis where a whole lot of head 
offices were moved out of the CBD and it was found the companies 
could operate perfectly well.   I have to ask the question is an 
office tower just a depreciating commodity?

With interest rates so low, and forecast to remain so for at least 6 
months, I wouldn't be surprised if the property market has peaked.  

I was in Kirkaldies a few weeks ago and noted it was packed with both 
shoppers and Christmas goods.  I am not surprised to read today 
that they want to expand.  But I wonder if buying that deserted 
centre on the Wellington waterfront is the right move?  Anyone who 
has an opinion what Kirkaldies might be up to like to comment?

If we are indeed at the bottom of the interest rate cycle, a spike 
in interest rates could spark another fall in property values.  I am 
playing a bit of a devils advocate here, so I am happy for someone to 
come in and tell me why I am wrong!
>
>
>. Of course property
> shares are unlikely to increase in value dramatically so maybe
> they are too unexciting to interest many sharechatters. Jonboy.
> 
> 
You could be right Jonboy.   Rather perversely I entered Mike 
Hudson's 'Beat the brokers' competition, not with the idea of picking 
hot stocks but just selecting a range of solidly performing 'income' 
shares, and letting the expected increase in income feed through as 
capital growth.  To my great surprise I have now edged into the top 
ten based on the end of November figures, and I am looking good to 
get to my target of 12% return for the year.  Yes, I know it sounds 
boring and not even very ambitious.  But you try getting 12% at the 
bank these days.  And I haven't had to watch my computer screen like 
a hawk to achieve it.   Any other 'boring' (as you put it Jonboy)  
investors out there like to comment? SNOOPY



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