Quotes

“Live your life each day as you would climb a mountain. An occasional glance towards the summit keeps the goal in mind but many beautiful scenes are to be observed from each new vantage point.” *Harold B. Melchart

“The need to be right all the time is the biggest bar to new ideas. It is better to have enough ideas for some of them to be wrong than to be always right by having no ideas at all.” *Edward de Bono

“It is in giving that we receive.” *St. Francis of Assisi

“If you limit your choices only to what seems possible or reasonable, you disconnect yourself from what you truly want and all that is left is a compromise.” *Robert Fritz

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Market shift bring opportunities and threats for investors

Property investors can’t expect to generate easy equity from rising house prices in the current market.
By Andrea Milner

The latest ASB housing confidence survey reveals price expectations have dropped back to similar levels as the lows early last year.

ASB economist Nick Tuffley says property investors need to be aware that prices will trend up over the long term, particularly in areas with high population growth, however over the course of the property cycle, “you get times where property prices do nothing spectacular”.

“We are heading into that part of the cycle at the moment.”

“You can’t really expect capital gains year in, year out,” Tuffley says.

Realistically, he says, house prices can probably average 5-6% growth in the dollar value over the long term.

“There haven’t been any fundamental shifts in the economy that mean house prices could keep rising at the same rates as they have over the last five years.”

This is the time of the market where those doing “quick flicks” run a greater risk than normal of coming unstuck, Tuffley warns.

The flipside of a slower market, he says, is that a lot more opportunities arise. “The people likely to sell are those who need to, so for property investors in a good cash position there is the potential over the next year or two for there to be some decent bargains.”

The market has shifted in a relatively short space of time, Tuffley says, and property investors trying to lighten their portfolio might have more of a struggle than they would have at the start of the year to achieve the same price. On the other hand, those buyers pushing for harder bargains will have more of a chance of succeeding with that strategy.

There needs to be some sort of correction in the housing market of the ratios between incomes and house prices and rents and house prices, says Tuffley. “If you’re investing in a rental property, you need to cover the expenses and get sufficient rent to service the mortgage off the people who can’t afford to buy, in order to make the sums work as a property investor.”

Overall he predicts a mild correction. “Areas where you tend to find booms and busts are the more manic-depressive parts of the country where you’ve had very sharp gains coming in a very short period of time. The Auckland CBD market looks as though it has a little further to correct. Queenstown potentially “is a bit of a risk” and rural areas where price growth has been the strongest relative to the cities could go through more of a slowdown than other areas.

“However any areas remotely connected to dairy farming stand to do pretty well.”

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This entry was posted on Monday, November 26th, 2007 at 6:00 pm and is filed under Real Estate, Millionaire Mindset, Business, Entreprenuership, Wealth Creation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.