Property Investors are Getting Burnt and so are their Properties
“Natural growth” / “external growth” what are they, and how do they relate to the rise and fall of property?
It is now very apparent that many investors have no idea what the words mean as the large number of fire sales confirm.
Look what happened in the Auckland CBD, and will happen in other areas if the path of “natural” growth is not factored in. Back in the day when students flocked to the CBD from around the world to study, the apartment industry started to flourish, then a dash of greed was added to the mix, as supply and demand exceed growth, a little more greed was added. The apartments became smaller and smaller and next thing investors were paying top dollar for a shoe box, they were blinded by the returns and flocked from around the country and from shores far away to feast on the returns forgetting they were now on a different path running like hell towards a cliff that would see their net worth plunge by thousands if not hundreds of thousands of dollars.
Was it greed that was their undoing? Yes in part (building too many smaller low cost apartments for students to maximise returns) relying on external growth alone rather than factoring in an element of natural growth (build a good mix of apartments) that is what caused the first cracks to appear and from then on the fires started to burn and many are still smouldering.................................
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