Tony Brazier

www.braziers.co.nz

Tony Brazier

The Press - Tuesday 21st April 2009

Introduction
Over the next few months Tony Brazier of Brazier Property Investments Ltd will explore the process for new, and experienced, property investors of getting into the residential investment property market covering how to buy, manage, and sell residential investment property in New Zealand.

Timing Vs Time In

As property investors we'd all like to think that we can time our entry into and exit from the market to best effect. The truth be known we are not very good at it. Out natural fear and greed motivations usually make us hold on too long and hesitate too much. What tracks as a property giving 10 or 11%pa compounding growth over time ends up being a single digit gain for an investor who exists and /or enters with the wrong timing.

Ten years ago, we had a similar ‘bear' market but it did not stop investors buying due to a far better array of property being available in such times. Although the market slipped back approximately 10% over the next year or two, by 2001 all of that lost growth was made up in a matter of months, and some. We have the same market now. Economists are predicting tightening in the housing market until the end of the year when housing shortages, nett migration and low interest rates will stabilise, if not drive the market once again.

The temptation, having received a late Christmas present from Dr Bollard of 1.5% decrease in OCR, is to wait for more reductions over the next three months. Experience tells us that vendors start to take their properties off the market when;

(a) they can re-finance at a much lower rate and
(b) the deposit rate they looked to enjoy has just disappeared.

Even before this latest OCR cut we were seeing old clients emerging from the depths, along with new bright eyed investors, tempted by the fact that many ‘sticking' properties are suddenly starting to look good.

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In fact those giving 7% gross return will soon be self funding when the banks have their new round of adjustment to the OCR rate. We haven't seen this for four or five years, at least. If interest rates do settle for investors at 5%pa we will see a regime that has not been available to us since post WWII. I started when they were 26%.
At the end of January it was reported that $12 billion in loans had already been broken. With even lower rates, even more will be broken, freeing up millions of dollars for repayment or re-investment. This is, of course, the intention to stimulate the economy but what will also happen is those with money already on deposit will have to start thinking seriously about a better place to put their funds. Property investment becomes a real choice for anyone who has freed up money due to a growing shortage of housing (due to lower building activity) and an increase in people choosing to rent as an option (due to needing a 20% deposit to purchase).

One habit we see forming among our investors that has merit for young homeseekers as well, is to put their freehold house up as collateral to get their grown-up children onto the property ladder. With a reasonable income and the best interest rates we've seen in decades, the time is ripe for this.

Our advice to our buyers is not to try and pick the perfect time to enter the market. Generally it went by three months prior. Buy where there is a good selection, available, float the mortgage if you wish, but don't wait until vendors change their minds about selling, because once this happens the market starts to tighten up with more competition for what is available.

Footnote:
Tony Brazier has serviced residential investors in Christchurch for over 21 years and runs two real estate companies under the brand of Braziers specialising in the sale and management of this type of property respectively.