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One of the disadvantages of being relatively new to the investing scene is that I haven’t lived through several property cycles so I am not able to take that historical experience and overlay it on to today’s situation.  However I do try to pick the brains of the older hands and I find a very common theme.

1. They virtually all think a slump has been coming for some time. Many expected it 3 years ago.
2. They virtually all think we will see significant drops in value and a return to 10% yield in places like Auckland.
3. None of them can intelligently explain why their historically based predictions have not happened yet.

1. Look at the obvious data and make intelligent decisions.
2. Ensure we have rules that will keep us as safe as possible regardless of what may occur.

So to deal with 1, what is the obvious data??
Well the things I am making my investing decisions on are:

• The baby boomer population bubble is real.  It is not some ploy dreamed up by property investors.  It is a real situation that has NEVER EVER occurred in NZ history before.  This block retirement/death situation MUST create a chronic workforce shortage.
• We are losing skilled people to Australia in their droves, due to their better government policies.  However our immigration figures are remarkably robust at a time when they shouldn’t be.  This indicates to me that we are on the fringes of the workforce squeeze already.
• Interest rates and a strong dollar are not killing the property market.  Why?? Maybe it’s because there is a genuine demand for housing that is NOT going to go away.  When my parents built their house they were paying 23% interest on their mortgage.
• I was talking to a senior analyst from ANZ this weekend and he was like an encyclopedia regarding population trends recently released by Statistics NZ. Amongst other things he said that all indicators were that Auckland population would be over 2 million in the next few years, Queenstown and surrounding areas were going to double their population in the next few years, and that many smaller areas were going to have population decreases, in some areas quite significant.  Now that ties in EXACTLY with the baby boomer generation retiring to places like Queenstown, forcing people in the provinces to move into cities where the jobs are and then immigration on top causes Auckland and Hamilton in  particular to grow enormously.
  And I see in the paper this morning that; surprise, surprise, new building consents are “surprisingly strong”.

  “New housing consents for June 2007 showed a significant increase of 29% on June 2006 – the highest monthly total since March 2005. Of the 2574 consents authorized in June 2007, 561 were for new apartments. The largest regional increases were recorded in Auckland, Wellington and the Waikato.”

Well I always sing the same song when it comes to safety.  It doesn’t really matter what the market is doing, you need to stick to certain basic rules.

• Always buy well.  When we are in a the middle of a full on boom you can risk paying full price for something because it will be worth more a week later, but at any other stage of the cycle, like NOW, never, ever, ever, ever, ever pay full retail for a property.  Unless there is some twist to it like the deferred interest with Blue Peak, buying Greenfield’s in new subdivisions, buying off the plans with a deposit bond or similar, always buy some equity on purchase.
  It is not hard to buy 10 to 15% below in this market, make sure you do.
• Know your buying rules.  You have to have clear rules for your investing and stick to them.  I see many investors who set rules and then when it takes too long to get the right deal, they take the next deal that comes along, and then get into trouble.  If your rules are 10% below valuation then 9.9% is not good enough.  If you are doing reno’s then what % of the purchase price is your maximum reno cost?  You need to know it and stick to it!!
• Don’t over react to blips on the radar.  If a news item is going to cause you to change your strategy, then you don’t have a strategy.  You need to get good professional advice, whether that is seeing a professional/mentor, consulting with me or someone similar, or just taking an experienced active investor out to lunch. You must get an informed take on what the market is doing.  Only someone active in the market can tell you what is happening. I have had over a dozen people this week say this to me:  “I was going to start trading but then I heard that the government might be changing the rules on traders so I haven’t done anything”.  How sad is that!  People are staying poor because of a news item!!
• Lastly make sure you keep the main thing the main thing.  The most important things in life are your health, your family, your relationships and your spiritual well being.  Don’t pursue wealth; pursue life, love and real meaning.  Successful people are those who have made a difference in the lives of others, who know they will need a huge chapel to cater for mourners at their funeral, who have left a legacy larger than themselves. Their financial position is only one small factor in their lives.

Attention to detail can be important with property.  I have had 2 situations recently where I paid the price for being in a hurry and not thinking.  I share then with you to allay the rumours of me being invincible and to help you to not do the same thing.

Yes you can finally stop asking when will our first ever event be repeated. Dates are set. Behind Closed Doors is an opportunity to get up close and personal with Raewyn and myself about the stresses that investing puts on relationships, how to keep your head in a good space, how to set strategies and rules that work for both partners, especially when one of you is afraid or risk averse. This course is primarily but not exclusively for couples, last time we ran it many people got a lot out of it but “wished my other half had come”.

The day after Behind Closed Doors we are running a sister event to address the practical stuff people seem to NOT do!! Nuts and Bolts will take you through step by step, setting up and efficiently running an office from home. Raewyn has fantastic systems and spreadsheets, which she will give you at the event for your own use!!  Dean will teach you how to keep your deals under control through systems for filing, setting up Outlook and spreadsheets. In addition he will give you his calculators and tools for lease options, analyzing deals, trading and gearing calculators, you name it!!

Sponge Bay:
Last month we sold out the new Sponge Bay development and as expected, a few deals didn’t finalize. I found managing a waiting list to be rather difficult whilst in Fiji so this is to advise you that there are a few lots available still. Please go here, choose an available lot and follow the instructions. Strictly on a first in first served basis!! Don’t forget to read the market update at the bottom of the link page!!

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August Newsletter