Unethics

Indeed, I personally knew the guy… but that was 10 or so years ago.  Please don’t go asking me about him and his recently exposed behaviour in the media.

In context, it looks like he pushed it a little bit too far over the edge, particularly considering given the climate of housing unaffordability issues which really are a political hot potato at the moment. (There is no two ways about it, Australasian property prices in the main centres are way out of line relative to things globally… being other real estate markets in the world, and relative to other economic factors)

The fact that “Every investor does it”, doesn’t make it right as such.

Unethics

Tarawera Terrace St Heliers

Tarawera Terrace, St Heliers, joint (clan) acquisition. Pictures before it gets lived in. Much of my liquidity is now gone. Undoubtedly we’ve bought at the top of the market.

Semi related posts…

 

Tarawera Terrace St Heliers

Apples and Oranges

This is a “living” Post (Meaning this post will keep changing as I investigate…)

Important: Please read the disclaimer before continuing to read this post

Take one asset class… Commercial and Industrial Real Estate Investment Trusts (REIT) and then another… Direct Investment into Residential Real Estate.

It would appear that Commercial / Industrial REITs as a broad asset class has well and truly under performed against Direct Residential Real Estate investment in Auckland. But why, I’m not quite sure and hence why I am now investigating.

Points of difference I currently see (over direct residential investment)…

  • Auckland Residential rental yields are low. (3% may be 4% Gross).  REIT’s rental income are around 5-6% NET across a given REIT’s portfolio. (As a side point, other costs aside, Dividend yield is around 5-6%)
  • REITs are already inherently leveraged to some degree (30-40%)
  • Appears to be Less Work involvement with managing this.  (Managers of REIT do must of dirty work and heavy lifting as it were, Less complicated Tax Returns to file at the end of the year).
  • A minor advantage is perhaps the liquidity.  You can exit your investment quickly.

In terms of say Goodman  Property Trust (Ticker GMT on the NZX)(I use Goodman in this example because it is perhaps the REIT that I am most familiar with), There was fairly modest to significant declines in valuations from around 2009 to 2012 (where the Auckland residential market was already rocketing away).  While flat Valuations persisted until around 2014 before the valuations very very started slowly turning around and then started taking off at a modest 8% for the 2015-2016 financial year.  None of this sustained 20% year on year price increase as seen in the Auckland Residential Housing Market… Yet.

On the surface, it would appear to make some sense (for me) to invest in say the likes of Goodman Property rather than continuing to chase the Residential Property Market up, by buying another rental…

zombies

…But More to come I guess. (As I investigate further)

Disclosure: Current Investor in Goodman Property Trust (as well as other NZX listed REITs), Planning to add more.

 

Apples and Oranges

Duck test on Residential NZ property

If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.

No matter what angle I look at the whole situation (specifically Auckland’s market), it’s a bubble. If I look from the top, it’s a bubble, if I look at it from the side, the bottom, the front, even at it crooked on the piss, it’s a bubble. You consult the legion of “Experts” whom point out to you and say “see, look!” Auckland is not a bubble, and who are quick to offer their concocted explanation as to why it’s not a bubble. But even when I put my head against their straight out arm trying to align my vision with their straightened out index finger to what they are pointing out to. I see a bubble, I’m just not seeing nor registering the same as what they’re (claim) to be seeing.

Whether this holds any predictive value as to what the housing market will do next… No it most certainly does not. Looking deeper, the whole Global Financial system is just plain broken beyond any recognition.  To have a given asset class’ prices appreciating at a several fold wages, especially for the time it’s being going on for is a rather irregular event.   (In addition to that, Traditional financial analytical models such as those found in Fundamental analysis and especially Technical Analyst just seem to hold little weight these days)

The (so called) bubble will perhaps only (so called) “burst” when no one is looking and the nay sayers have stopped saying “nay”, the legion of masses who missed out finally cease continually wailing “bubble” at the top of their voices and resign themselves to high house prices (“Acceptance”), right at that point (perhaps) the rug may or may not suddenly be pulled out from under the frothy market by some invisible hand.  Just like the Oil market, the commentators were saying that Oil will never come down, propped up by China’s growing middle class.  It was when cries for government intervention ceased and had given way to “acceptance” (that Oil was going to stay high) by the masses, eventually the media got sick of reporting on it, Oil pricing silently slipped out the back door and went south (rapidly) after period of price pattern consolidation.

And as a further side note, perhaps in a rather jaded way, those crying foul at the house prices (being the commentators who flood sites like interest.co.nz) are perhaps unwittingly helping to fan the bubbly house euphoria.

Duck test on Residential NZ property