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If Nothing Changes … Nothing Changes?

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Brian Dalley
Brian Dalley

Ever since New Zealand was hit by the world recession not one property expert has paved the way forward, instead they constantly refer to the past for explanation as to what will come. 

Apparently nothing has changed, it is still all about cycles.  A common comment is “we are at a particular point in the cycle and need to be at another point, when this happens then we will be able to …. “.  I certainly don’t share this view. 

We are currently in a recession, largely because of the idealist theories of the past, and yet we are still being told we are on the right track and we just need to wait it out until the fog clears before moving forward ounce again.

Would it not be wise to instead assume that if nothing changes … nothing changes?  You can’t change the direction of the wind, but you can adjust your sails. The sooner that decision is made, the sooner we will be back on course.

Let’s use the OCR (Official Cash Rate) as an example.  In the past one could reliably expect retail interest rates, that is your home loan interest rate, to move in unison with any changes made by the Governor of the Reserve Bank. However the goal posts have changed, not just moved, and a new set of rules applies.  One should no longer expect what happened in the past to influence future trends.

Say you are playing a game of rugby, and halfway through the game a group of workers appears and relocates the goal posts.  The field hasn’t changed, you can still play the game, but some of the rules must change.  The real estate industry is in a similar position; it has changed, in my opinion for the better.

For far too long people have had an obsessive fixation with owner occupied property, and there is nothing wrong with that so long it is for the right reason.  Soon we will see many moving away from owner occupied property and instead, dotted on the horizon will be more rental properties.

As there are no tax advantages to owning an owner occupied property wouldn’t it make more sense to rent and invest in a rental?  Many people prefer the security of their own home, as opposed to living in a rental, and that is fine if that is their preference, but one should at least consider all options.

Remember what I said about cycles, that gone are the days you could hold a property for few years, sell it and make untaxed capital gain before repeating the process.  The only reliable cycle you will see for the next few years will be the kids racing past you at the speed of light.  As for capital gains tax, there is already provision to charge capital gains tax, so don’t be fooled into thinking there isn’t.

Kiwis really do need to stop behaving like sheep and take heed of what is in their best interests.  Far too often I come across people that say they did what they did because a friend said it worked for them. When I ask simple questions such as, “why did your friend set it up that way?, what is their income?, what debt do they have?, what are their goals?”, it is soon obvious that they simply went “baa” and followed.

Think about the heading for a moment, “if nothing changes … nothing changes”.  Some experts still believe we just need to be patient and wait for the wind to change direction rather than adjust our sails and move to calmer waters.  

Can you remember the saying that had been around for years, ‘if America sensed we would get a cold?’  Well now it is they who have the flu.

I guess it comes down to who you turn to for advice, and my advice is to keep away from the sheep, they breed for a reason.  

Brian Dalley is a qualified NZMBA Mortgage Broker, Property Investor and former Real Estate Agent. 

You can read more of his views and opinions on his website

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