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Textbook Thinking Is Now Largely Obsolete: What Lies Ahead In 2011

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Contributor:
Brian Dalley
Brian Dalley

Well another year draws near to end with an unblemished record. For over a decade, my predictions have been right on the nail.

Justification for being a little smug? Not really.

Anyone could have done the same if they had chosen to use the same way of analysing the information as I did.

Textbook thinking is now largely obsolete in the real world because so much has changed since the books were written. People, their ideals, the market, how the world markets affect each other and the emergence of terrorist activity have all but ended textbook theories.

If your advisor is telling you to base your decision on past cycles beware as they may be a little deluded…

“The definition of insanity is doing the same thing over and over again and expecting different results.”

2010 tracked on and closed as predicted, the market largely held its head above water but made very little forward momentum. But then again, property values did not sink to the depths as some predicted they would.

Property Investors started to procrastinate as they took heed of tax changes that lay ahead and this did surprise me, as there are some very good opportunities out there for the cash rich.

For example over the past few months, I have seen land prices reduce like never before. In fact, it is hard to recall I time when they did reduce, apart from the last recession.

Then those that are cash rich generally prefer term deposits and the like. Even though returns are generally a lot less than investing in property some say the guaranteed return outweighs the difference but I still find that a little hard to fathom.

So considering 2010 didn’t live up to the expectations of some, yet offered a lifeline to others in the form of lower than expected interest rates, what is installed for home owners in 2011? The answer will no doubt be debated vigorously by commentators fighting for headlines.

Sadly, for those working in the real estate industry, I feel 2011 will largely mirror 2010.

I do expect there will be an increase in activity, but in saying that I do not expect there will be any records broken. - Remember my assumption is based on data to date, unfortunately we now live it a world of unpredictability as radicals and terrorists alike can bring the world to its knees overnight. Naturally I hope just like everyone that such attacks are few and far in between.

As far as Interest rates go, we will have a much better idea on what to expect after Boxing Day when seasonal spending has ended but I feel one can with an element of safety expect the floating rate to remain much as it is for a few months yet.

It may very well be the middle of the year or soon after before we start seeing interest rates start to creep up a little but in my view we are not out of the woods by any means. The economy still hasn’t recovered and is likely to take another year or two before we see balance restored.

So am I predicting doom and gloom for 2011? Not at all.

For those that think there is a money tree on every street corner, and it is the form of real estate, they may have to change their way of thinking to reap the rewards.

A money tree will always be a money tree but to expect it to produce year after year is surely unrealistic. A little down time is sometimes required to rejuvenate growth.

To those that have read and commented on my blogs throughout the year, the Team at PropertyProfit would like to take this opportunity to - Thank You.

Have a safe and joyful Christmas. May 2011 brings you closer to your goals and dreams.

Cheers, Brian and Team at PropertyProfit

Brian Dalley is a former NZMBA Mortgage Broker, Property Investor, and Real Estate Agent with over 15 years experience in the industry. You can read more of his and other professional’s views and opinions on his website www.propertyprofit.co.nz.

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