I thought you might like a bit of a read through some excerpts from the book; A History of Money by Glyn Davies.

The book runs from 9000BC to the present day discussing the story of the History of Money.

This little excerpt starts in 1934 with the “US Silver Purchase Act”.
The Act obliges the government to buy large quantities of silver. This raises its price in world markets to such an extent that China is forced off its silver standard and many other countries demonetize their silver currencies. Thus in the long run the Act reduces the demand for silver, contrary to the intention of its supporters.

*1934 German Banking Act* This establishes a national Banking Supervisory Board authorized to license every bank.

*1935 – c.1970* Continuous moderate inflation in Britain The general level of prices rises every year but at a moderate rate.

*1935 US Banking Act* The changes this makes in the Federal Reserve System have the effect of shifting power away from New York and the Federal Reserve Districts towards Washington.

1935 Reserve Bank of India begins operations India’s central bank is modelled on the Bank of England. c. 1935 Cowries still used as money in Nigeria.

*1936 France abandons the gold standard* The French government’s policy of a strong franc is undermined by competitive devaluation.

After abandoning the gold standard France continues to be the centre of a Franc bloc including most of the non-German European countries south of Scandinavia until the Second World War.

*1936 Tripartite Agreement* between Britain, France and the US on exchange rates The aim of the agreement is to stabilize exchange rates. It falls apart with the advent of the Second World War

So, some interesting times I’ll probably post more at some stage so subscribe and don’t miss a thing.

It’s the day after  the budget and already the doom and gloom merchants are talking about the great property crash due to depreciation being removed from property investment.

Obviously this is a great topic to focus on because there is a whole lot of misunderstanding, myths and untruths about the property investment market and it is easy to make bold statements like “the property market due to crash because of the budget”…. what a load of old bollocks.

Yes there will be some people who will struggle with keeping their investment property because the ability  to claim depreciation put some money back into their pocket which allowed them to pay the mortgage. Without this injection of cash from the government these folks will not be able to maintain the mortgage and will need to sell. That’s a fact. However think about this…will the small numbers of people (and I mean relative to the overall property market) who must sell be enough to cause the Real Estate Market to tumble? I don’t think so.

Let’s look at why.

To begin with the rental market makes up approximately 34% of households in NZ with the other 66% of people owning their homes.

We also know that on average landlords have approximately 2 rental properties each, with some having many but a lot of people have dipped their toes into the water and own just 1 rental property.

So taking that little bit of info it means that statistically we can only have maximum of 17% of homeowners are landlords and the number will actually be less than that due to the great number of people who own more than 2 investment properties.

Ask yourself this question now, of the 17% of people who own the properties that people are renting, how many will now go out and sell their investment properties for less than what they paid for them?

That’s the big question….how many of you out there will sell your investment property for less than what you paid for it?

After all that’s the definition of the property market crashing, the value of the market based on what people are paying today vs what people will pay tomorrow.

Even if 100% of property investors rushed out and tried to sell their properties tomorrow the market would not crash….. not unless those investors had to sell…that’s the kicker, if the investors had to sell, i.e someone else made the decision as to what price the property was going to be sold for as the case if for mortgagee sales, then you would see the prices drop, however if 100% of the property investors went out tomorrow to sell I doubt any of them would be saying “you know what, we paid $300,000 for this property and now we are not going to get that extra $600 per annum back from the government so lets sell our property for less than what we paid for it”….can you see that happening. I didn’t think so.

What I think will happen is that some people will panic sell….. that’s not unusual, some people will do the smart thing and visit a financial adviser who can work out for them exactly what the difference will be in costs and then work out what the best strategy is with regard to holding on, putting rents up, selling now, selling later….those people will be few and far between, some people will sit and hold and put the rents up accordingly and just like in 1984 when the Aussie governement did this watch rents skyrocket because of the following.

1. There is now no benefit having a new property over an old property when it comes to depreciation.
2. With no demand for new properties the developers will not build.
3. With no new properties coming on to the market the demand for rentals will increase.
4. With increasing demand on rentals the Rent will go up quickly just like they did in Oz in 1984
5. Property prices will increase as the yields increase and property that once was not good for investment becomes viable as a property investment.
6. Developers come back into the market as the demand for new housing makes it profitable for them to build again.

Obviously this cycle will continue with ups and downs but over the long term I still see property being more expensive to buy in 2020 than it is today.

So it’s the day after the budget, don’t go out and sell your investment property unless you already were planning on selling.

Remember one thing, the reason why investors were allowed to claim deductions is because property investing is a business and as in any business it is the user who pays. In this case it is the tenant who is the user and it is the tenant who will ultimately pay.

The herald states that this budget will cost landlords $235 million next year, I think the more accurate statement would be the budget will cost Tenants $235 million next year.

Controversial commissions paid by financial institutions to investment advisers for promoting their products will be abolished voluntarily before the government regulates them, an industry body says.

Investment Savings and Insurance Association chief executive Vance Arkinstall said under a new regime investment houses, banks and superannuation funds would stop paying commissions on any investment product including KiwiSaver.

The new policy will be signed off next week, but it could be up to 18 months before the change takes effect for some.

Instead of a commission being deducted from customers’ investments, often without their full knowledge, investors would negotiate a fee directly with their adviser.

Commission-based sales by supposedly independent advisers have always been open to criticism, Mr Arkinstall said.

The above excerpt from a news article just goes to show how far from being in touch with the real world the Financial Planning fraternity is.

The real people who need financial Planning advice, you know, the ones who don’t have hundreds of thousands to invest but would like to will not be able to afford Financial Planning advice.

When this occurs they will turn to the people who will give them advice, just like they did in Australia.

Who are those people you ask?

Those are people like Blue Chip and the like, property spruikers who will tell you that an over priced, expensive property that they have just developed is the perfect solution for retirement savings.

All I can see from these new reforms are Financial Planners providing the service to already wealthy clients and every body else being left to the sharks.

Many people are asking what will happen if the proposed tax reforms are introduced and investment property does not get as many tax benefits as before.

My simple, quick and dirty answer has always been. Rents Will Rise.

The following information pulled from From the Housing NZ (Auditor General)website will provide you with a bit more of an understanding however:

Role and structure of Housing New Zealand Corporation

1.2
Housing New Zealand Corporation (the Corporation) is the entity responsible for managing state housing on behalf of the Crown.1 It provides housing to people who are unable to find suitable and sustainable accommodation through the private sector. It houses about 190,000 people, and controls an asset portfolio of more than 66,000 state houses with a value of $11,300 million. The Corporation also works to increase levels of home ownership, and has a lead role in advising the Government on housing policy.

1.3
The Corporation’s services are in high demand. As at 30 June 2005, there were 11,458 applicants on the state housing waiting list. Of these applicants, the Corporation assessed 4288 as being of high priority for state-provided housing. Although 57% of the high-priority applicants live in Auckland, only 44% of all state houses are located in Auckland. In response to this demand, the Corporation plans to increase the number of state houses by 3164 between 2005-06 and 2008-09. Most of the additional state houses will be in Auckland.

1.4
Some of the additional houses will be built by the Corporation, and some will be buildings bought or leased from private owners. The Corporation will also reconfigure some houses to make them better match the needs of applicants on its waiting list. Most state houses are made available to applicants on the general waiting list, but some are specifically for people in rural areas, and some are made available only to providers of residential

Did you get that? 11,458 applicants in 2005 !! That was the number then  so guess what it might be now!

So lets do some maths with that information.  11,458 x 2.2. people average per dwelling (thats from the last census) = 25,000 people who need housing supplied by the state.

In 2010 the figure must be even larger and I would guess there might be 30,000 people today or 13,600 extra homes that need to be built to provide just the state housing demand – almost a years building.

Now we add to this already significant problem a bunch of nuffnuts who want to punish the private sector for providing homes either directly or to the Corporation.

There is only one way for rents to go- and that is up!

With Christmas just around the corner I thought what better time to get in some new information about finance and money and at the same time get some brownie points for buying a great gift for family members.

Books make great presents and what a great way to spend some of those Christmas hours reading a new book.

Live Well, Spend Less is a simple, practical and definitely not boring book on living well while spending less. It will appeal especially to families but also to students, flatters and fixed income households. It incorporates tips, suggestions and serious strategies but with a light hearted, easy to apply, honest approach. Covering all aspects of life there are suggestions for making money as well using less of it. The intention is to motivate and encourage not hector and lecture. It is NOT a book about investment, mortgage repayment or banking. Each chapter includes immediate as well as longer term suggestions. The immediate ideas are to capture the initial enthusiasm and motivation and longer term strategies will result in bigger savings given time or effort. Topics include: food, energy, cleaning, cars, outdoors; family life, kids and money, leisure, celebrations, looking sharp and presents.

About the Author

Sophie Gray is the face and inspiration behind Destitute Gourmet, the DG series of cookery books and www.destitutegourmet.com. She is a popular speaker and teacher on food, family life and finances, and writes regularly for Healthy Food Guide, Parenting magazine and www.simplesavings.com.au. She is married to Richard and they have two children, Isabella and Jack. Sophie works fulltime communicating the destitute gourmet philosophy from their home in Auckland, New Zealand.

Our expectations are for the Reserve Bank to hold the Official Cash Rate steady tomorrow, even though the markets will be searching for clues as to how long the cash rate will stay at current levels.

Economists and analysts from the major banks all believe the OCR will be held at its current level of 2.5 percent.

Chief economist for Deutsche Bank Darren Gibbs suggests there is little scope for surprise in the Reserve Bank’s monetary policy statement and an official cash rate review.

The focus for markets will however be on the Reserve Bank’s updated economic projections, which were last published in September, and in particular, the central bank’s implied stance on monetary policy for 2010.

It is always difficult to predict the next twelve months but some trends are starting to emerge and some earlier predictions are coming true.

I believe house prices, in the main centres, will continue to appreciate, especially Auckland which has already started to occur. This is due both to supply and demand. There are less new dwellings becoming available as there are fewer being built (especially in the apartment market), demand is increasing due to higher immigration figures, more Kiwis returning home and a natural population increase.

Interest rates will go up but in the second part of the year only as the Reserve Bank honors it’s commitment to the nation when it said it would keep rates low. The amount they go up all depends on the recovery happening, how strong it is and if unemployment is starting to fall.

Finance will be difficult to obtain for self employed, businesses and construction projects due to the demise of virtually all second tier lenders. This is a serious issue for the country and will hinder our future growth.

Each month the international credit crisis moves further into the background and hopefully next year it can be consigned to part of global economic history.

Case Study 9900 searches in NZ in July.

PIS -  437 accounting firms.

50% ???? of independent market???

2 only independent dealer groups rest are banks (top 10)

PIS biggest dealer group including banks

2500 Advisers world wide.

5 mill p.a in compliance spent in Oz