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How to Pay Down Your Debt and Invest at the Same Time

admin — Tue, 07 Feb 2012 22:40:41 +0000

Ramit Sethi is a New York Times best-selling author and creator of one of our favorite personal finance sites, I Will Teach You to Be Rich. In his weekly video Q&A, Ramit answers common questions about personal finance, careers, and more. This week: What’s the best approach for paying down debt while also investing your money?

Chris from San Francisco asks: “I’m 30, my student debt amount is just below the amount of my annual salary (5.375% interest). Should I be trying to eliminate this debt at all costs or continuing to save for retirement, emergency, living life and pay off debt equally?”

There are three potential answers to this question:

The mathematical answer is to put your money where it will have the biggest impact. If your debt interest rate is lower than what interest rate you can expect from investing, pay the minimum on the debt each month and invest the rate.

The emotional answer is that for many people, they hate having debt of any kind, so even if they’re paying off low-interest debt, it still makes sense for them.

The hybrid approach is to split the difference: Pay off some of the debt and invest some. A nice compromise.

Many people scoff at the emotional or hybrid solutions, not understanding that personal finance is about more than simple math. But it’s clear that psychology and emotions play a huge role in money. If they didn’t, we’d all spend less than we earned and construct a perfect asset allocation.

If you feel strongly about the mathematical or emotional answer, your answer is clear. For everyone else—which turns out to be most of my readers—I suggest a hybrid approach.

One more thing: Surprisingly, the most important step isn’t finding the optimal balance between paying off debt and investing. It’s automating your money so you don’t have to think about either. Six months from now, you’ll be shocked at how much you’ve paid off and invested.

Ramit Sethi is a New York Times best-selling author who writes about personal finance, psychology, and careers. Learn the word-for-word scripts to negotiate your salary, lower your cable fees, and earn more money at http://www.iwillteachyoutoberich.com/.

via lifehacker.com

The best explanation of the US economy I’ve heard

admin — Sun, 18 Dec 2011 09:39:05 +0000

At least twice a week I get recommendations in my inbox to invest in US property and for the last 2 years I’ve been writing blogs explaining why I would avoid investing in the US at present.

I recently wrote an article explaining how the American property markets are sinking.

Today I’d like to share with you something I received in an email that’s the best (and simplest) explanation I’ve seen on what’s going on in the US economy.

Look at it this way…

- U.S. tax revenue……. $2,170,000,000,000

- Federal budget………. $3,820,000,000,000

- New debt……………… $1,650,000,000,000

- National debt…………. $14,271,000,000,000

- Recent budget cut……. $38,500,000,000

Now, let’s remove 8 zeros and pretend this is a household budget…

- Annual family income………………….. $21,700

- Money the family spent………………… $38,200

- New debt on credit card……………….. $16,500

- Outstanding balance on credit card… $142,710

- Total budget cuts…………………………. $385

This put things in perspective, doesn’t it?

Not the ideal household budget is it?

Just to make things clear… I have long term confidence in the US and its level of entrepreneurship and the American economy will eventually rebound. It is expected that the number of millionaires in the US will almost double in numbers by 2020.

And while there is not “one” US property market, most are in the doldrums, especially the low end ones that are being promoted to Australian property investors.

After considering cash flow, capital growth, tax implications, financing options, the currency risk and all other factors, investing back home has a better chance of being more a profitable, more predictable and more manageable option.

via propertyupdate.com.au

10 Top Budgeting Tips

admin — Wed, 14 Dec 2011 08:43:17 +0000

1. Don’t see a budget as being about what you can’t have, but instead, working out what you can afford.

2. Don’t deprive yourself completely. Factor in the odd treat, otherwise you will never stick to your budget.

3. Don’t use ATMs, or only use them once a week.

4. Leave your credit card at home; the less temptation, the better.

5. Only shop when you have to.

6. Shop during sales, especially for major purchases.

7. If you see something you want, look at your budget first. If you can, save the money rather than use credit.

8. Pay your bills on time. You can save hundreds of dollars a year in charges.

9. Go back through your bills and work out where you can cut costs.

10. Don’t be afraid to ask for a discount.

Real Estate Investing Off-the-plan

admin — Mon, 12 Dec 2011 20:40:22 +0000

There have been several short reports for public consumption of late, discussing off-the-plan buying. Most have been masquerading as buyer tips or advice, but they take a very pro-developer side of things.

Now, without wanting to peeve too many of our developer clients – we have helped, after all, over 550 new residential developments (nearly all of which involved pre-selling) come to fruition over the past 15 years – below are my thoughts as to what a buyer should be asking when considering buying a dwelling before it has started construction.

I haven’t bothered to comment on the obvious here – stamp duty concessions; building depreciation; potential for growth before settlement (don’t we all wish!); time to sell your house or other investments or even the need to match the dwelling type to demographic/economic demand – but have touched on some less covered ground.

There can be great benefits to buying off the plan, but inherent in such purchases is risk.

One of the biggest risks is that the project is cancelled – or that the completion date will be delayed for lengthy periods of time, during which you may be required to commence paying fees without the ability to live in or rent out the property.

Another risk is that the development will not be built to a high enough standard to reflect the price you paid.

A third risk – which applies to investors – is that your property won’t attract the actual rent and yield you were told it would.

It is important to do your own homework in order to limit your risks – ascertain information regarding the property you are interested in and comparable sales/rents in the area. It is also important to seek legal advice regarding the terms of any contract. Okay, now that the basic caveats are out of the way, here we go.

Risk 1 – the building is late or doesn’t happen

Right off the bat, a buyer should question the number of sales being reported. A fast sales rate, with only a few remaining for sale, is one of the oldest spruiks in the book – it’s project marketing 101.

It used to be that a new off-the-plan dwelling sale was only reported as “sold” when a contract went unconditional, the full deposit was paid and all the necessary documentation was signed by both parties. Too often today a “sale” is reported, based on a holding deposit only – sometimes as little as $1,000.

One service my business conducts is “mystery shopping”. We send buyers to new projects to critique sales techniques and to ascertain the real sales status. Often, and increasingly of late, our mystery shoppers have been able to purchase “sold” stock. Sometimes up to a third of the sales claimed to be made had not really occurred at all.

In addition to challenging the number of reported sales, a buyer should also ask if the proposed project has all the necessary development and building approvals to go ahead.

Another good thing to query relates to multiple sales being made to the same buyer. Also, ask if any sales have been made internally i.e. to people directly associated with the development; and whether any of the reported sales actually reflect unsold stock taken off the market.

A buyer should also question the time period for the reported sales. Often developers will “soft” launch their new project to interested buyer groups many months before going to the open market. Many of the sales might have been made during this period, yet the sales spruiking is often based on the public launch date. Don’t always believe the “50 sales made in the first two weeks” or similar headlines. Fifty sales might have been made but our experience is that they took many months, if not up to a year, to make.

Finally, in relation to this first risk, a buyer should ask about the financial conditions needed to be met before start of construction. And although somewhat obvious, too few ask about the exact planned start and finishing dates.

Risk 2 – building standard

First and foremost, make sure you know the answers to these questions: Who is the developer and/or builder? What are their track records? Have they developed/built buildings before, and do they have any history of being sued over defects?

Also important is to check that the three-Fs (fixtures, fittings and finishings) in the display and printed material are guaranteed. Beware of glossy leaflets with annotations along the lines of “artist impression” and “subject to change or availability”.

Ask, too, whether the construction will merely meet Australian standards. These standards are, in the main, inadequate for the realities of modern urban living; and in particular, for those residing in large apartment complexes. You are better off paying for higher than the prescribed building standard.

Risk 3 – rent and return

Paramount questions when building an off-the-plan apartment or townhouse are: Who will manage the complex? What is their track record? And under what circumstances could these arrangements change?

Sometimes the management rights are sold early in the piece. That is okay, as selling the rights to manage a complex forms an integral part of a developer’s income stream. But you should be told who they are and make sure that you have full voting rights at the first AGM.

Whilst many buyers ask how much the body corporate fees are; like they do with council rates; too few ask for a breakdown of the body corporate costs. Nor do they ask about cost projections.

Also, make sure that your view – for which you will pay a premium – is unlikely to be blocked by any future development. And also ask an independent agent for their opinion on the suggested rent.

In most cases, you will receive honest and satisfactory answers to these questions. But in those rare examples that you don’t, our experience is that it might be best to move on.

via matusikmissive.wordpress.com

I awaken with a grateful heart to have the gift of another day

admin — Mon, 12 Dec 2011 06:43:04 +0000

via flickr.com

House of horrors?

admin — Mon, 12 Dec 2011 03:57:21 +0000

According to The Economist, Australian house prices are more overvalued than the US housing market at its peak.

According to the economic journal, there are two ways to track valuations: price-to-rent ratio and price-to-earnings ratio. Just as a share price reflects a company’s future profits, house prices should reflect expected return. If both measures are well above their long-term averages, then the property market is overvalued.

Australian house prices, The Economist says, are 53% overvalued relative to rental return and 38% overvalued relative to income. Australia, today, has more household debt than America at its housing-market peak, which leaves it – again according to The Economist – more vulnerable to a credit crunch, higher mortgage rates or a recession which drives up unemployment. Either of which, The Economist says, could send house prices tumbling.

What balderdash!

I am not referring to the premise that a credit crunch, higher interest rates or rising unemployment would have a negative impact on the housing market, but rather the two measures used by The Economist to measure housing value.

According to our most recent Matusik Snapshot (Matusik Snapshot 499 – House price update) – how could you not subscribe ? (Snapshot Subscription form 24 issues $100) – Australian housing is becoming quite affordable again. Falling end prices, coupled with falling interest rates and rising household incomes, have now made housing across Australia – and especially in Queensland, Western Australia, South Australia and Tasmania – much more affordable. For example, it now only takes 30% of household income to buy the median priced dwelling in Brisbane, even less in Perth, Adelaide and Hobart.

Prices are starting to get to the point where people will start buying again. That doesn’t mean that prices will necessarily rise quickly, but they are unlikely to crash as strongly suggested by The Economist.

The Economist’s other housing value measure – the ratio of average house prices to average rents model – is seriously flawed.

There are several logical reasons why our house price to rent ratio is high; the sum of which dismisses The Economist’s claim.

Now, as recently outlined, the value of investment property (that is, stock held by investors) should be determined by its return (i.e. rent) but not owner-resident or even secondary homes. Why?

Close to 70% of Australia’s dwellings are held by owner-residents, of which half are owned outright. A third of Australia’s dwellings are held by investors and are rented out. We can sell our principal place of residence tax-free. Investment property is subject to capital gains tax.

In addition, two-thirds of the Australian housing dollar is spent on renovations, a trend which has accelerated since the introduction of GST on new dwellings about a decade ago. We estimate that close to 80% of this renovation money is spent on owner-occupied homes.

In contrast, very little is spent on improving investment dwellings. Improvements to Australian investment property are done to increase the rental return, not necessarily the sales price.

Given the current tax laws, it makes good economic sense for owner-residents to improve their homes. Hence, there is a large difference between the price of owner-occupied homes and investment property across Australia. Many rental properties sell for prices in the mid-to-high $400,000s. Most owner-occupied properties sell for much more, with close to 70% selling for prices over $500,000 and near to 40% selling for amounts in excess of $600,000.

Owner-residents generally prefer detached houses over attached stock. The reverse is true for investors. Attached stock is, more often than not, cheaper than detached housing. More renters live in attached stock than detached product. This further exacerbates the reason why end prices – when pooled together – far exceed rents in this country.

So there is little wonder that the average price of Australian houses is much more than the average rent. Our rental stock is inferior – for the most part – to the dwelling stock held by owner-residents. A simple drive around any of our cities will illustrate such.

A house of horrors it is not!

via stocktrader.co.nz

The RBA’s Plan to Make You Happy

admin — Wed, 27 Jul 2011 09:24:04 +0000

“To return to the first of my two charts, the current divergent trends between income and consumption spending are no more sustainable than the previous trends ultimately were. At some point, the two lines are likely to stop moving apart.”
– Glenn Stevens, Governor, Reserve Bank of Australia

Is this the Reserve Bank of Australia (RBA) admitting there was a credit bubble?

Seems that way to us.

Finally confessing the credit boom during the 1990s and 2000s was unsustainable.

But here’s the thing…

The credit boom really kicked off in the 1970s. It picked up pace through the 1980s. Exploded in the 1990s and 2000s. And then burst amazingly in 2007 and 2008.

By our figures this unsustainable credit boom lasted nearly 40 years.

Yet the current period of slow credit growth has lasted… two years.

And think about it. Credit is still growing… just at a slower rate. This makes us wonder…

Unwinding the credit boom

If it took 40 years for the credit boom to burst, what’s to say it won’t take 40 years for the credit boom to fully unwind?

Look, we’re not saying it will take that long. It could happen sooner. And it could happen later. But the way we look at it is there must surely be an equal and opposite reaction to the boom.

The equal and opposite reaction to the credit boom of the 1920s was the Great Depression of the 1930s.

Remember how that turned out?

Clearly the RBA wants to paint a rosy picture. After all, they’ve taken the credit for Australia’s strong economic growth. And they’ve taken credit for supposedly steering the economy through the 2008 economic meltdown.

If the RBA now says things will go to pot for 40 years, well, how will that make them look?

Not good.

So, they have to say what all bubble deniers say: there won’t be a crash. Instead they talk of a “soft landing”… the market will plateau for a while before… it takes off again.

This the RBA think will make you happy. As Mr. Stevens noted:

“Suffice to say that this is, at least potentially, the biggest gift the global economy has handed Australia since the gold rush of the 1850s. Yet it seems we are, at the moment, mostly unhappy.”

A happy consumer is a spending consumer. And a spending consumer needs more credit. Which is exactly what every banker wants – re-ignition of the boom.

Mr. Stevens also said:

“If we want to sustain the rate of growth of incomes, and hence lay the basis for a return in due course to the sorts of growth of spending seen in the golden period of 1995-2005, we will have to look elsewhere.”

What he’s saying is Australia can’t expect the commodities boom to give the economy the same rapid boost as last time. That even if the boom continues the rate of the boom’s growth won’t. That makes sense. We’ve no quarrel with that.

The argument we do have is that the Australian economy can come up with another boom that will provide similar growth rates.

No magic pill to refuel the boom

Mr. Stevens thinks he has the answer: improved productivity.

Here’s what he said:

“The thing that Australia has perhaps rarely done, but that would, if we could manage it, really capitalise on our recent good fortune, would be to lift productivity performance while the terms of trade are high. The income results of that would, over time, provide the most secure base for strong increases in living standards. That sort of an environment would be one in which the cautious consumer might feel inclined towards well-based optimism, and re-open the purse strings.”

It’s tempting to say we admire the optimism. But we don’t. Instead we despair at the ignorance.

In all honesty we can’t see where the productivity will come from. Put simply, productivity comes from innovation. But innovation only happens if there’s investment. And the ability for entrepreneurs and business people to take risks.

Trouble is, investors and entrepreneurs will only take risks if they believe they’ll get a reward for the risk-taking.

If they believe red-tape and other factors will rob them of a reward then why bother investing or taking the risk.

Besides, the best productivity gains are in industries Australia has in short and falling supply – manufacturing and technology.

In other words, it’s hard for Australian firms to innovate and improve. Not to the extent needed to create another economic boom anyway.

The productivity numbers don’t stack up

You only have to look at one of Australia’s biggest sectors – the retail sector – to see the problem. According to the Sydney Morning Herald:

“Retail sales currently account for around 18 per cent of Australia’s $1.3 trillion in annual gross domestic product (GDP), but that is down from 23 per cent before the global financial crisis.
“The sector is the second-biggest employer with nearly 10 per cent of all jobs. But again its share has fallen in the last few years with health, professional and mining employment growing far faster.”

You could argue retail employers have tried to increase productivity by cutting jobs. But it hasn’t worked. Income for retailers has dropped five percentage points in just three years.

The fact is, without credit growth and an innovative economy, consumer sectors can’t grow.

That means if the retail sector is dragging its heels, other sectors will need to pick up the slack. But when you remember that all levels of Australian government make up around 30-35% of the economy, you’re relying on less than 50% of the economy to provide the productivity growth.

That won’t and can’t happen.

But even if there is some productivity growth, it won’t be enough. Certainly not enough to repeat the “golden years” of the 1990s and 2000s the RBA yearns for.

That means lower asset prices. It means lower wages growth. And it means a shrinking Australian economy. And that’s even if the resources boom continues!

When you hamstring an economy with red-tape, fixing it isn’t as easy as hoping for more productivity…

Investment and innovation is the key. Unfortunately, there just isn’t enough of it in Australia to keep the economy ticking along at the growth rate the RBA would like.

Cheers.

Kris Sayce
Money Morning Australia

Gold’s Hidden Clue

admin — Fri, 08 Jul 2011 11:56:03 +0000

Gold’s Hidden Clue on the State of the Market

“Gold has got a negative correlation to bonds, it has got almost no correlation to equities…” – Ronald Stoeferle, Erste Group Bank, AG

Mr. Stoeferle is betting on gold to hit USD$2,300 per troy ounce.

We agree. Keep buying gold.

Today it’s USD$1,526 and AUD$1,428 per ounce.

His point on gold having no correlation to equities is important. As the following chart shows:

Source: Google Finance

The blue line is the U.S. S&P 500. The red line is the U.S. SPDR Gold Trust [NYSE: GLD], a gold exchange-traded fund which tracks the price of gold.

Sometimes gold goes up and stocks go up. Sometimes both fall. And other times one goes up… and the other goes down.

We’ve seen that play out in the past week of U.S. trading. Stocks have gone up, whereas gold fell then climbed.

As we see it, the importance of gold is it’s a better indicator of trouble than the stock market.

China’s bad loans to get worse

Even on bad news days stocks can still go up – we’ve seen that happen plenty of times recently.

Especially on low volumes, where most sellers have already gotten out, and all that’s left are the funds and those who foolishly believe markets always go up.

But while gold can get beaten up, it usually doesn’t take long for the fundamentals to show through. We’ve seen that happen this week too. Gold is up USD$50 in just a couple of days.

And that tells you to keep your crash alert turned up… and your exit plan ready.

Yesterday China increased interest rates by 0.25%. No big deal you may think. It’s only a small increase.

But think back to yesterday’s Money Morning and the news that Chinese banks could have over $100 billion of bad loans on the books… a number that could get worse with higher interest rates.

Bloomberg today reports:

“The ruling Communist Party may delay further increases because of signs of weakness in manufacturing and export demand and to avoid attracting more speculative capital to the fastest-growing major economy.”

There you have it. The “ruling Communist Party” is trying to micro-manage the Chinese economy to prevent a crash.

You know our opinion on that. It will fail.

An economy built on debt needs more debt to keep it growing. And it doesn’t matter where the debt comes from.

Trouble is, the debt just isn’t flowing fast enough. The drop in export demand tells you foreigners aren’t buying. They’ve hit the ceiling when it comes to debt.

The U.S. and Europeans are too busy figuring out what to do with the debt they’ve already lumbered themselves with.

More reasons for gold

And with official inflation above 5%, the Communist Party has increased rates to slow down borrowing. If those businesses have borrowed up big banking on higher foreign and domestic growth, they could be in trouble.

That spells bad news for those firms… bad news for Chinese banks… and bad news for the Aussie economy, which more than ever relies on China buying resources.

Add in the continued debt problems in Europe, and it gives another reason to hold gold for insurance.

As we’ve said all along, we can’t guarantee you’ll make a million buying gold. And we can’t even guarantee the gold price will initially go the right way when the proverbial hits the fan.

But there’s something we are sure about. And that’s the fact gold provides a great option as a long-term insurance policy against government and central bank meddling.

It always has, and as far as we’re concerned, it always will.

Cheers.

by Kris Sayce

Why Use A Financial Planner

admin — Thu, 03 Jun 2010 07:34:51 +0000

Financial planning involves making the best use of resources to ensure income, financial growth and security. It may involve risk management and insurance, investment, taxation, retirement and estate planning issues.

A financial adviser can help you make money and maintain or improve your lifestyle with a sound financial plan. This will include helping you to avoid pitfalls, using your money to best advantage, and choosing products that suit your needs. A financial adviser will also help you understand risk, so you can assess what the best options are for you.

If you are planning for your retirement, have received a lump sum of money or have just left the workforce, or you simply want to make the best use of your money, then you should contact a financial adviser.

Talking to a financial adviser will

help you make more informed decisions about your money
help you use your money to best advantage, and
help you choose products that suit your needs

To discuss your financial options and find out how we can assist you, simply fill out our online enquiry form and we will be in contact with you within one business day.

Leave The Country Now Gen X & Y

admin — Tue, 09 Feb 2010 06:57:09 +0000

This is the headline on Bernards column over at the Herald. Read it here

Usually I would just roll my eyes, chuckle at the obvious jealousy that surrounds Bernards comments and carry on with my day.

Today however the message has been continually thrust upon me via that wonderful medium twitter (you can follow me here if you like tpr2 ) in such a way that I can’t ignore the fact that a lot of the article is sensationalist and hides some deeper agenda that only Bernard knows about.

The story starts with

“John Key has just sent Generations X and Y a clear message: Leave the country now.”

Now I watched the broadcast live and I’m scratching my head with exactly where that message was, sure the speech was crappy ( I like to use french words like that occasionally) and John really needs to stop grinning when he is making statements that he obviously thinks are a bit of a con but it didn’t strike me as a message to those who are my wife’s age to bugger off to Oz.

Bernard went on to say

“younger taxpayers who are stupid/poor/unlucky enough not to own property to the websites for AirNZ, PacificBlue and Jetstar and suggested they buy one-way tickets to Australia.”

If I was a younger tax payer who did not own my own home I would be pretty miffed by Bernards assumption that I was Stupid, Poor or Unlucky. After all Property investment is not the only option out there in the world and I know plenty of very smart, very wealthy and I guess because only very lucky people can get rich, very lucky people who choose to rent while investing in other ventures.

Bernard then ranted about the rich generation….ahem.

“He decided not to challenge a generation of voters who are now rich because of the property boom and don’t want to give it up”

As someone who owns Financial Planning practices in Oz and NZ I get to meet a lot of people, real people, mums and dads, the folks who go to work, work hard and have done so for 25 , 30 and even 40 years. These are the folks that Bernard reckon are the Generation who are now Rich because of the property boom…bollocks.

These people bought their homes 30 years ago for a fraction of what it costs today, thats true but in those days it cost them a relative small fortune to own a home, not only that…have you seen those homes, not something the generation of today would choose to live in however thats what Mum and Dad did, they sacrificed all the goodies that were available to put a roof over the heads of their family.

That generation put up with 25 year mortgages and saved for 10 years to go on an overseas holiday and dreamed of owning a brand new car rather than something that was already 10 years old. That generation knew about delayed gratification.

This so called rich generation seems to be all smoke and mirrors as far as I’m concerned, unless of course Bernards definition of rich is someone who owns a home. I guess we would then be talking at cross purposes because my definition of rich is someone who does not need to work to generate sufficient income to provide his or her family with everything they need and want.

I want to know who this rich generation is?

Where are all these wealthy people?

Certainly the majority of people I meet who are trying to plan for their retirement are in this “rich generation” that Bernard talks about but strangely enough they don’t have that much money. Certainly nowhere near enough to fund a retirement and so they will end up relying on the pension to subsidise their existence.

The next bit sent me ROFLMAO , (thats roll on floor laughing my ass off for you older rich generation folks who might not know what that meant)

He is saying all those too poor to own a home now will never be able to own their own home.

Younger Taxpayers can buy property, you just have to use the same strategies that my mum and dad used and that I used when I got into the property market. Delayed Gratification…

You see my first property was not my $1.95 million penthouse apartment in Auckland or my house at Mount Maunganui, it wasn’t the fancy apartment on the Broadwater on the Gold Coast or the house at the lake. It was a block of land because that was all I could afford. I bought that block of land and I bought it in an undesirable part of town because that was all I could afford. I paid that block of land off and built a house on it. I sold it and bought another house. I still own that house 20 years later.

My Mum and Dad taught me that strategy, they lead by example, you see their first home was not a fancy 4 bedroom house in the heart of the CBD, it wasn’t a modern state of the art piece of property 3 minutes from the city centre… it was a 40 yr old small house 10 minutes out of Cambridge… the town that has a school where both Bernard and I went (I wonder if Bernards parents used a similar strategy?)

So don’t take a swipe at this so called “Rich Generation” because John Key didn’t do enough to cause a wholesale collapse of the property market which is what Bernard has been trying to incite for years.

Take a swipe at him because if he brings in what I think he is going to bring in (something similar to what the Aussies did in 1984) then rents will go through the roof (they tripled in Sydney in 18 months).

The removal of the tax benefits that surround property will simply stop people becoming landlords. Great the uninitiated say because then property won’t go up in value and we can afford to buy ourselves.

I’m sorry but thats a long slow road and in the mean time no one is building new homes to house our growing population, after all why would a developer build something he can’t make any money on.

So no new buildings, a growing population, increasing demand on the existing housing stock and the only people left around to provide rental accommodation are the current landlords who have just had significant tax benefits removed from their investments….yep thats a recipe for rents coming down…not!

Remember that 1/3rd of kiwis rent. For most landlords, even with the tax benefits, they have to pay something each and every week to pay for that property. In other words the landlords are subsidising the tenant in most cases especially in the bigger cities. The long term benefit is that they pay that property off, it gains in value and they have a nice little stash for retirement. that seems fair to me.

For example a landlord on 70k per annum would need to pay approximately $170 a week towards a 4 bedroom brick and tile property in Tauranga if the tenant was paying $350 per week.

Yes, at the end of 25 years the landlord has paid the property off but he has still subsidised the tenants along the way.

I would ask all of you who support Bernards view, Why do you want to own your own home?

Could it be because you see it as a way of becoming wealthier over the long term? Could it be that the very things you say are atrocious and outrageous now are the exact things you want the moment you hop onto the property ladder.

Could it be that once you are a home owner or a landlord you might change your mind about supporting Bernards article?