Professional Investment Services

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?