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The story of a typical property investor

Friday, June 4th 2010, 12:25PM 14 Comments

by Philip Macalister

There’s a saying that taxi drivers are a good barometer of what is happening in the world and that they have a good idea of what people are talking about. Why do I mention this?

Well on Wednesday I took a taxi out to Auckland airport to catch a plane home and the driver asked, as they do: “What do you do?”

Since this chain of cabs had magazines for their customers I mentioned the NZ Property Investor Magazine.

“I’ve read that,” he said. It turned out this chap, who I guess was getting on towards retirement age, owned four properties. Two in Auckland and two in Australia.

From here to the airport we had a good yarn about investing.

In many ways my driver was probably typical of a lot of investors. Started out not knowing too much; learnt along the way and was doing it to prepare for retirement.

Just an ordinary bloke who had the wherewithal to get off his butt and look after himself.

Of course our discussion turned to the Budget and what it means for him and his wife, as property investors. The answer was that he wasn’t too worried. Clearly not impressed with Finance Minister Bill English, but the changes won’t derail his property investing activities.

The story is interesting as this driver, as I said, is probably pretty typical of many investors. They are not speculators or people trying to rort the system as many suggest.

Are these people, the ones Rob Muldoon would have called Kiwi Battlers really the people the government should be picking on?

Hell no.

These politicians spend plenty of time in taxis (at our expense). Maybe they should engage with their people and see some reality.
« Budget hasn't put off property investorsIt's good that some investors are selling »

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Comments from our readers

On 4 June 2010 at 1:43 pm Peter II said:
This is a very relevant comment similar to the majority of long term property investors. Bill English and his sharemarket and financial "advisors" seek to stop the Kiwi battlers investing in property and start to "invest" in the sharemarket. Yeah right. The only thing the budget will do for me as a long term property investor is to NOT vote National at the next election. Bill English is a farmer and farmers make most of their money on capital gain when they finally sell their farms to retire. I am sure Bill will do this too unless he makes more money as an MP ripping off the NZ taxpayer.
On 4 June 2010 at 2:21 pm Paul said:
But isn't the point of the conversation that this investor would not be drastically changing his investment portfolio?
Obviously he was happy with the budget?

If the budget had derailed his investment plans then Id say you had a case but it didn't, so hasn't this been a rare case of win win.
On 4 June 2010 at 2:51 pm regan said:
i sure as hell wouldnt want to invest my money in the sharemarket over property based on the last few years... on top of the general shakiness of the sharemarket due to the 'recession', there were a couple of large companies who had their share value destroyed by the labour govt - telecom and auckland airport.
On 4 June 2010 at 3:04 pm Tony said:
No, Paul, obviously he wasn't happy with the budget, and you should read the article to see his opinion of Uncle Bill and his budget. Just because he's not bankrupted does not necessarily mean he's on a 'win-win'
On 4 June 2010 at 3:41 pm Anna said:
How can the property sector think that they can continue to benefit from tax advantages. Sure, there may be property investors who weren't trying to "rort" the system, but the thing is that unintentionally, they were. This was a completely fair tax change.
On 4 June 2010 at 4:06 pm anita said:
Always in some equation 10% ratbags ruin it for the rest, with some legislation to sort us ALL out. The problem I see going forward is, how do we repay all those loans. The government debt is low but private debt is still hugh. Most of that debt to repay is just impossible, so the banks are going to have to oblige, otherwise the next wave of mortgagee sales is going to occur. Cutting depreciation will stop growth and we now hear how it is going to effect older buildings in Wellington. Fewer buildings will be built but still with high costs and they will not come down because of so much CC regulations/cost etc etc So the cost will remain and or be higher to make up for everyone else not purchasing. The economy needs to start moving again and quickly!!!!
On 4 June 2010 at 4:44 pm aileen said:
Hello I have read with interest I am an investor who has lossed and gained with property ,if it was not the tenants in Rotorua pulling the carpet, blinds off the property to light the fires, it was the finance companies stealing from me, but know I will just sail along with my house(s) here and Aussie and hopefully keep my overheads at a minimum and get what I want in the long term. We need to keep positive about this all. Move on and keep smiling - you are not going to sell your properties at the first negative action from our lovely government - think about it, are you here for the long haul- well I am (pensioner)
On 4 June 2010 at 6:36 pm Chad said:
It's like anything the laws were put in place to incentivise people to invest in property. We are afterall suppliers of a service to those who cannot afford or choose not to own their own homes. Now everyman and his dog have got in on the game, with that comes those that are only there short term to take advantage of the incentives beyond their initial intent and purpose. So, the new changes are fair enough. I own five properties, have sold one and have another on the market but for different reasons. Those sold or for sale do not meet my initial investing criteria and in this environment its all about conserving cash.
On 4 June 2010 at 10:10 pm darren said:
Robert Kiosaki wrote in one of his first books that you should not invest in a property if for tax advantages only. In our country we have had that upside for some time now. Now it's time to look very hard at our figures and make clear cut decisions as to how we invest and make adjustments accordingly.
On 5 June 2010 at 3:13 pm Tony said:
I will still invest in properties, after no deprieciation etc.
At least I have control of my investment, compared to a finance company. There will always be capital gains to be made, which I have benifited from when buying and selling rentals. If you are in for the long haul. you will make better gains than investing in the banks etc.

We are here to provide a service, as the goverment can not provide enough rental properties to meet demand, and they know this.
Lets face it, members of goverment are landlords as well.
On 6 June 2010 at 12:06 pm chris said:
I can't stand people propagating that myth! Sorry for being slightly off topic.
Telecom's share value was slashed due to Telecom's behaviour, not the govt's.
Telecom invested zip in the network for years, providing poorer and poorer service [why lay more capacity when you can just cap usage?], while distorting competition as much as they could, giving their shareholders [and CEO] high returns.
In the meantime, the govt warned them to behave better, and kiwis learned to hate them. T Gattung smuggly believed that they were untouchable at they made a large share of the NZX 50. Guess what, the chickens came home to roost, the govt belatedly took action, regulations were imposed, and the tax payer now has to fork out over $1b that Telecom gave to their shareholders instead of investing. Don't count on me to pity said shareholders.
And back to topic, that's why property investment has the appeal it has: fewer possibilities of tinkering by greedy corporations and global bankers, all eager to rake in private profits, plus to take public money when they screw up. A house is a house. A stock is whatever you trust it to be, and trust is gone, especially after the GFC.
On 9 June 2010 at 1:28 pm Joe said:
If Private property investors are worried about the tax changes in the budget then it's time to re-assess your portfolio as your finances must be on the edge. Get more equity back into your portfolio, sell a site and avoid the enevitable higher upcoming mortgage costs. Avoid mortgagee sales and be part of the solution by not fueling the private debt problem.
ps. get off your high horse about providing a serice to renters.. the house is going to exist in the market as a rental or owner occupide whether YOU own it or not.
On 9 June 2010 at 1:43 pm Christopher said:
Good grief - what a pathetic little bitter blog. How many of the moaners invested in rental property for the capital gain and not the income ? The majority ? Property investors of which i am one got off lightly. Lets get some honesty into this debate or better still, move on. I am staying in property for the same reasons i started with - i manage the investments and the net income is still comparatively worthwile.
On 9 June 2010 at 3:41 pm Kimble said:
Jeez, if everyone is investing in property, it MUST be a good investment, right?

Hang on, the story of the taxi driver or shoe-shine giving investment advice is usually used as sign that it is time to SELL UP.

And FYI, when you buy a share you are buying into a business that provides goods and services. When you buy an investment property with the idea of renting it out, you are buying into something that will provide a service. There isnt as much difference between the two.
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