'Buying NZ Property – Download the free sample readings!

NZ presents some of the most alluring property in the Western World; particularly given the greater easy of residency, the low cost of property, and the liveability of the country. In addition, there is no capital gains tax, transfer taxes, VAT/GST or wealth taxes in NZ, so rest assured that NZ property is tax-effective! Learn more now!

New Zealand Property Report 2010 - Download the table of contents or buy this 180-page report at our online store for just $US19.95.


Tuesday, October 12, 2010

Kiwibank tells people to buy a home

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The CEO of Kiwibank is encouraging NZ'ers to buy a house if they can afford it. The logic I guess is:
1. The property market is NOT going to fall significantly
2. The opportunity cost of buying vs renting favours buying
3. If you can afford it - you may as well buy

This is not a bad argument, but I would suggest that there are a few factors to consider:
1. Whether you are sure a certain area suits you
2. If you are going to have a job in a year
3. If there is a chance you might be going overseas in future, i.e. Going to Australia for 30% higher wages

The outlook for NZ is not bad, so there are no compelling reasons for a collapse in property prices. There is unlikely to be a significant rise in interest rates because the Chinese are not buying US treasuries in order to make profits; they are doing it to finance investment and US imports. I would however raise a cautionary note. The US and Germany are currently complaining about China's currency management. They argue that China's currency is up to 40% undervalued. The problem for the US is that China is using demand for its exports to finance the US deficit. You might think that the US will be more competitive China raises its currency (yuan). The reality however is that the US does not compete with China so much as Japan, Korea, Taiwan and Germany. The implication of their threatened trade war could have implications for global interest rates....so that is one threat....however it might be a decade before anyone acts on these threats. China is likely to budge a little if matters heat up...though not by much. The Kiwi house buyer might therefore want to keep some buffer in their interest rate outlook, and they ought to pay off their home as quick as possible. Chinese demand for NZ imports will bear some relationship to how much they can export, and their currency competitiveness. Though I would argue this factor might be less significant than Western governments assert because China is very much a processing centre. The raw materials it imports are cheaply converted into exports. So if the currency rises, its raw material purchases get cheaper. In truth, the larger the Chinese market grows, the more competitive it will become, so this will also have a beneficial impact. In truth, the US and Germany are just impatient for the day when China will be able to afford its products.

There is no reason that will change because the Chinese economy is growing faster than the USA. Of course at some point the strategy will make less sense. i.e. When Chinese demand for US 'sophisticated' products is higher than Chinese exports to the USA. At that point, we can expect the US to claw back market share. That will be another 15-20 years off yet.


'Buying NZ Property – Download the free sample readings!

NZ presents some of the most alluring property in the Western World; particularly given the greater easy of residency, the low cost of property, and the liveability of the country. In addition, there is no capital gains tax, transfer taxes, VAT/GST or wealth taxes in NZ, so rest assured that NZ property is tax-effective! Learn more now!

New Zealand Property Report 2010 - Download the table of contents or buy this 180-page report at our online store for just $US19.95.


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