Podcast: How Are Real NZ Investors Feeling Right Now? | Ep. 216

Posted by Ed McKnight on 23/04/20
How Are Real NZ Investors Feeling Right Now 001
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Show Notes

What's Covered in the Show?

In this episode, we discuss how real investors are feeling about the property markets' prospects during the Covid-19 induced shutdown.

This data comes from both a webinar that we held last week, as well as data collected from the Auckland Property Investors Association.

If you'd like more property investment content, be sure to follow Opes Partners on Instagram. You can click the link, or find us. We are @opes_partners.


Transcript of the Podcast

Ed McKnight: Hello, and welcome along to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and today on the show we're talking about how confident are New Zealand investors right now about the property market. Now, you might expect a lot of investors to be quite bearish about the market to be a bit worried.

We just did the previous episode about Airbnbs are they going to come on the market and decrease rents? Will unemployment mean that some tenants aren't able to pay their rent? And what impact will that have on the rental market? Now because of all that you would expect that investors would be quite sheepish about the market but actually we're kind of finding a bit of the opposite aren't we Andrew.

Andrew Nicol: Absolutely.

Ed McKnight: Which is, I'm a bit strange, but I want to share some data with you to kind of kind of back this up and then we'll talk about some of the things we are hearing. So in our recent webinar back last week, we asked people, you know, right now, how are you feeling about the property market? Now I just want to share this data with you. 25% of the people on that webinar, and there were about 150 people who turned up as well.

So it's a decent sample size, 25% said they're feeling bullish. They think that there are some deals to be done and actively out there ready to find them a quarter of the people. Now, the thing that struck me there, Andrew, as well as that, I think that in any normal time you probably wouldn't find a quarter of investors feeling really bullish about the market.

Usually you're going to at least find some people who are very conservative. So I thought a quarter of people feeling really confident about the market was a pretty good sign. Now, the next thing is...

Andrew Nicol: Sorry, it's hard with the pause there, I thought that you wanted me to jump in there, sorry, carry on.

Ed McKnight: Oh, I thought you were going to jump in. I was just giving you the opportunity, let's not edit that out, people will like it. I'll just keep rattling on then, about 57% said, that they are cautious but positive. So that was saying, look, if the right deal came along, they'd be keen to take it on and seriously consider it. 57% and then 18% only 18% said they're feeling cautious, but erring to the negative side.

So it would take something amazing for these investors to take action and actually seriously consider it. So 18% feeling cautious, but the main thing was that 0% not a single person on this webinar said that they were feeling bearish about the market. So none of them were looking to completely get out of the market. They were just looking, nobody was saying that they're looking to downsize at the moment, which I thought was a really interesting statistic.

Now, the other thing I want to mention is, I know a little indicator that the Auckland property investors association are measuring at the moment. So every week they send out a survey, a small survey to their whole database. And they say, look, on a scale of zero to 10, how confident are you feeling at the moment?

And then they average it all up and they send it out. So I was talking to Sarina Gibbon, who's the general manager there, and she was saying, look, when we first did this in the first week of lockdown, the average was 7.2 that dropped to 6.8 the next week, and now it's around about 70% that's how, that's how confident people are saying they're feeling a seven out of 10 and when Sarina said that to me, I thought, that's really good. Because your base isn't a hundred your base might be 80% your base might be 90% in terms of how confident people are feeling. A nine out of 10 I would think there was very confident and she said, actually you kind of right.

If we had a base in quote unquote normal times, then we'd know, well, how does this actually compare? And my sense is that that's a really high level of confidence, compared to the times that we're seeing. So we're probably saying people who have thought well about their portfolios and who are actually evaluating what opportunities and risks, real risks there are at the moment. Now, Andrew, you're talking to people every day, just give it, give me anecdotally. Do you see this kind of data that we've just rattled on about, coming through in some of the conversations you're having anecdotally.

Andrew Nicol: Yeah. So most of my time while in isolation has been split between new clients and existing clients and new clients who are considering investing and existing clients who've got a portfolio and just want some advice around making sure that they weather the storm. And certainly in that first week, people were a little bit nervous that their rent was going to be paid, they're going to be able to make their mortgage payments, and what their game plan if something went wrong.

And so a big part of what I was doing in that period of time was just reassuring people and reminding them that they'd have things like a rental buffer account to cover them. They might have landlord's insurance to cover them in the event of tenants not paying their rent. And also that if you're using a professional property manager, they know the process and law to follow if a tenant is behind in rent, and because now they've had a lot of conversations with their tenants through their property managers, most people are finding that tenants are still paying their rent, which is a really good sign.

People still recognise that it is a responsibility to pay their rent. And again, you know, a part of this depends on how long isolation goes on for and how many people lose their job as a result potentially. Housing is probably one of the expenses that people take the most seriously, your gym membership, your Spotify account, your Netflix accounts. A lot of those things, people are willing to cut off or change their spending habits because they want to pay their house first and they don't want to be evicted or have a mortgagee sale if they own that property.

And so what we're finding is that the vast majority of people are still supporting the whole industry by paying their rent, and therefore landlords are able to pay their mortgages. And also,because these products like mortgage holidays, which we've done a show about them and they should be last resort but whilst they're available, if people really are in trouble, there is a mechanism to be able to hold that property and weather that storm, which is great.

And so the initial scares that people have had have sort of boiled down quite a bit, which is really promising because I spoke to one of my friends actually today and, they've taken my advice and got their properties managed with a property manager and they've had no problems, some friends of theirs who own their own properties and manage their own properties are really struggling at the moment because some tenants have said we're not paying our rent and they don't know what the next steps are. And so as a result, their knee-jerk reaction is to sell.

They're already having conversations with when we get out of us, maybe we'll sell that property. And so what I'm going to do now is have a conversation to them and trying to figure out some ways that they can retain that property because the key thing is you don't want to sell in desperation, because that's when you lose money and you lose any future growth. And so if you can do something to make sure that you can hold onto that property then normally you can weather the storm and the property always corrects itself in value over time.

The biggest thing, and I know quoted it before, Warren Buffet "be greedy when people are fearful and fearful when people are greedy" when we come out of this, there are going to be a lot of people who are wary to invest, those uneducated investors. Those are the people that will sit on the sideline while the others take charge and get some of the opportunities. And I was reading one Tony Alexander's articles today about where he thought the opportunities might be. And so again, we as a company,are looking for those opportunities for clients to ensure that you're getting the best possible deal when we come out of isolation to be able to make some money in a quick period of time.

Ed McKnight: And look, I've just got two points before wrap up. First of all, it's a beautiful thing, Andrew, when economic theory becomes reality, and what I mean by that is, an economist would always predict that people are going to spend on necessities as opposed to luxuries.

So of course people are going to spend and find the money for the rent and mortgage payments because housing is an absolute necessity. Whereas some of those other things you mentioned would be considered non-essential or more on the luxury side. So of course, if people have take a hit to income, or are down at 80% or whatever it happens to be, and that's really unfortunate, of course they're going to spend on the necessities as opposed to luxuries, and that kind of makes sense. So we can kind of predict that.

And then at the margin, of course, there are people who really aren't able to pay their rent. Then the other thing that I just want to mention in terms of that article that you mentioned by Tony Alexander, which was a great article and I read that when you tagged me in it on Facebook as well. The one little tip that I want to give people listening at home or while they're renovating or out for a run wherever you are, is to, when you see an article from Stuff or the Herald at the moment, please click into the article and actually read it.

What I mean by that, not the headline, because when I read Tony's article, it was very sensical, it was very level headed, he's a great guy, and I, and I just think I've got such a crush on him. I've told that on the show, I've admitted it so many times. I just think that, I think he's the best. I love Tony Alexander. But the journalist clearly wrote the headline or changed the headline because it was something along the lines of, here are the areas where you're going to get the best deal, or something along the lines of that. And that wasn't really what the article was about.

It was a bit of a salacious headline while the actual body of the article was some really good content. So please do read past the headlines especially when you're hearing things from an economist. It was actually the same as I was tagged in something that the reserve bank governor had written, and it was quite a positive story. But actually the headline that the journalist had written was quite different from the content of the article. And so you can't necessarily just use the headline as a, as a summary of what the article says, but that's my little tip for you.

But anyway, let's wrap it up there. Of course, don't forget to rate, review and subscribe to the podcast. It really does help us get the message out to more people and hey, if you want to learn more about property investment, why not check out our Instagram, I'm going to drop a link into the show notes because every couple of days we post a new carousel. We try and educate you about the property market and look as you scrolling through looking at cats and photos of your old high school friends, you can learn something a little about the property market. So we are at Opes_partners. You can check us out there.

Thanks for listening to the Property Academy podcast. I'm your host Ed McKnight, and I'm Andrew Nicol, and we are going to be back again tomorrow with even more daily strategies, tactics, and insights to help you get the most out of the New Zealand property market.

Until next time.