Aust-NZ common market will drive property prices

The leaders of Australia and NZ - PM's Kevin Rudd and John Keys - have moved a step towards a common market which will reduce the cost of flights between Australia and NZ. The steps to be taken in the next year will see trans-Tasman customs and immigration abolished, so an entry into NZ is essentially an entry into Australia. This will spell a travel revolution for Australia & NZ, a property boom in areas, but it could also be expected to cause a flight of more people and jobs from NZ (in general). It will mean more tourism for NZ though. The implication is clear:
1. NZ Property around airport hubs like Christchurch, Palmerstown North, Dunedin, Wanganui, Hamilton are going to get a lot more expensive.
2. Queenstown-Wanaka are going to benefit the most because of its tourist icons and restricted land because of its mountainous geography.

The operating costs on trans-Tasman flights will fall by at least 30% and expect an increase in the number of new routes being flown. Jetstar says the savings for the airlines will be about $60 a passenger one-way.Typical prices can come down from $200-$210 to $140-150 [one-way]. Even greater reductions are possible by using the smaller airports. New destinations could include Avalon (Melb), Newcastle and Hamilton in Australia side and Hamilton, Palmerston North and Queenstown in NZ. The implication is that NZ property is looking very attractive for Australian buyers.

The common market is motivated by NZ's desire for greater access to the Australian market, as well as the airline's desire to stimulate travel by removing the government imposts (extra airport charges and government taxes) that don't apply to domestic travel.

Bruce Buchanan, the CEO of Australasia's low-cost carrier, Jetstar, has been a leader in the campaign to integrate the two countries aviation industries.

-------------------------------------------------
Andrew Sheldon www.sheldonthinks.com

'Buying NZ Property – Download the free sample readings!

The NZ property market is shaping up as one of the most attractive property investment markets for the next few years. High yielding property and the collapse of the NZD make NZ the perfect counter-cyclical investment if you buy right! 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 2009 - Download the table of contents or buy this report at our online store for just $US19.95.

Japanese property weakness spells opportunity

The Japanese government has reported that the recovery in land prices over the last few years has ceased. A SMH Online journalist suggests this could signal a move back to deflation. I would suggest not because the asset collapse is being accompanied by a slowdown in economic activity and the printing of more money by international central banks, including the Bank of Japan.
Certainly there is room for further falls in inner city property prices, which is why we have always advocated that investors or owner occupants should be focused on the lifestyle (rural) and outer city areas where there has been depopulation keeping property prices down. These areas remain goodbuying. Weak property prices doesn't mean deflation, though you might regard it as an element of asset deflation.

Residential land prices fell 3.2% in CY2008 1 and commercial land value fell 4.7%. These falls in property prices of course come after 16 years of falls that only bottomed in 2006, so the market is still very cheap. For this reason I say, property is going to fall further in the city (asset deflation), but not likely, or not significantly in rural and fringe city areas, where there are tenants. Just make sure you rent out to security-conscious government workers. Maybe you can advertise on the notice board at the city office when you are there to buy foreclosed property.

The good news is that Japanese investors will be scared to buy even foreclosed property in these market conditions, particularly with Japanese investors likely to listen to journalists with no knowledge or life experience to speak of. But of course it does sell! Be discerning, and be selective, and you will be ok.
----------------------------------------------
Andrew Sheldon www.sheldonthinks.com

South American interest in Japanese foreclosed property

I received my first order today from South America. It was perhaps remiss of me not to target this market because there are considerable numbers of Spanish speaking South Americans in Japan. Of course there are obvious candidates like the former President of Peru - Mr Fujimori. I have yet to receive an order from him....but maybe he works through offshore companies. I can understand that - politics suxs.
For South Americans in Japan I suggest you are better off with your savings in Yen because your currency is pegged to the USD (I understand), and the USD outlook is not good. Its true that there is likely to be some effort to rebuild US savings by raising rates, but I would also expect a fair amount of printing USD.
The other issue of course is recognising the need to pay rent. It makes more sense to buy property here, particularly if you are able to get a loan in Japan, or your partner is able. The high yielding Japanese property makes particular sense at this time, and that means buying in the outer areas of the main cities since you have to work...unless you are Fujimori with many minders.
So if you are from Peru, Brazil, Colombia, Venezuela, Chile or Argentina, I would suggest that it is premature to invest in these markets unless you are buying remote rural land. You are better off investing in Japanese property than holding savings in your local savings given that we are going to experience a wave of global inflation.
------------------------------------------------
Andrew Sheldon www.sheldonthinks.com

Foreign governments acquiring foreclosed governments

Its perhaps surprising we don't see more foreign governments buying foreclosed properties in Japan and NZ at times such as now. The reason I suggest this is because governments have considerable accommodation demands for their staff, and these needs are ongoing. Given that foreclosed properties are so much cheaper than the rest of the market there is a considerable opportunity to save, particularly in the high-end condominium market right now.

The other two countries which are appealing in this respect are NZ and Australia, given that there currencies have sunken to lows. I would caution however that there is no significant discount for Australian and NZ foreclosed property since distressed property is sold through the same channels. The attraction is purely the currency benefit. Foreign governments should recognise that they will never get a better opportunity to buy property in such markets given that growing prosperity in China and India is going to see strong commodities demand in these countries in 5-10 years. There is no rush mind you. In fact the NZ and Australian city property markets have not yet bottomed, but since governments are so slow to act, they should be preparing for this eventuality.

Frankly I don't like doing governments any favours. They are so inept at investment, and remarkably people allow their governments to direct their money. The government accounts for 25-45% of most countries yet government ministers scarcely have any training in money management. So why are they trusted with this task? Go figure. Oh that's right, the system is based on slavery and repression. Sorry, I keep forgetting. In fact foreign governments should be buying property in each others countries to help absorb each others property market overhang. I guess you could argue that they are just displacing tenants, but it does make sense to buy property in Japan and commodity based currencies (Aust, NZ, Canada, South Africa) as there will never be a better chance.

----------------------------------------------
Andrew Sheldon www.sheldonthinks.com

NZ property fundamentals looking stronger

The more the NZD falls the more compelling this market looks. We have long been believers in the contrarian investment philosophy which involves recognising under-loved markets and investing when things look worst. The rationale is that when things appear at their worst things can only get better because all the bad news has been priced into the market.
Clearly with the ARM mortgage resets in the USA only just starting to feed through the US market, we will be looking at more bad news in the USA. Its unlikely this bad news has been fully priced into the market. This might actually be the news that drives the NZD to 40c USD. Why? Because when thew US stumbles, the NZ and Australian currencies tend to suffer as 'growth' associated economies with weak internal demand. This perception is actually flawed in the sense that weaker local currencies increase local receipts from US export earnings. This is the great aspect of the Australian and NZ economies, that they have this wonderful currency buffer in bad times. For this reason I suggest any move to 40c will be a magnificant FX trading opportunity, whether its the currency you solely play, or whether you are buying NZ property.

The compelling attractions about NZ at the moment are:
1. A current account deficit of 9.6% - which can only improve in a time of global uncertainty
2. Free trade agreement with ASEAN nations - this in itself is a positive indicator that Asian nations are not protectionist in these difficult times
3. Greater integration between Australia-NZ
4. Strong food export receipts for NZ - as commodities are denominated in USD
5. Improvement in NZ savings rates
6. Increasing tourism - the low NZD will make NZ a preferred destination for international travellers. Perhaps the other strong aspect in hard times is the ability of NZ to offer cheap travel options for backpackers.

I visited some business colleagues last weekend in Ruepehu. In the town of Taihape the largest bar-restaurant is in foreclosure. This is a wonderful opportunity to develop an external tourist market for this property because this is a town with a wide range of eatery options. What it needs is better marketing. The owner of this property over-capitalised in the property, but has under-invested in developing tourist links. During this period of low dollar, there could be no better opportunity to buy this property for foreigners or NZ expatriates. This place stands in the shadow of Mt Ruepehu. It has access to whitewater rafting, the skifields, jet boating, and its situated between Auckland and Wellington. It strikes me as a good investment!
------------------------------------------------
Andrew Sheldon www.sheldonthinks.com