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G & J

Economic & Market Updates

Residential Property Defies Normal Investment Principals

The residential housing market defies normal investment principals. This is not surprising as one’s primary residential property is a lifestyle asset, not an investment asset.

The key determinants of investment returns are normally growth in income and price earnings (PE) ratios. For property, the PE ratio is the property value divided by net rents. Using that measure, prices have typically been in the range of 20 to 35 times earnings for years. This is well above the norm, for publicly listed companies.

Rest Home Costs

As authorised financial advisers, one of the real concerns we hear from clients is the worry about potential rest home costs. People who qualify for rest home care will either need to pay a maximum contribution of about $800 per week for their stay or apply for the Government’s residential care subsidy.

Hire Purchase Higher Debt

01 Jun 2015

Hire purchase and credit sale agreements can seem like a great way to pay when you haven't got the money right now. This is particularly so if the retailer offers an interest free period. However they can be a recipe for financial disaster. If you're sure you want to buy an item on credit, sometimes borrowing through hire purchase or credit sales agreements isn't the best option.

Taxing Short Term Property Investments

The recent pre-budget announcement that property transactions, in which properties bought and sold within two years would be taxed at the investor’s marginal tax rate appears to have struck some accord. It does not seem to be a concern to the Auckland Property Investors Association, as their members typically buy property as a long term investment strategy. The budget will be presented by the Minister of Finance on Thursday 21 May.

Reserve Bank wants to Protect Reverse Mortgage Lenders

Over the years we have cautioned about people taking out reverse mortgages. We believe it is usually more prudent to consider alternative options rather than taking out a reverse mortgage for those who are cash poor and asset rich. They were a traditionally expensive way of obtaining money for funding one’s lifestyle. Even now, borrowing costs are significantly higher than traditional mortgage costs.

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