How Long will the Window of Opportunity Remain Open

Obama has been sworn in as the new president of America
promising CHANGE. We step into a new year with a nervous
feeling of hope, doubt and apprehension as to what is in
store for us. Will the clouds of doom clear or bring in
further rain of misfortune? Like the weather forecasters
all the financial gurus went wrong last year or someone
would have warned us of the impending doom that took all of
us by surprise. Same thing happened when the Dotcom bubble
burst. So let us look at some facts.....

Finances are the life blood of the property market. There
will be no turn around until such time the financial
markets are set right. Currently irrationality has gripped
the market. Not even the soundest of financial institutions
can survive when this kind of fear hysteria takes over. It
is the electronic and new media age that is driving the
sentiment. Six months back oil was at $147 per barrel based
on the analysis of the huge demand due to projected growth
in the world economies. The question is what has really
changed? There are definitely some problems that need
addressing but normalcy has to return sooner than later
because this hysteria is not based in reality...... the
biggest danger is hysteria getting out of hand and burying
rationality.

Last week Donald Trump was on TV complaining that US
Treasury had pumped in Billions of Dollars into the banking
system but still he can not borrow money from his bank. The
same bank was busy buying banks in China to improve their
bottom-line. Robert Kiyosaki, who has perhaps one of the
finest financial minds, voiced similar complaints in a
recent interview of not getting credit from his bank. If
big boys can’t get money than what about little guys like
us. Property markets will start to recover as soon as credit
starts flowing again.

The good news is that the world has gone into an over drive
with all kinds of rescue packages. US is pumping in half its
GDP into the financial markets to de-freeze the credit
squeeze. Europe and other countries around the globe are
following suit. The interest rates are taking a tumble
down the steep slope. This factor alone will reduce the
pain for property investors and take us into positive cash
flow territory. These massive actions by government around
the world will start turning the wheels of credit at some
point and the tide will turn.

The NZ dollar is down nearly 40% from its peak. This
coupled with low interest rates will bring in foreign
investors as soon as there is some improvement in the
credit situation. In my opinion the domestic investors will
have no option but to re enter the property because this is
the only investment that gives control and returns of over
8%. There is too much uncertainty and negative growth in
the share market and bank deposits will produce declining
rates of return of less than 4%. Property remains the only
sound investment and will continue to give respectable
return on investment.

The property clock does not seem to move at a steady pace.
I think it has jumped from 3 O'clock position to 5 O'clock
position during this crisis of confidence. Because the
decline in sentiment has been so sharp the recovery this
time around is likely to be that much faster. However it
must be noted that upward sentiment movement and recovery
phase is much slower than the sharp fall due to panic
sentiment. In future property cycles are likely to be more
compressed due to the advent of the information age were
things tend to get exaggerated.

Being a property agent and an investor I have my ears on
the ground. Early last year I wrote an email with the title
‘Should I go fishing?’ as I could sense that investor
sentiment was going down. This was much before the economy
nosedived. Since the sharp fall in interest rate last
December, the number of inquires are on increase. Funding
is still a problem and the number of inquires are not
converting into sales but this is likely to change in the
next couple of months. The window of opportunity in my
opinion is going to be relatively small. As no one knows
with certainty when the market will bottom out it is wise
to space out your investments at regular intervals so that
this unique opportunity is not lost.

You may be sensing the opportunity but credit may be
holding you back. Explore the possibility of trade and
vendor finance. There are deals available if you are
prepared to be a little creative. Like in the past there
will be a great shift in wealth during these times of pain
and misfortune. I wish you wisdom and courage to make your
journey to greater prosperity.

My good wishes to you and your family and may you prosper
in the New Year.


Best regards,
Mr Colin Kumar
c.kumar@barfoot.co.nz
WE LOVE SELLING AUCKLAND

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