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My Sporting Income Won’t last forever – what next?
27/03/04 by Gain Zohrab
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Retirement. – what am I going to do? My sporting income can’t last forever. Shall I buy a rental?
All of us have noticed the significant activity in the New Zealand property market over the past two years. House prices have risen at the fastest level seen in almost ten years.
Is property the place to be?
In its September 2001 edition, Metro magazine reported:
“If the real estate sector has been so flat that agents say they’re taking Prozac, should home owners also feel dazed and confused?”
It then went on to report:
“In 1998 house prices slumped dramatically and investors who’d sunk their extra cash into a rental property were stung. If they could sell, they were looking to make a loss; if they rented the place out the rent still failed to meet their mortgage payments.
During 2000 there was little investor activity in the low-cost, rental end of the market and mortgagee sales have been frequent. The middle market was hit by stalled immigration and increased outward migration, mortgage rate rises, slowing employment growth, rising inflation and sliding consumer confidence.”
What’s the Story in 2003 / 2004?
It is difficult to believe that this sentiment was felt only two years ago! Then, house prices were relatively cheap and there were very few investors entering the sector.
Now, after a period of excellent returns and house prices looking somewhat hyped in many areas, investors continue to flood into the market. This illustrates just how quickly investor mind-set can change.
Another example of the influence of investor sentiment is when share markets were booming in the late 1990s. Inflows into the markets at that time were achieving record highs. When the markets receded, investment dried up. Now that share markets are rising substantially again, investors are returning.
Don’t second guess the trends
While your goal as an investor is always to buy low and sell high, it is interesting that many investors appear to do exactly the opposite. This is partly because many people decide the latest winning or losing trend is the ‘real’ trend and assume that it will last; in reality this is just part of the investment cycle.
Long term planning is the key
So what can you do? Putting in place a sound long-term strategy and sticking with it is fundamental as, when markets move up and down, you are less likely to make emotionally-based decisions which could be detrimental to your long-term goals. Before making any investment you should do your homework and document your strategy and reasons for your investment decision.
If you are looking at investing it is a good idea to talk with a professional financial adviser first. An adviser can discuss your personal situation and financial objectives with you and develop a plan tailored for your individual requirements.
Article supplied by Gain Zohrab, Senior Financial Adviser, Spicers Portfolio Management Ltd. Phone 09 2711704. Click here for more information.
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