So why aren’t the Yanks buying these deals?

Posted on 09/23/10 in General, 2 Comments

If you have read the last few blogs you will know that I’ve just got back from a few days in America where I was attending a property conference and generally looking at the American property market with an eye to making some moves in the US.

In the time it takes to commute to America via 6 flights on 3 days with 4 different airlines you get a chance to speak to quite a few random different people and normally they work their way through the same questions which go something like this.

So you on holiday?

Me: No I’m going to a conference?

Really what’s the subject?

Me: Investing in Real Estate in the US.

This is were the regional differences start depending if your having the conversation with a kiwi or an American.

Kiwi Reaction: Wow that’s a great idea, it’s smart thinking to buy while the markets so far down.


America Reaction: Why?

This is realistically a true account of a large number of conversations I had on planes, in restaurants and generally in transit over the last 5-6 days.

The ordinary American investor just does not buy Standard real estate deals, and I put this down to a few things.

Most Americans first investment seems to be a parcel of shares given as a gift from their parents or grandparents

America is such a massive place that it’s very hard to be a regional expert

There really doesn’t seem to be a voice for property investors in the media, were there seems to be a huge voice for shares and funds.

This may in fact be a huge generalization so I bought a couple of magazines at the airport to read on the way home.

They were “Fortune Magazine” and “Money Magazine” and I read them cover to cover to try and spot some property related articles.

Guess what?

Didn’t find even one article uniquely about property investment.

The Money mag did have an article that spoke about personal property investment but only in the context of a comparison to buying into a listed property trust.

I suppose the answer is that kiwis as a nation have a larger hand in their own active quest for wealth creation, and the American public really would rather put money either into shares, their 401k (retirement account) or a savings vehicle that is very hands off.

Which is part of why I saw so many properties selling for 30 and 40% of their replacement cost, and properties selling with insane yields some as high as a true 25% net return after management.

Don’t get me wrong I’m not saying people don’t invest in Real Estate, they just don’t do it at the core level that we do in New Zealand.

We believe that it’s our absolute right to have the Bach and the Beemer, paid for by the portfolio, were the average American has a longer term strategy to invest so that they can make it too and through retirement and hopefully when their shares are on an up swing, and who’s to say which is the better move.

All I do know is that it leave’s a huge amount of great deals on the table for the savy Kiwi investor, and I intend to jump to it and grab a few for myself.

Below are a few photos of properties I had a look at nothing too flash just standard flats and homes.

Standard block of flats

4 flats in this complex.

2 Comments

  1. Gregory P

    You just have to look at the complete lack of liquidity and dearth of half decent stock offerings on the NZX to see why kiwi’s do not invest in stocks. Real Estate has lots of liquidity, in that the average person will move house every couple of years, whereas in some other countries houses are bought and passed down to the next generation.

    Until NZ has endured a 50% decline there will always be the interest in properties. It is still a winning formula for most. However in the US, an entire generation will be adverse to property, even though prices in a great inflationary period will take them up.

    Posted 10-2-2010

  2. Steve

    While I appreciate the comments I’m not sure I can agree with you here.

    The average kiwi has as much opportunity to invest in all the same stocks that the average American can invest in.

    Just as we don’t have to limit ourselves to buying property based in it’s distance from our own town the same has to be even more true for stocks.

    I agree that up till now property has been very liquid but that too could end if banks aren’t able to loosen up on lending, and from the stats that I have seen the average house ownership seems to run about 7.5 years.
    This is about one time round the clock as it relate to the property cycle which is also interesting.

    I agree that some countries pass down property from one generation to another but is this more to do with passing down the debt also?

    So interesting comments, thanks for sharing.

    Posted 10-2-2010

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