WEBVTT - Ed McKnight: What does property investment look like in 2025? 0:00:03.880 --> 0:00:06.960 Curt Koto, Welcome to Shared Lunch. I'm Garth Bray. A 0:00:07.000 --> 0:00:09.200 lot of you are investing for the long term, and 0:00:09.240 --> 0:00:13.000 so at some point the question arises, what about investment properties? 0:00:13.400 --> 0:00:16.400 To answer that question, we've tagged in another expert from 0:00:16.400 --> 0:00:20.240 a highly visible podcast, the Property Academy, who spends a 0:00:20.239 --> 0:00:23.120 lot of his time thinking about exactly these issues. It's 0:00:23.440 --> 0:00:26.880 Ed Bigknight from Opus Partners. Before we get to him, 0:00:27.080 --> 0:00:29.840 some important information that you always need to consider it 0:00:29.880 --> 0:00:30.800 before investing. 0:00:31.040 --> 0:00:33.600 Investing involves for risk you might lose the money you 0:00:33.640 --> 0:00:36.919 start with. We recommend talking to a licensed financial advisor. 0:00:37.640 --> 0:00:41.479 We also recommend reading product disclosure documents before deciding to invest. 0:00:41.760 --> 0:00:44.120 Everything you're about to see and here is current at 0:00:44.159 --> 0:00:45.000 the time of recording. 0:00:45.360 --> 0:00:49.520 Ed welcome, more than two thousand podcasts under your belt. 0:00:49.560 --> 0:00:50.800 Is that a black belt then, ic you? 0:00:51.000 --> 0:00:53.360 Well, so, I'm just so grateful that so many people 0:00:53.640 --> 0:00:56.720 want to nerd out about property for so many thousands 0:00:56.760 --> 0:00:58.880 of episodes. But yeah, we've done it every single day 0:00:58.880 --> 0:00:59.800 for over five years. 0:01:00.440 --> 0:01:03.600 What is maintaining that sort of consistency? 0:01:04.080 --> 0:01:06.840 Like, well, the beautiful thing is so many people email 0:01:06.959 --> 0:01:10.480 in questions and it's quite humbling that people will literally 0:01:10.520 --> 0:01:13.880 write their entire financial lives in an email, send it 0:01:13.959 --> 0:01:18.000 to myself and Andrew, random strangers effectively on the internet 0:01:18.360 --> 0:01:20.640 and say hey, can I have your opinion? Can you 0:01:20.680 --> 0:01:23.360 talk about this on a podcast that thousands of people 0:01:23.360 --> 0:01:26.039 listen to? And so we're very grateful to have that 0:01:26.160 --> 0:01:28.720 kind of community engagement. If we didn't have that, maybe 0:01:28.720 --> 0:01:30.920 we would have wrapped up after ninety days, But here 0:01:30.920 --> 0:01:32.160 we are over five years later. 0:01:32.920 --> 0:01:35.639 So I'm interested because you've taken a big bolt step. 0:01:36.000 --> 0:01:38.880 As I understand, in the last couple of weeks, you 0:01:38.920 --> 0:01:41.920 announced that you'd spent over one hundred thousand dollars of 0:01:42.000 --> 0:01:46.760 the company's money on building an AI client. How do 0:01:46.760 --> 0:01:47.800 you know if that's worth it? 0:01:48.200 --> 0:01:50.720 I mean, who knows? But you make big bets and business. 0:01:50.880 --> 0:01:54.440 So what I really want to do is answer people's questions. 0:01:54.520 --> 0:01:57.840 And one of the big questions that investors often ask is, well, 0:01:58.440 --> 0:02:01.080 how many properties can I buy? Starting out? I've owned 0:02:01.080 --> 0:02:02.640 my own house for a while, I've paid off a 0:02:02.640 --> 0:02:05.400 bit of the mortgage. How many properties might I be 0:02:05.440 --> 0:02:07.919 able to purchase over the next fifteen years? Because people 0:02:07.960 --> 0:02:10.160 just want to get a sense of where could they go? 0:02:10.600 --> 0:02:13.320 And so I thought okay, we could probably answer that. 0:02:13.480 --> 0:02:15.680 And so what we spent one hundred grand doing was 0:02:15.680 --> 0:02:19.920 we tried to recreate all of the bank's internal calculators 0:02:20.240 --> 0:02:23.680 that say whether you get a mortgage or not, and say, okay, 0:02:23.720 --> 0:02:26.040 could we project that into the future and say, wherever 0:02:26.080 --> 0:02:28.640 you are right now, if your income goes up and 0:02:28.680 --> 0:02:31.000 if you keep paying off your mortgage, how many properties 0:02:31.000 --> 0:02:34.399 could you potentially buy? But then the real issue there 0:02:34.960 --> 0:02:37.720 is once you start doing that, I realized there were 0:02:37.760 --> 0:02:41.560 like hundreds of thousands of different scenarios you could run 0:02:41.600 --> 0:02:43.440 with the spreadsheets, So how do you find the right 0:02:43.480 --> 0:02:46.240 one for you? And so that's where we started building 0:02:46.240 --> 0:02:48.920 an AI trained it on this model so that it 0:02:48.919 --> 0:02:52.160 can spit out, okay, what property should you buy and 0:02:52.200 --> 0:02:55.280 in what order. We're only using that with our financial 0:02:55.280 --> 0:02:58.440 advisors at the moment, so that if a client came 0:02:58.520 --> 0:03:00.560 in it's like, yeah, I want to use that. We've 0:03:00.560 --> 0:03:02.480 got to make sure there's a person checking all of that. 0:03:02.720 --> 0:03:05.720 But we have released a public AI chatbot as well, 0:03:05.760 --> 0:03:09.240 called Opah's AI, where people can ask any question, a 0:03:09.240 --> 0:03:11.880 bit like chat GPT, but it's just been trained on 0:03:12.120 --> 0:03:16.440 the hundreds We've written over five hundred articles about property 0:03:16.480 --> 0:03:18.560 investing over the last five years, so it's been trained 0:03:18.760 --> 0:03:21.160 all on that. One thing that's really interesting that you 0:03:21.160 --> 0:03:24.000 won't be able to see though from the public view, 0:03:24.400 --> 0:03:27.120 is what people are typing in Now. I've had a 0:03:27.160 --> 0:03:29.920 look because I want to know what are people asking 0:03:30.200 --> 0:03:34.119 a property AI when you know they're just at home 0:03:34.120 --> 0:03:37.000 at two am in the morning typing stuff in and 0:03:37.080 --> 0:03:40.400 people write their life stories in there and say I 0:03:40.520 --> 0:03:43.000 have this much income, my mortgages this much, how many 0:03:43.000 --> 0:03:45.600 properties can I buy? Where should I buy? And what 0:03:45.640 --> 0:03:48.480 that showed to me is that there is a real 0:03:48.560 --> 0:03:51.320 need for advice, whether it's in shares or property in 0:03:51.320 --> 0:03:55.640 New Zealand because people have these questions and previously they 0:03:55.680 --> 0:03:57.320 would have gone to Google. Now they're going to be 0:03:57.360 --> 0:04:00.600 going to AI. So I'm really to be in this 0:04:00.640 --> 0:04:03.480 position where we've created this AI, people are trusting it 0:04:03.600 --> 0:04:05.920 enough to write in their live stories and now we 0:04:05.960 --> 0:04:08.440 can kind of guide this AI to try and give 0:04:08.480 --> 0:04:11.520 good answers in a New Zealand context rather than an 0:04:11.520 --> 0:04:13.760 American context. Because usually you talk to an AI and 0:04:13.800 --> 0:04:16.240 it's coming from an American based perspective. 0:04:16.480 --> 0:04:19.080 That's a huge amount of information for people to be imparting. 0:04:19.160 --> 0:04:21.039 I guess you've got some pretty good safeguards in there 0:04:21.040 --> 0:04:23.520 for how you look after that data and how you 0:04:23.640 --> 0:04:23.919 use it. 0:04:24.040 --> 0:04:26.279 Well, you've got to make sure that you know, not 0:04:26.400 --> 0:04:29.000 everybody in the company can access that. That's usually me 0:04:29.120 --> 0:04:32.760 looking through as a director of the company to make 0:04:32.800 --> 0:04:34.880 sure that when people are typing that stuff and we 0:04:34.920 --> 0:04:36.479 are protecting that. Yeah. 0:04:36.680 --> 0:04:40.400 Right. I actually did ask your Opah's AI a question. 0:04:40.600 --> 0:04:45.240 I said, Look, if we're talking about investments, why is 0:04:45.320 --> 0:04:49.520 buying an investment property better in the long term than 0:04:49.520 --> 0:04:51.599 investing in the US s and P five hundred? 0:04:51.839 --> 0:04:52.680 What did it say? 0:04:52.960 --> 0:04:54.760 I want to know what you think it said first, 0:04:56.320 --> 0:04:58.359 because you've worked this thing through thoroughly and I'm just 0:04:58.400 --> 0:05:02.160 a punter, right, Okay, Probably a difference between what I 0:05:02.200 --> 0:05:04.039 think it said and what I would say. 0:05:04.320 --> 0:05:07.000 Okay, So I'm sure that it probably talked about the 0:05:07.000 --> 0:05:09.919 pros and cons. It probably said that shares were higher 0:05:10.040 --> 0:05:14.040 risk but ultimately higher return. If it got really advanced, 0:05:14.040 --> 0:05:16.480 it might have talked about the impact of debt as well, 0:05:16.720 --> 0:05:19.480 and how if you buy properties with debt, that can 0:05:19.800 --> 0:05:21.680 make your returns bigger, but it can also make your 0:05:21.680 --> 0:05:23.719 losses bigger. Yeah, but what did it say. 0:05:23.640 --> 0:05:25.400 We're pretty good, You're right. I think it's sort of 0:05:25.400 --> 0:05:28.080 talked a lot about leverage, and I think that's probably 0:05:28.080 --> 0:05:30.800 a good place for us to dive in and say 0:05:31.080 --> 0:05:34.560 when you're thinking about investing. A lot of people say 0:05:34.640 --> 0:05:37.240 property investing is a way to go, but it's based 0:05:37.279 --> 0:05:40.520 on leverage and on taking quite a big risk. If 0:05:40.560 --> 0:05:44.719 the value drops, you've effectively lost your entire investment, Whereas 0:05:45.000 --> 0:05:47.960 whether shareholding, obviously the gains might be lower, but the 0:05:47.960 --> 0:05:50.039 losses tend to be a little bit lower. So I 0:05:50.040 --> 0:05:52.960 guess there's probably a bit of a chance there for 0:05:53.000 --> 0:05:55.040 people to get both sides of the story if they 0:05:55.040 --> 0:05:57.280 look into it and some death. But on that idea 0:05:57.320 --> 0:06:01.120 of leverage, talk to me a little bit about that 0:06:01.360 --> 0:06:03.640 in property investment at the moment and whether it's a 0:06:03.640 --> 0:06:05.200 good time to be leveraged. 0:06:05.400 --> 0:06:08.239 Yeah, I think the thing in New Zealand was always 0:06:08.240 --> 0:06:11.479 considered property to be quite safe, and I think that's 0:06:11.839 --> 0:06:15.120 really mischaracterized property because property is actually pretty high risk, 0:06:15.160 --> 0:06:19.360 higher return. But when we typically think about property over 0:06:19.400 --> 0:06:22.920 the last kind of twenty five a year, so since 0:06:23.000 --> 0:06:26.960 nineteen ninety six, the average property increase in New Zealand 0:06:27.000 --> 0:06:29.760 has been about six point three percent, and for shares 0:06:29.800 --> 0:06:32.039 it's been eight point six percent. So shares have been 0:06:32.440 --> 0:06:35.120 higher return, and that's where a lot of people start 0:06:35.120 --> 0:06:37.480 by saying cool shares higher return. But then we've also 0:06:37.560 --> 0:06:39.680 got to think about risk. Now, when we think about 0:06:39.760 --> 0:06:42.320 risk and investment circles, often we're talking about like the 0:06:42.480 --> 0:06:45.159 ups and the downs, and so we see that with 0:06:45.200 --> 0:06:48.039 shares that you do have some pretty high ups, you 0:06:48.040 --> 0:06:51.120 also have some pretty high downs. So if we think 0:06:51.200 --> 0:06:53.760 about the best year in the S and P five 0:06:53.880 --> 0:06:56.719 hundred since Google Finance started reporting the S and P 0:06:56.800 --> 0:06:59.400 five hundred and nineteen ninety six, the best year has 0:06:59.440 --> 0:07:02.320 been about fifty four percent up. Great year if you 0:07:02.440 --> 0:07:05.880 timed that. The worst year has been down forty five percent. 0:07:06.040 --> 0:07:08.640 So shares higher return, but bigger ups and downs. The 0:07:08.680 --> 0:07:11.240 worst year and property has been quite recent It was 0:07:11.240 --> 0:07:15.440 about fifteen percent down and best has been thirty percent up. 0:07:15.680 --> 0:07:17.920 So typically this is the way we think about property 0:07:17.960 --> 0:07:21.680 versus shares in New Zealand that cool shares higher return 0:07:21.920 --> 0:07:24.920 but also a bit higher risk. But what that conversation 0:07:25.840 --> 0:07:29.840 misses is the leverage part. So let's run through those numbers, 0:07:29.840 --> 0:07:32.760 because we always think that when you add debt to 0:07:32.800 --> 0:07:36.320 an investment, whether it's property or a business, whatever your 0:07:36.360 --> 0:07:38.760 asset happens to be. That is going to make the 0:07:38.840 --> 0:07:41.760 returns larger, but it's going to make the down side 0:07:42.040 --> 0:07:45.680 much larger as well. I call it the mortgage magnifier, 0:07:45.960 --> 0:07:48.840 just because I love my alliterations. Mate, who doesn't. So 0:07:48.920 --> 0:07:51.160 let's say you're buying a five hundred thousand dollar property. 0:07:51.200 --> 0:07:53.200 You put one hundred thousand dollars worth of cash in, 0:07:53.320 --> 0:07:55.880 and we've got four hundred k worth of debt. Now, 0:07:56.080 --> 0:07:59.520 if that property goes up by five percent, that property 0:07:59.560 --> 0:08:02.000 is no longer worth five hundred thousand. It's worth five 0:08:02.080 --> 0:08:05.720 hundred and twenty five thousand. Now most people be like, oh, okay, yeah, 0:08:05.720 --> 0:08:08.240 that sounds about right. But what that means is that 0:08:08.320 --> 0:08:11.080 your equity within that property has gone from one hundred 0:08:11.120 --> 0:08:15.040 grand to one hundred and twenty five grand. So yep, 0:08:15.120 --> 0:08:17.320 the market went up by five percent, your house went 0:08:17.400 --> 0:08:20.000 up by five percent, but your equity within that property 0:08:20.080 --> 0:08:23.360 went up by twenty five percent. Now that sounds pretty good, 0:08:23.400 --> 0:08:25.120 but we've got to talk about the downside as well. 0:08:25.160 --> 0:08:27.080 What happens if it goes the other way. If that 0:08:27.160 --> 0:08:29.840 house goes from five hundred k drops by five percent 0:08:29.880 --> 0:08:32.960 to full seventy five, you've now lost twenty five thousand 0:08:33.040 --> 0:08:35.439 dollars and you're down twenty five percent. 0:08:35.720 --> 0:08:37.840 And we are seeing that at the moment in some markets, 0:08:37.840 --> 0:08:40.839 aren't we We are seeing values in some respects kind 0:08:40.840 --> 0:08:44.280 of dropping backwards in places, or valuations not kind of 0:08:44.320 --> 0:08:46.719 coming in where they were originally put out. So that's 0:08:46.720 --> 0:08:47.280 a real risk. 0:08:47.440 --> 0:08:49.520 Yeah, the market's starting to smooth out quite a lot, 0:08:49.559 --> 0:08:52.360 but it's actually even worse than than what you've made 0:08:52.360 --> 0:08:54.880 it out to be. You know, in Lower Hut at 0:08:54.520 --> 0:08:58.240 the largest peak to trough drop, property prices were down 0:08:58.320 --> 0:09:01.880 like thirty percent. And so the reason that those property 0:09:01.960 --> 0:09:05.040 drops hurt isn't just the fact that you've lost thirty 0:09:05.080 --> 0:09:07.240 percent on your investment. It's that if you put in 0:09:07.280 --> 0:09:10.920 a twenty percent deposit and your property value dropped by 0:09:11.040 --> 0:09:14.920 thirty percent, you're now in negative equity. Your return on 0:09:15.040 --> 0:09:17.960 the money you put in is negative one hundred and 0:09:18.000 --> 0:09:21.679 fifty percent, because you're getting five times if you put 0:09:21.720 --> 0:09:23.360 in a twenty percent deposit, you put in a fifth 0:09:23.360 --> 0:09:25.960 of the money, you're getting five times the market return. 0:09:26.320 --> 0:09:29.800 And so typically we think of New Zealand property little 0:09:29.800 --> 0:09:32.559 bit lower risk, a little bit lower return, but an 0:09:32.640 --> 0:09:36.400 actual fact, if you're using debt, it's much higher risk 0:09:36.440 --> 0:09:38.839 and much higher return than shares. And that's the thing 0:09:38.840 --> 0:09:41.120 that I think people miss. And I'm not really trying 0:09:41.120 --> 0:09:43.440 to emphasize the higher returns here. I'm trying to emphasize 0:09:43.480 --> 0:09:46.240 the higher risk when we take on debt, because that's 0:09:46.280 --> 0:09:47.679 the thing a lot of people forget about. 0:09:47.920 --> 0:09:50.400 Sure, I mean, and that's it's great that I guess 0:09:50.400 --> 0:09:52.000 the AI spat that out is the kind of the 0:09:52.040 --> 0:09:54.560 number one thing to address. I just want to talk 0:09:54.600 --> 0:09:56.319 as well a little bit about some of the other 0:09:56.400 --> 0:09:58.640 aspects that talks about about how property is a tangible 0:09:58.640 --> 0:10:01.000 asset for a lot of people, it's a huge attraction. 0:10:01.440 --> 0:10:04.280 But of course, anything you can't pick up and move, 0:10:04.280 --> 0:10:07.160 anything you can't sell quickly, it makes it a little 0:10:07.160 --> 0:10:09.920 bit less liquid. It's harder to get out of that 0:10:09.960 --> 0:10:12.040 position if you can see a problem coming. So is 0:10:12.080 --> 0:10:14.080 that another thing that people really need to consider it 0:10:14.080 --> 0:10:14.640 with property? 0:10:14.960 --> 0:10:18.040 Well, it kind of depends on who you are. You see. 0:10:18.440 --> 0:10:21.920 For me myself, I don't care that property is bricks 0:10:21.960 --> 0:10:24.680 and mortar. To me, that's not a huge pro But 0:10:24.800 --> 0:10:27.160 I hear from a lot of people that they like it. 0:10:27.200 --> 0:10:29.719 They like that they can drive past the property, they 0:10:29.760 --> 0:10:33.080 can see it. If they needed two in fifteen years time, 0:10:33.120 --> 0:10:35.960 they could do it up, improve its value and sell it. 0:10:36.160 --> 0:10:39.640 And so some key weis really value that side of 0:10:39.720 --> 0:10:42.160 property and they say, big pro for me is that 0:10:42.200 --> 0:10:45.120 it's tangible. Me myself, I don't care so much about that. 0:10:45.200 --> 0:10:46.640 But for some people it's a big pro. 0:10:46.920 --> 0:10:51.000 Yeah, okay, And that idea of a less liquid market, 0:10:51.960 --> 0:10:54.440 lesser ability to sort of liquid eight things. Potentially that's 0:10:54.480 --> 0:10:56.800 not necessarily sort of a big problem from the people 0:10:56.800 --> 0:10:57.400 that you're seeing. 0:10:57.559 --> 0:10:59.760 Oh well, for some people that has a big issue. Yeah, 0:11:00.040 --> 0:11:02.600 especially because when you buy a property and you go 0:11:02.720 --> 0:11:05.120 to sell it, the average days to sell might be 0:11:05.240 --> 0:11:07.560 like forty five days, or it might take thirty days 0:11:07.600 --> 0:11:09.640 to sell a property. But by the time you talk 0:11:09.679 --> 0:11:12.000 to a real estate age and by the time you 0:11:12.880 --> 0:11:14.560 get somebody to say yes, I'm going to buy your 0:11:14.559 --> 0:11:16.880 property and then they pay you the money, it's more 0:11:16.920 --> 0:11:19.800 like three months. So it can take easily three to 0:11:19.880 --> 0:11:21.920 six months for you to say cool, I'm going to 0:11:21.960 --> 0:11:25.240 list this property to eventually sell it. Now, that's probably 0:11:25.240 --> 0:11:27.320 one of the reasons why it works, really well as 0:11:27.400 --> 0:11:29.720 a long term store of value or for a long 0:11:29.840 --> 0:11:33.280 term investment. But the big pro I see around that 0:11:34.040 --> 0:11:37.160 is that people don't look at their property values every 0:11:37.200 --> 0:11:39.400 single day. I think this is another one of the 0:11:39.440 --> 0:11:42.600 reasons why people think that shares is more risky than property, 0:11:42.720 --> 0:11:44.560 because they look at the value where they look at 0:11:44.559 --> 0:11:46.320 their key we save every single day, and they see 0:11:46.320 --> 0:11:48.520 it going up and down, and that scares them. To me, 0:11:48.640 --> 0:11:51.160 that's not something to be too scared about. The reason 0:11:51.440 --> 0:11:54.280 that you look at property and you think it's safer 0:11:54.559 --> 0:11:57.839 quote unquote is because the value on homes not codd 0:11:57.960 --> 0:12:00.840 n Z only updates every two weeks, or you're only 0:12:00.840 --> 0:12:03.480 looking at your bank ap once a month and it 0:12:03.559 --> 0:12:07.920 updates the property value, so it appears to be less volatile, 0:12:07.920 --> 0:12:10.760 but simply because it's a more I liquid asset. Yeah. 0:12:10.960 --> 0:12:13.320 Right, So, what are some of the market specifics that 0:12:13.360 --> 0:12:17.720 you think are important to consider right now in terms 0:12:17.800 --> 0:12:21.920 of availability of property, in terms of prices and so on. 0:12:22.080 --> 0:12:24.440 I mean, it's a pretty broad question, but it feels 0:12:24.440 --> 0:12:26.679 to me like that's an entire section that we can 0:12:26.720 --> 0:12:27.240 talk about here. 0:12:27.280 --> 0:12:29.679 Yes, there are two main things that I'm really interested 0:12:29.720 --> 0:12:31.640 at the moment. The first thing that gets me really 0:12:31.640 --> 0:12:33.720 excited is that there is a huge number of listings 0:12:33.760 --> 0:12:35.280 on the market. You go on trade, we are one 0:12:35.400 --> 0:12:37.600 roof for real estate, dot coded and Z. At the moment, 0:12:37.760 --> 0:12:41.280 there's like over thirty thousand properties currently available. It's basically 0:12:41.360 --> 0:12:43.800 at a ten year high. And so as an investor, 0:12:43.800 --> 0:12:45.800 that gets me quite excited because there's a lot of 0:12:45.960 --> 0:12:48.760 choice out there. It is a buyer's market rather than 0:12:48.760 --> 0:12:51.160 a sales market. One thing that's just as a bit 0:12:51.200 --> 0:12:53.320 of a sign about this, it's really interesting that a 0:12:53.320 --> 0:12:57.000 lot of people seem to be quite scared of buyers markets. 0:12:57.040 --> 0:13:00.520 They see that property prices are kind of going sowards 0:13:00.640 --> 0:13:03.160 at the moment, especially over the last six months, seasonally 0:13:03.160 --> 0:13:07.280 adjusted house prices have basically been flat, and some people say, oh, 0:13:07.320 --> 0:13:09.200 that's really scary. I'm not sure if it's a good 0:13:09.200 --> 0:13:11.520 time to buy. Holl Tho, it's a great time to buy. 0:13:11.520 --> 0:13:13.560 It's a buyers market, heaps a choice out there. But 0:13:13.640 --> 0:13:15.880 the thing that I really care about when I'm thinking 0:13:15.880 --> 0:13:18.959 about where am I going to invest is I always 0:13:19.000 --> 0:13:21.559 try and judge, well, what might be the next market 0:13:21.640 --> 0:13:23.760 to take off. So I'll give you an example of 0:13:23.800 --> 0:13:28.000 that back in twenty eighteen twenty nineteen, christ Church property 0:13:28.000 --> 0:13:30.960 prices were very flat and had been flat for a 0:13:31.000 --> 0:13:33.880 long time. But what we were tracking was, well, how 0:13:33.920 --> 0:13:36.400 expensive is christ Church compared to the rest of the 0:13:36.440 --> 0:13:39.480 country and compared to where we would expect it to be. 0:13:39.800 --> 0:13:41.880 And what we thought was christ Church is looking really 0:13:41.960 --> 0:13:44.520 cheap right now. We directed a lot of our investors 0:13:44.280 --> 0:13:47.560 to start buying in christ Church, and over the last 0:13:47.559 --> 0:13:49.840 couple of years, crash Church property prices are up fifty 0:13:49.880 --> 0:13:52.800 percent and they didn't really tank that much during the 0:13:52.840 --> 0:13:55.920 downturn because Crasschach was still relatively cheap compared to the 0:13:55.920 --> 0:13:58.320 rest of the country. So I call it this overvalued 0:13:58.400 --> 0:14:01.600 undervalued model. Data is free on our website. We calculate 0:14:01.640 --> 0:14:04.120 it for every council area and every region in the country. 0:14:04.240 --> 0:14:06.079 And that's one of the main things I'm trying to 0:14:06.080 --> 0:14:09.680 look at, which is basically saying, is a particular area 0:14:09.720 --> 0:14:13.120 relatively cheap or relatively expensive compared to where we'd expected 0:14:13.200 --> 0:14:14.920 to be, because that kind of gives us a good 0:14:14.920 --> 0:14:17.720 indication about which areas might take off next. 0:14:18.040 --> 0:14:19.680 And I guess you've seen the market adjust to that 0:14:19.760 --> 0:14:22.480 because now we've effectively got I mean a glut of 0:14:22.520 --> 0:14:25.560 properties there in christ Church, haven't we It's an area 0:14:25.600 --> 0:14:29.040 that so we're lead to believe there's a lot available. 0:14:29.440 --> 0:14:31.480 Well, there's a lot of properties that have been built, 0:14:31.480 --> 0:14:34.200 but there is a very large difference between the number 0:14:34.240 --> 0:14:37.720 of properties that have been built and a glut. To me, 0:14:37.960 --> 0:14:40.480 a glut, what does that look like? That looks like 0:14:41.000 --> 0:14:44.000 you can't rent a property. Actually, our property management team 0:14:44.040 --> 0:14:46.880 are renting properties pretty quickly in christ Church, much quicker 0:14:46.920 --> 0:14:49.880 than Auckland, so we're not necessarily seeing that. I think 0:14:49.920 --> 0:14:52.560 what we are seeing in New Zealand is that we 0:14:52.640 --> 0:14:57.120 are our housing stock is changing because the makeup of 0:14:57.200 --> 0:15:00.000 the country is changing. So if I took you back 0:15:00.120 --> 0:15:02.840 the seventies or eighties, your standard house was kind of 0:15:02.880 --> 0:15:06.640 three bedrooms one bathroom. Now people are having fewer kids, 0:15:06.680 --> 0:15:10.680 we've got fewer people living in each house and so 0:15:10.720 --> 0:15:13.240 we don't need as many bedrooms. But there's this move 0:15:13.320 --> 0:15:16.160 to kind of compact quality where even though we don't 0:15:16.160 --> 0:15:19.440 need as many bedrooms, we have higher expectations around what 0:15:19.480 --> 0:15:21.520 our house is going to give us. That's why more 0:15:21.560 --> 0:15:25.360 people want two bathrooms within a property as opposed to 0:15:25.360 --> 0:15:28.040 just the one that we would have had previously. So 0:15:28.080 --> 0:15:31.320 I think there is a change in the expectations of 0:15:31.440 --> 0:15:33.920 kiwis and therefore we're seeing a change in the housing stock. 0:15:34.120 --> 0:15:35.960 That's why you see a lot of building. I don't 0:15:35.960 --> 0:15:39.240 necessarily say look at that and say that's a supply issue, 0:15:39.280 --> 0:15:40.800 because some of it is demand driven. 0:15:41.600 --> 0:15:44.120 In terms of diversification, if we're thinking still back to 0:15:44.160 --> 0:15:46.000 that same idea that we started in with, which is 0:15:46.040 --> 0:15:48.160 why would I put my money into a house rather 0:15:48.200 --> 0:15:52.080 than into an equity investment. You could spread your bets 0:15:52.080 --> 0:15:54.720 a lot more easily, can't you if you are putting 0:15:54.720 --> 0:15:57.800 money into a market, Whereas if you are investing in 0:15:57.880 --> 0:16:02.040 anyone property that you're locked up, you're exposed to climate risk, 0:16:02.080 --> 0:16:04.680 rental risk, all of these other kinds of issues. You 0:16:04.720 --> 0:16:08.520 never can pick your neighbors, how I mean, is there 0:16:08.560 --> 0:16:10.040 any way around that problem. 0:16:10.520 --> 0:16:13.360 One thing that's really interesting when we're thinking about diversification 0:16:13.760 --> 0:16:15.760 is those numbers I shared before about S and P 0:16:15.920 --> 0:16:20.680 five hundred versus zed house prices, the inset house price 0:16:20.800 --> 0:16:24.200 index or medium sale price, whatever graph you look at 0:16:24.200 --> 0:16:27.880 online is a little bit misleading because if you invest 0:16:27.880 --> 0:16:29.760 in the S and P five hundred, you can put 0:16:29.760 --> 0:16:32.840 your hundred bucks in and you can become reasonably diversified 0:16:32.880 --> 0:16:35.640 buying up all five hundred of those stocks, and so 0:16:35.800 --> 0:16:38.680 the ups and downs can be smoothed out because you 0:16:38.720 --> 0:16:42.400 are being diversified. Now when you buy an investment property, 0:16:42.480 --> 0:16:45.920 you're not buying the average house in New Zealand. You're 0:16:45.920 --> 0:16:47.760 not going to go up and down with the market. 0:16:47.800 --> 0:16:51.880 You're buying one specific property in one specific area that 0:16:52.040 --> 0:16:55.280 is basically not diversified at all, and so the ups 0:16:55.280 --> 0:16:57.840 and downs that you get as a property investor will 0:16:57.880 --> 0:17:00.680 be much larger than the ones that you see when 0:17:00.720 --> 0:17:05.080 you google median sale price in z for houses, or 0:17:05.160 --> 0:17:07.240 look at any graph of NZED house prices and it 0:17:07.280 --> 0:17:10.640 will look like, oh, most of the time house prices 0:17:10.920 --> 0:17:14.440 are going up, yes, but that's because sometimes Auckland will 0:17:14.440 --> 0:17:17.040 be going up in value, when Wellington's flat. Sometimes christ 0:17:17.119 --> 0:17:19.000 Church will be going up in value well and the 0:17:19.080 --> 0:17:22.000 Cargol is flat, and so it will look as if 0:17:22.080 --> 0:17:25.200 New Zealand house prices are going up constantly, but you're 0:17:25.240 --> 0:17:28.560 not buying in for Cargol and christ Church and Auckland 0:17:28.600 --> 0:17:31.119 and Wellington. When you buy your first property, you're just 0:17:31.119 --> 0:17:34.159 buying one specific property and one specific market, and so 0:17:34.280 --> 0:17:37.560 the value increase will be much more volatile than the 0:17:37.640 --> 0:17:40.600 overall market. And that's a nerdy point, but it's a 0:17:40.640 --> 0:17:42.200 very important one to get across. 0:17:42.000 --> 0:17:44.199 You know. I guess it's like there is no average 0:17:44.200 --> 0:17:47.080 houses there, right, that's the that's the thing, right, It's 0:17:47.200 --> 0:17:50.960 very very specific. It's a very bespoke kind of investment 0:17:51.000 --> 0:17:54.080 in that kind of respect. I guess that appeals a 0:17:54.080 --> 0:17:55.960 lot to some people, but to some others that might 0:17:56.080 --> 0:17:58.400 there might be some pressures on there they might be understanding. Gosh, 0:17:58.440 --> 0:18:00.720 I'm now on for a bunch of maintenance. You know, 0:18:00.760 --> 0:18:04.480 the rates bills going nuts. We've touched on climate there. 0:18:04.480 --> 0:18:06.919 I mean, we're getting some quite granular assessments from the 0:18:07.080 --> 0:18:10.080 insurance companies about whether they'll even extend cover over properties 0:18:10.119 --> 0:18:12.680 and so on. I mean, are you finding that from 0:18:12.760 --> 0:18:15.240 the people that open as you talk to the customers 0:18:15.240 --> 0:18:17.080 coming through the door, that that to turn off or 0:18:17.119 --> 0:18:18.760 something that they have to try and get over. Are 0:18:18.760 --> 0:18:21.120 people stepping back as a result of that, or how 0:18:21.119 --> 0:18:23.240 are you helping them deal with some of those challenges. 0:18:23.320 --> 0:18:24.920 Well, one of the main things we do at Opus 0:18:24.960 --> 0:18:27.680 Partners is we only focus on new built investment properties 0:18:27.760 --> 0:18:29.720 and so let me give you an example, if you 0:18:29.800 --> 0:18:32.520 bought an older property that was built in the nineteen 0:18:32.640 --> 0:18:36.520 seventies and that property is now on a floodplane, chances 0:18:36.520 --> 0:18:38.959 are that property is built quite low to the ground 0:18:39.040 --> 0:18:42.080 and will have a reasonable risk of flooding. For a 0:18:42.080 --> 0:18:44.399 property to be built on a floodplane, if it's a 0:18:44.440 --> 0:18:46.680 new build today, it has to be built up off 0:18:46.720 --> 0:18:49.160 the ground. You'll often see when you're looking at townhouses 0:18:49.200 --> 0:18:51.480 they might have steps up to them. Typically it might 0:18:51.600 --> 0:18:53.439 need to be about half a meter off the ground. 0:18:53.600 --> 0:18:56.720