INTO THE BLUE Investing sustainably in the South Pacific
GRUNT WORK From personal trainer to property king
Hot sectors to watch this year
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NZ$11.95 INC. GST
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ISSN 2744-6085
THE FTX EFFECT Will the demise of FTX kill crypto?
Five Focus Points for 2023 • China Opens Up • Electric Dream: Tesla Model Y
In this easy-to-read and practical guide, you’ll learn how investing in property can achieve your financial goals at every stage of your life - from buying your first home, to building a portfolio and into retirement. ‘Ed and Andrew’s book focuses on lifelong property investment and the changes in strategy needed along the way to build wealth for retirement and passive income!’ Tony Alexander, economic analyst and commentator
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I N F O R M E D I NVESTO R
Contents IN THIS ISSUE
12. What We Like
PERSONAL FINANCE
New art, luxe jewellery and money book launched.
14. Essentials Homeware and accessories for an autumn pick-me-up.
16. Going Up, Going Down Economist Cameron Bagrie explores how we are doing as a nation.
20. Tread Carefully Martin Hawes urges caution when it comes to property investment.
24. Top Five Property Myths We explore top enduring property myths and uncover the truth behind the cliches.
32. Building a Portfolio in a Downturn Is it possible to build a portfolio when times are tough? Ben Tutty investigates.
38. Pacific Trade We explore renewable and resilient energy systems in the Blue Pacific.
40. Short-Term Rentals Holiday rentals – can they be a good long-term investment?
44. Key Focus Points for 2023 CMC Markets’ Chris Smith explores the year ahead.
48. Crypto Following the FTX saga we take a look at the year ahead for crypto.
50. New PIE Funds for InvestNow Looking for an ETF with US or global exposure and low fees? InvestNow’s newest funds can help with that.
52. The Travelling Investor Michael Burge has 17 properties but chooses to live out of a suitcase.
54. Worldview Andrew Kenningham looks at China’s reopening and the effect on the world economy.
58. Snapshot What’s been happening in the world of finance, investment and innovation?
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62. What to Watch Pie Funds share what they expect to be hot in 2023.
64. The Great Townhouse Debate Are too many being built? Ed McKnight explores the stats.
66. Do You Need a House to Build Wealth? Dean Anderson from Kernel Wealth on how to set yourself up for retirement without owning a house.
68. Saving Your House and Your Relationship The stress of paying your mortgage is likely to add stress to relationships, writes Lynda Moore.
70. Money Grows on Trees In the agrisector, money can grow on trees, according to Syndex experts.
72. Asset Protection Are you regularly reviewing your property insurance sum insured? A timely reminder from Vero.
74. KiwiSaver and Property There are ways KiwiSaver can help you buy property and some it can’t. Booster has the facts.
76. Take Responsible Investing to the Next Level Booster’s socially responsible fund is driven by investor feedback and extremely thorough.
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Contents PROPERTY
80. Next Six Months Vital for Success Scott McKenzie from PMG discusses the importance of the next few months.
84. Property Market Uncovered Kelvin Davidson from CoreLogic on how the market has been faring recently.
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87. A Property Retirement Plan Andrew Nicol shares a case study showing a comfortable retirement achieved through property investment.
90. Getting the Best Mortgage Deal There’s a key difference between an adviser and a broker. Peter Norris explains.
92. Commercial Property Funds Property investment but without the high barriers to entry and admin headaches.
94. Taking Away the Tenancy Pain The Rental Bureau and their unique system for renting your investment property more efficiently.
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96. Architecturally Designed Transportable Homes
Shamil Gujarati on Transbuild’s fixed-price build options.
INVEST IN YOURSELF
102. Fashion Update All the best styles for the autumn season.
106. Introducing Volvo’s Polestar 2 Liz Dobson finds this Swedish EV has a lot to offer Kiwis.
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112. Electric Dreams Telsa’s Model Y is an all-round winner.
EDITOR’S LET TER
Published by: Opes Media
Bringing Clarity to those Property Myths
Informed Investor 33 Federal Street, Auckland Central, Auckland. www.informedinvestor.co.nz
Let’s clear the air around the current slump and recognise it’s just part of a natural cycle that can, and should, be ridden out. In this, our autumn issue of Informed Investor, we explore all things property. It’s an asset that underpins the wealth of many (as Andrew Carnegie put it, “Ninety per cent of all millionaires become so through owning real estate”) and a beautifully tangible way to create wealth. However, if you are to believe the conventional wisdom (and the doom and gloom merchants in mainstream media) now’s a terrible time to be a property investor. House values are slumping, rental yields are low, and credit is hard to come by. It’s all quite dispiriting. But there is another way to view this: the current slump is just part of a natural property cycle that can, and should, be ridden out. Our lead story by Amy Hamilton Chadwick deals with this, alongside four other property myths. In response to those naysayers who claim the end is nigh for property investment, Matthew Gilligan, property investor and managing director of GRA, has the following to say. “In the past 40 years I’ve never seen a downturn that hasn’t recovered to peak value within five years. Reduced values are temporary. The burden of interest rates will rein in inflation, and I think we’ll see a recessionary environment in 2024. Then, in 2025, we’ll start to see recovery of values as rates drop again and demand increases.”
Our second story, on creating a portfolio in a downturn, is also useful for those worried about property investment. Writer Ben Tutty gives a compelling argument around why now is a good time to buy, especially if you follow three simple rules: buy property under value, focus on cash flow and add value wherever possible. Property is the focus of this issue, but we also have our usual range of informative features to keep you up to date with investment issues. We look at whether the downfall of FTX will kill crypto (there’s mixed opinions on this one) and look at how New Zealand is faring in the face of high inflation and the threat of recession. We also explore autumn’s best new fashion trends; review the Tesla Model Y; and launch a new car section. It’s been a challenging few months, especially for those in the North Island who have been battered by weather on all fronts. We hope you are all keeping well and safe, and find education and inspiration between the cover of this magazine. Take care.
Joanna Mathers Editor
Editor Joanna Mathers
Resident economist Ed McKnight
Art Director Mark Glover
Printer Webstar
Account Manager Stephanie Bryant – 021 165 8018
Retail Distributor Are Direct
This magazine is subject to NZ Media Council procedures. A complaint must first be directed in writing, within one month of publication, to the email address, stephanie@informedinvestor.co.nz. If not satisfied with the response, the complaint may be referred to the Media Council PO Box 10-879, The Terrace, Wellington 6143; info@mediacouncil.org.nz. Or use the online complaint form at www.mediacouncil.org.nz. Please include copies of the article and all correspondence with the publication. Cover photo by Pierre Châtel-Innocenti on Unsplash Quote spread illustration designed by pikisuperstar / Freepik AUTU M N 2 0 2 3 | I N F O R M E D I NVESTO R 8
Informed Investor is an investment magazine published quarterly by Opes Media. You need Informed Investor’s written permission to reproduce any part of the magazine. Advertising statements and editorial opinions in Informed Investor reflect the views of the advertisers and editorial contributors, not Informed Investor and its staff. Informed Investor’s content comes from sources that Informed Investor considers accurate, but we don’t guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk: Informed Investor magazine is not liable to anybody in any way at all. Informed Investor does not contain financial advice as defined by the Financial Advisers Act 2008. Consult a suitably qualified financial adviser before making investment decisions. Informed Investor magazine does not give any representation regarding the quality, accuracy, completeness or merchantability of the information in this publication or that it is fit for any purpose. To advertise in Informed Investor, you must accept Informed Investor magazine’s advertising terms and conditions. Please contact Stephanie@informedinvestor.co.nz about advertising. Informed Investor is printed on environmentally responsible paper. The paper is produced using elemental chlorine-free pulp, sourced from sustainable and legally harvested farmed trees. The magazine is recyclable. PRINT ISSN 2744-6085 DIGITAL ISSN 2744-6093
UP FRONT
Meet Some of Our Contributors CAMERON BAGRIE
KELVIN DAVIDSON
Cameron is the managing director of Bagrie Economics, a boutique research firm. He was previously chief economist at ANZ, a position he held for over 11 years.
Kelvin joined CoreLogic in March 2018 as senior research analyst, before moving into his current role of chief economist. He brings with him a wealth of experience, having spent 15 years working largely in private sector economic consultancies in both New Zealand and the UK.
ANDREW KENNINGHAM
LAINE MOGER
Andrew is the chief Europe economist for Capital Economics. He was previously an economic adviser for the United Kingdom Foreign Exchange.
Laine is a journalist at Opes Partners, having come from a reporting role at Stuff. She regularly writes for Informed Investor and NZ Property Investor and has a wealth of knowledge around property.
ANDREW NICOL
CHRIS SMITH
Andrew is an authorised financial adviser and the managing partner of Opes Partners. He has more than 15 years’ experience in banking, finance, and property.
Chris is the general manager at CMC Markets. He has more than 15 years’ investing experience in financial markets, global equity, commodity, and forex markets.
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C ONTRIBUTORS
AMY HAMILTON CHADWICK
MARTIN HAWES
Amy specialises in property and finance journalism. She has been a writer and editor for almost 20 years. Amy is a registered financial adviser.
Martin is the chairman of the Summer KiwiSaver Investment Committee. He’s an authorised financial adviser and offers his services throughout New Zealand.
ED MCKNIGHT
LYNDA MOORE
Ed McKnight is Informed Investor’s economist. After working for the Auckland Philharmonia and Hatch, he now crunches data for Opes Partners.
Lynda Moore spent 20 years in her own accounting practice before co-founding Money Mentalist. She blends psychology and neuroscience with money coaching.
MIKE TAYLOR
BEN TUTTY
Mike is the founder and CEO of Pie Funds. He’s also portfolio manager of Pie Funds’ Chairman’s, Global Growth 2 and Conservative funds.
Ben is an Auckland-based but not Auckland-bound property investor and freelance writer. He’s travelled and worked across Asia, Europe, and Australasia, writing for some of the biggest names in property and finance.
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RE U P GFURLOANRTS
What We Like Showcase of the best new products, art and accessories. Shades of the sea Photographer Mark Glover’s horizon shots create an atmospheric focal point in any large living space. Glover’s Auckland studio overlooks the Waitematā Harbour and he’s been taking pictures of the everchanging seascape for around 10 years. There are shades of Rothko in his abstract works; the images appear to be painted. But instead, Mark uses his photographic skills to distil sea and sky into their most basic tonal form, azure, pale rose, alongside crisper textural images in blackand-white. The images can be printed to order in any size (but bigger is better for the greatest impact).
The works can be viewed at on Instagram at: www.instagram.com/northeast_studio or email northeaststudionz@gmail.com
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W H AT W E L I K E
Seasonal style Beautiful autumn jewellery exclusively available from Partridge Jewellers.
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1. Messika Move Uno Pave Choker – $8,470 6 Move Uno charms adorn the thin and adjustable chain of this bohemian chic 18ct yellow gold necklace by Messika. 2. Chopard My Happy Hearts Carnelian Earring – $1,600 Crafted in 18ct rose gold, this earring from the My Happy Hearts collection by Chopard, features a red carnelian heart inlay. 3. Cartier Tank Française – $7,750 Both aesthetic and ergonomic, the reinvented Cartier Tank Française energises with its ultra-profiled lines. This medium model features a quartz movement and steel case.
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4. Extensible White Gold Bracelet – $11,295 To be worn alone or stacked, this diamond tennis stretchable bracelet in 18ct white gold is the perfect accessory. 5. Vhernier Calla Earrings – $12,065 From the iconic Calla collection by Vhernier, these stylish earrings are crafted in 18ct rose gold and feature small white diamonds.
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See partridgejewellers.com for details.
Lynda Moore Our wonderful contributor, Money Mentalist Lynda Moore, has released a new book, Conversations with Money: A Love Story, aimed at helping readers “remove financial blocks and create more wealth”. In it she explores how our relationship with and attitude towards money influences our decisions and helps identify behaviour that can hold us back from financial well-being. It’s easy to read and highly engaging, and she shares her own (heartbreaking) story of love and loss and the role money played in it. Over the book’s three sections, Moore explores personal beliefs around money, how money affects relationships, and provides practical exercises designed to help us thrive financially. An excellent resource for those wanting to change the way they engage with money and create long-term wealth and well-being in their life.
Visit https://moneymentalist.com/book for more information.
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ESSENTIALS
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Autumn Colours
Warm up your life as the weather gets cooler. 7
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Make it Pop
Resene Quarter Sandspit Brown
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Resene Sebedee
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Resene Celebrate
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Resene Fun Green
Bright accents and cooling whites for hip home highlights.
8. In the roundhouse wave placemat set of 4 in red - superette.co.nz, 9. Abode bryson ip44 wall light brass in antique brass - lightingdirect.co.nz, 10. LE SPECS Outta love oval vintage tort sunglasses - floandfrankie.com, 11. Teresa tote in tangerine yumeibrand.com, 12. Muuto echo pouf - bauhaus.co.nz, 13. Mellor weave throw in brick - nood.co.nz,
14. Point floor lamp mondular - cittadesign.com
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UP FRONT
Going Up, Going Down Economist Cameron Bagrie takes a good, hard look at New Zealand and how we’re going as a nation.
Seven per cent The annual inflation remains stubbornly above 7 per cent, for the third successive quarter. While lower fuel prices have helped ease inflation of late, strong contributions from housing, food and service sectors contributed to the cost of living pain.
Recession There are widespread calls of a pending recession with the Reserve Bank and Treasury projecting one. Leading indicators such as NZIER’s Survey of Business Opinion are also pointing to one. Business sentiment has tanked to a record low. A net 73 per cent of respondents expect conditions to deteriorate. It does not get much worse than that. Experienced domestic trading activity fell 15 points to -13 per cent and suggests an economy hitting reverse. When trading activity is negative it normally means a negative GDP result.
The playbook Rapid rises in interest rates bring recessions. Housing has cracked, and retail spending too. But job markets are holding up, with firms scrambling for staff. That is not your normal recessionary playbook. A pullback in growth for many businesses represents an environment that is less good, and not necessarily bad. An environment that is less good though with little strain leaves questions over how inflation will disappear? Disinflation (a reduction in the rate of inflation) is associated with economic weakness, pressures on profits, discounting, and job losses. We are not seeing job losses.
The real inflation story If you want a real time barometer of living costs look no further than food price inflation. Food costs are the everyday items we notice. Food price inflation is now above 11 per cent, led by fruit and vegetables. The latter is being driven partly by mother nature, with what seems like an ongoing series of supply disruptions hitting various items. But farm price inflation is having a huge impact on food prices as well, rising around 15 per cent in the past year.
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The playbook #2 Financial markets are anticipating interest rate hikes will turn into falling interest rates in late 2023 and 2024 in New Zealand and the United States. This playbook is based on history, concerns over a recession (which typically central banks respond to by cutting rates) and signs inflation is cooling rapidly in the US. That playbook faces challenges. Inflation looks sticky. Central banks, including the US Federal Reserve, are saying rates will remain elevated for a while. It is a game of chicken between markets and central banks.
MARKET INSIGHTS
Looking for the bungee cord
Welcome #2
House prices continue to retreat, dropping another 1.7 per cent in the month of December, taking the annual decline to 13.7 per cent and 15 per cent below their November 2021 peak. Weak sales, rising days to sell and inventory suggest those talking a near-term recovery are too early. The market has not yet based, a precursor to a recovery taking hold.
NZ welcomed 231,300 visitors in November 2022, up 226,000 on November 2021, led by 105,000 Australians. The November 2022 number of overseas visitor arrivals is 62 per cent of the pre-Covid number of 372,100 in November 2019.
The interest rate on bank mortgage books is around 4 per cent. Fixed lending rates are now above 6 per cent and just under half of mortgages are set to refinance in the coming year. The pain of higher interest rates is only really starting to be felt.
Shrinking Household wealth shrunk by $56.8 billion (2.5 per cent) in the September 2022 quarter. Household wealth has fallen $179.4 billion in the first nine months of 2022, driven by an estimated $91.1 billion fall in owner-occupied property. Household net worth at September 2022 was estimated at $2,250 billion.
Where is the strain? Bank non-performing loans remain low at 0.4 per cent of total lending. For housing, 0.2 per cent of loans are characterised as non-performing. One reason bank non-performing loans are low is that people took advantage of falling interest rates to increase their principal repayment and kept payments unchanged despite falling interest rates. This has provided a bit of a cushion as rates rise with mortgage holders ahead of their payment schedule.
Welcome! Statistics New Zealand estimate a net migration gain of 5,700 for the year ended November. It was made up of a net loss of 15,600 NZ citizens, and a net gain of 21,300 non-NZ citizens. On an annual basis, the November 2022 year is the first net migration gain seen since the February 2021 year.
Despite rapidly rising interest rates and construction costs, huge numbers of residential building consents continue to be issued. There were 50,209 new homes consented in the year ended November 2022. This included 28,364 multi-unit homes, up 24 per cent compared with the year ended November 2021. The number of standalone houses fell 15 per cent to 21,845 over the same period. While Bagrie Economics uses all reasonable endeavours in producing reports to ensure the information is as accurate as practicable, Bagrie Economics shall not be liable for any loss or damage sustained by any person relying on such work whatever the cause of such loss or damage. Data and information have been gathered from sources Bagrie Economics believes to be reliable. The content does not constitute advice. AUTU M N 2 0 2 3 | I N F O R M E D I NVESTO R 1 7
Correct as at 30 January 2023.
A pipeline
F E AT U R E S
Portfolio /port·fo·lio/ (noun)
The securities held by an investor. – Merriam-Webster Dictionary
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QUOTE & DEFINITION
‘The best investment on Earth is earth.’ – Louis Glickman, real estate investor
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I NVESTM E NT
Tread Carefully Down that Property Ave Just because prices are down now gives no certainty of a major bounceback, warns Martin Hawes. Buy in gloom, sell in boom. This is my No.1 investment mantra and it calls for investors to think counter-cyclically as they shun what the masses may be doing. Residential investment property is a buyers’ market and well down in value and this would normally be a time when I would suggest buying. Buy in gloom: well, things are looking pretty gloomy at the moment. Many investors will have similar instincts to take advantage of the price fall and buy. That would usually be the best investment strategy. However, investors need to be careful. Although residential rental property has given quite good returns for some decades, that provides no guarantee they will remain good in the future. Just because prices are down now gives no certainty of a major bounce-back nor promises that “normal” transmission will be resumed. In fact, for my money future performance of rental property may be nothing like as good as it has been over recent decades. The current fall may not be just a routine part of the cycle but instead a major secular change. Economies of scale, pricing There are four changes and conditions that should give cause for investors to think hard before buying: AUTU M N 2 0 2 3 | I N F O R M E D I NVESTO R 2 1