Landlord Notes – November 2020

Some general property notes…

Rolleston Rental Property

Was originally aiming for an existing house that was a few years old, Built post Christchurch earthquake and was less interested in new builds due to the higher price they tend to command.

The place I ultimately snagged was the final one on my short list that did not have active offer(s) already on it. A 3 Bedroom, 2 bathroom house with internal access 3 car garage in a new subdivision.

After having my offer accepted, there was signs of seller’s remorse kicking in due to alleged “big interest in the property with buyers willing to pay more” and there was pressure on to get the LIM report from the council by the end of the unconditional date.

Despite the above, to be honest, I still firmly feel I paid a “New house premium” for the place over say an existing house. The real (extruded) value of the property when compared against a market snapshot at October 2020 I believe is around the 535,000 – 540,000  mark.

That said, the market appears to be catching up quickly in the recent month to narrow the perceived gap / premium.

One Window has already been damaged by someone attempting to break in. While apparently nothing was taken, it does mean Extra $$$$ to get that buggered window fixed. While hiccups like these were anticipated (what goes smoothly these days?), it is never the less still a little disappointing.

Make sure the place includes a basic burglar alarm, if not, factor that in when making an offer. A basic 2 PIR alarm system installed is around the $1000 mark with extra PIR sensors about a $100 each. Will look at what can be reasonably done to further harden the place security wise.

I am willing to buy again, but I think I will focus far more strictly to my original scope and aim for a place that is in an older, more established part of Rolleston which is also closer to the town centre but built using the new code post Christchurch Earthquake.

Landlord Notes – November 2020

Bank runs hypothesis

Another risk scenario that could happen is that some fed up savers could begin withdrawing their savings in frustration at Central Bank policy. Given sufficient enough numbers could culminate into a bank run where it generate it’s own momentum feeding upon itself.

Asset prices would continue to rise in the meantime while people convert their savings into other forms, however once a full on bank run is in motion, Asset prices then could snap back the other way while money supply contracts, loans are recalled and people forced to sell assets in a sliding market in order to fulfill collateral requirements.

Subjectively, the risk of such an event happening in the next few years I feel is currently ‘low’, but thought it was something worth putting out there.

Bank runs hypothesis

Unusual Economics

The original bull trap assessment is well and truly dead I believe. If a down leg as part of a great depression type scenario were to have happened, it should have occurred by July and no later than the middle August. Coming to the view that COVID-19 was a mere interruption to the previously assessed larger trend.

The financial markets from many accounts appear to mostly now be sentiment (emotionally) driven and would not be at all surprised to see Asset prices continue to drive higher as a result of the FOMO affect (before possibly abruptly pulling back), helped along by Federal Reserve support and other interventionist (as opposed to classic free market) policies.

The ‘Efficient Market’ disciples can argue blue in the face that the markets are forward looking and the market is factoring in that things will drive back to normal before we know it, but this argument simply isn’t stacking up for me… at all.

I see a forming Technology bubble, driven by the likes of TSLA whose prices are being driven far beyond what facts, fundamentals and underlying data could ever justify.

While this certainly seems like a classic bubble with the usual tell tale signs including Taxi drivers talking about their gains in Property + stocks, and phases such as ‘Permanently high plateau’ + ‘This is a new paradigm!’ being banded about (i.e this time being “Modern Monetary Theory”), these bubble signs and anecdotes have been going on for an extraordinary long time, considerably longer than what would have normally occurred in a text book bubble. In fact, I’d go as far as to say that I feel the last secular bull run from 2009 to today is highly unusual.

Nothing can be said for certain as all I can see is that much of the information coming out to date is simply too poor to base any meaningful longer term decision making off of (have long held the view that Economics as a discipline is in disrepute), and that the markets in my view have most certainly been interfered with.

Current personal investment focus is towards NZ Farm Land where prices on average have not shifted a huge amount over the last decade (See Farm land price Graph at and REINZ Rural + Lifestyle property data). How one might be able to partake in this may be through funds such as the Booster Private Land and Property Fund, however, the types of properties they appear to cover are rather limited. In regards to other investment related thoughts… Continue reading “Unusual Economics”

Unusual Economics