Apartment market crunch for Wellington

There are a few newish Taranaki/Tory Street apartments for sale presently.  In particular the new Bellagio complex has a few people bailing out at what is probably a hefty discount to what they paid.  This is when there’s a huge amount of apartment construction going on in this part of town. 

If people are bailing out of the apartments now what will happen once purchasers of developments like the just started Soho apartments, which seemed aimed at investors, need to ask the bank to lend them the pre-credit crunch purchase price?  I’m calling a Wellington apartment crash for 2009.

The most memorable collapse

The Hanover collapse could become the most notorious incident of the finance companies meltdown.  Where most of the collapses have been due to clear incompetence or criminal wrongdoing, Hanover could be viewed as a rip off of the little guys. 

Having taken over $100 million in dividends and loaned their associated companies considerable sums from the now cash strapped company, Watson and Hotchin risk considerable opprobrium should Hanover’s gran and grandad investors lose money.   The Fay and Richwhite of the 2000s perhaps.

Such unfairness could sit in people’s memories longer than collapses where the owners lost their shirts as well.

Mother’s investment choice crushes a sick boy’s dream

The trouble with Hanover Finance has set off another round of investor sob stories.   While Hanover’s advertising claims of their ability to “weather any conditions” will make an interesting fair trading case, the Dominion Post has again glossed over one of the greatest contributors to the current finance companies’ meltdown – stupid decisions by investors.  

Nowhere in this article is the foolish decision to put money that could not afford to be lost into junk bonds questioned or even noted.  Surely this isn’t an irrelevant point?

Which finance company will collapse next?

After 17 collapses there are still plenty finance companies left to keep the business journalists busy.  If the theory that proves correct the property market will be the new pressure on these companies, then recent statistics suggest we’ll see a few more collapses.

In terms of who’s next Kapiti Coast financial adviser Chris Lee seems to have done a pretty good job at picking them so far.  His ratings 2005 from show a reasonable track record in rating the finance firms. The failures are circled including notable mistake Provincial.

Looks like there are quite a few E grades to go.    

Sugging telemarketers

I was a victim of sugging the other day.

Net Lifestyle Limited had a foreign call centre give me every impression it was conducting market research about attitudes to tax.  Next step was a local call back offering to provide ‘tax advice’.  After some questioning it became apparent that I would be offered the services of the Circle Group, which funnily enough is half-owned by the owner of Net Lifestyle.  Circle is yet another property investment spruiker clipping the ticket of the type of unsophisticated investors sought by the Blue Chips and Richmasterys of the world.    Net Lifestyles

Real estate industry reform

The submission by REINZ on real estate industry reform provides a number of insights into why reform is needed. 

First REINZ state they need to remain central to regulating the industry, then say the proposed Bill doesn’t go far enough in not regulating residential letting, leasing and property management.  So having failed to do a decent job of protecting consumers and lifting industry standards, REINZ wants to expand the scope of its influence!  Consumer concerns are notably absent.

The sales pitch for their submission is like a description for a do-up; overstatement combined with the main problems glossed over or ignored.    

How hard is it to Google?

In an offline article, today’s SST states that some wording in a Bill before Parliament is 30 years old.  Had the author bothered to check his facts he’d know the wording in question is only four years old, this information is easily found on the legislation online site.   It appears he just accepted what he read in a submission on the Bill without verifying its accuracy.

While the points made on the wording are useful for the public debate that’s little excuse for not checking what presented as the story’s main point.  

Blue Chip Financial Dissolutions

Is there anything about the Blue Chip collapse that doesn’t have a stench to it? 

The circumstances don’t match a straightforward bad business model and/or dumb decisions as we saw in with finance company collapses.   I see four things that stink:

1. ‘Financial Advisers’ selling their company’s products;
2. Suspect valuations and associated high margin deals (7:40mins in);
3. A unusually complex web of companies; and
4. Mysterious thefts.

Also, if Blue Chip associated companies did make large sums trading properties (point 2.) where’s this money gone?  I doubt anyone would put money on the Fair Trading Act being the only law breached.

My significant other (bank) isn’t telling me everything

Internet bank Raboplus has been a teeny tiny bit disingenuous.   When comparing the returns on their new Cash Advantage Fund they’ve compared it to a standard 8% deposit.  As their standard deposit rate is 8.2% their comparison is entirely realistic. 

Admittedly, the real world example would show only a marginally worse comparison.  In their $100k example there’s only $120 difference.  

What they do under sell is the change in the after inflation return.   Without considering inflation their example shows the cash fund offering a 14.75% better return.  Using the real world example with inflation considered gives a 18.75% better return.

Noel Leeming’s ‘Real Deal’

 Noel Leeming’s recent Erin Brockovich campaign grates; aside from being odd.  

It’s difficult to take the message about doing “the right thing by their customers” seriously when Noel Leeming has a history of selling questionable services.    The Consumers’ Institute has noted that many customers haven’t seen the ‘right thing’ being done.

Amusingly, Brockovich has already given Noel Leeming’s sister firm a slap for their ads.  Notably, while Noel Leeming is making a fuss about its corporate responsibility neither its sister nor parent companies do.  Looks like Erin and charity spending are just alternatives to billboards.

Good for the charity though!