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Hi, here is what I've found for you over the last week. Enjoy!

● Top 10 Fastest Rising & 10 Falling NZ Suburbs
● 5 Reasons to Be Positive on 2019 Property Market + 5 Reasons to Be Negative on 2019 Property Market
● How to Diversify Your Money to Get Better Return on Investment

● Event: Q+A: Investing & Landlording in Auckland

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10 Fastest Rising & 10 Falling NZ Suburbs

CoreLogic has released a list of suburbs with the fastest-rising and fastest-falling house values throughout New Zealand

House values in most lower socioeconomic areas have been rising in the year to March 2019 while values in the $1m-plus on Auckland's North Shore fell the most.

Firstly, we must acknowledge that some results vary from other recently released market analysis. Particularly, REINZ data stating 30% growth or falls in some suburbs of Auckland.  

It’s important to note that the data used was based on the median sales price and only represented what happened to sell over two separate periods. Today, I’m focusing on the actual change in the value of all properties in each suburb.

Why is that important? A quick comparison of a real-life example in Takapuna shows it quite clearly. There are a total of 2,905 residential properties in Takapuna. The median value of these 2,905 properties was $1,781,450 at the end of March 2018.

In the 6 months to the end of March 2018, there were 83 residential sales in Takapuna where an agent was involved. This represents only 2.9% of all properties. The median sales price of these 83 properties was $1,000,000. Clearly, these 83 properties don’t represent the whole suburb – there were a lot more lower-value (for Takapuna) property sales over that 6 month period than higher-value.

Fast forward a year (to the end of March 2019) and the median value of all those 2,905 properties is now $1,713,400 – a drop of 3.8%. This is relatively indicative of a weakening market, as is the case across the city with fewer buyers and more properties for sale.

However, the median sales price for the 6 months to the end of March 2019 was $1,300,000; a whopping 30% increase. This is from just 67 residential property sales (by agents), or 2.3% of all properties. So while there are fewer sales overall, a greater share of them are in higher value bands this year than last.

Why? It could be anything – from certain agents or agencies dominating one year to the next, to buyers’ confidence shifting in a changing market. We don’t really know.

One thing is for sure, the change in a median sales price tells you nothing about the performance of the overall property market in that area.
 
 
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5 Reasons to Be Positive on 2019 Property Market:

● Historically low interest rates, which might stay for 2-3 years;
● Low unemployment giving job security, and mortgage repayment confidence;
● LVR restrictions easing after five years, resulting in more buyers;

● Prices have not been rising as fast as in previous years, market more stable.

5 Reasons to Be Negative on 2019 Property Market:


● Foreign buyer ban potentially removes buyers from the market;
● Tax changes for landlords, removing ring-fencing, could mean fewer sales to investors and them dumping properties onto the market;
● More real estate regulations potentially on the horizon could depress prices;
● House prices are still high compared to incomes and rents.
 
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How to Diversify Your Money to Get Better Return on Investment

🕑 2-minute read

According to the March quarter 2019 Morningstar KiwiSaver Survey, 151 of the 153 KiwiSaver funds underperformed the NZX50 Gross Index in the 12 months to March 2019.

The only funds to outperform this NZX benchmark index, which returned 18.3 per cent for the March 2019 year, were two small property funds with total assets of only $25 million. These two funds represent only 0.05 per cent of the total KiwiSaver assets of $54,661m.

How could this happen? How could the vast majority of KiwiSaver funds, including all passive funds, underperform the benchmark New Zealand sharemarket index in the March 2019 year?

The first point to note in the accompanying table is multi-sector funds dominate the KiwiSaver sector.

 
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These multi-sector funds invest in a wide range of asset classes, including New Zealand, Australian and global equities, as well as property, alternative assets, fixed interest securities and cash.

Multi-sector funds will never outperform the top performing asset class, and the New Zealand sharemarket has been the best performing investment in the March 2019 year.

The best performing multi-sector KiwiSaver fund delivered an annualised 13.3 per cent return for this 10-year period. 

The multi-sector approach has its foundation in the work of several academics, notably Harry Markowitz. Markowitz was one of the pioneers of Modern Portfolio Theory (MPT), which assumes investors are risk-averse.

For example, MPT is based on the principle that investors would prefer to have consistent returns of 8 per cent per annum compared with, for example, consecutive annual returns of plus 35 per cent, plus 4 per cent, minus 15 per cent, plus 30 per cent and minus 5 per cent over a five-year period — even though the latter would deliver a slightly higher return than 8 per cent per annum.

Industry experience in New Zealand also indicates a similar attitude among investors — they prefer consistent returns even though more variable annual returns may deliver higher long-term results.

Markowitz wrote in his 1959 book Portfolio Selection; Efficient Diversification of Investments that "uncertainty is a salient feature of security investment. Economic forces are not understood well enough for prediction to be beyond doubt or error.

Even if the consequences of economic conditions were understood perfectly, non-economic influences can change the course of general prosperity, the level of the market, or the success of a particular security.

The health of the President, changes in international tensions, increases or decreases in military spending, an extremely dry summer, the success of an invention, the miscalculation of business management — all can affect the capital gains or dividends of one or many securities."

Consequently, Markowitz recommends that a portfolio should have a range of uncorrelated assets — assets that don't always go up and down together. He wrote: "To reduce risk it is necessary to avoid a portfolio where securities are all highly correlated with each other. One hundred securities whose returns rise and fall in near unison afford little more protection than the uncertain returns of single security".

This is one of the reasons why multi-sector growth funds hold fixed interest securities and cash because they are usually uncorrelated with share price movements.

Another MPT principle is Markowitz's Efficient Frontier Theory, which is the asset allocation that will deliver the highest return for the lowest risk.

In general terms, this mix is usually around 80 per cent growth assets and 20 per cent income assets because once a portfolio goes above an 80 per cent allocation to growth assets, its risks increase at a greater rate than expected returns.

KiwiSaver members have two main options if they believe their fund or funds are too cautious.

The first is to put all their money into single-sector funds, a strategy that would receive limited support from most qualified financial advisers.

The second, and preferred, option is to keep investment money outside KiwiSaver and place this in higher risk single-sector funds.

In other words, KiwiSaver should be viewed as a lower-risk investment option, while higher risks can be taken through non-KiwiSaver investments.


Source: Brian Gaynor / NZ Herald

 
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Q+A: Investing & Landlording in Auckland

If you have burning tax, tenancy and legal questions Auckland Property Investors' Association will be featuring Huw Evans (property manager), Kristine King (lawyer) and Nick Ashford (accountant).

Each panellist will talk briefly about important developments in their respective industries and spend the rest of the session doing nothing but answering your questions. 

Subject areas
● Landlording/property management; 
● Accounting;
● Legal; 

The panellists at this session are: 

Huw Evans, property manager from Barfoot & Thompson 

Kristine King, lawyer and director of Duncan King Law

Nick Ashford, accountant from Withers Tsang.

Full event details are here.

 
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Hi, I'm Maxim, the human behind this newsletter.

I research and interview economists, tax advisors, investors etc. to find tools & tactics that YOU can use to save money and time.
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