Where are smart young people investing?
Because the problem of rising house prices makes other investment strategies focus, Generation Rent investors don’t know what to do best.
In Oakland Shortland St a dark in the room above, from Cambridge St Peter’s college, a large number of students are listening to the New Zealand investment community one of the most prominent figures in Brian he personal savings.
This advice is the same as he always used: start saving early; Don’t just invest in one thing; Taking on more risk when you’re young and taking on more risk when you’re older; If it looks too good, it probably is.
The news may be old chestnut, but Gaynor said the fact that he spoke to his middle school children marks a shift in new zealanders’ attitudes toward saving and investing. “Obviously, the teacher brought them together, but you’ve never done this before.”
According to Gaynor, the head of Milford Asset Management, a firm that launched the KiwiSaver’s retirement savings plan a decade ago, two big shifts have been made: one is that it is better to challenge residential real estate than other assets (such as house prices). And the fear that a generation of investors experienced after the stock market crash of 1987.
As house prices continue to rise, this fear remains, encourage people’s fears of residential real estate investment, lead to other investment, especially in the late 21st century after the collapse of the financial company, the industry’s confidence has been hit.
Geithner noted that Wall Street recovered nearly 30 years from the 1929 crash, which triggered the great depression.
“Sometimes, if you have something bad, you can change it in a generation. (after 1987) happened is, all this age crowd into the residential real estate, it proved to be a good investment, but due to do well, they were able to borrowing and lending, interest in it.
“But now people are beginning to think,” the house is doing well, can it continue? I need more liquid assets “, because if you have a house, you can’t sell a window, but if you have stocks or funds as we run, you can put up 5% of the money at any time. Indifference still exists, but not so. ”
A new queue
Part of the reason for this change is that a new set of savers has begun to appear, as savings began to be saved in the decade. For this generation of savers, their only experience is that non-bank investment has been managed through KiwiSaver. Today, at least 15 providers provide nearly 150 plans to manage more than $47.5 billion. And the total is expanding rapidly. By 2030, the total amount of money managed by the KiwiSaver provider is expected to exceed $200 billion.
As these savings accumulate, interest in investment performance is rising. “You don’t want to change from apathy to a real interest in a short period of time, but it’s definitely going to change,” Gaynor said. “It’s a 10-20 year process.”
Improving life expectancy is changing behavior, he says. “I told these students today that for the last 10 or 15 years, the biggest change for me is that people now want them to live to 80,90, 95, and not give them the lifestyle they want. ”
Another major force is that young new zealanders expect them to have their own homes someday.
And, of course, many of the children at the university of st. Peter’s earning between $16500 to $21450, could reach the target: economic safe families, they can rely on the help of parents, from time to time, in Auckland a price affordable house deposit.
But in all parts of New Zealand, especially in Oakland, the next generation is less likely to be a homeowner than at any time in the past 66 years. According to official statistics, about 63 percent of new zealanders own homes, the lowest rate since 1951, and 61.2 percent of homes are occupied.
Since then, it has been three generations since the concept of home ownership has become a part of the expected lifestyle of new zealanders, before many people begin to realize it.
The dream of home ownership is alive. A small sample survey conducted at the end of last year by Barfoot&Thompson, a real estate firm in Oakland, found that 90% of millennials surveyed wanted to own their own homes. Most also want a kiwi independent house, not an apartment.
He saw many young, salaried professionals to give up part of potential annual bonus, in return for a small amount, it can report to the bank to improve their income, allow them to borrow more money.
But by 2017, the concept of Generation Rent, which economists Shamubeel and Selena Eaqub (their latest venture to buy), is shaping up to be a new debate about the next Generation of home ownership expectations.
“They’re all very eager to compete, but it’s really hard,” Gaynor said. But they are not discouraged. Human beings are visible. They are used to anything. ”
The top out
The unaffordable challenge for housing prices is that the housing market is likely to be eliminated, at least in the short term, to weaken capital gains. According to the real estate institute of New Zealand, Auckland, house prices fell by 2.5% in the three months at the end of July, prompting the prime minister bill the reserve bank of England has urged not to impose further lending restrictions.
These conditions may stimulate purchase new interest, as more and more bank debt crisis, there is not enough savings of local buyers and slowing the interest of foreign buyers are slowing down the housing prices rise.
From this point of view, the rise in residential real estate is not obvious, which makes it more likely that savers and investors will find new places to get better returns than the 3% of bank accounts. The catalyst for the new investment dialogue is in place.
“There are a lot of places in the world where you don’t want to own a house,” says Ainsley McLaren, an investment market expert and board member of the Financial Markets Authority. “she speaks to her audience in her personal capacity. New role in Wellington fund manager seaport asset management.
“New Zealand has some problems in respect of the lease, help people into long-term leases, where they can actually feel they lived has certain stability, so that they can leave their mark on his mark. Short-term lease agreements are holding back those who favor leasing. ”
But the mood is growing. Most opposition parties have committed to a comprehensive lease law reform to eliminate long-term leases and make tenants more fair. If that happens and house prices are likely to be more than double the average household income, it will become more common to invest in other places.
“It’s really important to have the minimum amount of money you need right now,” says McLaren. “But with less money, you can go into a diversified portfolio and generate fairly good returns by having similar growth characteristics. I am talking about stocks and real estate investments as alternatives. ”
“KiwiSaver is part of our next generation of Kiwiana,” says David Boyle of the financial literacy council (CFL). It’s there. It’s working. They don’t need to solve or understand, because their parents put them in to get the $1,000 start. This is a part of life, and that itself is gold. ”
The average portfolio of KiwiSaver is currently about $12,000, but compound growth rates apply, and the money is growing fast: at Milford, the average value is over $40,000. As these balances increase, some people are using their KiwiSaver nests to pursue home ownership.
In the year to June, 33000 KiwiSaver scheme member withdrew about $600 million, to help deposits, in the home is more than the number of withdrawals due to economic difficulties 10 times (the only another reason, in addition to death, retirement).
But a lot of people choose. Last October, “Investment News” published on the Internet (Investment News) on a survey found that 1.1 million New Zealand yuan was identified as 2.6 million member can enjoy the holiday, the holiday could be extended for 5 years and then we will require payment member restored.
The CFL wants to ask each year whether to continue to opt out, because the five-year funding gap reduces the most powerful factor in any long-term savings plan – compound earnings growth.
In addition, many KiwiSavers never automatically allocate savings funds. KiwiSaver fund under management, nearly one 5 of the funds in a conservative default state, even though many young savers should consider the investment situation of the investment target is higher risk profile, but higher long-term returns.
By contrast, the default plan pressure is small to ensure that its costs are competitive, especially since many absentee planning members do not know the cost of their plans because of their characteristics.
At the same time, about 600,000 people were eligible to join KiwiSaver, but did not. CFL’s Boyle says some of them are misinterpreting the plan. Two of the most common are that you may lose all of your KiwiSaver funds, and all funds will be returned to the government if you die before you retire. Not so, he said. “I think this will require a good meteor strike (losing all funding) to happen. Money is so diversified. “
Also, you can’t lose the government’s booty, though he knows that many people and KiwiSaver accounts don’t realize they need a will. “If they don’t have the will, then taking out the money is very expensive,” he said.
McLaren says it is the value of professional advice to invest in someone with extra money rather than investing in a mortgage.
“People seem a little reluctant to go into management funds and don’t want to pay for investment advice, but if you buy a house, you don’t hesitate to pay legal advice,” she said. “Buying a house involves a lot of transaction costs, but people don’t apply the same discipline.”
Gaynor argues that the trend to invest through managed funds in KiwiSaver or other schemes has implications for business news media.
“In fact, I found that how fund management and corporate performance are more interesting than the stock market, because of the new funds, new fund managers, different fees, different features, and a surge of different returns.
“It’s a much more interesting place than a listed company, because people will have to decide. Like, “do we invest in Fletcher building and Meridian energy or contact energy companies?” “They will decide,” are we going to go into the growth fund or join the anz conservative fund?”
For McLaren, the biggest challenge for investing in product vendors facing a new generation of investors is to make sure people know what they’re getting.