This article was published on 8 May 2004. Some information may be out of date.

QI am thinking to go into property investment. However, I have been watching the market from the middle of last year, and the prices are just too high!

I would like some advice about investing in areas like Howick, Flatbush and Richmond Park, because the prices in those areas aren’t so high.

Is the market going down soon? If yes, how much will it go down? 10 per cent? 20 per cent?

ANobody knows. That’s the point really.

The main reason that investments with higher returns, such as shares and property, get those higher returns is because they are riskier than term deposits and the like. Part of that risk is that we can’t tell, in advance, what prices will do.

Nevertheless, economists are often prepared to have a go at property forecasts. BNZ chief economist Tony Alexander, for instance, says, “I think we still have a wee bit of upside left before a minor price correction starts later this year.”

How big is minor? He expects average prices to fall about 5 per cent “from some point in the middle of this year to some point in 2005.”

He bases this on:

  • Rising mortgage rates, following the Reserve Bank’s raising the official cash rate. “Clearly the days of overly generous mortgage rates have come to an end, and this will remove the extra stimulus which has been running through the housing market over the past five years,” says Alexander in a recent newsletter.
  • Falling immigration. In the year ending March, nearly 28,000 more people came to New Zealand than left. “But if you extrapolate the results for the last six months then the net outcome will hit zero before mid 2005.”
  • “The biggest surge in supply of new dwellings since the year to January 1977,” — which is a long time ago. As anyone who has studied basic economics knows, if you raise the supply of something, its price will fall.

Alexander also notes that the ASB has reported a decline in investor sentiment towards housing. And that’s going to be crucial to what happens next.

If lots of potential house buyers think prices will fall soon, they will stay out of the market in the meantime. That will reduce demand, and some sellers will settle for lower prices.

Other would-be sellers, though, will have some leeway about when they sell. If they think prices are starting to dip, they will keep their houses out of the market — or hold out for a higher price, even if it takes longer to sell.

How many sellers are in each camp? Who knows? In my experience, when you first list your house for sale, you don’t know what price you will eventually settle for. Months down the track, heartily sick of open homes and hopes raised and then dashed, you may accept a lot less than you originally thought.

As for whether the areas you mention are good prospects, again, probably nobody knows — although I’m sure the real estate agents out that way will be pretty positive.

If prices there haven’t risen as much as elsewhere, maybe they are suburbs that are going out of favour. But maybe they are late boomers.

So what should you do?

If I were you, I would wait a while. Even if prices don’t fall, it seems unlikely they will continue to rise fast — although I hasten to add that I could be wrong.

In the meantime, you might want to do a bit of research.

It sounds as if you want to buy rental properties. It would be useful to find out which suburbs are popular with tenants.

With all the people entering the landlord game in recent years, I wouldn’t be surprised if a tenant shortage develops in some areas.

You don’t want to start out with mortgage bills and no income.

QThe first letter in your column last week was on the subject I find most interesting — reconciling marriage with finances.

A few thoughts:

  • The Property Relationships Act 2002 replaced the Matrimonial Property Act 1976 — but you refer to PRA 1976?
  • Given the couple are already cohabiting, aren’t they perhaps already considered a de facto relationship for the purposes of the act? Don’t relationship property issues count forward from when they first “de-factoed”, not when (if?) they get married?
  • A pre-nuptial arrangement could be agreed. However, don’t judges have very wide discretion to override pre-nuptial arrangements under the new act?

AThis can be tricky stuff, so I went back to my source, lawyer Margaret Lewis.

Her response to each of your points:

  • “The MPA 1976 was not replaced but amended, in 2002. The title was also amended and the correct title is now the Property Relationships Act 1976.”
  • You’re right that a couple starts counting from the time they first enter a de facto relationship.

    And note that a de facto relationship may exist even if the couple is not living in the same house. Conversely, it may not exist just because they share the same house, says Lewis.

    The definition of a “living together as a couple” takes into account: the duration of the relationship, the nature and extent of common residence; whether it’s a sexual relationship; the degree of financial interdependence/dependence; ownership, use and acquisition of property; the degree of mutual commitment to a shared life; care of children; performance of household duties; and reputation and public aspects of the relationship.

    Not surprisingly, given that list, deciding exactly when a de facto relationship starts is “a grey area in law,” says Lewis. “A couple may not know their legal position with certainty, at the time.”

    Assuming a starting date HAS been established, a de facto relationship and/or marriage must last at least three years for the equal sharing presumptions to apply to each person’s separately owned property.

    In this case, we don’t know the couple’s history. But, even if they have been living together as a couple for more than three years, they can still contract out of the provisions of the act.

    What if the man refuses to contract out? Comments Lewis: “You have problems. Your bargaining power is significantly diminished and you probably wont be able to do it, except on his terms!

    “However, if the issue is raised prior to three years, the woman can terminate the relationship if he won’t agree.”

    From the tone of the letter, though, it sounds as if the man and woman would both be reasonable, regardless of the length of their relationship. Here’s hoping.

  • “The court can set aside an agreement if it doesn’t comply with the act.”

    To comply, the agreement “must be in writing and signed by the parties, each party must consult independent legal advisors, who must witness their client’s signature on the document, etc.,” says Lewis.

    “And the court has a broad discretion to set aside an agreement if it would cause serious injustice. There is a wide range of factors which the court must consider.”

    But, she adds, “If both parties received sound legal advice and the agreement is based on the accepted principles, the court would be unlikely to set the agreement aside.”

QI’m a grammar teacher. I taught English grammar in China and Chinese grammar at Massey, here.

Your poking fun at grammar teachers in the April 24 column was unnecessary and (dare I say?) unfortunate because your sentence is grammatically 100 per cent correct.

The rule is: When a relative pronoun (e.g. whom, which, that) functions as an object in a relative (also referred to as attributive) clause, it may be omitted and is often omitted in everyday English.

AFor others’ benefit, you’re writing about a paragraph I wrote that said, in part: “…put yourself in the shoes of the finance company you are lending your money to. (Okay, grammar teachers, I know it should be ‘to whom you are lending money’. But who talks like that any more?)”

My worry wasn’t about leaving out the “whom”, it was about ending a sentence with the preposition “to”. I was taught at my mother’s knee (she had been a high school English teacher) not to do that.

Your letter has prompted me to search websites, to see what the experts say these days.

Most are rather disdainful about the rule. A couple quote Bill Bryson as writing, “Today, happily, it is universally condemned as a ridiculous affectation.”

And several quote a comment Winston Churchill made after an editor changed a sentence he wrote to get rid of a final preposition. “This,” said Churchill, “is the kind of impertinence up with which I shall not put.”

One website, Get it Write, run by American academics, gives as an example the sentence: “Who did you give the flowers to?”, which is rather like my troublesome sentence.

It goes on to say, “Only diehard grammarians would take issue with this usage in casual conversation. In professional documents, however, we should write, ‘To whom did you give the flowers?’.”

Even though this column is written rather than spoken, my guess is that most people don’t particularly want professional document language in their Saturday morning read. But I made my bracketed comment about grammar teachers in deference to those who do. I wasn’t meaning to poke fun, honestly!

What’s all this got to do with money matters? Not a lot, but it makes an interesting change.

Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.