Illustration / Getty Images, Herald graphic
OPINION:
Q: I've bought and sold three properties over the past decades. Two of the transactions were with parties I knew and one of them was through a real estate agent.
In each instance I contacted my solicitor (who I trust implicitly) and asked for the name of a local valuer who could be trusted to produce a valuation that favoured neither the buyer nor the seller.
I showed the valuations to the other parties, with this statement: "That's the price". It was take it or leave it.
Perhaps I was simply lucky, but all three transactions went through without a hitch. Was it because I was prepared to walk away without a deal? I dunno.
A: Nor do I. But generally it takes two conditions for a seller to successfully stick to their price as you did:
• You haven't already bought elsewhere, so you don't have to worry about expensive bridging finance, or for some other reason have to sell fast.
• You're in a sellers' market, with many people keen to buy. That's what the housing market has been like for most of the last decade or so, but no longer.
House prices are falling, and many buyers are sitting on the sidelines, hoping prices will fall further. And they're probably wise. Economist Tony Alexander says it's likely prices will end up about 15 per cent below their 2021 peak by later this year or earlyish next year.
If you had been selling in that situation, and said "take it or leave it", potential buyers might well have replied, "leave it", and found another seller who was more realistic.
Indeed, I expect some buyers these days are offering well below sellers' prices, and finding the sellers willing to negotiate. It's good to see the shoe on the other foot for a change.
It's interesting to ponder the difference between the house and share markets.
When share prices fall, as they have recently, a few investors welcome the chance to buy bargains. But most people — including nearly all members of KiwiSaver — are unhappy, often ignoring the impressive gains their investments have made over the last decade.
On the other hand, when house prices fall, would-be first home buyers and investors feel positive, as do many others worried about New Zealand's declining home ownership rate. Sure, no home owner is thrilled to see the value of their property fall. But unless you bought your first home in the last few years, you've ridden along on huge price rises and probably accept what's happening now.
I don't receive letters from home owners worried about the decline in their property value.
That's probably largely because they don't know what their home is now worth, whereas share prices and KiwiSaver balances are readily accessed. But it's also because everybody knows house values will recover.
Hey — share prices will too!
Q: Mary, I settled on War and Peace as a good book to see me over the decline, but it appears I will have to include the entire library of Tolstoy's works.
On the other hand, my 1.25 per cent term deposits are maturing, so that is a balm.
A:The investment world does look gloomy these days. With shares, property and bonds all wobbling, and inflation misbehaving, it sometimes feels as if there will be no good news for many months.
But if you've invested wisely, yes, grab a good book and ignore the short-term shenanigans. Actually, you may not have long to wait for brighter news. Read on.
Q: Of course you know what this writer is saying: "Being in a bear market now doesn't imply big downside ahead or a long decline. Since MSCI World data start in 1969, the median time from piercing minus 20 per cent to a downturn's low is 0.8 months. From there back to minus 20 per cent has taken a median 0.3 months.
"The median drop to the bottom after crossing that minus 20 per cent threshold? Just minus 7.6 per cent. The rally is very likely at hand soon — maybe it already started. Regardless, selling now risks missing it, potentially making this year's slide harder to recoup. Look now to the recovery." The article is at tinyurl.com/ShareCycles
A: I know the basic message, but not those stats, which are interesting. Thanks.
The main point is that share markets won't necessarily keep falling. Don't sell now — or move to a lower-risk KiwiSaver fund. You risk missing out on the inevitable rally. Once world shares have fallen 20 per cent, they usually don't fall much further, or for much longer.
Where are we now — or at least when I wrote this?
• World shares are down 19 per cent from their high around New Year.
• New Zealand shares are down 18 per cent from their high last October.
The writer of the article — billionaire US investment analyst Ken Fisher — is talking about averages, of course. There are no guarantees about what will happen this time.
But investors have a strong tendency to think markets that have risen lately will keep rising, and markets that have fallen lately will keep falling. Changes of direction can happen quite suddenly — and share markets rise far more often than they fall.
Q: I stay away from the hype and am only investing in Vanguard value and growth indexes, in SuperLife KiwiSaver, and also through Hatch. I buy a little each month. The turtle will eventually win against the frog, is my motto.
A: The fable is usually about a hare racing against a tortoise — which is slightly different from a turtle. The tortoise wins because the bragging hare stops to eat some cabbage and takes a short nap, which turns into a deep sleep.
But I like your choice of a frog. Some investors do jump around, in and out of high-risk or low-risk investments. And I like your attitude.
Q: I am a 42-year-old mother of two young children. In April I applied to withdraw my KiwiSaver under serious illness withdrawal.
I was diagnosed with stage 4 colorectal cancer in January. But I'm not writing for sympathy. There are many out there in more serious situations, especially just trying to provide a roof over their family's head or food on the table.
My question is regarding the closing and cashing up of the account.
On April 26 I received an email from Kiwi Wealth advising that my application for withdrawal was approved. I was quoted the balance as at April 20 ($51,124), which I thought strange as the email date was April 26.
Then it stated, "Please note this is just an estimate and we will need to take into account further contributions and investment returns when we withdraw your funds. Payment will be made to your nominated bank account within 10 working days".
I received $47,737 on May 16.
I understand markets rise and fall at the drop of a hat, and had the market gone the other way I would of course not be writing. Bad luck. But I want to know why is the account not "frozen" or a hold put on it once the application is accepted so it's not "live"?
I feel like it was sitting in someone's "in tray", and by the time it was actioned the market had fallen.
Kiwi Wealth advised my account was closed on May 10. (Payment received May 16 — not 10 working days from the 26th.) I am taking a drug not funded by Pharmac called Avastin, and am fortunate to have basic health insurance, which is helping but not covering the full costs of the drug, or to have it administered. My mother cashed in her KiwiSaver earlier in the year with AMP to help me, and it seems it was done more swiftly.
A: My heart goes out to you. You've had rotten luck with your illness, your lack of drug funding, and the timing of your KiwiSaver withdrawal. Not fair. And I appreciate your acknowledgement that if the markets had been rising and you received more than expected, you wouldn't be complaining.
Your provider also expresses sympathy. "Kiwi Wealth is sorry to hear of the exceptionally difficult time that this customer is going through." The spokesperson adds that they can't comment on individual customers and their accounts, and has sent me an outline of how the provider handles withdrawal applications.
At a certain point, after your eligibility is checked and Inland Revenue has calculated how much government contribution is coming to you, "a unit price is locked in and payment is made within 2 -3 days," it says. So I suppose that answers your question about your account being frozen.
And if your account was closed on May 10, as they told you, that is actually 10 working days from April 26.
However, it took four more working days for the money to get to your bank, which was no doubt stressful for you — and not what Kiwi Wealth had promised.
The spokesperson goes on to say, "We would invite them to contact us directly and give us the authority to review their specific application." I then asked if Kiwi Wealth could give you a list of your balances on each day from mid-April to mid-May.
The reply: "If the customer asks Kiwi Wealth for this information, we could request it from our registry provider. Current active customers can view their historic daily balances within their Kiwi Wealth Login." You might want to ask for that, so you can follow what happened.
I'm sure every reader will be wishing you all the best.
Q: I'm in a "total remuneration" situation with my employer. I pay both my 4 per cent and my employer's 4 per cent into KiwiSaver.
Given that I'm also paying the employer superannuation tax as a deduction, would it make sense for me to take a contributions holiday, pay 8 per cent of my salary (less $1042) into a comparable managed fund, and pay $1042 into KiwiSaver each year? I would avoid employer super tax, while still getting the benefits of KiwiSaver.
A: Good thinking, but not quite correct. Basically, the employer superannuation contribution tax, or ESCT, is at much the same rate as PAYE tax — except for minor differences in a few cases. If you made the change you are proposing, instead of paying ESCT you would pay PAYE on the money — gaining you nothing.
Stick with what you're doing, unless you would prefer ready access to your savings or more flexibility in how much you save, in which case your proposal would be better.
Either way, good on you for making sure you will still contribute $1042 a year to your KiwiSaver to get the maximum government contribution.
For what it's worth, I don't like total remuneration. Sure, it means all employees — in and out of KiwiSaver — are treated the same. But being in KiwiSaver is meant to be advantageous.
Both Retirement Commissioner Jane Wrightson and Consumer NZ have criticised total remuneration recently. I hope the Government outlaws it.
Q: I am finally reading the first of eight books of The New Zealand Heritage encyclopaedia we collected about 45 years ago. This book deals with about 1807 to 1853.
During the 1830s there were enterprising Brits like Jonny Jones, an owner of several whaling stations, who had his own currency. Also a chap Manning who tried to persuade the Māori not to sign the Treaty of Waitangi as he did not want them (or himself) to be burdened by taxes, duties and other payments to the government to support their bureaucracy.
Today we have cryptocurrency, which is trying to avoid government interventions. It will never survive in its current form under democratic societies.
A: I'm not sure about your prediction, but I love your history.
We've had a literary column today — War and Peace, The Tortoise and the Hare, and an encyclopaedia. Let's end with an appropriate quote from the best selling book of all time: "What has been will be again, what has been done will be done again; there is nothing new under the sun." (Ecclesiastes 1:9)
- Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions 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 mary@maryholm.com. 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.