City of Sales: Inside look at Auckland's property investors

With the boom years over, many property investors are asking "what now?" Don't worry, their advisers are telling them: listen to us and you'll be fine. Kirsty Johnston reports.

The first slide at the property investor's conference celebrates the death of New Zealand's proposed capital gains tax. "Phew!" it says. "Defeated!"

"We defeated it!" says host Matthew Gilligan, reading aloud. He pauses for dramatic effect and looks up. "I did have to cancel a new Porsche."

The audience laughs. Gilligan, pink-faced, laughs. Behind me, a girl laughs and then whispers excitedly to her boyfriend: "He sounds just like on the podcast!"

It's 9.30am on a dreary Saturday morning in May, and the Property Leaders One-Day Event has begun. For eight hours in the windowless room at the Ellerslie Events Centre, 500 investors will sit in unbearably hard plastic seats, learning how to "thrive in the downturn".

The conference - an annual event - is organised by Gilligan's company, Gilligan Rowe & Associates, and his other company, Auckland Property Mentors. It promises "up-to-date content from property leaders". It also promises free lunch, and the chance to win a trip to Fiji, all for just $55.

"We are trying to promote prosperity in the property community," Gilligan says. He then asks the audience not to take photos of any of the presenters' slides, in case it is passed off later as official financial advice. Formalities over, he flicks to the next slide.

Property has long been New Zealand's favoured investment choice. But in the years following the Global Financial Crisis, as values in Auckland doubled and the regions followed not far behind, it has grown more popular than ever. In 2005, for example, investors made up 32 per cent of buyers. By 2015, investors were 42 per cent. Huge money has been made. Between 2013 and 2018, in real terms, the value of housing and land assets grew $277 billion while financial assets grew by $153 billion. Property has become the default choice for anyone looking to invest.

Amid this age of prosperity, property advice services like those offered by Gilligan Rowe and Associates have become a mainstay of the New Zealand investment scene. Each markets a slightly different product. Auckland Property Mentors has a "school" - 10 weekly night classes about tax and portfolios and interest - plus the opportunity for "students" to meet other potential investors to collaborate on joint ventures. Other firms also offer renovation advice, or online seminars. They speak of "trading" and "holding" and "wealth creation".

The goal is always a "passive income"; the dream, an early retirement.

A dream, which - according to the speakers at the conference - should not be forsaken even as the market flattens.

"Property haters like the Government like to stress you. Shamubeel [Eaquab, an economist] loves to beat up on property investors and get inside your head," Gilligan says.

He promises the conference will deliver tips and tricks on how. He says a mortgage broker will tell the group how to get around loan-to-value ratio (LVR) laws. Real estate agents will provide insider information. And, he says "colourful" developer Kenyon Clarke will speak after lunch about his "journey" from boom to bust, and back again.

The Reserve Bank is virtue signalling

Gilligan is an accountant by trade. He is the author of two books - Tax Structures 101 and Property 101 - a columnist in New Zealand Property Investor magazine, and a regular on the New Zealand Property Podcast. He is also an active property "trader" with his own portfolio, and seemingly, a hero of the New Zealand property scene. When Gilligan talks, investors listen. When he posts in the New Zealand Property Investors Chat Group, investors comment and they like.

Here is some of his advice: The current market situation is "slowing" but on the plus side "investor-bashing" has peaked. He "doesn't mind" the new healthy homes laws, aimed at making rentals safer. Twyford is on the right track with Kiwibuild but he's "stuffed the numbers up".

Finance is now tougher to get, he says, the banks cautious. As for the Reserve Bank, they don't realise the housing market is the backbone of small business, he says. He accuses them of "virtue-signalling", trying to impress the Government.

But migration is good, he says. In some places - like Tauranga - supply issues are under control due to council action. "From an investor that's trouble. We want the opposite," he says. Councils like Auckland, for example. "Auckland is the gold standard of dysfunction."

He says it is important to understand the impact of both migration, and natural population rates. A slide called "The Slide of Death" gets a huge laugh. It explains net births and deaths, and the impact that will have on demand. For example, Tauranga has a large elderly population, he says. "I'm not buying in Tauranga." More laughter.

At the end of his presentation, the big question: Will Auckland be the next Sydney? In Sydney, and Melbourne, prices are already down 14 per cent, with concern they could fall further. "I think it will be a soft landing," he says. The audience gave a palpable sigh of relief.

"Think of battery hens rather than free range hens"

After Gilligan's talk, he introduces Kiwibank's chief economist, Jared Kerr. Kerr assures the audience that interest rates will remain low for "a very long time". He explains that migration is good for investors. He talks about a lack of supply, and how people are forced to live in "higher density arrangements".

"Think of battery hens rather than free range hens," he says. Behind him, a slide reads: WE ARE SHORT 100,000 HOMES!!

Auckland will fall and the regions will rise, he says. "But the property market will hold up over time."

The day goes on like this, presenter after presenter saying: Don't worry. There is money to be made.

The flip side of the boom years, of course, has been falling home ownership rates and rising rents, a housing shortage, and an accompanied boom in homelessness. We do not learn about that at the conference. We also do not learn anything about tenants (other than at one point, Gilligan says he had a whole family sleeping in the garage of a property he'd bought! They were using a bucket as a toilet. He evicted them. "Just another day in the life of a landlord," he says.)

We learn a lot about Principal and Interest, about Interest-only, about debt-to-income ratios (don't worry about those, Kerr says), about how loss ring-fencing can't be avoided, but how some forms of tax could.

Several real estate agents come and go. "It's nice to be in a room of people that appreciate us," the first says. He talks about promising investor areas on Auckland's North Shore. Another describes the "potential" in the regions. He sounds like an auctioneer. Otaki: "Bit left to go there." he said. Christchurch: "A lot more to happen there." Invercargill: "Might be a bit more growth coming on there."

One of the agents is Gilligan's sister. Megan Jaffe works at Ray White, in Auckland's Eastern Suburbs. She is one of the country's top-selling agents, we are told. Her advice is to buy "lock and leave" properties to sell or rent to baby boomers when they reach retirement age and want to downsize.

An agent from South Auckland assures investors he can help them avoid buying in state house areas. He tells a story to illustrate how banks are tightening up on lending. "I recently had a guy who had his loan declined because the bank said 'you had too much takeout' and I said 'get your wife to start cooking,'" he says. "Haha." The audience laughs with him.

Silent wait staff bring out endless trays of sausage rolls and spinach pastries for morning tea. In the long coffee queue a man says: "I've been thinking about a deal." He says he is a client of a mortgage broker in the room. He says he is at the conference to get time to think about his investment strategy, away from his kids.

His monologue is interrupted as "Absolutely Everybody" by Vanessa Amorosi comes piping through the sound system. People take their seats. Gilligan gets back on stage. "Somebody with a Lexus has a window down," he says. "Your alarm has been going off all morning." The audience laughs.

The message is: Get someone to help you

The promised trick for "circumventing" the Government's loan-to-value ratio laws turns out to be a sales pitch. Mortgage broker Kris Pedersen presents his new, non-bank lending product, which will only require a 20 per cent deposit for investors, instead of the usual 30 per cent.

Pedersen brings news from Australia, where a national inquiry into the finance sector has seen banks crack down. They are being much tougher on investors, and including extremely strict new rules around discretionary spending. It could happen here, he warns. Fortunately, his product offers less scrutiny around income and debt. The only catch is a slightly higher interest rate, somewhere between 4 and 5 per cent.

Gilligan notes how in the "good old days", Pedersen was able help clients "clean up", with three months of spending very little to prove they were fiscally prudent. "Now banks want to see two years of statements," Gilligan says. Pedersen says yes, in some cases they do. But his lenders don't. However, they aren't interested in apartments. Or commercial property.

Tua Saseve, Gilligan's business partner at Auckland Property mentors, takes the stage to a round of applause. Saseve leads a team of 30 traders and investors, who scour open homes on a Saturday morning, in a group. In two years, Saseve has assisted with 60 trades, Gilligan says. "I trust him implicitly," he says. "No one has lost any money."

Saseve says the mentoring scheme is about using property as a vehicle to wealth. They have "systems and processes", he says, which they teach in a team culture and environment. There is a "no dickheads" policy. He is slightly apologetic about that. The best clients "know why they are doing it", and are resourceful and hard-working, he says. He doesn't explain the cost of the programme, or whether the mentors take a cut of any sales. "We help people change their lives," he says.

He gives examples of recent trades, all from South Auckland. In Weymouth, a trader added a fourth bedroom by adding a wall in the lounge, making a $54,000 profit. In Mangere, a client recently converted the garage to two "utility rooms". "We don't call them bedrooms," he says. In Weymouth again, a two-week renovation - completed before settlement - saw a $52,000 profit. Polite clapping and a whistle from the audience at that.

Two of Saseve's students also speak, both middle-aged Pakeha women wearing "property mentor" T-shirts. They say they have given up their jobs to focus on property. "My goals are to build capital and to have a passive income to live on in retirement," the first says. The second has bought and sold 13 properties so far.

Gilligan thanks the women and turns to the crowd. " Working doesn't make sense," he says. "We spend 2000 hours of our life in a year for a salary. You can trade 2000 hours for 100k or you can do two trades and make that."

"These students of Tua are doing that. They're giving up their day job and trying something different. Sorry it seems like a bit of a sales pitch. The message is 'get someone to help you'," he says.

From hero to zero and back again

At one point, Gilligan asks: "Does anyone remember the Richmastery days?" Richmastery, once headed by Phil Jones and David Hows, told people how to get rich in a prominent series of promotions and seminars. It folded in 2009 owing creditors more than $75,000. Jones was later bankrupted, owing Westpac $1 million, according to newspaper reports. The stories also mentioned Richmastery's "star" pupil, Dean Leftus, who went on to become a mentor in his own right. In 2011, his company, Property Gurus, was also placed in liquidation.

Another round of "Absolutely, Everybody" signals the end of the lunch break. A "property analyst" speaks about identifying good development sites. Gilligan talks more about tax, mainly the new loss ring-fencing laws, which have everyone in a spin.

"The IRD or the Government or whoever is doing this really hates residential property," he says. "They're trying to disincentivise speculation and investment on housing."

But, Gilligan says, at least things aren't as bad as in Australia, where the Government has recently brought in new tax avoidance laws.

"Jacinda was smart and showed great leadership on the capital gains tax," he says. "I don't think governments realise how annoyed the population get with playing with the tax base."

Finally, the bit everyone seems to be waiting for arrived. Gilligan announces developer Kenyon Clarke as "the man who builds more houses than the housing minister". He has experience in mergers, acquisitions, corporate finance, development and property investment, Gilligan says. His company, Du Val, was the second-largest apartment builder in Auckland. But it hadn't been easy. In 2008, after amassing a huge property portfolio, Clarke lost everything he owned. In 2009 he was declared bankrupt, owing an estimated $50 million. (Clarke later said it was because his bank had unexpectedly called in his loans during the Global Financial Crisis). But he's built himself back up again, and is so successful he's even started his own charity.

Clarke leaps to the microphone.

"How many of you here did well at school?" he says. No hands go up. "School didn't work for me." He describes his journey, form being expelled, to moving to New Zealand from the UK, to building his investments the first time, and the second. He speaks of multi-million dollar apartment developments, of rising yields, of the pressing need for investment property.

"We don't have a housing crisis we have an accommodation crisis," he says. "It's not entitled journalists that can't afford to buy in Remuera that's the problem. It's people sleeping in gutters next to McMansions."

Private investors owned 500,000 properties in New Zealand, he says.

"To beat up on investors is just ridiculous. You guys are the bedrock of our society. Once the Government recognise that the private landlord has a place in society we will do better as a country."

He says building apartments creates jobs. Apartments are great investments. They have a higher yield per square metre. You can even rent them to MSD as social housing. His 25 metre square apartments are leased to MSD for $390 a week. Some tenants even try to fit more than one family in there, he says. The need is endless.

He plays a video of his developments and speaks to it in a booming voice, using words like "aspirational" and "affordable".

Gilligan joins him on stage at the end. "We are a community of people helping people," he says.

Clarke nods. "There is a vast need for rental accommodation," he says. He ends his segment with a warning. Although it felt "shit" to lose everything, it has taught him a valuable life lesson.

"It's a mistake to conflate self worth with net worth," he says. The audience claps.

"We don't work in a snowflake culture"

A month on from the property conference, we go back to Gilligan him to reflect on what was said. He stands by everything (except he says, he drives a Jeep, not a Porsche).

"My job is to call it how I see it," he says. "We don't work in a snowflake culture."

He says death rates are important to property values, and he is concerned about the Reserve Bank. "I think they risk putting recessionary pressure into New Zealand by being so conservative. Is this virtue signalling ? Maybe."

Trading helps improve homes, he says. "It cleans up run down houses. We have lots of clients doing this and making money from producing better housing stock, that is otherwise run down and poor quality accommodation. I don't see the issue."

And he couldn't care less about politics. "I represent the investor's perspective. The enormous investment in public housing at present represents a significant investment opportunity. Period."

Gilligan says the way to be a good landlord is to get a property manager. "They manage the houses for landlords. Mine do it well," he says. And there was a slot about the Healthy Housing laws at the conference - after the Herald left for the day.

But anyway - there wasn't time to talk about every topic, Gilligan says - and the inference that the event was incomplete without a section on good landlord it was "interesting in itself".

"We are not a government dept responsible for sugar coating every communication with PC mantra. Quite frankly we are a private business and we call it how we see it."

"My opinions are just that. Opinions. Feel free to disagree with me."

But for the record, he didn't necessarily agree with all the speakers or condone their opinions.

"We facilitate a conversation with different organizations. Much can be learnt from taking this approach."