Hello and welcome along to the property Academy podcast. I'm your host Steve McKnight and I'm Andrew niccol and today on the show. We've got another really interesting topic and it actually comes from a question that I had from another listener, which is we were previously talking on another episode about the differences between the property cycles that we see in the property market and the cycles that we see in the share market which tend to be more up and down in our conjecture was or the key message. We were trying to get across with in that episode was that the property Market does tend to be more stable. There aren't as many Peaks and troughs in it particularly in the Auckland Market compared to the share market. So what we're going to do in this episode is we're going to give you four different sources other than the fact that you can leverage in order to purchase property, which is a big difference as well. But we're going to give you four differences between the actual markets between shears. And investment property or the property Market in general. Now this all comes back to the fact that in the share market the share market is a hundred percent investor driven people are there to get a return on their investment and they act on that now within the property Market it's completely different because 76% of the property Market is based on owner-occupiers only 24 percent of the property Market is investor driven and this leads to some corn and some real differences and how the markets operate. So we're going to go through each of these four. So number one is that there are higher barriers to exit particularly for owner-occupiers. So, you know, if you think about an owner occupy if the price is in the property Market start to go down and they start to panic even if they did suddenly think we need to sell our property in order to maintain Equity if that's what they were thinking. They would not only have to sell like an investor would and The sales cost to a real estate agent, but that also have to move their family that have to move their whole life in order to be able to do that. And so we don't see owner occupies coming in and out of the market depending on what the price is doing and that's simply because owner-occupiers aren't necessarily worried about the price day-to-day. Yes. They are thinking about the long-term trends because it makes them feel wealthier. But because we don't see this entry and exit from the property Market from these owner. Occupiers who make up the bulk of the market. You've actually got a slightly less time hammock Market than you do in the share market and so we don't see as much price variation because of these higher exit barriers now Andrew what have you got down as the the number two difference between these two markets? So the second is that there's more emotion involved to property and so what that means is that it can be more easily manipulated. So if you've got a property where maybe there hasn't been the same growth or its come back. Little better what you want to add some value to it. It's a relatively easy to do that through cheap often cheap cosmetic changes to it. So you can go in and you can you know put in some new wallpaper paint it up to, you know, change the bathroom and manipulate the value of a property much more easily because it appeals to a certain more people now, then you can with something like she is that's right and because of that because especially owner occupiers who make up the bulk of the market are more emotionally driven we do tend to see See more stable prices because of that because if you want to raise the price of a property, you can actually make some minor cosmetic changes that will appeal to owner-occupiers ending get that that that that slightly higher price and actually we've done some really good episodes on this with Tim Weston who has done a lot of Renovations was actually on Grand designs and we also talked about it with Nick who is a developer investor down in Christchurch. Now, let's talk about the third difference that we see and this is this A really big one because the share market Is So based on investor sentiment about where is the market going as this Shear? Is this particular stock or share doing well, or is it doing poorly and because it's based on vent investor sentiment and the whole Market is based of an is made up of investors. We do see that it's quite volatile. Where is again? Because the property Market is only made up of 24 percent investors where the rest is owner-occupiers where they're all stable and their homes You know, there's this really long term Trend with a New Zealand or this this long-term value of owning your own home because of that that market is not volatile. It's not fully based on investments investor sentiment and again, so when prices do drop owner-occupiers just don't sell their homes. And then we have lower Supply in the market which keeps prices relatively stable over that time so we don't have the whole of the market. Based on one particular by group and so these two tend to even each other out and I should say again. The owner occupier part of the market is very stable because people aren't going to all of a sudden wake up tomorrow. And thank although the market is not the markets bad. I'm not going to get in. You know, if people want to buy their own homes, they're typically going to buy their own homes when they can because that's something they want to do. It's not based on the on the necessarily on the fundamental value of that property, but Andrew bring it home with the fourth difference. Between the property Market in the share market. So the final one it is just having individual control. So generally speaking with most people who are investing in property. It's a complete direct investment. So you own the property yourself, and normally it's just yourself yourself in a partner or something like that. And so you've got a lot of control with what you do with that asset when your salad Etc and compare that to someone who's just a shareholder and say whis pack how are you going to be able to control or make significant changes to the direction that we spec a If you're unhappy with the performance of them, it's just impossible. That's right. Unless you're Craig's Investment Partners David McLean's not very interested in what you've got to say. It's a shield or in mighty mighty might be the CEO of wisbech might be interested in what you're going to say is individual shareholder if it's something particularly good but I think the reason these are these are really important is that yes, there are some there's lots of differences between property and shares but we specifically talking about the markets here the fact that the property Market is primarily made up of owner-occupied. Sighs and that has some real benefits for property investors because it means that we can be a little bit more Nimble we can enter the market and exit the market much more easily than an owner occupier and take advantage of trends when they're good or win that or wind are unfortunately not as good and because we have more individual control, even if the market is flat or comes back a little bit because we can make changes to the property to increase its value if necessary. It means we're able to kind of mitigate our risks or here. Happy it's so even if if it does slightly come back we can make some changes where appropriate and order to increase its value and that really helps to protect us as property investors. Now. The other thing I will say is that if you want to learn about property with Andrew and I here's what you do follow your phone go to Google Google property investment in said and in the top three or three or four results when you scroll past Those ads, you can see the Epic guide to property investors. So epic tied to property investment and this has just been updated. So when you Google That is going to have a big updated sign in those Google search results. Now, if you click on there you're going to get to the Epic guide to property investment is a 16,000 word article where Andrew and I have lovely put our heart and soul into it teaching you everything we know about property investment. It'll take about 45 minutes to read but what this will do for you is it will give you a really good grounding in the fundamentals of the New Zealand property Market ante if you do take the chance to rate review And subscribe to the show. We would really appreciate it because man, that really does help. Get the message out to more people. Thanks for listening to the property Academy podcast. I'm your host a big night. I major in a coma going to be back again tomorrow with even more daily strategies tactics and insights to help you get the most out of the New Zealand property market and two links on.
In this episode, we discuss 4 key differences between the property market and the share market. Only 24% of the property market is made up of investors, the rest is primarily made up of owner-occupiers, this has some important flow on effects in terms of how the market operates:   The property market has higher barriers to exit for owner-occupiers than there are in the share market. Property owners need to pay for a real estate agent to sell their house, which can be a real disincentive for property owners to get out of the market – especially as it takes a median of 33 days to sell a property, whereas shares can be traded instantaneously. This means that when the market is not doing so well relatively fewer property owners will opt to sell their properties, which creates a more stable market  In the property market, you have the ability to make cosmetic changes to your investment in order to increase its value. You can't do this in the share market, because you have one share. And because there is more emotion associated with property, investors have the opportunity to make quick gains because the market is based on emotion, not on the fundamental value of the asset   The property market is less reliant on investor sentiment, as the majority of the market is not made up of investors   Individual property investors have more control over what they can do with their investment. If you are an investor and want to make a change to your property, you can. If you're a Westpac shareholder, try telling Westpac what you want them to do. 