Feature
House of the rising sum
by Pamela Stirling
A booming housing market has also seen the explosion of property investment advice and seminars, most promising great returns and sustainable wealth – for a fee. But what of the risks? What might turn those dreams of capital gain into nightmares?
There were no fewer than 10 property investment seminars advertised in Auckland one recent Saturday … wait, wasn’t that one of the first signs of the Apocalypse? The explosion of property seminars is a sure sign at the least, say economists, that the market is getting “frothy”. Despite warnings of house-price falls of an average five percent over the next 18 months, these seminars share “all the hallmarks”, says Westpac, “of the 1980s sharemarket frenzy when the hot topic at dinner parties, pubs or in taxis was people’s share portfolios”.
But there’s no room for negative thinking in this industry. “Listen, folks, you’re here to learn why you’re poor!” an ebullient Dolf de Roos tells a packed audience of 500 well-heeled people – including an 11-year-old boy writing down every word – at the Sheraton ballroom for his $79 a head Real Estate Riches seminar last week.
“The deal of the decade comes along once a week!” says de Roos. “If you believe that, you will find deal after deal after deal.” But you will only amass money, he says, when you come from an abundance consciousness instead of a poverty consciousness; when you tell yourself, “I am a magnet for money!”
Tonight, a pumped de Roos tells his audience that he wants people to invest in property and write to him 12 months down the track and tell him they’ve “made one million or three million, or you’ve got 16 properties, or we’re taking six months off because our cash flow now exceeds our outflow!” He says, “I don’t know any other activity where the rewards are so huge. If you want to invest a million dollars in the sharemarket, you need a million dollars. If you want to invest a million in real estate, you only need $100,000.”
You can buy one property, get it revalued, use the equity to buy another property and then buy another and another. “And you do it all with OPM. Other people’s money. OPM. It’s like being high on drugs!” What’s more, the wonder of depreciation claims on the building and contents means “the government subsidises your investment! It’s delightful!”
Later, de Roos will say privately that he agrees that the property bubble might burst if interest rates go up. “It’s all correct. All true. But with every cycle we go through, the peak tends to be higher than the previous peak.” It’s “bollocks”, he says, that it’s a bad thing if the market goes down. “It’s good if it will go down. If interest rates go up, properties get cheaper to buy. Oh, just get in there, boots and all, and do it and in 10 years time you’ll think it’s great.” He tells his seminar audience “doom and gloom, I secretly relish it. I love it. Bring it on! That’s when people ditch things!”
Might those not be the same people he’s telling to buy tonight? In his example on stage, he uses a five percent growth rate. No examples of property prices declining here; no examples of what happens when you overcommit financially at the peak of a boom to buy a property in which you might end up with negative equity. Reserve Bank Governor Alan Bollard has already warned that this is not the same as previous property cycles: New Zealanders are more vulnerable to financial shocks, such as rising interest rates, than we were 10 years ago.
The property market has risen a blistering 16 percent this year, fuelled in part by the stampede into the market caused by property investment seminars. The value of housing mortgages has jumped from $15 billion to $81.5 billion in the last two years. Debt stands at about 130 percent of income, up from 65 percent in just over a decade. And our net financing from offshore has just reached an astounding 90 percent of GDP, compared with just 60 percent for Australia, 25 percent for the US and 15 percent for Canada.
But de Roos, who plans to list his property investment company on the stockmarket next year, continues on stage to cajole and hector people to get into the market. “Why don’t you have 20 properties on your portfolio already? It’s all to do with the subconscious, folks. How do we describe the rich? We call them filthy rich. What else? Stinking rich. We’re told money is the root of all … Evil!
“That’s right. It’s sad, folks, and that’s why you have to break that cycle.” You have to lose the mental belief system that’s holding you back from becoming rich.
Surprisingly, the next day he says, “A lot of people when they’re rich lose the art of being happy. It’s sad. That’s why a lot of rich people are very sour. Very mean.”
But to help us become wealthy – “who’d like to make money?” – he gives all of us at the seminar the chance to sign up for his weekend Property Investors School for the special price of $2695 (normally $2895), where he will cover the finer points of property investing, demonstrate more fully his $669.38 software and again provide the special offer of purchasing any “three of Dolf’s books plus Real Estate Twists” video – save $30!! – for $149.
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