Going for Gold

As the markets continue to talk up gold and the fact that it may hit $2,000 sometime during 2010, property investors and owners in New Zealand continue to ponder decisions around making an investment in property, despite the alternative potential offered by that shiny metal. New property investment funds are beginning to surface around the place with value propositions to tempt would-be investors.

Enhancing the value of any investment, whether gold or property involves making decisions around risk. These decisions are based on experience, knowledge, information and often, intuition. We seek advice from other people regularly on matters that impact on our perception of the risks of a particular investment.

One of our core services involves providing clients with long term maintenance plans (LTMPs or reserve plans as we like to call them), that provide a basis for understanding the costs associated with maintaining an asset over it's lifetime and enable the creation of appropriate sinking funds. This is a popular service. There are a number of service providers in the market offering a range of advice and options.

Currently the building industry in NZ is dealing with significant shortcomings with it's design and construction processes - the weathertightness issue is touching us all. I worry whether, as an industry, we will learn from these mistakes and come out as better professionals. This concern was echoed last week when I learnt that some service providers are offering Body Corporates long term maintenance plans for a fraction of the cost of others. On a multi unit complex of over 100 apartments (with complex building services, a swimming pool etc), fee quotes ranged from $2,500 to $12,000. Every Body Corporate Committee has a fiduciary duty to the owners, and whilst the Body Corporate in question went through a weighted attribute analysis of the proposals, they are still highly likely to accept the lowest quote. Without getting into detail, and in my humble opinion, $2,500 just doesn't cut it, in terms of providing the right depth and quality of professional advice on a building of the complexity and size in question. In several years time, when reliance on that long term plan becomes important, the Body Corporate may find themselves with a problem..

We all acknowledge that price is important. Sometimes work is 'bought' to secure market position or to keep our people busy. That said, it is a rocky road - offering long term plans at such a low price creates an issue that, in years to come, may yet again question our ability as an industry to get our act together. People are beginning to rely on the LTMP when they purchase apartment units as an indicator on what they will personally have to contribute to the pot. It will not look good of the professions preparing those LTMP's get it wrong!

So, going back to the price of gold - isn't it about time we all started talking quality up? Isn't it about time we started going for the gold standard? It's an old well used phrase, but you do get what you pay for..