Innholdsfortegnelse for No 142 Sep 2015 i NZ Property Investor

TUNE IN TO THE CYCLE AT THE MOMENT PROPERTY PRICES are going up. At some point in the next few years property prices will level off and possibly even fall in some places. Then after a while they will go up again. It is called a cycle and is almost as dependable as the ebb and flow of the tide. It is a bit bemusing therefore that media make such a fuss about a phenomenon that is so well documented and something most people will see through several cycles in their lifetimes. Recently, the fact that a below-average priced house in Auckland sold 4 times in as many months at ever increasing prices made front page news in the NZ Herald. The whole front page! Was that really the most…

AUCKLAND CONSTRUCTION REMAINS A HOT TOPIC, with a new report from Westpac Institutional Bank saying the SuperCity continues to build fewer dwellings than it needs. According to the bank’s Outlook for Auckland Residential Construction, Auckland should be building around 10,800 dwellings a year over the next eight years to address its supply shortage. Westpac’s industry economist David Norman said this is a 30% increase on the current level but is a target that is both achievable and sustainable. In order to achieve this, around 7,700 more construction workers will be needed as the Auckland building industry appears to be operating near capacity. Norman said the Christchurch experience showed that these workers could be sourced locally – and Auckland has large numbers of residents who could be added into the construction…

PROPERTY INVESTORS ARE SPENDING more to keep their tenants comfortable, a new survey shows. The New Zealand Property Investors Federation (NZPIF) has released the preliminary results of its annual membership survey. NZPIF executive officer Andrew King said the results put paid to the idea that landlords were putting profits ahead of tenants’ wellbeing. Respondents spent a total of $12.9 million on repairs and maintenance over the past year, which averaged $20,500 per respondent and $3,205 per property. The average spend per property has increased by $653 or 26% over last year's survey. A third of respondents had added a heating source to their rental properties over the past year. Heat pumps were the most common. From the middle of 2019, tenanted properties will be required to have ceiling and floor…

REINZ HOUSE SALES: UP Sales volumes were up nationwide in July. INTEREST RATES: DOWN Banks continue to offer lower rates following the Reserve Bank’s latest OCR cut.. OCR: DOWN The Reserve Bank cut the OCR from 3.25% to 3.0% in July. IMMIGRATION: UP Migration levels continue to hit record highs, according to Statistics NZ. BUILDING CONSENTS: UP Auckland’s ongoing rise in consents has led the way – and there is now a slight increase in the nationwide trend. MORTGAGE APPROVALS: UP Bank lending data remains strong. RENTS: NEUTRAL Auckland rents continue their slow rise, although not at pace with house prices. But rents are static around the rest of New Zealand.…

GIRLPOWER Ron Hoy Fong has made his fortune in property investment and now offers mentoring programmes through his company, Ronovationz. He says 55% of his students are Chinese and at least half are in mixed marriages, mainly married to Kiwis. “Chinese girls [are] married to male Kiwis," Hoy Fong says. "It is the women who usually drive the property investing."Many of his students have little or no funds when they approach him. There are no special advantages; on the contrary there are barriers of language and cultural differences. They are succeeding where non-Chinese sometimes give up or just never get started. Case in point is Allbright Liu who NZ Property Investor profiled in the February issue. Hoy Fong’s conclusion: “Young migrants out of nowhere can do it; surely Kiwis can…

FROM NOVEMBER 1, NEARLY all new investor mortgage lending for existing residential properties in Auckland will be capped at a maximum 70% LVR (meaning a minimum 30% equity required). Under the previous set of “speed limits” effective from October 1, 2013, some Auckland residential property investment could be undertaken using mortgage financing at high (more than 80%) LVRs at the bank’s discretion and within the Reserve Bank restrictions. This option has already been closed off by the new 70% LVR rule even before its introduction because the Reserve Bank requires banks to respect the spirit as well as the letter of its restrictions. Banks have responded proactively by tightening up mortgage lending criteria for Auckland property investment in order to prevent a last-minute rush for low-deposit mortgage loans. NEW DWELLINGS…

LAST MONTH I INTRODUCED the concept that Christchurch is currently in Stage 2 of a five-stage growth cycle. Stage 1 was deciding and dedicating where the government and rebuild money was to be spent, Stage 2 was about Early Adopters and the impact that their first mover status has on the bare landscape of Christchurch and the shaping of it for the future, and this month I will talk about Stage 3 which is Affordability. I like analogies and as I sit on a plane looking out at the Garden City, I liken this next stage of growth to the Rugby World Cup squad that will be named on the 31st of August. I don’t have the luxury of knowing who will and won’t be on that plane, but there…

THE DATA The rental data for each area is matched to house price information from our database to determine property prices and therefore yield. The yield is calculated as the annualised rental income divided by the median house value calculated using our E-Valuer. The rental market in Central Auckland is made up of almost all apartments. With a premium on space in the city, it is typical that one and two-bedroom apartments dominate the rental market and there are no apartments with more than three-bedrooms with bonds registered. In fact, even three bedroom apartments are uncommon; accounting for only 5% of all rental apartments in Central Auckland. One-bedroom apartments are most common in four of the areas here, with only Eden Terrace having a larger percentage of two-bedroom apartments (77%).…

WHEN WE ARE YOUNG, RETIREMENT is one of those events we can safely park somewhere in the future. One day we will look in the mirror, however, to see the first signs of wrinkles and grey hair and realise that the future is rapidly becoming the here and now. Various government-funded agencies are fond of telling us that we need to act early in life in order to provide ourselves with more than a basic tea-and-biscuits existence in our twilight years. The universal government pension to which most of us are entitled will, on its own, fund only a modest existence. Even worse, some economists believe that even this level of state pension is unsustainable in the longer term and we should not factor that income into our retirement planning.…

We discussed the importance of timing in property investment. YOUR COMMENTS Simon Archer: Timing is important, it's just that very few can tell the time. Keshav Maharaj: Whilst timing is important, more important imho are property values, sales stats, reno skills and ip to increase values, project management, property management, and accounting and roi calcs - knowing all this keeps you ahead of the game, in up and down markets.... Chris Pan Fox: It's not. Property is a long term (boring) commitment. There are highs, lows and bubbles. Patience pays off. If you get it in at the top of the market you can always wait until the next peak. Our fans gave us their opinions on buying investment properties in Rotorua. YOUR COMMENTS Warren Flay: Just dipped a toe…

THE RESERVE BANK’S NEW 70% LOAN to value ratio (LVR) policy for Auckland feels like a headless chicken moment. The Government’s inability to address property issues and a general lack of understanding by the Reserve Bank and the Government on the impact of foreign capital on the Auckland market has left us rudderless. It will have unintended and possibly serious consequences, and ironically it won’t impact on foreign capital which is often invested below the new 70% threshold. Although the changes are flagged for November 1, the RBNZ has “encouraged” all major banks to implement the new rules now. To kneejerk now on rules that aren’t even official yet shows how reactive the RBNZ has become – a dangerous and an undemocratic way to decide on winners and losers. The…

MANY PEOPLE OCCASIONALLY ALLOW themselves to slip into “if only” reveries. Then they snap out of them and return to resignation, to a status quo of reduced expectations. Not Southland-based Angela Strang. Economic suffering and struggle in her early years has left an indelible stamp. As a child who from the age of six experienced the poverty of having a solo-parent on the domestic purposes benefit, any striving for betterment for Strang and her two younger brothers was a treadmill type of reality. Fast forward to young adulthood and Strang’s determination, strategy plus stamina has proven a powerful mix. There is nothing inert or “too-cool-for-school” about Strang. She is a young woman with a mission. One of Strang’s epiphanies happened, she recalls, while swimming lengths in a beautiful lane pool.…

I’M OBVIOUSLY IN FAVOUR OF Auckland apartments. They have performed extremely well for investors over the past five years, and if you have the money, Auckland would always be my pick. I’ve spoken to apartment managers in other regions whose clients have had solid returns, but they are not nearly impressive enough to outweigh the growth we’ve seen in Auckland. The only problem with Auckland is that this capital growth has priced some investors out of the market, especially since first-home buyers have arrived at the party and bought many of the higher-quality medium-sized apartments. The prices have meant yields are no longer as hot as they were in, say, 2010 when you could get a gross yield of 10% without breaking into a sweat. Now you’ll need to buy…

ALTHOUGH THE INTERNET DID not make the real estate selling world flat as many predicted, it has given many people the confidence to break the mould and sell privately. Private selling requires effort and commitment, which is why I believe 90% of people opt for the easy route and use a real estate company. Agents and their companies have their place, but what I wish to imprint on property owners is that by following a few basic steps you can sell your house directly. Not only can it be fun sharing your thoughts and experience of the house, but you could be richer for the experience. Selling an average-priced Auckland property at auction through an agent could set you back around $30,000. Is it worth it? GREED PERCEPTION I believe…

FLICKING THROUGH SOME Tenancy Tribunal Statistics the other day, as you do, I found an interesting fact. The stats showed that nearly 50% of the tenant applications against landlords contained a claim for exemplary damages from the landlord, while fewer than 0.5% of landlords applications were for exemplary damages. Exemplary damages are an award that the Tenancy Tribunal can make against a party to the hearing. It is like a fine, but unlike a fine the award goes to the claiming party rather than the Crown. So there should be quite an incentive for either party to claim exemplary damages against the other. While it’s fair enough for tenants to make these claims, it was disappointing that less than half a per cent of landlord claims included exemplary damages against…

NEWS THAT THE RESERVE BANK HAS tweaked its upcoming LVR restrictions for Auckland investors was a bright spot in a tough month for property investors. The RBNZ originally planned to impose a 30% deposit on Auckland investors from October 1, but that date has now been moved out slightly to November 1. Also, banks will now be able to lend out 5% of their new loans to investor borrowers with less than 30% deposit – rather than the 2% initially proposed. The RBNZ said both tweaks were made in response to submissions. However, RBNZ Deputy Governor Grant Spencer followed this announcement up with a speech which claimed that growing investor demand has exacerbated price pressures in Auckland’s housing market. Data showed that investor activity in Auckland has increased from 33%…

NEW AUSSIE TAX RULES AFFECT KIWI INVESTORS Kiwi investors are being warned that the hard line Australian authorities have adopted on global tax mitigation strategies could impact on them. The Aussies recently introduced two tax changes which will impact on all foreign property owners – yet most Kiwis are not aware of them, or the existing rules. HAS THE AUCKLAND MARKET REACHED ITS PRICE LIMIT? Barfoot & Thompson’s July data shows that Auckland’s average sales price is at $827,359 - much the same as it has been for the past couple of months. This indicates that price growth has stalled and that the market could be fully priced, according to B&T managing director Peter Thompson. For more news, visit www.landlords.co.nz.…

WHILE AUCKLAND’S PRICES REMAIN undoubtedly high, the latest data seems to suggest that the phenomenal price growth of recent months might be starting to stall. For the first time, commentators appear to be looking at a slowdown as an imminent possibility. Even Finance Minister Bill English recently said that, given house price drops in other major cities around the world, Auckland’s prices are likely to fall. According to the latest Real Estate Institute of New Zealand (REINZ) data, Auckland’s median price fell by $20,000 (-2.6%) from June’s median of $755,000 to hit $735,000 in July. This was a slight decline, but the median price is still up by $125,000 (20.5%) from $610,000 this time last year. NOT CONSISTENT Further, the Auckland region’s overall median price fall was not consistent throughout…

KRIS PEDERSEN Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. Phone 09 476 1199, www.krispedersenmortgages.co.nz MARK WITHERS Mark and his team specialise in advising on property-related transactions, valuation and restructure services, and tax planning. Withers Tsang & Co Phone 09 376 8860, www.wt.co.nz RON HOY FONG As a successful property investor and mentor, Ron has built an impressive portfolio and a wealth of investment strategies and experience. Contact Ron today on 021 888 298 or ronhoyfong@gmail.com BERNARD PARKER Bernard is principal of Quinovic – Kapiti-Mana. Quinovic’s outstanding people and systems provide the most professional, effective and reliable residential property management service in the NZ market for over 26 years.www.quinovic.co.nz KRISTER SAMUEL Krister specialises in selling high yielding apartments for…

FOR THE PURPOSE OF THIS STORY WE are going to assume that our newbie investor is able to scrape together an initial investment fund of $60,000. Not many people have that kind of sum sitting in the bank, but if you are determined to launch your property investment career you may have to take a risk and be creative. Looking at the equity built up in a family home is one of the most common ways for new investors to start out. A new investor also needs to be cognisant of changes that the Reserve Bank is imposing on banks which make it more difficult to obtain funding for Auckland property purchases but slightly relax lending restrictions in the regions. Two or three years ago, a $60,000 deposit would easily…

THESE MEASURES ARE predominantly in two parts – a new “bright line” test and new information-gathering provision. While in draft form, public submissions have already closed and the Government is keen to introduce them from October 1 this year. WHAT IS THE BRIGHT LINE TEST? A bright line test aims at taxing any residential properties (including properties purchased “off plans” and sold or assigned before the title is issued) contracted to purchase after October 1 2015 and sold within two years of purchase. This is heralded as the objective test. This test supplements the existing but more subjective “intention test” (Section CB 6 Income Tax Act). WHO WILL BE AFFECTED? The proposed measures are “colour neutral and apolitical”. It affects everybody – Kiwis, expats and foreigners (not just Chinese, no…

WHEN YOUR TENANT IS BEHIND with the rent and failing to cooperate with you, what do you do? While your inner thoughts are telling you that you should have screened the tenant better, that isn’t going to solve the problem now. You’ve sent your rental statement to the tenant, to no avail – where to from here? Life can get in the way and your tenant may have simply forgotten to pay their rent and not seen your messages. A friendly reminder may see the arrears paid with no further action and you can breathe a sigh of relief. If not a 14 Day Notice will need to be sent or delivered. MEDIATION At this point an application to the Tenancy Tribunal for a Termination Order can be lodged. If…

NORTHLAND NEXT MEETING: Wednesday September 30, 7pm, at the Northland Cricket Pavilion, Okara Dr, Whangarei. MEMBERSHIP: : $180 single or $210 couple; includes subscription to the NZ Property Investor and NZPIF discount card, plus local trade discounts. Email npiacontact@gmail.com for more information. PO Box 1640, Whangarei. AUCKLAND NEXT MEETING: Tuesday September 8 at the Dorothy Winstone Centre, Auckland Girls’ Grammar School, 14 Howe St, Freemans Bay. No late entry after 7.30pm. TOPIC: Is this the cycle that will end all cycles? Or are the newspapers just filling column inches? With prices climbing at an almost unprecedented rate, investors can be forgiven for starting to feel the jitters of nerves. To help you bring everything back into perspective, Kiri Barfoot of Barfoot & Thompson will go beyond the visceral media headlines…

At 486 pages, Matthew Gilligan’s Property 101 is comparable in word volume to a party political speech. Inside, this guide to “investing in New Zealand with a focus on Auckland” has enough information to satisfy economic and property nourishment. If at first it appears a collation of ideas already espoused, then the reader is in for a pleasant surprise. It is not only a classy production with useful graphs and more tips than a decade of good housekeeping magazines, it is also a property guide Bible. Gilligan is also clearly well-read and uses his knowledge under such titles as “examples of asset bubbles” – a little history on tulip mania and the housing bubble of 1920 California. Such useful information adds value to this doorstop – probably best read at…