Innholdsfortegnelse for No 151 June 2016 i NZ Property Investor

FOR A LONG TIME NOW WE’VE TALKED about the housing crisis in Auckland and the overheated property market. That heat has well and truly spread to the regions and we are starting to hear cries of unaffordability there, too. Commentators are becoming increasingly vocal about the inherent dangers in the strength of the market and everyone from the Government to industry experts to housing advocates have publicised their views. Suggested solutions cover a wide spectrum of taxes, bans, supply-side incentives and regulatory changes. But while the Reserve Bank hasn’t announced any further macro-prudential measures to date, it is widely thought they will – and such a move won’t be too far in the future. The latest idea the Reserve Bank are flying is debt-to-income restrictions – causing much debate among…

1 Values rising around NZ The most read this month on Landlords was following the last QV data results. It revealed rocketing house values in Hamilton and Tauranga overshadowing Auckland’s renewed growth in values. 2 Investors under fire Early May was tough for investors. Readers were keen to read about rising house prices and the minimum rental standards debate, which left investors under heavy fire. Investors were being blamed for both surging house prices nationwide and tenant health problems because of substandard rental properties. 3 Capital price prospects A story about investment in our capital was a hit with readers this past month. It was Wellington, not Auckland, which was set to offer some of the best house price prospects in New Zealand, economist Rodney Dickens suggested. His firm, Strategic…

ANY TIME YOU TAKE ON DEBT, SUCH AS A BIG MORTGAGE, IT IS IMPORTANT THAT YOU GET THE CORRECT ADVICE AS YOU WOULD HAVE READ IN MY previous posts, I get great satisfaction from assisting people in getting to where they want to be. You will hear me mention the word ‘why’ a lot, for example, 'Why do you do what you do?' Generate passive income? Buy that new boat? Maybe you want to create financial freedom for you and your family? But what happens in the situation where you are in business with someone else or there are multiple people involved in a venture? Multiple people amounts to multiple ‘whys.’ We see a lot of partnerships being developed where people pool their resources, working together to invest in property.…

KRIS PEDERSEN Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. Phone 09 486 4719, 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…

Healthier rental homes are at the forefront of public consciousness these days – thanks to the ongoing push for a “Warrant of Fitness” for rental properties. Both the Labour Party and the Green Party are promoting Bills which would enforce minimum standards in rental properties. Meanwhile, the Government’s Residential Tenancy Amendment Bill, which features insulation and smoke alarm requirements, is currently making its way through Parliament. Under the RTA Bill requirements, landlords will have an obligation to have installed smoke alarms by July 1. Insulation will have to be installed in social housing from July 1 this year, but landlords will have until July 1, 2019, to install it in other rental properties. Some exemptions where it is not practical to install insulation will apply. These requirements, however, have nothing…

THINGS CAN LOOK GOOD ON PAPER BUT YOU’VE GOT TO PRESS THE FLESH AND CHECK OUT THE VARIABLES FOR YOURSELF - CAMPBELL VENNING CLICHÉS. BY THEIR VERY NATURE, clichés are things that we don’t bother to reflect on very often. But when it comes to buying an investment property, there’s one old cliché that’s rings true over and over again. Location, location, location. Get it right, and your property will start working for you right from the outset. Get it wrong and you’re in for a bumpy ride. It’s worth doing your homework on this one! Whether it’s your first foray into the property market or you’ve been around long enough to see the property market move through its cycle multiple times, researching your investment location is paramount. Even with…

CONDUCTING THOROUGH MARKET RESEARCH IS VITAL WHEN GAUGING THE RENTAL PRICE OF YOUR PROPERTY – SARAH DAWSON GETTING YOUR RENTAL PROPERTY to stand out from the crowd can be a daunting task, especially for a new investor. Vacancies are one of a few things that can derail your real estate investing career. But don’t fret – these simple steps can ensure your rental property looks its best and appeals to quality tenants. Best of all, you’ll get the income you deserve from the property and your time will be freed up to focus on other things. REFRESHED PROPERTY With modern day technology, prospective tenants can search and compare properties easier than ever before, via the Internet. If your property has cracked paint, an unkempt garden or stained carpets, that may…

I CHOSE TO INVEST IN MANUREWA AS THE CASHFLOW IS EXCELLENT AND THE SECTIONS ARE LARGE WITH SUBDIVISION POTENTIAL JIMMY HO THE AVERAGE PRICE FOR A HOUSE IN THE Auckland area now stands at $942,760 in April, up 1.3% from March and 16.5% higher than a year ago. The biggest increase in Auckland values, however, occurred in south Auckland in Papakura, with an April average of $608,610, up 24.4% from a year ago. In Manukau City values rose by 20.8% to $812,657. But as property values skyrocket and outpace rent returns, gross yields have taken a big hit, with Auckland dropping to an average yield of 2.3%. So what's the property market like in south Auckland? Adam Thomson, of Ray White Manukau, says the areas in south Auckland experiencing high…

MANGERE Mangere's proximity to Auckland Airport is a great bonus - the airport and surrounding industrial areas are predicted to be major employment growth areas in the coming years. OTARA With the recent price rises in Auckland, Otara is one of the last remaining suburbs where reasonable yields can be achieved. Prices are lower here than in neighbouring Otahuhu and Papatoetoe. PAPATOETOE An established and multi-cultural suburb with easy access to Manukau CBD and motorways. Papatoetoe High School is a top school and rentals within the school zone are in good demand. CLOVER PARK This suburb has seen rising prices as the ripple effect spills over from more expensive housing in Totara Heights from the south and Flat Bush in the east. MANUKAU HEIGHTS Manukau Heights, Totara Heights, and Hill…

NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of April 2015 and April 2016, based on figures from the Ministry of Business, Innovation & Employment. RENTAL SNAPSHOT Median house rents of the dominant dwelling type for the area AUCKLAND - CITY WELLINGTON - CITY CANTERBURY - CHRISTCHURCH NEW ZEALAND EXPLANATION OF STATISTICAL TERMS No. of Properties: Total number of residential properties No of Bonds: Total number of bonds lodged in last three months Median Rent: Weekly rent based on the bonds lodged in the latest three months Rent Quartile Range: Inter-quartile range of weekly rent based on the bonds lodged in the latest three months Median value: The median value of properties in the group based on estimating the current market value…

THE GREATEST LESSON IN THE BOOK IS ABOUT THE IMPORTANCE OF ABUNDANT RESEARCH IMAGINE HAVING $2000 A WEEK TO spend for life – and spending just 10 hours of your time on each property a year. That’s a little over a full day’s work a year to manage each property in your portfolio, which can generate a passive income for the lifestyle you’ve always wanted. In Ben Kingsley and Bryce Holdaway’s The Armchair Guide to Property Investing – How to Retire on $2000 a Week, the pair show the “armchair” or passive approach to investing is all about creating an easy to follow process. They provide the compass (along with checklists) to let you know what your next step should be at any time. It’s a system they developed and…

PROPERTY INVESTORS NEED TO BE prepared to pay higher interest rates on their loans in response to changes made by the Reserve Bank. The Reserve Bank last year made changes which require all banks to hold more capital for property investment loans than they do for owner-occupied properties. No banks have yet made changes to investment loans but Westpac has written to mortgage advisors advising that it is likely to start doing so. It says: “The changes by the RBNZ in November 2015 mean that all banks need to hold more capital against investment loans. This makes investor property lending more expensive for banks.”“The changes we are making reflect this cost.” Westpac refused to provide more information about these changes or grant an interview. It went on to say in…

PAY DOWN AS MUCH DEBT AS YOU CAN BECAUSE IF IT DOES COLLAPSE IT’S NOT JUST HIGHER INTEREST RATES YOU HAVE TO COVER, IT’S ALSO MAINTENANCE AND OTHER COSTS – SUNVI AHSAN IF THERE’S ONE THING ALL OUR EXPERTS agree on, it’s that interest rates are definitely going to go up. At some point. But not soon. Also, they could very likely go down before they go up again. Interest rates will definitely either go down, or up, at some point. So now that’s clear, what strategies can you use to take advantage of the lowest interest rates New Zealand has ever seen? We spoke to investors, mortgage advisors and economists to find out what uses these low rates are being put to and what the forecast might be for…

THE TRICK WHEN LOOKING FOR ADVICE IS TO NOT ONLY LEARN WHAT TO DO, BUT ALSO LOOK FOR WHAT NOT TO DO MICHAEL YARDNEY THE TERM 'STATUS QUO BIAS' describes our tendency to stick with what we know. It could be as simple as buying the same name-brand groceries that you always have or as complex as holding on to that underperforming property. People do this partly because they want to avoid costs, even when it’s apparent those costs will be offset by a larger gain, being the long-term growth of a better performing property. Psychologists call this ‘loss aversion’ and it explains why so many Kiwis are willing to stick their money in a plain old bank account earning minimal interest, rather than taking the ‘perceived risk’ of a…

WERE LIMITS PLACED ON DEBT-TO-INCOME RATIOS THEN ON THE FACE OF IT A LOT OF BUYERS WOULD BE TAKEN OUT OF THE MARKET – TONY ALEXANDER KITE FLYING IS A POPULAR SPORT IN some countries and an occasional past-time for us Kiwis – perhaps associated with one of the wind-related festivals run in Wellington each year. Kite flying is also something which politicians like to do. It involves putting an idea out into the public arena and seeing what the reaction is. The Prime Minister did this a few weeks ago when he said that maybe a land tax could be applied to foreign owners of property in New Zealand. We analysts wrote columns speculating on what level such a tax might be at. There was an opinion ventured by…

 YOUR PROPERTIES ARE WORTH hundreds of thousands or even millions of dollars. They secure your financial future. They are an investment to be treasured. THE SHORTSIGHTED SCROOGE NEXT DOOR WHO HASN’T SPENT ANYTHING ON MAINTENANCE HAS SEEN THE RENT INCREASES DRY UP OVER THE YEARS. AARON TUNSTALL So why do some landlords begrudge spending money to maintain them? Maintenance is something every property owner needs to work into the budget. If you can’t afford the maintenance in your calculations, you can’t afford the property. For many Scrooge types, if a property continues to be tenanted quickly and brings in a reasonable rent, there’s no need to spend any money on improving it. That is not a successful long-term strategy. For a small apartment, it may cost as little as $3,000…

Ormiston in Flat Bush is New Zealand's largest and most comprehensively planned town, taking shape on 1700ha in south east Auckland. By 2025 it is expected that the area will be home to at least 36,000 people. Manukau is home to the largest community of Pacific Islanders in the world, with 72,378 individuals. A new $26-million bus station in central Manukau is under way next to the recently-built train station and Manukau Institute of Technology, and is expected to open late 2017. Over 300,000 people live in south Auckland. About 116,000 dwellings in the region are occupied. The median house price in Manukau City is $812,657. Sources: QV.co.nz ; REINZ; Auckland City Council; stats.govt.nz…

THE RESERVE BANK'S ANSWER TO THE HOUSING SUPPLY ISSUES CAUSED BY OVER REGULATION IS TO REGULATE DEMAND. MORE REGULATION DOES NOT ADDRESS THE CORE PROBLEM AND WILL ALMOST CERTAINLY HAVE UNFAIR AND UNINTENDED CONSEQUENCES ANDREW KING LAST MONTH I WROTE ABOUT HOUSE prices rising and the calls for more regulation. Unfortunately, the calls for more regulation have been heard and the Reserve Bank is looking to introduce loan-to-income restrictions for mortgages. This type of regulation has already occurred in the UK, where many borrowers are restricted to borrowing no more than 4.5 times their annual income. However, unlike the UK, where rental property loans are exempted from the new loan-to-income ratios, the RBNZ is looking to include them. Some politicians and media commentators are saying New Zealand should do the…

1 Last month we celebrated printing the 150th edition of NZ Property Investor. For the past seven years we have profiled property investors and their investment strategies. We asked our Facebook fans what their property portfolio looked like seven years ago. YOUR COMMENTS Paula Fryer: There wasn't one. Now hubby and I have two rental properties in the space of two years and hopefully a third next year. Kirsty Merriman: The same as now, except now we have paid off a lot of the mortgages – not keen on high debt levels. The time has been fantastic and leverage has delivered great paper results (ones that I am not banking until we eventually sell). Patrick Gleeson: Zero. I was investing in shares. Kerry Beveridge: Two houses, now 10. Nichola Baker:…

REINZ HOUSE SALES: UP Once seasonally adjusted, sales were up both nationwide, and in Auckland, in April. INTEREST RATES: DOWN Interest rates remain at historic lows. OCR: DOWN The Reserve Bank kept the OCR on hold at the record low of 2.25% in April. IMMIGRATION: UP The annual net gain of migrants hit another record high in April, but Statistics NZ data shows that, although monthly numbers are steady, the trend is slowing. BUILDING CONSENTS: DOWN Once seasonally adjusted, building consents were down nationwide in March – and the trend shows no signs of easing, Statistics NZ says. MORTGAGE APPROVALS: UP Reserve Bank data shows that mortgage lending rose strongly to hit a record high in March. RENTS: UP Rents around the country went up in April. This was partly…

PHIL AND PAUL HAVE GREAT BUSINESS ETHICS WHICH MAKES WORKING WITH THEM AN EASY CHOICE. THEY REALLY LISTEN WHEN I DESCRIBE WHAT INVESTORS ARE LOOKING FOR AND THEIR COMMITMENT TO QUALITY DRIVES EVERYTHING THEY DO. – CAMPBELL VENNING CHRISTCHURCH HAS EXPERIENCED STEADY capital growth over the past couple of years. More recently, Christchurch’s central city is a hive of development activity after initially being held up by red tape and insurance disputes. Commercial, retail and hospitality projects are well underway; the well-publicised Government Anchor Projects are moving forward and new inner city low-rise apartment developments and townhouses are coming on stream. Projections for 2016 are for relatively steady market growth in Christchurch. For savvy investors whose goal it is to buy at the beginning of the growth cycle and sell…

IS AN UNINSULATED HOME IN THIS DAY AND AGE “FIT FOR PURPOSE”? – MARK WITHERS UNFORTUNATELY, WHEN THE initiative for insulation of rental homes was announced the politicians seemed to miss the low hanging fruit: It’s fair to say most landlords will prick up their ears at the suggestion of a tax deduction on offer. If the Government simply asked the IRD to confirm the tax treatment of retrofitted insulation and confirmed its deductibility I’m sure many landlords would willingly make the spend. So why is the deductibility question difficult? The question of whether a cost is deductible maintenance or a non-deductible capital improvement is often a grey area. The tax department’s typical response is to simply say “we consider every case on its merits” which doesn’t assist much! There…

SO FEW KIWIS HAVE ANY REAL IDEA OF WHERE THEIR DISPOSABLE INCOME GOES. GETTING CONTROL OF THAT IS THE FIRST STEP – SUE IRONS DO YOU KNOW ANYONE WHO gets overexcited about something and jumps right into the deep end, only to get stuck or give up soon after? Often, I meet with investors and they want to jump straight into talking about particular properties and what they should buy. Instead, I ask them to take 10 steps back and start with the most basic questions, in order to build an investing plan. I can assure you that at some stage the novelty of investing will wear off and unless your goals are clearly defined and 'real' for you, your interest will fade. In my last column, I talked about…

MARKET COMPOSITION The rental market in South Auckland is made up of mostly houses, with a significant amount of flats but not many apartments. Only three areas do not have a majority of houses. Papatoetoe South has the greatest representation of apartments, at 27% and has another 33% flats, while the only other area with apartments is Otahuhu with less than 10%. Otahuhu comprises over 60% of its rental market with flats, while Papatoetoe West is made of 46% flats. Both Otara and Wattle Downs/Conifer Grove’s rental markets are exclusively houses while Mangere is also heavily dominated by houses with over 90% represented by this property type here. As is common across the country, three bedroom houses are the most prevalent in the South Auckland rental market. Every area within…

NORTHLAND NEXT MEETING: June at the Distinction Whangarei, 7 Riverside Dr. Whangarei. MEMBERSHIP: $180 single or $210 couple; includes subscription to the NZ Property Investor and NZPIF discount card, plus local trade discounts. Please email npiacontact@gmail.com for more information. PO Box 1640, Whangarei. AUCKLAND NEXT MEETING: June. TOPIC: Please refer to www.apia.org.nz/events for upcoming meetings information. MEMBERSHIP: Sign up for an APIA membership at www.apia.org.nz/register. APIA memberships include a free subscription to the NZ Property Investor, networking opportunities at over 100 events throughout the year, an excellent discount card, free subscription to APIA TV, and massive savings off mortgage interest rates with the ANZ bank. For more information visit www.apia.org.nz or email admin@apia.org.nz WAIKATO NEXT MEETING: Wednesday June 8. 7pm for 7.30pm start. The Pavilion of the Hamilton Workingmen’s Club,…