Innholdsfortegnelse for Mar 2018 i NZ Property Investor

‘It takes just a little bit of lateral thinking when hotspots aren’t so obvious’ There are currently opposing forces at work in the property market. We’ve got legislative changes pulling on one end of the rope and, on the other, strong population growth and low housing supply. It’s an unsettling time for some investors. Proposed and pending changes to migration laws, the tax regime, rental property regulations and the KiwiBuild programme will all have their impact on market conditions and the investors’ ability to find deals that work. It’s hard to strategise for future investing when there are regulatory changes afoot, let alone when the market (and market commentators!) don’t seem to know whether it’s coming or going. Over the past few years investors have targeted high capital gains locations…

It took 18 long months, but housing strategist Leonie Freeman has finally succeeded in getting the major players in the housing sector to agree that collective action is the way forward for Auckland. Minister of Housing Phil Twyford, Auckland Deputy Mayor Bill Cashmore, and a range of industry, NGO and iwi chief executives, including Property Council head Connal Townsend, all attended Freeman’s latest housing action event. The upshot of the event was the formation of the cross-sector working group, which will work together to figure out ways to fix the Auckland housing crisis. Freeman, who first started agitating on the issue in October 2016, says this is a significant development. She says the change is due to the new government, who believes that there is a problem, and the new…

REINZ HOUSE SALES: DOWN Once seasonally adjusted, sales volumes were down around the country, (including Auckland), in January as compared to December. Also, once seasonally adjusted, sales volumes remain down year-on-year. INTEREST RATES: DOWN Interest rates remain low and banks have been battling it out with cuts to short-term rates of late. But it is expected rates will rise over the next year. OCR: DOWN The Reserve Bank left the OCR on hold at the record low of 1.75% in February and most expect it to stay on hold until 2019. IMMIGRATION: DOWN Annual net migration dropped for the fifth month in a row in December, although monthly net migration inched up slightly as compared to November. BUILDING CONSENTS: NEUTRAL Once seasonally adjusted, building consents dipped nationally in December, after a rise in November.…

SHORT TERM RATES (<2 YEARS) Floating and short-term fixed rates are primarily influenced by the Official Cash Rate (OCR) set by the Reserve Bank of New Zealand (RBNZ) and the level of competition within the banking sector. The OCR has been on hold at 1.75% since September 2016, and is likely to remain at this level for the rest of 2018. While inflation remains below 2%, it’s unlikely we’ll see a shift in the OCR, but keep an eye on inflation. If it drops closer to 1%, RBNZ will drop interest rates to stimulate economic growth; inflation rise will see interest rates rise to slow growth. The good news for borrowers is there may be opportunities to secure competitive short-term rates as banks compete for a share of a slowing…

Ring-fencing losses The Government has promised to remove the ability to offset losses from rental properties against other forms of income. Bright-line In Labour’s pre-election tax plan, the party pledged to extend the bright-line test that taxes the profits made on the sale of properties, other than the family home, from two years to five years. Capital gains tax (CGT) The Government set up a Tax Working Group with the aim of investigating, “possible options for further improvement in the structure, fairness and balance of the tax system”. In particular this Group will look at a capital gains tax.…

‘It is the Commissioner’s view that each case is to be decided on its own merit so the legislation is subject to individual interpretation’ It’s no secret that New Zealanders have a long-standing love affair with property investment, so it’s no surprise that property investors are under closer scrutiny from Inland Revenue in regards to their property tax affairs. One area that seems to be attracting increased focus from the Commissioner, is the deductibility of repairs and maintenance. The legislation that is in place currently, which governs the criteria for deductibility, is complicated at best. The Inland Revenue released an Interpretation Statement IS 12/03 to give tax payers guidance and there have been a lot of articles and publications from experts in the field too. In determining an amount of…

‘If you don’t have a purpose or a reason behind your goal to succeed, you will find it very difficult to gain momentum’ Of all New Year’s resolutions made, “making better financial decisions” is in the top three. But by February 80% of New Year’s resolutions have already failed or been forgotten about. And according to a study by the Statistic Brain Research Institute, only 9.2% of people report feeling like they succeeded in achieving their resolution at all! It’s March now. Have you put your resolution to buy an investment property in the new year into motion? If you’re still unsure where to start, I’d like to make some suggestions on getting started. The sooner you begin, the sooner you’ll be able to tick this particular resolution off your…

Sean Dunn General Manager – The Rent Shop Lovegrove Residential Property Management Phone 021 860 360 or 09 555 9125 Email seandunn@professionals.co.nz 6/123 Ormiston Road, Flat Bush, Auckland 2019 1 OTARA Popular for its proximity to Manukau City centre, the Southern Motorway, MIT and its Pacifika vibe. A growing trend is adding minor dwellings for multi-generational families, however, do your homework to ensure the structure is legal. 2 ORMISTON The newer area of to the east of Flat Bush attracts tenants who want new, low maintenance, fully insulated modern homes. The quality of schooling is a major drawcard. The five and six-bedroom homes command high rents, but attract larger families which could mean more wear and tear. 3 FLAT BUSH (INCLUDING CLOVER PARK) Tenants are attracted to its transport routes and…

NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of January 2017 and January 2018, based on figures from the Ministry of Business, Innovation & Employment. RENTAL SNAPSHOT Median house rents of the dominant dwelling type for the area 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 of each property using our E-Valuer at the end of the…

Changing regulations mean the costs involved with owning a rental property are rapidly mounting but they don’t need to be the final straw for serious landlords. First, there is the Healthy Homes Guarantee Act and the costs that will come with ensuring compliance with the set of minimum standards it introduces. Then there is the Government’s plans to ring-fence losses, and the increased management costs likely to come, with the tenancy law reform set to be introduced into Parliament later this year. At the same time, rates and insurance premiums are on the rise. It all makes for a host of increased financial considerations and costs for landlords. Auckland Property Investors’ Association president Andrew Bruce says he hopes the mounting costs don’t end up meaning “death by a thousand cuts”…

“We’ve started the year with significantly more enquiry than we were seeing in the last six months” When the loan-to-value ratio (LVR) restrictions came into play in 2013 they had a reasonable impact on the housing market and borrowers in general. However, whilst the market slowed for a few months, buyers soon found ways around the rules and the craziness continued. It wasn’t really until the changes in late 2016 – which removed the use of overseas income and increased investor deposits to 40% – that we started to see a turn. As a result, 2017 was a significantly slower year in certain parts. Maybe not across the country or even Auckland in its entirety, but certainly in parts. John Bolton’s article late last year, Welcome to Auckland’s Growth Party,…

If they stand at home, in the right spots in the garden, Geoff and Dana Walsh can see all three of their rental properties. Each one is within 200 metres of their house – making managing the tenancies a little bit easier for the couple, who were runners-up in the 2017 Landlord of the Year Award. “We try not to be overbearing, but if the tenant rings up and the tap washer’s stuffed, I can be around in five minutes,” says Geoff. “If I’ve forgotten a tool I’ll just go back home and get it.” Walsh knows his way around the tools very well; he worked as an Army mechanic most of his life. Having joined as a cadet, back in 1989 at the age of 17, he has lived…

‘Look at the types of properties first-home buyers don’t want’ Warren Buffet, the world’s wealthiest investor, once said “Be fearful when everyone else is greedy and greedy when everyone else is fearful.” Up until recent times, everyone’s been quite greedy, buying property as quickly as possible all over New Zealand. If you bought property over the past few years, it doesn’t mean that was a mistake. If you’ve done the maths, you’re fine. But if you’re aiming to be a serious property investor, you want to think about being a bit Warren Buffett. Buy when the other buyers are feeling scared, because that’s when prices are lower. Then, when the market does its usual cycle and buyers are once again feeling greedy, your asset has shot up in value –…

‘Many real estate agents believe they can access with 48 hours’ notice however don’t be fooled’ There still seems to be some confusion about how much notice needs to be given for arranging access with tenants. Basically, the rules are set out in the Residential Tenancies Act – section 48: landlord’s right of entry. • If a landlord is wishing to visit and the tenant invites them in (thereby giving consent of entry) the landlord may enter. • 48 hours must be given for the purpose of an inspection. Notice must not be issued more than 14 days out from the inspection and the inspection should be carried out between the hours of 8:00am and 7:00pm. The Act does not dictate that notice for an inspection should be in writing.…

‘All those in the business of buying and selling property are required to pay income tax on their profits’ANDREW KING Property Investor Associations educate investors to buy and hold their rental properties for the long-term. It is a shame that Labour are pushing ahead with increasing the bright-line test from two to five years, but it isn’t the end of the world for most of us. However, it does show their lack of understanding about the difference between speculators/traders and rental property providers. In addition, it will not help increase the supply of rental properties for tenants. To clarify, anyone in the business of buying and selling property is required to pay income tax on their profits. Note that this is an income tax, not a capital gains tax. This…

Q I am looking at subdividing my central Auckland property into either two or three lots. It currently has an older house on-site that I have owned and lived in for the past 16 years. This house would be removed and two or three townhouses built. I would live in one and sell the other one or two. What would be the tax consequences of this development – if any? Would there be different tax consequences depending on whether it is two or three houses being built? A Firstly, CB12 and CB13 typically tax gains on subdividing property where there is work of more than a minor nature. CB12 taxes apply where the work is undertaken within 10 years of acquisition but CB13 has no time limit. CB13 only applies where there…

It’s that time of year again – time to file your return. Yet, while you wrap your head around filling out those dreaded forms, it will pay to consider the proposed and impending tax changes that lie ahead for residential property investors. The proposed changes include ring-fencing losses from rental properties and extending the bright-line test from two to five years; while another possibility being investigated is the introduction of a capital gains tax (CGT). To help you make sense of the changes, we’ve spoken to industry experts on what you should expect and how you can better prepare for the new tax regulations. HOW AND WHEN WILL CHANGES BE IMPLEMENTED? “Given that there isn’t any policy as yet in the pipeline, it’s difficult to speculate on exactly how and…

Renos always cost more than budgeted, don’t they? Not Richard Visick’s renovation of the “Gold Miner’s Cottage” in Thames. Visick’s exterior renovation was judged runner-up in the NZPIF/Resene Renovation of the Year Award late last year. Visick bought the Thames property in June 2014 for $175,000 and renovated the interior before it was tenanted. An exterior renovation was always on the cards and Visick made the decision in late 2016 to begin the project in 2017. The outcome excelled initial expectations, which encouraged the Thames property investor to enter it in the competition. Previous owners had “updated” the Karaka Road property in a fashion that was now long out of style. The exterior was a mix of rather sad imitation brick cladding over weatherboards and a metal tile roof fitted…

‘I think this new policy is going to lead to more student tenants in the main centres, particularly around our best-performing universities’ A year of free tertiary education and an extra $50 a week student allowance and loan entitlement: Doesn’t sound like something related to the housing market, but all these economic drivers are interconnected. Will these policies increase student numbers? Probably. If you’re not sure about what you want to do when you leave school, a free year at university is much more appealing than spending thousands of dollars before figuring out it is not for you. It will certainly be interesting to watch how it all plays out. Having said that, will most of those students be serious? I really hope we don’t see a mass influx of…

‘If you buy an under-rented property and then rent it for the market rent, you would typically add value immediately’ Recently I interviewed Andrew King, executive officer of the Property Investor Federation, for the NZ Property Podcast video series. It occurred to me that some of us forget about the fundamentals of property investing: of buying well, buying to hold, adding value and those other good things many talk about. It seems too often people trade property and, unless they are experienced, they don’t get the results they are after. I know I have probably traded more properties than most people reading this article. If only I had used those old-fashioned strategies, I would have more property than I do right now. So, after the interview with Andrew King this…

THE DATA Rental data is sourced from the Ministry of Building Innovation and Employment (formerly the Department of Building and Housing) based on rental bonds lodged. This rental data is supplied to us, grouped into geographic areas based on statistical area units used by Statistics NZ for the census, and as a result do not always match well with common usage suburb names. 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. MARKET COMPOSITION The rental market in South Auckland is mostly made up of houses, with a significant amount of flats but not many apartments. Otahuhu is…

NORTHLAND NEXT MEETING: Wednesday 28 March, 7.00pm start at Distinction Hotel, Whangarei TOPIC: Barry Trass, Northland business owner and developer. Barry is one of Northland’s best-known businessmen and he will cover a range of topics of interest to property investors. Barry and his wife Jenny co-own Homeworld Design & Build which they have been operating locally since 1980. Barry is an accomplished property developer, having successfully carried out a range of subdivisions and comprehensive developments. He is an active and involved champion of Northland business and industry – come and hear all about his activities and accomplishments. 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…

HOW DID YOU GET STARTED IN PROPERTY INVESTING? My parents have always had rental properties so I was likely going to follow that path. I got into property investing back in the day when they were throwing money around. Low-doc loans, no-doc loans, 100% lending – it was great. The banks gave me $2.6 million and I went hard out. WHAT ARE YOU DOING IN YOUR PORTFOLIO AT THE MOMENT? At present I am still trying to get my portfolio to 40% equity by doing renos and getting a better yield. I have just been holding on since 2009. ANY PLANS FOR YOUR PORTFOLIO IN 2018? Just tidying up more of my rentals, as they become empty, and lifting my rents. FAVOURITE BOOK THAT’S HELPED YOU ON YOUR INVESTMENT JOURNEY?…