Innholdsfortegnelse for May 2018 i NZ Property Investor

‘If we don’t move and change with what our customers need, then we’ll miss out on the opportunities of our time’ When it comes to property investing, landlords have seen a great deal of change over the past couple of years – some say more than in the previous decades. Regulatory changes have been a huge factor, as have the changing size and demographic of our population. As we all know, New Zealand cities have experienced unprecedented growth; families look different to what they did a decade or two ago and correspondingly how they live does too. Because of this, how we rent and manage rentals, who we rent them to, and what rentals look like are all in the process of an upheaval. It goes without saying that landlords’…

REINZ HOUSE SALES: DOWN Once seasonally adjusted, sales volumes were down around the country, including Auckland, in March as compared to February. Once seasonally adjusted, sales volumes were also 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 March and most expect it to stay on hold until mid to late 2019. IMMIGRATION: DOWN Annual net migration fell in February as compared to January. Further, monthly net migration was down in February after rising for the last few months. BUILDING CONSENTS: UP Once seasonally adjusted, building consents rose in February, as compared…

Over the last month, local and international data released suggests that in the short-term volatility may exist around interest rate movements. However, overall data continues to support an upward movement of interest rates in the medium to long-term. SHORT TERM RATES (<2 YEARS) As expected, with the economy growing at trend and near-term activity looking solid despite a slowing housing market, the RBNZ kept the OCR at 1.75%. Adrian Orr has taken up the role of Governor of the Reserve Bank, and one of the first things he did was sign a new Policy Targets Agreement (PTA) which outlined specific targets for maintaining price stability, and incorporated requirements for employment outcomes to be considered when implementing monetary policy. Other key news is that RBNZ will start to make interest rate…

‘The value of a commercial investment property is dictated by the quality of its income stream in terms of security, length of lease, quality of tenant and review provisions’TOM BARCLAY A building is a building whether it’s a house or a warehouse. So calculating the value of a commercial building can’t be much different to calculating that of a residential building. Right? Wrong. Valuing commercial properties is not like comparing apples to apples and it’s a common mistake made by investors new to the sector. While it’s generally true to say that no two residential properties are identical, there are, ultimately, overarching similiarities in residential property. These allow for a more standardised approach when it comes to valuing residential properties. Opteon Solutions (formerly Sheldon & Partners) valuer Mark Davidson says…

If your tenants are keen to paint your rental, it’s important to ensure you choose a colour that will appeal to all. Karen Warman from Resene has some tips: • Most landlords decorating rental properties are aiming for universal appeal. One easy way to achieve that is to use popular neutral colours that go well with a wide range of furnishings. • While neutrals do change with the trends, some are always popular. Resene Black White and Sea Fog are very popular in urban areas and on modern properties. Older properties and ones in cooler regions work well with variations of Resene Pearl Lusta and Spanish White. In rentals, it’s usually best to avoid all white as this shows up marks the most. • One option for landlords with many similar style or era properties…

‘As the market floods with new listings and new management companies, we’re seeing the market mature and a more realistic return settle into place’ Disruptive technology is hot right now, and almost nothing has been more disruptive than Airbnb. It’s changed the way we holiday, the way we use our holiday homes and the whole hospitality and property management industries. As apartment specialists, we had no choice but to enter the short-term stay market more than two years ago – and it’s been fascinating to watch this phenomenon grow and mature. When we started out, we had to ask the owners of a couple of smart, furnished apartments to be our guinea pigs. We guaranteed their rent, taking on the risk ourselves so they’d let us take a punt at…

‘Whether you buy to renovate, keep it long term for capital gains or get a good rental return; you should always be aware of the obstacles that may affect the property’s price in the future’ Last month I received some great questions in my “Ask Mark” series on Property Ventures’ Facebook page (propertyventuresnz). On the page, Carrie asked a very important back-to-basics question: “What factors do you take into account in considering a property to be a good investment?” It is a great question, and even though I have already briefly answered it on the Facebook page, I will dedicate this forum to it. It’s a two-part answer: LOCATION Location, location, location. We hear it all the time, but what does it mean? There are some things you must consider…

Greg Watson, Business Development Manager, Watson Real Estate 267 Broadway Avenue, Palmerston North Phone: 021 321 768 Email: greg@watsonrealestate.co.nz Bob Weaver, Business Development Manager, Watson Real Estate 59 Manchester Street, Feilding Phone: 021 586 488 Email: bob@watsonrealestate.co.nz 1 CITY CENTRE Palmerston North is largely flat, easy to navigate and much of the city is considered ‘central’. Typified by a blend of older character homes, blocks of units and more modern townhouses there is much to choose from. The yields tend to be average. 2 MILSON Has increased in popularity over the years and is well placed for workers at the hospital, the aviation industry and the Northern Industrial zone. An excellent ‘middle ground’ for affordable prices and reasonable rents. This should mean a stable investment for years to…

Tenant liability for damage has been a fraught issue ever since the Court of Appeal released its controversial Osaki ruling, which left landlords liable for accidental damage caused by tenants. It led the previous government to introduce the Residential Tenancies Amendment Bill (No. 2) into Parliament and hopes were high the Bill would result in changes of greater benefit to landlords. But the Governance and Administration Select Committee has now reported back on the Bill and its proposed changes have left the NZ Property Investors’ Federation angry. NZPIF executive officer Andrew King says that rather than clarifying the situation, the Committee’s recommendations further complicate the issue. The Bill states that, if a property is insured against damage, a tenant’s liability is limited to either the applicable excess under the insurance…

‘Auckland is simply the place within our country that has the scale to do business and attract talent’ We ran a seminar the other night where clients were lucky enough to hear from Ludo Campbell-Reid, a design champion for Auckland. I came away from the evening inspired about the future of this city. We’ll throw up a video of his presentation on our Squirrel blog soon. Definitely check it out. It got me thinking though: “If Auckland was a company, would I buy it?” And what sort of price/earnings (P/E) multiple would I pay for a company like that? My thinking was that property prices could be a proxy for a share in Auckland’s future. The same logic could be applied to New Zealand, but for the most part I…

On March 29 an issues paper was released outlining Labour’s tax loss ring-fencing proposals. While it is designed to generate public feedback and therefore doesn’t represent the final form of the rules, it’s worth considering some of the detail provided. The detail is at a relatively high level, but these are the highlights: APPLICATION IS RESIDENTIAL LAND ONLY The proposed rules will apply to residential land only. This aligns the ring-fencing rules with the bright-line rules, which also apply only to residential land. Generally, residential land is land with a dwelling on it, or capable of having a dwelling built due to zoning. Excluded from this is commercial property, a person’s main home, mixed used assets (e.g. a bach used privately and to generate income) and residential land that is…

‘There are exemptions in certain circumstances applicable to the disposal of a taxpayer’s main home’ In 2015 the National Government brought in a two-year bright-line land sales test. This bright-line test required income tax to be paid on any gains made from the disposal of residential land which was acquired and disposed of within two years of purchase. The purpose of the introduction of this legislation was to strengthen the existing land taxing provisions by introducing an additional test alongside the current “intention provisions” which was easier to measure and apply to tax payers’ circumstances. The two-year period starts from the date of acquisition, being in most instances registration of title, to the date of disposal, being generally the date a contract for disposal of land is signed. Note that…

“A smart man makes a mistake, learns from it and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether” – Roy H. Williams. Does it take luck to become wealthy? Some people say so, but I say that a smarter choice is to make your own luck … at least you have more control over that. So how can you make your own luck? By doing what countless others do to grow their wealth; making smart money decisions that minimise your expenditure and maximise the return on your investments. Take a look at the following habits and strategies. How do they align with your own? 1. SAVE MORE THAN YOU SPEND Don’t discount the power of…

‘No longer are run down properties an attraction for students – they are more discerning and want better quality housing these days’PAULINE BEISSEL Slowing, even flatlining markets in the main centres mean that the regional heartland is where the engines firing the property market are these days. After years of languishing in the background, it’s provincial markets that are now seeing high demand and stellar price growth. Palmerston North is one such market. While it may not have the glamour or dramatic potential for growth of a big city, investors would be unwise to overlook its quiet charms which include a very healthy student rental market. Property in the Manawatu’s business hub is available for comparatively affordable prices and, at the same time, the market can still provide decent capital…

I’m very pleased to let you know that Sharon Cullwick has been elected as president of the NZ Property Investors’ Federation, taking over from Terry le Grove. It’s wonderful to have our first female president. It reflects the growing number of women involved in our associations. Women were 41% of respondents in our last membership survey, up from 38% in the 2014 survey. Sharon has been a property investor since 1998 and has property throughout the North Island. She joined the NZPIF Executive Committee in 2016 and brings a wide level of experience from a number of Property Investors’ Associations. From 2002 to 2005, Sharon was a member of the Auckland Association where she helped set up the New Investors’ Group and was coordinator of the Eastern Group. After moving…

WHAT’S NEXT IN THE DIGITAL ARENA FOR REAL ESTATE IN NEW ZEALAND? The more I look overseas at technology’s impact on real estate, the more I realise that we are one of the most developed and technologically enabled real estate countries. Sure, we have a large proportion of agents using virtually no technology, but the core of the transactions (in terms of property title transfer process systems) is world leading, as is our legal structures of purchase. Our real estate companies operate integrated digital customer relationship management (CRM) systems and with the two main digital platforms, buyer enquiries and digital marketing is fairly sophisticated. For me there is not a lot missing. We will see the complete digitisation of the Sale and Purchase agreement, but in some ways this will…

Changes to the Residential Tenancies Act mean that it has been compulsory for smoke alarms to be installed in all rental properties since July 2016. Earlier this year a Tenancy Tribunal decision, which earned an Auckland landlord a $2,000 fine for not having smoke alarms, showed that MBIE’s tenancy compliance team is investigating and prosecuting for failures in this area. It’s perhaps no surprise then that there are now companies that are advertising smoke alarm maintenance services. But Lotus Property Management’s Keys Kerdemelidis-Kiesanowski says such companies are an industry that does not need to be there and are built on the back of scare-mongering. “The law states that landlords must have a quality smoke alarm installed in their rental property at the start of a tenancy. And that tenants must…

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 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 JENNIFER SYKES Manager, Information & Education, Housing & Tenancy Services at Ministry of Business, Innovation and Employment (MBIE). Q We have a block of units in Wellington. We have just changed property managers and found that our previous manager had not, among many…

‘The Salvation Army have furnished it so that inside it is a really respectable place where someone can hopefully get back on their feet’ ANGELA PLIMMER While every landlord should feel proud to provide a much-needed public service, supplying transitional housing to those Kiwis in desperate need of short-term accommodation has an extra “feel good” factor, as well as some quite unexpected benefits. The possibility for community housing providers (CHPs) to pair with private landlords became much more accessible last year when National announced the expansion of the Housing First initiative. Its aim was to reduce homelessness in Auckland and to provide hundreds of transitional homes across the country. CHPs have been working swiftly in conjunction with the Ministry of Social Development (MSD) to procure dwellings for their clients, as…

Intuition … it’s a word that has associations from the quasi-spiritual to the realms of science. A quick look at Google came up with this definition: “Intuition is the ability to understand something instinctively, without the need for conscious reasoning.” Malcolm Gladwell in his bestseller Blink describes this process very well. He refers to intuition as the “adaptive unconscious”. Whilst intuition doesn’t need conscious reasoning, it does possess cognitive elements. Intuition uses past knowledge and experiences to assess a situation, as well as a very quick assessment of the present, based on clues and details that may not be obvious to the rational mind, but are definitely there. My personal definition is that intuition is a sense of knowing which is non-verbal and may be experienced as a sensation in…

‘It is often suggested that having a pet in a tenancy adds to the landlord’s risk of suffering property damage however our experience has been exactly the opposite’ It’s a personal decision for any landlord to make the choice not to allow pets but you may miss out on many benefits. Tenants’ living arrangements in New Zealand can be pretty tenuous. Living at the whim of an investor, never knowing when the house will be sold, renovated or rents increased. Tenants are often unable to create a long-term “family home” and can face the costs of shifting at short notice – often when they can least afford it. It would be easy to say that no tenant should own a pet, however, for those people that will rent their entire…

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 Palmerston North is made up mostly of houses, with a reasonable number of flats and a few apartments in the…

NORTHLAND NEXT MEETING: Wednesday May 30, 7.00pm at the Distinction Hotel, Riverside Drive, Whangarei. TOPIC: How to rebuild your rental business after a tenancy nightmare No amount of reading landlord books and toiling away at legislation will ever properly prepare you for a tenancy crisis. When things go wrong, they go wrong. And you’ve got to claw your way out of the situation, dust yourself off, and move on. This webinar by long-time landlord Peter Lewis is designed to show you exactly how. Having been a hands-on landlord since the 90s, Peter has considerable coal-face experience dealing with all aspects of renting – the good, the bad, and the downright ugly. Peter’s war stories will give you the tools and confidence you need the next time things go wrong with…