Innholdsfortegnelse for June 18 i NZ Property Investor

As we go to print, the Government has announced a $3.8 billion spend on housing in the Budget 2018, which includes 6400 more state houses to be built by 2022, $170 million for emergency housing and further insulation subsidies for low-income families. As rental providers, it’s our business to provide healthy homes for Kiwis and this Budget offers up a couple of opportunities to help us do so. Previous insulation subsidies for low-income earners end this month, but the new insulation announcement will mean more home-owners will be able to insulate their homes. While this doesn’t offer much to landlords, it will mean other providers will have to step up their game – such as ANZ who are now offering interest free insulation loans – to capture the landlord market,…

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). MATTHEW GILLIGAN Matthew Gilligan is a property investor, developer and tax adviser. He is managing director of chartered accounting firm Gilligan Rowe…

With entry level prices high, affordability low in many locations and lending regulations stringent, it’s harder than ever for aspiring young (or new) investors to get on the property investment ladder. But it’s not impossible. We speak to three young investors who’ve come at the problem from three different angles and find it’s still possible to succeed as a new investor, if you’re strategic and determined. BILLY MCLACHLAN – FLIPPING LIKE A PRO When Billy McLachlan left Opahi College in Temuka in year 12, all he cared about was skateboarding – much to his mother’s dismay. And despite the fact that he showed considerable talent (he’s sponsored by Amazon NZ), his mum encouraged him to enrol in a one year Certificate in Business and Tourism course in Timaru, so that…

• Purchase price for two units on one site: $416k. • Cost to buy the relocatable house and have it positioned on site $69k. • Cost of subdivision of two units and all other costs to completion of project $100k. • 15% yield across the three dwellings rented separately. • Sale of 14 Beverley Rd being main relocated dwelling with one bed unit as minor dwelling: $705k. • Sale of small unit at 83 Brightside Road on small, freehold site: $385k. Bagby says there was some capital gain on the purchase over the year they kept the property before selling. “But the majority of profit was created by the subdivision and relocation.”…

Property investment is a game of leverage. Most investors are familiar with the idea of “other people’s money” or “OPM”, where one leverages the bank’s money to buy a property. The rental income that covers your mortgage and costs is another example of OPM. ‘I leaned on an architect, a builder, a property manager, a valuer, a mortgage broker and an insurance broker, I leveraged their time and expertise to make the deal work’ There is another form of leverage that is just as important in the modern world, “other people’s time” or “OPT”. Having a team around you is a form of leverage. Your property manager finds, vets and looks after your tenants – they also contact a builder for repair work; the builder visits and looks after the…

At The Relocatable House Co we believe that more families living under their own roof creates better family environments, better communities and better futures. Yet in the midst of a housing shortage, too many perfectly liveable houses are demolished and end up in our ever-growing landfills. All too often demolition is the first (and often believed to be the only) method of making way for new developments – but relocating results in far more direct and indirect benefits for everyone. Whether you’re looking to get on the investment ladder for the first time, adding to your investment portfolio or wanting to develop a site to maximise equity and yield, here are some of the reasons that more investors are considering relocation: VALUE IN YOUR LAND If you look at your…

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 New Plymouth is mostly made up of houses, with a reasonable number of flats in some suburbs, and a few…

Finance Minister Grant Robertson’s first Budget didn’t contain any surprises, but it did commit to building 6,400 new state houses over the next four years at a cost of over $4 billion. This will be partially funded by a $234.4 million Budget allocation and partly funded by Housing New Zealand borrowing up to $2.9 billion and also investing funds from its operations. Housing and Urban Development Minister Phil Twyford says the plan will mean 1,600 new state houses are built a year, which exceeds their earlier commitment of 1,000 state houses a year. This commitment is critical because too many New Zealanders are hurting as a result of the housing crisis, he says. “The single most important thing the Government can do to solve the housing crisis is to build…

REINZ HOUSE SALES: UP Once seasonally adjusted, sales volumes were up – but only slightly – around the country in April as compared to March. Sales volumes were also up year-on-year in some markets, but not many North Island centres including Auckland. 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 May and most commentators expect it to stay on hold until mid to late 2019. IMMIGRATION: DOWN Monthly net migration was up slightly in March as compared to February. But annual net migration was down in March for the second month in…

SHORT TERM RATES (<2 YEARS) As expected, RBNZ maintained the OCR at 1.75 per cent in May. Similarly in Australia, the RBA held the cash rate at 1.5 per cent. Worldwide, fast job growth and low employment rates are placing very little pressure on wage growth and inflation. This is equally so in New Zealand, where inflation has fallen over the past six months, a move that should interest property investors. If inflation continues to fall, it’s likely a drop in OCR will follow. In his latest announcement, Reserve Bank Governor Adrian Orr stressed that the RBNZ remains “balanced” and that “the door is open to a cut and a rate rise”. Continued competitive pressure on two-year fixed rates has led to a drop in these rates, providing excellent value…

There are only 3 ways to profit from properties: 1 Buy below value through negotiations 2 Buy and add value through renovations 3 Buy before the peak of the boom through anticipation. If the property you are buying is not giving any of the above then look for a better opportunity. Successful property investor and mentor Ron Hoy Fong has built an impressive portfolio and has a wealth of investment strategies and wisdom to share with you. For information on his mentoiring programmes call Ron today . Ron Hoy Fong 021 888 298 www.ronovationz.com…

• McLachlan recommends wannabe investors reach out to someone who has created the success you want to have yourself. “Just going on to Google and reaching out to that one person is literally all I did.” • “If you stay at home you do save a lot of money,” says Bax. But it’s equally important to have a plan and good support. For Bax’s first investment property she put together a tight team: “I had a really amazing banker, real estate agent and an amazing lawyer.” • Acknowledge your fears and address what the real issues are that are holding you back, says Humble. “Figure out how to get around those – because that’s what really stops people – their fears of not coping with issues that come up.”…

End October 2013 Surveyor lodges documents with council for subdivision consent. End November 2013 Resource consent with conditions for the subdivision granted. December to February 2014 Subdivision consent requirements met including upgrading services for the two units to separate them onto two titles. February 2014 224c resource consent from the council for the subdivision of two units. February 2014 Consent to relocate the main house and reclassify the existing unit to be the minor dwelling. March/April 2014 Building consent received for works on the main house. 17 April 2014 House moved onsite overnight. Late April 2014 New house connected up to the services. Drain laying done. New decks, steps and renovation works completed. Concrete driveways done. May 2014 Code of compliance.…

When Auckland investor Ginny Douglas looked at buying a duplex in the heart of Upper Hutt, she had a fair idea it could be problematic. Just twelve months earlier she’d purchased the adjoining property, and when the tenant vacated, the place tested positive for meth. It was no surprise when this one yielded the same result. ‘I expected the rent would increase to around $400 per week but my property manager suggested $430 and we had no trouble renting it’ GINNY DOUGLAS ASBESTOS AND METH CLEANUP Meth proved to be just one of a multitude of issues. With asbestos-laden stipple ceilings, threadbare carpets, a fireplace with no chimney, and a garage packed with furniture, the duplex was hardly the stuff of dreams. But Douglas could see its potential. After…

Why is it that we like property investment? It’s risky, it’s expensive, it’s time-consuming. But when you want to increase your wealth, property has been hard to beat over the past decade. If you are prepared to invest your time and money researching the market, you can sometimes find a deal that outperforms the market. That kind of deal can help set you up for a better retirement. It’s not always easy to find those deals, but it’s not impossible. I’ve long been an advocate of looking at opportunities like leaky buildings and even leasehold apartments, as well as short-term rentals. The trick is to thoroughly understand your local market so you can recognise a good deal and move quickly when you see one. Recently we’ve had a great example…

These days regulatory change costs and rates (which cost more than a few years ago) bring down the yield on a property. That is unless you increase rent. Recently rent has been increasing due to a lot of new regulations coming in that increase landlords’ costs. If “ring fencing” comes in, rents may increase again. These are factors that property investors have no control over, but there are many others they do. ‘Before advertising and showing people through, make the place look tidy and smell clean and make sure everything works’ A landlord can increase rent after updating the property’s value by, for example: • increasing rooms • adding a cabin attached to the premises • adding minor dwellings • turning it into a room-by-room proposition and furnishing • doing…

Quinovic New Plymouth Grant Carter, General Manager, Address 163 Courtenay Street, New Plymouth Phone 06 759 0012 Email grantc@quinovic-newplymouth.co.nz 1 BELL BLOCK A great range of homes are offered in this area. From traditional three bedroom houses built in the 1960-70s, offering reasonable rental prices through to new developments where executive houses are available. 2 FITZROY One of New Plymouth’s most desirable residential suburbs. Serviced by a popular suburban shopping centre, easy access to schools and New Plymouth’s premium swimming beach. 3 MERRILANDS Established in the early 1980s with predominantly larger family homes. A popular residential area for families. This is now a well established and desirable location for executive living. 4 VOGELTOWN Centrally located with a mix of older and newer homes, Vogeltown is definitely a desirable area…

NORTHLAND NEXT MEETING: Wednesday June 27, 7.00pm at Distinction Hotel, Riverside Drive, Whangarei. TOPIC: Jim Janse, CEO, will introduce The Property Crowd, New Zealand’s innovative crowdfunding platform that allows you to invest in residential property for as little as $500. A hands-off investment model that enables everyone to take part in property investing, The Property Crowd offers investors the benefits of diversification and liquidity with the ability to exit using a resale market. Tenants benefit from security of tenure in quality and well-maintained houses. Crowdfunding property will change the dynamics of home ownership using technology to benefit both investors and tenants. The Property Crowd taps into the sharing economy for the benefit of everyone. MEMBERSHIP: $180 single or $210 couple; includes subscription to NZ Property Investor and NZPIF discount card,…

WHAT KEY MARKET DRIVER WILL HAVE THE BIGGEST IMPACT ON THE PROPERTY MARKET THIS YEAR? The strong state of the economy and labour market which will underpin housing demand. I do not envisage any substantial change in interest rates, net migration flows, growth in dwelling supply, Reserve Bank credit controls, or attitudes toward property. WHAT ARE THE MORTGAGE INTEREST RATE PROSPECTS FOR THE NEXT YEAR? Minor upward movement in fixed interest rates look likely. But inflationary pressures in New Zealand and globally remain low. Central banks have been over-predicting inflation for eight years now, and monetary policy tightenings are likely to be very cautious affairs around the world for many years. WHY CAN’T WE PREDICT THE MARKET? Principally lack of understanding on the part of most people as to the…

Consumer NZ testing has revealed that ionisation alarms give much less warning of smouldering fires – like those caused by faulty electrical wiring, curtains draped over a heater, or a hot ember igniting upholstery foam. This means it is less likely residents can get out of a property safely. Consumer NZ head of testing Dr Paul Smith says the testing confirmed ionisation models were great at detecting flames, but not so good with visible smoke. “The four ionisation alarms in our test were faster at detecting flaming fires (burning oil and wood) but much slower at detecting smoke from smouldering foam.” All smoke alarms will respond to a fire, eventually, he says. “The difference is whether they respond to visible smoke. A smouldering fire can fill a home with deadly…

‘Houses in South Auckland are struggling to sell at auction and according to Opteon are down close to 20%’ We’re nearing the midpoint of 2018 and things seem to be simmering away without any obvious signs of change. We recently held an adviser training day for the team and one of our guest speakers was Opteon (formally Sheldons) valuers. It was interesting to hear their take on the market situation and their predictions moving forward. Generally speaking, the property market is stable after some softening over the last 12-18 months. This for me continues to be a very generalised argument though and is based on averages across cities. Looking more closely there are nuances. For example, good quality stock in Auckland City fringe ($2-$3 million) continues to bring high levels…

A key tax risk facing those engaged in property dealing, development or building activity is the risk associated with treatment of GST on purchase. GST BASICS The purchase and sale of property as part of an ongoing activity of property dealing, development or erecting buildings (ie acquisition for sale) is subject to GST. This means you can claim GST on purchase and pay it on sale. Generally, a purchaser bases their offer price on the presumption that they can claim GST, or adjusts for it. ZERO RATING ISSUES The catch is that the ability to claim GST on purchase hinges on the GST status of the vendor. If the vendor is not registered for GST, then a GST claim is available. If the vendor is GST registered, then the purchase…

1 Join up with a property group or association. The best way to learn is through like-minded people with experience – particularly if you are entering a new market. Having property buddies is also a great way to get useful tips and new ideas. 2 Effective portfolio management is all about maintaining good, productive relationships with anyone and everyone involved with your properties. Critically, that includes tenants. 3 If using a property manager, interview them as you would someone applying for a job. Look for things like whether they turn up on time and if they return your calls. Also, establish how many properties they are managing and how much support they have. 4 Before investing, always get to know the market well. Make sure you do 5 your homework…

Gaining consents for subdivision can be a daunting process for beginners. Due to restrictive bank LVR requirements for buying second-hand housing stock, many investors are creating a second income stream on existing property by subdividing and adding another dwelling, or alternatively buying property with potential for subdivision. Subdivision is a fantastic way of raising both yield and equity, but you need to do your homework first. Prendos director Gordon Edginton has seen residential subdivision go well and go badly. Issues with gaining consent aren’t always obvious and it’s important to employ really good professionals including surveyors, town planners, engineers and architects. For most councils there are about 150 rules to comply with. “It is a minefield of problems,” Edginton says. “Councils don’t make it easy.” You will need resource consent…

One of the major attractions of property for investors is its very tangibility. There’s security and value in bricks and mortar, popular opinion has it. While this is true, when it comes to commercial properties a huge part of a property’s value is in the lease that should accompany it. According to veteran commercial investor Olly Newland, after the location of the building, the lease is the most important component of a property. Commercial property is a business and the lease is where a large part of the value of that business is he says. “A good lease gives a property value so, as a landlord, you want to have as long and secure a lease, with the best quality tenant, as possible, in place. And the more it is…

Following on from last month’s article, this month I will focus on some of the exemptions applicable under the bright-line test. ‘Now that the bright-line period has been extended from two to five years, it is likely that more taxpayers are going to be caught as the characteristics of the land that they are holding changes’ DEFINITION OF RESIDENTIAL LAND AND EXEMPTIONS For the purposes of the bright-line test it is important to understand how residential land is defined. Residential land is land that: • has a dwelling on it; or • the seller of the land is party to an arrangement that relates to erecting a dwelling on it; or • is bare land that may be used for erecting a dwelling under the rules in the relevant district…

Buying investment property to grow your wealth is a proven strategy. Why then is it so scary for many would-be investors? A number of reasons, but in my opinion the two biggest are: 1. the large amount of money involved; 2. the fear surrounding the unknown. ‘There’s nothing wrong with being afraid, but it’s important not to let the fear overwhelm you’ HOW MUCH IS THAT DEBT? Taking on a lot of debt can be scary, but it’s important to put that debt into perspective. Unlike your credit card, the debt you take on to get onto the investment property ladder is considered “good debt”. Why? There are several reasons: • the debt is secured by the property; • the expenses incurred with owning the property are tax deductible; •…

The NZPIF made a submission to the Tax Working Group (TWG) who appear to have a directive to recommend a capital gain tax in New Zealand. We hope they are impartial, but in their background paper “Future of Tax” the TWG say that “property remains under-taxed compared to other investments. For instance, any profits from the sale of a longterm property investment generally isn’t taxed.” This is a misleading statement as the IRD has confirmed that profits from the sale of shares, farms, businesses and other assets that grow in value are also untaxed. However, of most importance is that the TWG uses a study into Marginal Effective Tax Rates (METR). This study suggested that the METR for property was just 29.4% compared with 47.2% to 55.7% for other assets,…