Innholdsfortegnelse for July 18 i NZ Property Investor

‘It’s important to remember that last year’s meth standards still apply to all Tenancy Tribunal and insurer decisions’ Over the past month we’ve had two pieces of big news that will make a difference to how landlords run their portfolios. The first was the government-commissioned Gluckman Report on meth, which suggested lifting the acceptable level of meth residue in residential dwellings from 1.5 micrograms to 15 micrograms. The report was welcomed by many landlords who’d felt that the levels were overly conservative. Personally, it feels to me that another arbitrary number has been plucked from the air, and that the lack of evidence around effects from third hand exposure is a reason to do more investigating, rather than declare a level of 15.0 safe. For landlords, it’s important to remember…

‘This builder has over 100 properties under construction and every single one of them is sold’ So often I talk about investment from an Auckland perspective because that’s where I’m based and that’s where I’m most familiar. However, I’m lucky enough to have some strong working relationships across the country – particularly in Christchurch. So here’s a slightly different perspective for a change. Talk to people outside Christchurch, especially those who haven’t been there since the earthquakes, and you’ll come up against nervousness and a close-minded mentality. A mentality that suggests the city is going nowhere and isn’t worth investing in. I can say that, because up until recently, I was one of those people. But as I write this article I’m sitting in an office on St Asaph Street,…

You are likely aware of the bright-line tax rule. Initially brought in as a two-year rule, the Labour Government extended it to five years, effective March 29, 2018. On the face of it, the regime is relatively simple – you either sell a residential property within the bright-line period, or you do not. However, like most things in tax, if you scratch beyond the surface there is complexity and real dangers for investors and their professional advisers. Here are three scenarios to illustrate: SCENARIO ONE: RESTRUCTURING OWNERSHIP OF AN EXISTING RENTAL In 2017, Donald purchased a residential rental property in Auckland for $800,000. Fortunately for Donald, the vendor failed to appreciate the development potential of the property and it has a current market value of $1.25 million. Donald is looking…

‘The best thing we ever did was not building the family home’ ANGELA PLIMMER • The couple have a “shimmer” meeting once a month (he’s Plimmer and she was Sheffield). The purpose of the meeting is to monitor their progress for investing, adventures, vehicles and family goals. “If I mention it to others they think it’s quite unusual but I think it’s key to our success,” says Angela. “It formalises our goals monthly.” • What comes around goes around: “What we’ve done well is we’ve made good connections with good people” says Adam. “They’re helping us to get where we want to go.” The Plimmers give back to those people by recommending them to others and using their services time and again. • The team you have around you…

Investors have long listed the risks – and potential costs – posed by meth contamination to rental properties as one of their biggest concerns. That concern, along with widespread public fears, has contributed to the rise of the meth testing and cleaning industry. It has all cost landlords dearly, with millions of dollars paid out to combat the scourge of meth. But now it seems the risks to properties caused by the smoking of meth have been significantly over-stated and that a fair swag of the millions spent on testing and decontaminating has been paid out needlessly. In May, the Prime Minister’s Chief Science Adviser Professor Sir Peter Gluckman released a game-changing report into the health risks of third hand exposure to meth in residential properties. The report found that…

Ceiling and underfloor insulation will be mandatory for all rental properties from July 1, 2019. If you have insulation, but it was installed before July 1, 2016, you will need to ensure it adheres to certain standards. Framing in a ceiling is usually around 90mm deep, and insulation needs to be either within 20mm of the top of the ceiling frame, or above it. Insulation settles over time, so if the insulation is under 70mm thick it will need to be upgraded. Ceiling insulation that is over 100mm is within the standards, if it is between 70-100mm it may need to be topped up. Anything below 70mm will need retrofitting. Underfloor insulation installed before July 1, 2016 must cover all accessible parts of the floor below the habitable spaces of…

The main home exemption is only available if the [trust] property sold is the main home of a person who is the principal settlor and also beneficiary’ Following on from last month’s article, this month focuses on the exemptions applicable under the bright-line rules for relationship property, inherited property and the application of the main home exemption for property owned by trusts. MAIN HOME EXEMPTION – TRUSTS The main home exemption can also apply to properties owned by trusts in limited circumstances. For the main home exemption to apply to a trust, the property needs to have been the main home of a beneficiary of the trust. The principal settlor of the trust cannot have another main home. A principal settlor is a person who has transferred the most value…

‘The reason why so few investors achieve the results that they want is far more about their lack of skill, knowledge and experience, coupled with a typical Kiwi DIY approach’ I am sure that you have all heard the saying “your current results in life are a direct reflection of the standards you are willing to accept or tolerate”. Depending on your current situation, you may not like reading this and even find yourself coming up with reasons why your situation is different and therefore allows you to justify your lack of success. However, the harsh reality is this, you are in control of your life; the choices you make and/or don’t make create the outcome you now have. So, if the current results of your investing do not reflect…

‘They admitted if they’d treated other assets with a capital growth component the way they treated rental property, then rental property would have a higher marginal effective tax’ Last month I wrote about a study used by the Tax Working Group (TWG) in their background paper Future of Tax. The study was on tax rates for different assets and led the TWG to claim that: “Owner occupied and rental housing is undertaxed relative to other assets.” This didn’t look right, so we commissioned financial and economics consultancy Morgan Wallace to review the study. They produced a report showing that they had uncovered serious flaws with the TWG’s study, leading them to conclude that apart from bank deposits, rental property is actually taxed at a higher rate than other asset classes.…

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 & Associates,…

In the wake of Sir Peter’s report, the meth testing industry has come under intense scrutiny, with many claims that the industry helped to drive the panic which gripped the country. But industry representatives deny the accusations and say they have always worked to the standards and guidelines set by the relevant government agencies. Meth Solutions director Miles Stratford is critical of the report. He says there is a lack of research globally, but the report doesn’t take overseas evidence into account. Further, its recommendations around risk management are based on an incomplete assessment of the risk. Forensic Meth Services director Alex Dalzell, who owns three rental properties herself, says that despite the report’s recommendations, it remains best practice for landlords to err on the side of caution. “I think…

Don’t be afraid and think it is harder than residential: Generally, you have less repairs and maintenance work to do, a lower turnover with your tenants, less management and higher returns. But commercial properties are harder to finance and sell. You can make good money by buying well: But the importance of due diligence cannot be understated. Ensure that you do your research and know the market well. Always make sure you use a great lawyer.  Communication is key: Build relationships. Make sure you talk to your tenants as they are gold. But always negotiate hard. Let people know what you want and ask them for it. Don’t be a cheap landlord: There are many examples of multi-tenant buildings losing tenants simply because the landlord was cheap and wouldn’t accommodate…

‘So many agents are accustomed to being used or treated badly – it won’t take much to stand out from the crowd’ Over the years I’ve attended more than my fair share of property seminars and there is a disturbing message that I have often heard. It relates to how to “use” real estate agents, and much of the advice I have heard has been disrespectful – bordering on dishonest. Examples of this behaviour: • When attending open homes lie about your name and give a bogus phone number (honestly folks, if you don’t want to be followed up you can just politely request this). • When the agent isn’t looking, open bedroom drawers and rummage through wardrobes to obtain as much personal information about the vendor as you possibly…

At The Relocatable House Co. we believe in educating our community and clients by sharing our knowledge. This gives you the power to make informed decisions based on facts and experience rather than fears or myths. Craig Brierly, the design manager at The Relocatable House Co., is passionate about re-using, re-purposing and re-designing existing houses to make them, yet again, somebody’s dream home. He runs a team with three designers and additional contractors available when required. Craig and his team deal with council and consent applications daily, as they work through multiple applications each week. He has the following advice when it comes to dealing with council: THE EARLIER THE BETTER Talking with councils early in the process can be the difference between a dream project and a nightmare. Avoiding…

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 Invercargill is mostly made up of houses, with 75 in Central Invercargill/Bluff and 200 in Suburbs. The Invercargill total for…

Westpac has released an analysis of whether various property tax changes would have an impact on house prices and the bank’s conclusion is a resounding “yes”. The bank’s chief economist, Dominick Stephens, says that New Zealand’s property prices are profoundly affected by the tax system so changing this would change property prices. “Property is more lightly taxed than other forms of investment – mainly because income from investments is taxed, whereas capital gains are tax-free, plus expenses, including mortgage interest, are tax deductible.” “This feature of the tax system is especially useful for property investors, who find it easier to borrow against their investments than other businesses. It has made property investment incredibly popular. And that popularity has been one factor pushing house prices higher.” Westpac estimates that the introduction…

REINZ HOUSE SALES: UP Once seasonally adjusted, sales volumes were up nationally in May as compared to April – but they were down year-on-year. In Auckland, May sales volumes were up on the month earlier as well as 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 May and most commentators expect it to stay on hold until mid to late 2019. IMMIGRATION: DOWN Monthly net migration dropped in April as compared to March. Annual net migration was down in April for the third month in a row and commentators say the…

SHORT-TERM RATES (<2 YEARS) Over the last month, there has been some competitive interest rate pricing in the market for short-term rates. Mid-June, ASB reduced its one-year, 18-month and two year rates from between six to 10 basis points, making them one of the most competitive in the market amongst the main banks. It will be interesting to see whether ANZ, BNZ and Westpac also reduce their short-term rates in response to ASB’s move. Either way, ASB’s move continues to highlight the competition amongst banks for market share from each other. Short-term rates are being used as the key lever in the market to grab additional market share. This is often the case in a stable or slowing real estate market. Irrespective of whether all banks officially drop their carded…

When investing in properties generally: 1 Lower yield equals higher capital growth. 2 Higher yields equals lower capital growth If you are on high incomes go for the lower yields. Likewise if you have a low income and/or are nearing retirement age go for higher yields. Pick the timing of the Market and consider each step you make as we move through the Property Clock Cycle. 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…

It’s no secret that the times are a-changing for the residential property market. Alongside the cooling market and tighter lending conditions, new government housing and tax policies mean that investing in residential property no longer has the attraction it once did. But commercial property is a different beast. While many investors are leaving the property market altogether, others are simply changing their focus and looking to commercial investments. One prime example of this is high-profile Auckland investor and developer, David Whitburn. As a board member and immediate past president of the Auckland Property Investors’ Association (APIA), Whitburn has long been one of the public faces of residential property investment. He remains as passionate about residential property as ever, but the changing times have led him to start ramping up his…

Stage two of Xiao’s renovation project will be converting a double garage into a second dwelling. She is currently waiting for the consents to go through council processes. Once they are granted she can put up a fire wall and lay down carpet in the bedrooms adjoining the garage. The renovation team will then set to work creating a stylish studio out of the old garage. The additional studio will bring in approximately $400pw (taking the total rental yield to $950pw). This will also see the valuation increase to approximately $1.1 million as a “home and income”, says Xiao.…

‘It’s going to be fascinating to see how market forces, council costs and landlord sentiment combine over the next 12 months’ Councils across New Zealand are changing how they deal with Airbnb and short-term rentals. Queenstown was the first city where the council cracked down on short-term stays – and it cracked down hard. Homeowners will now need to apply for resource consent to rent out their houses for more than 28 days in a year. The council has made this move because there is a shortage of places for workers to live; Airbnb is taking houses out of the rental pool. Queenstown has an outsized share of this market, with 14% of houses across Queenstown and Wanaka listed online for short stays, compared to 1.2% across the rest of…

Some weeks ago I was at the Gilligan Rowe and Associates Property Leaders event. It was a fantastic event with almost 500 investors attending and an array of outstanding speakers. People like Tony Alexander, Phil Twyford, Ashley Church, Hamish Firth, Matthew Gilligan, Kris Pedersen, Janet Xuccoa and others (even myself) were amongst the speakers. This event happens every six to eight months and is a fantastic way to stay current in the market. Over the past year, there have been concerns about the property market and where it is at. People were wondering about what was going to happen after the election, with new government policies, the foreign buyers’ situation and so on. Well, this leaders event gave me high confidence in the future of the market. Of course one…

NORTHLAND NEXT MEETING: Wednesday July 25, 7.00pm at Distinction Hotel, Riverside Drive, Whangarei. TOPIC: Members night. Calling all of our new and long-term members together for a round table forum evening. Discussion items will be where to from here – investing in today’s market, what do the people who succeed do differently and an update on the recent asbestos outcome. MEMBERSHIP: $180 single or $210 couple; includes subscription to 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: Tuesday July 10, Dorothy Winstone Centre, Auckland Girls Grammar School, 14 Howe Street, Freemans Bay. Admission closes at 7.30pm. TOPIC: The Auckland Property Investors’ Association facilitates over 100 events and presentations for property investors throughout the year.…

WHEN YOU RAN FOR MAYOR YOU HAD SOME STRONG OPINIONS ON THE WAY IN WHICH CONSENTS WERE DEALT WITH. CAN YOU EXPLAIN? When I was on the campaign trail a huge number of people approached me about how arduous the consents process was. Landlords were so frustrated by how slowly things progressed – it was impossible to know where the block actually started. There needs to be more transparency, people need to be able to know where they are in the process, and have someone they can contact who can give them information about what’s happening. SO WHAT WAS YOUR SOLUTION FOR THIS? Every council spends huge amounts of money developing online tools for their own area. If there was a tool that could be instated across the country, that…