Innholdsfortegnelse for Aug 18 i NZ Property Investor

In this month’s issue we lead with a story on the Auckland Unitary Plan – while it may seem a very Auckland-centric piece it does have relevance for investors nationwide. The idea was to highlight a theme you will hear more about in the magazine. That is the changing face of property investment. The so-called housing crisis in this country is really just a supply/demand imbalance. We need to build more houses. While investors have traditionally bought what I call second-hand stock, ie: existing houses – in the future, I believe investors will play an important role in building new houses and creating new stock. At first I wasn’t too caught up in the Unitary Plan, but sometime ago I heard Hamish Firth from Mt Hobson Group explain it all…

That’s according to a new Tenancy Tribunal ruling which has left a Raglan landlord having to pay exemplary damages of $500 to their former tenant for that failure. Raglan Property Management was looking after the self-contained unit that Maryanne Brunetti rented without viewing before taking up the tenancy. Brunetti was unhappy with the rental property, which she said was damp and cold, from the word go. Eventually, she went to the Tribunal seeking compensation for failure to maintain the premises and seeking damages for the lack of heating at the property. The Tribunal dismissed Brunetti’s claims on lack of maintenance, but it did award her damages for the lack of heating. Raglan Property Management said they were told by the council that no heating was needed – only an electrical…

‘A significant portion of house price inflation is accounted for by the cheap credit flow into assets as opposed to spending, thus, low inflation and continued low rates’ I get asked daily what’s happening with interest rates. To answer this question, it’s useful to first define what may affect interest rates. The major influence on interest rates is inflation. As inflation rises, interest rates rise to curb inflation (spending). As inflation falls, interest rates fall to spur spending and economic growth. In August 2008 the average floating residential interest rate in New Zealand peaked at 10.72%. By February 2010 it was 5.98% and it has been relatively flat since then. For the past eight years, interest rates in New Zealand have been historically low. Given these low rates we would…

Investors looking for a solid income in their retirement might like to consider Manawatu. Greg Watson has worked with lots of clients who have a single Auckland or Wellington rental property. Their strategy has usually been to hold onto more expensive properties in a trust for the next generation. But when the cost of retirement starts to bite, they start thinking more about cashflow. Watson helps these retirees to use the funds from a more expensive property to buy three or four houses in Palmerston North or Feilding. “For those people who are retirement age, they’re not worried about the values going up, they’re more concerned with cashflow,” says Watson. “They can achieve double the cashflow and improve their day-to-day lifestyle.”…

The Unitary Plan has opened up opportunities for canny Auckland investors, but according to Barry Walker from Keith Hay Homes, just because you can develop, it doesn’t mean you should. “The sums have to add up. You might have an 800m2 section in Manurewa that due to zone changes may allow for the development of four terrace houses, but this will cost you about $2.5 million. And given that lending restrictions are extremely tight at the moment, this isn’t going to be possible for many investors.” Less ambitious projects may be the best option for many. Properties that have been rezoned as mixed housing suburban (for example) can now have an additional dwelling added without Council consent. And this doesn’t have to be a million-dollar proposition. “You could build a…

‘An apartment that does not meet all the criteria of a serviced apartment, may still be a taxable supply if it is deriving income from the taxable activity of providing short-term accommodation’ The inclusion of serviced apartments to the definition of residential land for the purposes of the bright-line test has brought with it uncertainty as to how these rules can be practically applied and has become a topic of many a heated debate in our office. This is mainly because the term “serviced apartment” has not been defined in legislation in relation to the bright-line test. However, a serviced apartment is defined in the GST Act as being a “commercial dwelling” if it is managed or operated by a third party for which services, in addition to the supply…

‘Always be prepared to settle after completion, don’t sell halfway through construction and have your financing arranged before enterting into a contract’ New property investors are often intimidated by the process of buying an investment property off-the-plan, however, knowledge is a powerful tool. Not only can it help you navigate the purchasing process, it will also help alleviate the apprehension that often comes with trying something new. An off-the-plan strategy is a great way to buy a property at today’s value, without a huge outlay of cash. Use the following tips as a guideline when purchasing your first (or next) off-the-plan property: 1. Get a thorough understanding of the market cycle and its ability to grow by considering the six market drivers – infrastructure, yield variation, supply and demand, population,…

MARKET COMPOSITION The rental market in North Shore is dominated by houses, but there is also a decent presence of flats and apartments across the various suburbs. Of roughly 1,600 properties in North Shore as a whole, about 1,150 (around 70%) are houses, 300 flats, and 150 apartments. Suburbs with high concentrations of rental houses include Wairau Park/Glenfield North, Rothesay/Murrays/Mairangi Bays, Greenhithe/Unsworth Heights, Glendhu/Glenfield, and Torbay. Each of those suburbs has more than 80% of its rental stock comprised of houses. In terms of the number of houses, the most are to be found in Sunnynook/Westlake (123) and Glendhu/Glenfield (108). Hillcrest/Northcote and East Coast Bays are key suburbs for rental flats, while the rental apartment market in North Shore is dominated by Albany, Takapuna, and Devonport. HOUSE SIZE, BY BEDROOM…

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,…

As you grow your property portfolio and have a strong investment base in residential properties, consider changing your property investing strategy. It is a lot less work and management to make a million dollars a year in rents in commercial properties than it is in residential. 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…

‘Multiple tenancies also reduce cash flow risk as if one or two tenants vacate there will still be several tenants providing cash flow’ MARK SLADE Investing in storage units doesn’t have the glamour appeal of an on-trend office building or a well-located retail property. But in many countries storage units are considered an attractive commercial investment. In the United States and Australia, storage units are a niche sector of their own. Not only do investors buy existing storage complexes and/or develop new ones, but they can invest in property syndicates which specialise in the sector. The sector is less well developed in New Zealand. But it is getting bigger and it is widely considered that growth will continue. In recent years, some large Australian storage businesses have moved into…

In the world of Graeme Fowler, numbers tell the story. And it’s a story worth repeating to anyone keen to succeed in the property game. In the last 18 months he has bought 40 houses. Fifteen of these have required extensive renovation work (at a cost of between $20,000 and $70,000 each), and have made him an average of $35,000 each in profit. “With the trades/renos we have made well over $1 million profit in the last 18 months,” he shares. While renovations are only part of Fowler’s property investment success (he uses a wide range of strategies to achieve his stratospheric results) they are an increasingly important aspect of his business. So much so that his partner Katrina recently left her job as payroll manager so she could work…

‘We see many buyers who have been through a mentoring course, rigidly following their rules and missing out because of narrow thinking’ Have buying rules, don’t obsess over them. If I were to define a “successful investor” as somebody who has consciously set a plan and executed it well, then almost every successful investor I know followed buying rules to some degree. Here are some examples of buying rules, also known as criteria. These should illustrate that everybody is after something different. Location: • Close to a city with 100,000 people or more • Only buy in a location I can drive to within 20 minutes • Any town with a university, or several major employers • Close to shops and amenities. Type of property: • On a section with…

‘I used to say “I can’t afford it”, but when I understood this was an easy way for me not to do something, I looked at things differently and I have never said it again’ Now I know that everyone has had so much “get-rich-quick-talk” that you are full to the brim, so I am just going to pass on some wisdom received from someone who has seen a bit in his day. I was speaking with an experienced registered property valuer recently who said, “Richard, I still believe that relocating a house to a section is the fastest way to grow your equity”. I thought to myself, I can just imagine how many property transactions and development proposals this guy has seen; how many conversations he’s had and how…

Auckland’s ongoing population growth means the city needs to expand. While much of the focus around this has been on the development of higher density living options, the city is also spreading outwards. New developments heading further up north are much in evidence. There is Albany, Millwater, Long Bay and other projects that wind their way up the coast. iFindProperty’s Stephen Hart says the North Shore is an obvious choice for such development because it has land that’s ripe for it. “The problem has always been the commuting, especially if you have to for work. But the development of business hubs like Albany and technology which enables people to work from home, combined with the new motorway development, means change is inevitable.” That will mean the further development of satellite…

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.…

‘The rental industry is made up of rental providers and tenants, with both these parties being essential’ Tenant lobbyists, Renters United, recently publicised 36 law changes that they claim will fix the “broken” rental market. A key desire is for tenants to stay in a property for as long as they want. The only way an owner could end the tenancy is for non-payment of rent, serious illegal or antisocial behaviour, or significant damage. “No other reason will be legitimate.” It appears that they believe that moderate illegal or antisocial behaviour and moderate damage by tenants is fine. They would like tenants to keep any pet of right and to be able to make changes to the property to make it their home. They want renters to be able to…

NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of June 2017 and June 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…

REINZ HOUSE SALES: DOWN Once seasonally adjusted, sales volumes were down nationally in June as compared to May. They were also down year-on-year. Sales activity was down month-on-month and year-on-year in both Auckland and Wellington. 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 still 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 June as compared to May. Annual net migration was down in June for the fifth month in a row and commentators say the rate is easing.…

SHORT TERM RATES <2 YEARS) As we went to print last month, ASB had just 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. However, the other banks certainly didn’t sit on their rates too long and responded through competitively reducing their short-term interest rates. Over the past month, the majority of mortgage lenders have moved their carded short-term rates down. Even better rates can be achieved with negotiations, along with other incentives. This is reflective of the competition for market share between banks and is presenting excellent opportunities for borrowers. It is worth noting that the two-year rate peaked at 9.64% in March 2008. Today the two-year rate, although not…

‘It takes a bit of bravery to buy when the media is full of doom and gloom stories, or to buy in a region or purchase a type of property that hasn’t been popular in recent times’ In the property game, sometimes it’s hard to see value until five or ten years down the track. Most of us have had the experience of feeling as though we’re potentially paying too much for our houses, only to feel sheepish years later admitting to how much of a steal they were. However, the longer we spend buying and selling (or working) in the property market, the more we start to see the bigger picture. The bigger picture isn’t always easy to keep in mind. It takes a bit of bravery to buy…

‘Another reason why it’s a good idea to repay the principal is if the market goes down by 10% (or more), you have less risk’ Two weeks ago I did my usual NZ Property Video Podcast where I interviewed Ashley Church from the Property Institute of New Zealand. One of the topics we spoke about was his view on where he sees the current market and what will follow in the upcoming years. Like many others including myself, he sees that the property market is currently stabilising and will be for around the next four years. He believes that overall it will most likely stay relatively consistent and without significant rises or declines. So if this is the case, what can we do as investors? During the past year, I…

The Auckland Property Investors’ Association (APIA) covers the entire Auckland region. But, on behalf of APIA, some veteran North Shore investors host a monthly networking event for people interested in the North Shore. The event is usually on the third Thursday of the month in Silverdale. It is a free event and open to everyone, not just APIA members, and the organisers encourage new people to attend. For more information go to the events page on the APIA website at www.apia.org.nz.…

NORTHLAND NEXT MEETING: Wednesday August 29, 7.00pm at Distinction Hotel, Riverside Drive, Whangarei. TOPIC: TBA 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 August 14, Dorothy Winstone Centre, Auckland Girls Grammar School, 14 Howe Street, Freemans Bay. Admission closes at 7.30pm. This is a members-only event and prior registration is necessary. TOPIC: This is Auckland – the economy, growth, and opportunities. Auckland Council Chief Economist David Norman gives an update on the Auckland local economy and looks at what the major indicators are telling us. Construction and consenting activities will be closely examined with a commentary on what these mean for housing and affordability.…

Introducing Tony Mounce from Tony Mounce Mortgages & Insurance. It’s hard to imagine anyone with broader experience in the finance industry than Tony. After 42 years in personal and business banking and then onto mortgage advising, Tony is very familiar with the New Zealand banking system and calls himself a “finance all-rounder”. Multi award-winning, including Southern Region Mortgage Adviser of the Year for eight consecutive years and Southern Region Financial Services Business of the Year for seven, Tony Mounce Mortgages & Insurance provides financial advice for people of all stages of life. First-home buyers, families, the self-employed, and property investors. Q: WHY DID YOU ESTABLISH TONY MOUNCE MORTGAGES & INSURANCE? A: After the Bank of New Zealand mobile channel was disestablished in 2009, I set up Tony Mounce Mortgages &…