Innholdsfortegnelse for June 2019 i NZ Property Investor

Back in August 2015, it was the height of the Auckland market’s spectacular bull-run. Prices were climbing steeply upwards and investors were reaping the capital gain benefits. It was, I wrote in an article, the best of times and the worst of times. That’s because there were profits and gains on one hand - but affordability issues and unsustainability on the other. Times have changed dramatically. These days the Auckland market has cooled significantly, prices have dipped and sales activity is subdued. There are still pockets of growth in other markets around the country, but they are slowing too and the recent golden age looks to be over. And yet, in many ways, the phrase “the best of times, the worst of times” could still be applied to the market.…

Mortgage rates are funded by a combination of retail deposits (like term deposits and savings), and wholesale deposits from investors such as superannuation and pension funds. How does the OCR affect rates? When the OCR decreases, deposit rates should also drop. But something strange happens to deposits as interest rates approach zero. Depositors start to move their funds into other asset classes like corporate bonds, property or the share market in pursuit of higher returns. The Reserve Bank requires that NZ registered banks hold at least 75% of their funding in retail and long dated deposits. This places more importance on retail deposits, and if banks want to fund lending growth they need to compete aggressively for retail deposits. This keeps deposit rates artificially high. Hence, we have an official…

As anticipated in last month’s column, the pendulum has shifted. The big news was the announcement by the Reserve Bank of NZ (RBNZ) to reduce the Official Cash Rate (OCR) by 25 basis points. This was the first time that the RBNZ has changed the OCR since November 2016. It was a little disappointing to see that the level of cuts made by the main banks were only between four and 16 basis points meaning that the full OCR cut did not completely flow through to the retail interest rate that borrowers see in the marketplace. However, in saying that some banks had moved rates down prior to the cut as the market started to get ready for the anticipated May announcement. The interest rate cuts were generally applied across…

Land Supply: Suburbs where land is in short supply are great places to look for property because the values will dramatically increase, even without renovations. An example is an area between the CBD and the sea or a river – there is no more land available to build on and so the properties in that area will become more and more valuable. 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 mentoring programmes call Ron today. Ron Hoy Fong | 021 888 298 | www.ronovationz.com…

The changing property landscape means that many investors are looking for ways to boost the value of their properties. But when it comes to picking a value-adding project, there are many competing ideas and ways to spend your money. While all will achieve varying returns on your investment, it’s critical to spend your money carefully. And to do so, you need to be cognisant of which projects to choose, the condition of your property and its location. Over the course of our own renovations, we have completed a wide range of projects. From those experiences we have compiled a list of our favourite value-adding home improvement projects. There are many projects which can add value, but these options are all at the easier, more cost-effective end of the spectrum. Most…

Occasionally stories about contaminated land in New Zealand make the national media. Other than being quickly forgotten about, what do these properties have in common? HAIL. Whilst HAIL can be used to describe a good winter’s day on the West Coast, it is also an acronym for the Hazardous Activities and Industries List. As its name suggests, it is a list of activities and industries that have a high probability of causing land contamination due to historical use, storage or disposal of hazardous substances. Developed in October 2011 by the New Zealand Ministry for the Environment (MFE), it is a fundamental component of the Resource Management (National Environmental Standard for Assessing and Managing Contaminants in Soil to Protect Human Health) Regulations 2011 (effective January 1, 2012) commonly referred to as…

In my column last month, I wrote about the good news on capital gains tax (CGT). There was one aspect of the announcement that was concerning, however. It was that media reports stated that the Government still wants to target speculators and land bankers. Rental property providers are often incorrectly lumped in with speculators, and some people are still calling for some form of a CGT just on rental property. We were concerned that Government might choose to target rental property with either a CGT or another extension to the bright-line test. This would be totally unacceptable, so we called a meeting with the Minister of Housing, Phil Twyford, to seek clarification. It was very pleasing to hear directly from the Minister that neither a CGT just on rental property…

Working with development and commercial property funding, price is often an obstacle I come up against. Many people have limited understanding when it comes to risk-based pricing with banks, and when they uncover what that is, it can be a shock. In simple terms, risk-based pricing is where the return for funding varies relative to the risk profile of that transaction. I say return as it encompasses both fees and interest rates. Banks (and almost all lenders) are required to allocate capital (money) to transactions and the quantity of capital allocated is determined by the risk profile of the transaction. The riskier the deal, the more capital required and therefore the higher return (rates and fees) demanded. What’s often forgotten is that banks are publicly traded entities with an obligation…

Given last month’s surprise announcement that Labour will not enact any form of capital gains tax (CGT) while Jacinda Ardern remains leader, it is worth contemplating what to expect moving forward. Certainly the expectation had been that Labour would go into the election campaigning on a platform of CGT applying to at least property. Now that we know that is not the case, one wonders what other changes or impacts will arise. Here are my thoughts: • Without the revenue from CGT, I expect Labour to push for tax hikes. This is pure conjecture on my part, but I would expect them to add a new top marginal rate at a higher threshold, or simply increase the existing top marginal rate. Currently personal income above $70,000 is taxed at 33%.…

1 Be less career focused. “I think careers are very over-rated,” says Crawford. “They’re good in the mid-term to help you get to where you want to be.” 2 Before you get into debt, learn how to manage debt: “If you know how to manage a small amount of money, then you can know how to manage a large amount of money,” says Crawford. 3 Read a lot and educate yourself – you don’t necessarily need to spend big money on it. 4 Reduce your spending – if you’re in a couple, try to live off one person’s wage. “We lived off one income and saved the other, that’s a good $500 per week,” says White. 5 Use a holiday as a chance to really focus on what you want…

In recent times investors’ nervousness radars have been tuned into tax changes that have had extensive impacts on the property market and outlook for investors. And for those of you that have been in the market as buyers you may have sensed that gaining finance approval from our major banks for property investment projects is just not as easy as it used to be, thanks in no small measure to the LVR requirements imposed on banks. Investors may then have had their attention diverted by the announcement back in December when the Reserve Bank issued proposals to require banks to significantly increase their capital holding in order to strengthen their ability to weather a storm. Whilst this may seem sensible, the impacts of complying with this proposal will have a…

When’s the best time to make money from property? Well, some may say after the market has crashed; others will say when it is just about to recover; and those who have experienced multiple cycles might say during the time a small town near a large one is hitting new heights. All of them are right in one way or another, but you have to ensure you get the buying timing perfect so you can get the best outcome. Some people are never sure when the timing is right and never buy. Others get disappointed when they buy, but miss the boat by six months or a year. The great thing here is that there are so many successful buying strategies. Different approaches suit different people depending on lifestyles, finances,…

Airbnb returns are considerably higher than the median rent you can achieve for a long term rental. On Airbnb.co.nz the average nightly rental in Queenstown in May is approximately $300, while in Wanaka it’s $140. However, Sean Casey says some landlords have moved away from holiday rentals due to higher costs, maintenance and management. “There’s a reduction in people doing short term [accommodation] due to the expenses and management involved – some are going back to long term, they find it more consistent.” But Kelvin Collins says Airbnb is still a growth area in both Queenstown and Wanaka. “People are buying better quality, centrally located homes, for holiday accommodation and short term stays. It is a better yield than a long term rental. To facilitate hands-off Airbnb landlords, there are…

JUNE PROPERTY INVESTMENT AND EDUCATION SEMINAR June 12 and June 25 Hosted by Gilligan Rowe & Associates, Newmarket, Auckland. 6.45pm. Free to attend. For more information and to register: https://www.gra.co.nz/property-investment-seminars PROPERTY INVESTOR NIGHT June 5, Christchurch, June 10, Auckland, June 12, Tauranga, June 17, Napier and South Auckland, June 24, Wellington, Hamilton & Dunedin. Free to attend. Book at www.positiverealestate.co.nz/NZPI For more information about listing your event, please contact Lisa Wise lisa@tarawera.co.nz. Last date for entries for July 2019 issue, June 10. Correction. In the May issue, a quote by Lorraine Rishworth was wrongly attributed to Nick Irons. We apologise for this production mistake.…

Good landlords know it’s well worth acting quickly when a rental property needs repairs. That’s not only because it keeps tenants happy but it will keep the costs down. And two recent Tenancy Tribunal decisions make it clear that inaction will be frowned upon. In one case, Lincoln Darling Real Estate & Futcher v Ministry of Business, Innovation and Employment [2019], slow action on a leaky roof earned a property management company and an absentee landlord a fine and a reprimand from the Tribunal. Dunedin property management company, Lincoln Darling Real Estate, and Matthew Futcher, who lives overseas, rented a property to the tenant in early January 2017. Shortly after moving in, the tenant found several issues with the house. These included rotting window frames, draughty windows and ceiling panels,…

REINZ HOUSE SALES: DOWN Sales volumes both nationwide and in Auckland were down year-on-year in April. In Auckland they were the lowest in an April for 11 years. Both national and Auckland sales were also down on March. INTEREST RATES: DOWN The Reserve Bank’s OCR cut acted as ammunition in the mortgage rate war and banks immediately started dropping rates further. Commentators now expect a long-term low rate environment. OCR: DOWN The Reserve Bank cut the OCR to a new record low of 1.50% in May, after shifting to an easing bias in March. Economists believe another cut will come in this cycle, but they are divided as to when. IMMIGRATION: DOWN Net migration in March was down on February and Statistics NZ have revised down their earlier estimates under the new measuring…

MATTHEW GILLIGAN Matthew Gilligan is a property investor, developer and tax adviser. He is managing director of chartered accounting firm Gilligan Rowe & Associates, where he heads the specialist property and asset planning divisions. 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 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 JENNIFER SYKES Manager, Information & Education, Housing & Tenancy Services at Ministry of Business, Innovation and Employment (MBIE). MARK WITHERS Mark and his team specialise in advising on property-related transactions, valuation and restructure services, and tax…

FIRE is an acronym for Financial Independence, Retire Early. The basic premise is that FIRE is attained by aggressive saving – for example, if you’re saving 50% of your annual income it will result in a year of living expenses for retirement. Some devotees save up to 75% of their income, in order to retire early. As a result of the required low spending, the movement promotes a frugal approach to life. The movement began with the 1992 best-selling bookYour Money or Your Life written by Vicki Robin, Joe Dominguez and Monique Tilford. The book espoused the idea that living simply, combined with passive income from investments could mean early financial independence. Then in 2010 Jacob Lund Fisker added to the concept in his book Early Retirement Extreme, which detailed…

Firstly, I can take absolutely no credit for the title of this column. It is 100% plagiarised from the title of a book I have just read by author Ryan Holiday. The book draws its inspiration from stoicism, the ancient Greek philosophy of enduring pain or adversity with perseverance and resilience. Stoics focus on the things they can control, let go of everything else, and turn every new obstacle into an opportunity to get better, stronger, tougher. As Marcus Aurelius put it nearly 2,000 years ago: “The impediment to action advances action. What stands in the way becomes the way”. I found the content of this book so useful that I have recommended it to my friends and staff and I now am doing the same to you. THIS IS…

Investment in proportionate ownership schemes, or syndications, can be an effective and affordable way to participate in the commercial property market and enjoy the returns from real estate assets without the daily burdens and commitment of property management. Syndication is a passive form of property ownership, most commonly in office, industrial or retail properties that are managed by a professional manager. The main advantage of property syndicates is that they allow smaller investors to participate in higher yielding commercial property investments that are often only available to wealthier individuals or institutional investors. In recent years cash returns available from commercial property have also generally been higher than bank term deposits and rental from residential property investments. Most syndicates have a minimum investment requirement, which can range from $10,000 to $100,000…

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 Queenstown Lakes rental property market is dominated by houses, with a spread of flats and apartments around the district. Of the 376 properties…

NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of April 2018 and April 2019, 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…