Innholdsfortegnelse for August 2019 i NZ Property Investor

There’s no escaping it: New Zealanders have a deep and abiding fascination with property investment. They like to talk about it and they like to gather information about it. No matter what the occasion or forum – dinner party or school pick up or bus stop encounter – as soon as I mention what I do, I’m swamped by opinions and, more often, questions about the property market. I guess it’s similar to the way doctors are always asked for personal health advice when they tell people their profession. But here’s the thing: these conversations are very rarely hostile. Even when people have strong feelings about a controversial issue, like the capital gains tax proposal, it’s rare that I’m treated to the type of high octane, aggressive comments that property…

We are living in a world that is more interconnected and fast paced than ever before, and I often see this leading to impatience with many borrowers. I aim to provide some context around why the old adage “patience is a virtue” is as important as any other advice you’ll receive – particularly when it comes to property development. Property development carries with it many risks and currently it’s perhaps the most difficult market to find finance. Often, I find clients who haven’t exercised much patience and as a result can find themselves in a pickle. DOING DUE DILIGENCE Getting good advice early on and then taking the time to do your due diligence is key. Most people are eager to get things started and will go full steam ahead…

If you have a spare bedroom or two at home, you may consider renting it out to generate additional income. As you might expect, there are potential tax implications, and these differ depending on the arrangement you have with the occupant. Broadly speaking, there are three different types of occupants: BOARDERS According to the IRD’s latest statement, a boarder is somebody (often a student) who is provided accommodation “in conjunction with regular meals and other associated care, activities and benefits that usually, or commonly, occur in a domestic (‘family’) household”. While something of a mouthful, essentially a boarder is someone who lives with you as part of your family and in return for paying board gets not only accommodation but also meals, laundry, and so on. If you are providing…

Shane Storey works to three basic principles: Investments have to be cashflow positive; he looks for property with an ability to make improvements; and capital gain is just a bonus. Here are some of his other key tips for investors: 1 Due to past experience he has no more than 50% debt across his portfolio. “You can get there in three ways: One is savings, which is really hard; improvements like trucking in a house; and over time, capital gains.” Because if something goes wrong, “Banks will shut you down and will bankrupt you”. 2 Storey invests anywhere within an hour’s drive from where he lives. “That way I can get in the car and go and check it out if there’s a problem – contractors will have you on.”…

He may only be 22, but Adam Wareing from Wellington has already proven he’s got the right stuff when it comes to renovations. Software developer by day, the young investor spent the evenings and weekends of the first part of the year working on the renovation of a home and income in Newlands. He was thrown in the deep end, with a renovation that was full of thorny challenges. But he’s come out the other side with knowledge and a fire in his belly: property investment is now firmly part of his master plan. Wareing had been looking for an investment property in Wellington for a while, but the market’s vertiginous ascent made it difficult. So when he found out that his parents were looking to invest some of the…

As we heed the advice by the Reserve Bank governor to look for better returns (when RBNZ dropped the OCR to 1.5% in May) we are seeing a quiet resurgence of social media and blogs promoting the wonderful yields some Australian property is delivering. It seems many of us have forgotten the barrage of tax issues faced by Kiwis who invested in Gold Coast apartments back in the 1990s. The property fundamentals may have improved but those tax issues two decades ago still linger on today. So, it is timely to rehash some of those quirky issues that are not commonly known to those who are only familiar with New Zealand rentals and the new challenges we need to consider when investing in Australian rentals today. FINANCIAL ARRANGEMENTS If you…

During the last couple of weeks, I’ve been speaking to two new investors. One of them is still at school and getting started in property with his father’s help. The other one is around 30 years old and has a partner. They both wanted to talk about ways they could get ahead or start with minimal risk and outlay. This is one starting strategy I’d like to discuss further. It suits my kids who are in their early 20s. Your options are either buy, renovate and sell; or buy, renovate and hold. ‘If you are young and have time on your side, you won’t need to rush to make your fortune in five years’ BUY TO LIVE IN The apparent benefit of buying to live in is loan-to-value ratios (LVRs)…

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 As is common around most of the country, Gisborne’s rental property market is dominated by houses, with some flats, and a smaller number of…

After a long investigation, the Commission recently filed High Court proceedings against Ronovation Limited for price fixing in Auckland’s residential real estate market. Ronovation, trading as Ronovationz, was set up in April 2009. It advises its members on how to acquire and improve investment properties in Auckland and by March 2018 it had more than 400 paid members. However, the company ran into problems back in May 2017 after a furore erupted over a tutoring video by owner Ron Hoy Fong became public. The video showed Fong coaching investors to give vendors false names, work in packs to drive down prices and target desperate families or “dummies” who don’t know the value of their home. At the time, Fong denied exploiting people and said nothing he advocated was illegal. But…

REINZ HOUSE SALES: DOWN Sales volumes both nationwide and in Auckland were down from May as well as year-on-year in June. Further, June’s sales were the lowest for the month of June in five years. INTEREST RATES: DOWN The Reserve Bank’s recent OCR cut continues to fuel the mortgage rate war and banks just keep cutting rates. Commentators say a long-term low rate environment is now at play. OCR: DOWN The Reserve Bank kept the OCR on hold at its record low of 1.5% in June, after cutting it in May. Economists now believe there could be two more cuts to come in this cycle, possibly this year. IMMIGRATION: DOWN Migration data for May shows that the level of annual net migration remains high, although it is lower than May last year. Commentators…

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 over30 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 planning.…

When it comes to property investment journeys, Shane Storey’s is in part, a cautionary tale. At 25 years old, the Massey University student owned 12 seven-bedroom student houses in Palmerston North. Only two years later the pressure from problems relating to his portfolio landed him in the hospital coronary unit, with a stress-induced heart condition. He was close to bankruptcy. The Waikato-born investor and accountant grew up on the family farm and following high school, and an 18-month stint farming, he enrolled at Massey in 1988 to study business and accounting. It was there in Palmerston North where he made his investing debut: he and his then-girlfriend couldn’t find any accommodation so they used their interest free student loans from the bank as a deposit for a three-bedroom house. They’d…

I wake up every morning and look through Trade Me or realestate.co.nz to see what new offerings have hit the market and I can do my own due diligence and make the deal happen. Sounds like you? Depending on your strategy that may be all you need, but if you want your weekends back or are tired of not having the numbers stack up, having a property finder or two in your “kit bag” may just be the ticket. Here are some reasons why: ACCESS OTHER PROPERTY MARKETS When you look where you live, you limit yourself to markets you can visit and open homes you can get to. Maybe three to four on any given day? You also restrict yourself to rental yields achievable nearby. A property finding agency…

The guiding legislation around residential property management is primarily the Residential Tenancies Act 1986. But that’s not the only legislation landlords need to be aware of when it comes to renting out their properties. The likes of the Human Rights Act 1993 and more recently the Health and Safety at Work Regulations 2016, along with others, also come into play. The Health and Safety at Work Regulations place a legal onus on “Persons conducting a business or undertaking” (and yes that includes landlords) to ensure as far as is reasonably practicable the property doesn’t pose a risk to the health and safety of any person. Remember, ignorance of the law is no excuse and breaches can result in eye watering fines. Landlords need to be familiar with relevant legislation. They…

AUGUST PROPERTY INVESTMENT & EDUCATION SEMINAR  Thursday August 8, 6:45pm, Level 6, 135 Broadway, Newmarket, Auckland. Hosted by Gilligan Rowe & Associates. Free to attend. For more information and to register: https://www.gra.co.nz/property-investment-seminars PROPERTY SCHOOL SEVEN-WEEK COURSE BEGINS  Tuesday August 20, 6:30pm, Level 6, 135 Broadway, Newmarket, Auckland. Hosted by Gilligan Rowe & Associates. $450 for one person, $700 for two people. For more information and to register: https://www.gra.co.nz/gra-property-school PROPERTY INVESTOR NIGHT  August 5, Christchurch. August 6, Ellerslie, Auckland. August 12, Napier. August 14, Tauranga. August 19, Wellington, South Auckland and Dunedin. August 26, Hamilton. 6.30pm. Free to attend. Book at www.positiverealestate.co.nz/NZPI RENTING AND YOU SEMINARS  August 6, Napier. August 8, Wellington. August 12, Whangarei. August 14, Manukau. August 15, Auckland. August 26, Hamilton. August 27, Tauranga. 7pm. Seminars are free…

The idea of peak debt is similar to ‘peak oil.’ There is a theoretical point at which an economy cannot take on more debt. At peak debt, incomes are no longer high enough to service any additional debt. It aligns with an intuitive (but often ignored) truth that debt cannot grow faster than incomes forever. This concept is important because a lot of global economic growth over the past thirty years has been fueled by debt growth. Households have been borrowing more, to pay more for the ‘same’ house. House price inflation has increased paper ‘wealth’ and gradually property owners have fueled consumption by going on to spend those gains. We are collectively guilty of spending faster than we earn. Everyone including governments and regulators have been complicit in pursuit…

Interest rates are at record lows and globally we are seeing an easing bias - Rachael Alexander discusses how this will impact the local lending environment. The Reserve Bank of New Zealand (RBNZ) held the Official Cash Rate (OCR) at 1.5% during its recent announcement however, they did note that a lower OCR may be needed over time. Given inflation remains very low it is unlikely that interest rates will move up for quite some-time. All indications are for more downward pressure on the OCR. We are also seeing an easing bias all over the world. The global outlook continues to deteriorate with Central Banks lining up to add stimulus. Across the Tasman the Reserve Bank of Australia (RBA) cut their cash rate to a historic low of 1% and…

Value Through Renovations: For every $1 you spend on your renovation, you should be adding at least $3 in value. Everything you do to a property must add value – if in doubt, leave it alone. Never do anything expensive unless you are very sure it will increase the value of the property by at least three times more than it costs. 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 advent of platforms such as Airbnb and Bookabach have been great for property investors; often more lucrative than standard rental agreements, you can maximise financial returns on your investment, even if the property remains empty for significant periods of time. Known as rent arbitrage, it provides an easier way for investors to capitalise on higher daily rental rates compared to a fortnightly or monthly rental cost. There are fundamentally different risks to using these platforms and renting your property out in the short-term. Aside from the typical local government crackdown on these types of arrangements, there are insurance considerations which you may not have taken into account. Unlike when you enter into a long-term rental agreement, there is usually limited vetting done on the person or people staying in…

Infill housing has been occurring in New Zealand since the 1970s, when additional dwellings were constructed on existing residential sites. To achieve separate legal ownership of the infill housing, subdivisions have been completed either by cross-lease, unit title, or freehold tenure, using the services of qualified planners, surveyors and engineers. To enable the necessary certifications and for land transfer survey to be completed, the professionals need to be suitably qualified as either chartered professional engineers or as licensed cadastral surveyors. DO YOUR DUE DILIGENCE As with any project, the first step is to complete due diligence. Infill housing is no different to traditional housing and due diligence is particularly important, as each property is unique. The second step is to engage a suitably qualified planning, surveying and engineering team who…

Last month the Government passed legislation removing the right to offset rental losses against the tax paid on other income. It comes into effect immediately. This new law is extremely misguided and will cause many negative consequences. These consequences cannot be termed “unintended” because Government has been clearly warned of their likely impact. Ring-fencing rental property losses was supposed to allow “fairness” between property investors and first home buyers. The theory is that property investors claiming expenses and tax losses have an unfair advantage over first home buyers who can’t. Government believes that investors could outbid first home buyers when purchasing a property so ring-fencing their tax losses would “level the playing field”. Unfortunately, the entire premise for ring-fencing rental providers’ tax losses is wrong. Rental providers receive the benefit…