Innholdsfortegnelse for November 2019 i NZ Property Investor

We are living in a time of change, good and bad. There’s no escaping this. Not only do we need to constantly adjust and reset to keep up with ongoing transformation and disruption in all aspects of our lives, but the fact this is happening is constantly reiterated to us via media, old and new. While it may not be happening at quite the lightspeed of other sectors, change is hitting the property sector too. And the past month has seen some significant developments which are a sign of how times are changing in the realm of property. One of these was the opening of Fletcher Building’s flash, new, high tech, prefabricated house building factory in South Auckland. It’s the largest of its kind in the country and great expectations…

1 New ring-fencing rules in play Landlords - don’t forget about the Government’s changes to the rules around the ring-fencing of rental losses as they are now in force, Inland Revenue is warning. 2 Airbnb room rental not bylaw violation Renting a spare bedroom on Airbnb was a breach of the tenancy agreement but it did not constitute an unlawful act - under a local body by-law - by the tenant, the Tenancy Tribunal has found 3 The truth about flipping Claims about the sky-high gains generated by property flippers ignore the costs and taxes that come with trading properties – and that means the profit assumptions are wrong, property experts say. 4 Bad behaviour behind most 90-day notices Getting rid of “no cause” terminations won’t benefit good tenants but…

REINZ HOUSE SALES: UP Sales volumes nationwide were up year-on-year in September. The month also saw the highest number of sales for a September since 2016. In Auckland, sales were up annually. INTEREST RATES: DOWN The Reserve Bank’s shock OCR cut back in August poured fuel onto the mortgage rate fire and banks are still cutting rates. Commentators say a long-term low rate environment is firmly in place. OCR: DOWN The Reserve Bank kept the OCR unchanged at its record low of 1.0% in September. But economists believe that at least one more cut is likely to come in this cycle and it could be later this year. IMMIGRATION: DOWN Migration data remains volatile and, although annual net migration remains high, commentators say it appears to be trending lower. BUILDING CONSENTS: UP Consents nationwide…

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.…

Property is the biggest investment most Kiwis will make and naturally, when it comes to arranging house or landlord insurance, customers want peace of mind for their asset. Some property owners don’t ask for advice from their insurer and remain unaware of the following avoidable pitfalls: 1 SAVING MONEY ON THE PREMIUM BY REDUCING SUM INSURED On face value, it seems to make sense: reduce the sum insured to pay less premium. You could justify this by calculating that the odds of having a total loss are slim . . . But therein lies the issue: what if you do have a total loss? Would you be able to rebuild the house (and its site improvements, such as driveways and fences) if the insurance proceeds were less than you needed?…

The building development process, from a structural engineering perspective, starts with understanding the client’s drivers, budget, and what they want out of their structure, from a performance and aesthetic perspective. Unfortunately, it is all too common for design professionals and consultants to not take the time to understand their client’s needs, prior to commencing a design. Often by the time the client sees what has been designed, it is too late to change without significant additional time and cost ramifications. This article provides an overview of the minimum steps we believe any design consultant should be taking to ensure that they meet their client’s needs, and provides commentary regarding a design process that will ensure the best outcome for the project. ‘Often by the time the client sees what has…

1 KELBURN A real mix of professionals here, including families and students who like to live near the city and/or university. Properties are mostly large character homes which are upgraded over time with some new builds appearing. 2 TE ARO High demand for this city suburb continues for those wanting to be in the heart of the city. Mostly apartment accommodation is provided, with new apartment complexes currently being built providing a mix from studios through to those executive properties with stunning views, all due for completion over the next few years. 3 THORNDON Popular with Government employees, embassies, families and professionals. Accommodation here requires good heating for winter months when the sun disappears early, as tenants have a great eye for detail wanting a quality option close to the…

In a New Zealand first, property management consultancy Real iQ recently launched an online education platform which provides comprehensive training for landlords as well as property managers. Real iQ director David Faulkner says landlords are nervous about the changing regulatory environment around rental property and many want training on it so they can manage their portfolio well. “We deliver the NZ Certificate in Residential Property Management Level 4 (NZRPM L4) and found lots of landlords were approaching us to see if they could do that training too. “But it’s a workplace qualification so you have to be working in the property management industry to do it. So we decided to try and help them out.” And that’s how the company’s Real iQ Academy – which is a step-by-step, interactive course…

During the global financial crisis, eternal optimists always looked for green shoots. There’s no better time to look for green shoots than Spring, so what’s going on? Nothing’s really changed. House prices are high, interest rates are very low, and Donald Trump is still causing chaos around the world. Central banks have pumped the world with unprecedented stimulus and yet nothing has changed. It’s natural that humans can only stay pessimistic for short periods of time and that history is very quickly forgotten and past sins rationalized away. Housing is fundamentally driven by confidence and people needing to get on with life. Since the GFC, we’ve seen fairly wild fluctuations in confidence with buyers often sitting on the fence for extended periods of time only to eventually come back to…

It has been another month of rate competition with arguably the most attention going to Kiwisaver provider Simplicity’s entry into the mortgage industry with a market leading 2.95% rate. What was of particular interest was that unlike other leading rates, which were fixed, Simplicity has an offer which is based on a floating rate. With an initial plan of $50 million to be lent over the first six months, it remains to be seen if this will expand outside of being a clever marketing ploy as this amount won’t even register – considering the actual size of the New Zealand mortgage market. Outside of this we have seen most other banks interest rate offerings continue to trend downwards with SBS coming to the party at the time of writing with…

For Kristy and Richard Kelly living their values is crucial to their success as landlords and investors. They share their key values: SAFETY AND WARMTH FOR EVERY TENANT • All properties are fully insulated, many over the minimum requirements • All properties well heated • Safety-stays on windows • Good quality smoke alarms • Door locks changed in between every tenant • Land map showing water mains provided to all tenants on arrival REWARD GOOD TENANTS • Christmas gifts every year • Leaving rent under market value for outstanding tenants • Being flexible to tenant requests • Allowing pets LIVE BENEATH OUR MEANS • Live on 40% of our personal income, put 60% into the business (either as investment or debt reduction) BE INNOVATIVE • Use technology • WhatsApp groups…

“It’s the same as when you get a builder to build your house. Find a reputable business. Be clear about what you want and what they can do. Make sure you get a match.” – Scott Fisher “Understand your end goals as an investor and focus on them if issues come up. Make sure the numbers work. Also, understand the time frame. But don’t sweat the small stuff. And do account for time – including your own.” – Barry Walker “Spend the money and buy a riveting gun. Don’t make the same mistake we did and do them all by hand.” – Nathan Olliver “It’s not as straightforward as the website makes out, so I would recommend getting tradespeople to build it rather than DIY. At least for the first…

Over the years I have had many interesting ideas from clients about how they might reduce their tax bill. However, one of the most popular is purchasing an asset, for example, an investment property or car. The concept of purchasing or spending on a capital asset to reduce an overall tax bill was, and is at times, still a solid one. However, in the realm of residential rental investment tax reduction is becoming close to a myth. With residential ring-fencing in place, low interest rates and questionable short-term capital gains, serious thought has to be placed on how you choose to spend your money. It should no longer be the thought of a tax refund that helps drive these decisions. WHAT ARE YOU TRYING TO ACHIEVE?  When purchasing a new…

I had a meeting with a client last week and she loved the couple of tips or gems I gave her regarding property investing, so I thought I might share a few in this article. No individual topic, just four property investment gems for different property investment strategies. ‘Some people attending an auction forget who they are competing against - they sit at the front or middle of the room looking at the auctioneer, but the auctioneer isn’t who you are competing against!’ MERRY CHRISTMAS TENANTS Many tenants have resentments against landlords and think they are all heartless and don’t really care, so sometimes the smallest of things can go a long way. Besides, anything you can do to encourage a tenant to take better care of your property will…

Wellington Property Investors’ Association’s next meeting is on Monday November 25, 6.45pm for a 7.00pm start at the Wellesley Boutique Hotel, 2-8 Maginnity Street. Shawn Manders will recount “untold stories of the real estate world” and NZ Police acting superintendent Mike McIlraith will speak about the secure storage of firearms. Capital Property Investors’ Association’s next meeting is on Tuesday November 12, 6.30pm for a 7.15pm start at the Salvation Army Auditorium, 92 Vivian Street. MinterEllisonRuddWatts special counsel Philip Bremer will be discussing vendor warranties, the legal implications of non-consented work and disclosure by vendors when selling.…

I’m just home from the NZPIF conference in Rotorua. What a positive event it was, with the mood assisted by a great All Blacks’ win on the Saturday night, enjoyed by many of the attendees. I had the honour of making the first presentation on the Saturday morning. The topic was legislation and I was dreading starting the conference on a bit of a downer. However, when preparing my talk I was pleasantly surprised at just what we had achieved through all the industry turmoil we have been through over the past few years. Granted we didn’t win all battles and we didn’t get everything we wanted, but when you stop to look at the negative industry changes that appeared to be inevitable, we managed to get many of them…

NOVEMBER HOW TO PROFIT FROM PROPERTY November 19, 6:45pm Five Knots, East Tamaki. For more information visit www.ronovationz.com. PROPERTY INVESTMENT AND EDUCATION SEMINAR November 23 Hosted by Gilligan Rowe & Associates. Free to attend. Level 6, 135 Broadway, Newmarket, Auckland. For more information and to register: https://www.gra.co.nz/property-investment-seminars For more information about listing your event, please contact Lisa Wise lisa@tarawera.co.nz. Last date for entries for December 2019 issue, November 7.…

I joined Squirrel a little over 18 months ago after spending seven and a half years with ASB Bank. When I joined Squirrel, I knew of a few non-bank lenders in the market and that the non-bank segment of the market was recovering after 2008. What has shocked me, however, is the growth in that market over the past 18 months and even more so, what I see to come. At peak levels in November 2007, non-bank lending accounted for around $18.8 billion (split between $8.5 billion in housing and $10.3 billion in “business” development etc.) As at August 2019 those numbers are approximately $7.7 billion, split between $2.9 billion and $4.8 billion, less than half of those earlier totals. What that says to me is there is a lot…

By way of background, both the Income Tax Act and the Goods and Services Tax Act have definitions of associated persons and special rules that apply to transactions between associates. Property dealers, developers and investors are often party to transactions with associated persons (for example, restructuring ownership of existing property). TRAP 1 — GST Walter is a property investor who purchased a residential property five years ago on 1,200m2 of land. The intention at purchase was to hold it long term. Under the Auckland Unitary Plan there is potential for eight terraced houses on the land. Walter wants to proceed with this but doesn’t have the funds. He approaches his friend, Skylar, to take up a 25% stake to help with funding. As a result of this, a new company…

Vary the terms of your interest rates: That way they won’t all mature at the same time, i.e. for five properties, the five mortgages should have five different expiry dates. Potentially even leave one on floating for refinancing in order to buy more properties or as a buffer for a revolving credit. 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…

Summer is almost here so it’s time to get out the BBQ and enjoy the long evenings. It’s also a great time to do a check-up on your rental property, give it a bit of love and care, and make sure you are being a wise caretaker of your asset. Whatever the reasons for investing in property, it’s important to be aware that your properties require continual investment. While this doesn’t have to be costly, it is prudent to put aside time and money each year to freshen up your property and keep it in good condition. Not only will this ensure you attract and retain quality tenants, it may also save you money in the long term. In many cases neglecting maintenance items will lead to a quick fix…

Property investment tends to have two schools of thought – buy new properties and hold, or buy older properties and renovate. While renovation is a popular strategy – it’s not the right strategy for all (and I would argue, many) Kiwis. That’s for two reasons: 1) renovating is more cash-intensive, equity-intensive, time-intensive, knowledge-intensive and stressful than buying new. This means that some Kiwis will put off getting started. And 2) because renovation projects require more capital, they tend to produce a lower return on that capital. Let’s compare the two strategies. Take the example of a couple who have the choice of investing in a $500,000 new property, versus a $400,000 existing property. Let’s say the renovation would take $50,000, which will increase the existing property’s value to $500,000, resulting…

Subdividing is a strategy I have used successfully and it can provide great flexibility for your portfolio. The process involves council consent and a surveyor. Generally services need to be added and this can involve both the electrical and plumbing trades, plus liaison with your local power company. As an investor you need to be aware that it can be expensive and slow to subdivide a property, so any article on the topic must remind you to make sure the outcome is worth the effort. In saying that, unlike many other forms of property development, subdivision can usually be carried out while tenants live in the property, making it easier to cover holding costs. EVALUATE YOUR SITE The first place to check when considering a project is the current (or…

You don’t have to be a particularly clever landlord to realise the importance of carrying out a detailed inspection at the beginning of every tenancy. Any such inspection should include a full catalogue of photographs showing the condition of the property (video is also good) and an “agreed condition report” which details the condition of the property and is signed by the tenant or tenants at the time they take possession of the property. Without this sort of information as a starting point any claim to the Tenancy Tribunal further down the track concerning how the tenants have treated the property will undoubtedly be fraught. There is also no harm in letting the tenants see that as a landlord you are paying attention to the condition of the property at…

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 In contrast to the majority of other rental markets across New Zealand (which are dominated by houses), Wellington Central is an apartment market. Of…

Combining technology, data and smart people, Valocity digitises and innovates so lenders can leverage the latest technology, capture and make data driven decisions, and adopt and deploy solutions,quickly and easily, to transform lending experiences. MORTGAGE TYPE BREAKDOWN MORTGAGE TYPE BREAKDOWN BY LOCATION NATIONWIDE TOTAL OF 6 MONTHS ROLLING BUILDING CONSENTS 6 MONTHS ROLLING BUILDING CONSENTS…