Innholdsfortegnelse for No 155 Oct 2016 i NZ Property Investor

NO SOONER HAS THE INK dried on the Reserve Bank’s new LVR policy than we are hearing feedback on its impact from investors. Anecdotes of investors selling a property and being forced to reduce their lending to within the new limits for both home and investment properties are but one of the many examples of the immediate impacts of the new policy. More generally, we are hearing of industry commentators saying the market has started to display the signs of impact from the new LVRs. Despite the October 1 start date, the banks’ quick actions to comply with the new requirements means there is already evidence of drop off in market valuation requests, auction clearance rates, open home attendees and loan application rates in Auckland, Hamilton and Tauranga. In our…

1 Auckland’s New Top 20 Hotspots Barfoot & Thompson’s Auckland suburb growth hot spots have changed, with 16 new suburbs entering the top 20. The Barfoot & Thompson hot spots list calculates which Auckland suburbs have experienced the biggest growth in values over the six months from February to July 2016. While the exclusive Eastern Bays suburb of Mission Bay has rocketed up the list to claim first place, the rest of the list is made up of a wide range of suburbs across locations and price brackets. 2 Finding Solutions to 60% LVRs While the Reserve Bank recently announced it had delayed the start date of the new LVR rules to 1 October, many banks have already been acting in the spirit of the restrictions. For this reason, many…

REINZ HOUSE SALES: DOWN Once seasonally adjusted, sales were down both nationwide, and in Auckland, in August. INTEREST RATES: DOWN Interest rates remain at historic lows. OCR: DOWN The Reserve Bank cut the OCR to a new record low of 2.0% in September IMMIGRATION: UP Annual net migration was back up to record levels in August. However, the monthly net gain has been on a plateau since hitting record levels late last year. BUILDING CONSENTS: DOWN Following a big jump up in June, building consents were down, both nationwide and in Auckland, in July – although Statistics NZ said Auckland’s trend was increasing. MORTGAGE APPROVALS: DOWN Reserve Bank data shows that mortgage lending was down in July – for the second month in a row. RENTS: UP Rents were up…

A NZ PROPERTY INVESTOR SURVEY found between half and quarter of readers would seriously consider investing in commercial property – especially those who already have a sizeable residential portfolio. Commercial property is a different beast to residential investment and there are other issues to consider when selecting an investment. In this guide we run through some of the key things to look for and provide you with some examples of recent sales. Commercial property has primarily been seen as more of an income generating investment for many people rather than something that is going to provide a big capital gain. A good example of this are the property syndications which are almost solely sold around their yield. That’s not to say capital gains aren’t possible; indeed…

THE TRUTH IS, THAT WHEN YOU START TO INVESTIGATE IT, MOST PEOPLE DON'T ACTUALLY WANT MONEY – SUE IRONS A LOT OF PEOPLE ASK ME: “If you’re so good at investing in property, then why do you need to spend hours every week coaching investors?” This question often tells me a lot about where they are coming from. See, many of those who ask me will answer "No" to the following questions: • Do you love your job and look forward to it every day? • Do you have a clear vision of how you want to help your customers or clients? • Do you know how to create reliable passive income for minimal effort? I often find that people who ask me this don't like their jobs (which is…

YOU WANT SOMETHING THAT WILL BE REWARDING IN TERMS OF THE LEVEL OF INCOME YOU CAN REALISE FROM IT OVER TIME – SARAH DAWSON OVER THE NEXT two months I will be discussing the top property investment tips for investors. Investment in residential property is an increasingly popular option for upcoming and veteran entrepreneurs across the country. Despite the great prospects in this industry, a lot of novice investors make the mistake of approaching property buying for investment purposes in the same way they would for their own residence. Here’s the difference, if you choose a property for use as your own home, the criteria you use will involve considering how it fits your aspirations and lifestyle and not just your finances. But property buying for investment purposes is…

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 New Plymouth is split into four areas for rental information. Each area is made up of predominantly houses, with New Plymouth Central/Moturoa the most…

INVESTORS WILL BE ABLE TO RELATE TO THE PASSION PEARCE AND THE 12 WOMEN PROFILED HAVE FOR PROPERTY AND FOR THE SUCCESS IT HAS AFFORDED THEM Sarah Pearce attended around a dozen schools over the course of her childhood, moving from one house to the next as soon as her builder/developer father completed a renovation. Pearce says, in her new book Real Deals in High Heels that this may be the reason for her vocation for real estate. Pearce has spent many years in the real estate industry – both as a top salesperson and an executive in a senior leadership position. She eventually left the real estate industry to work as a business coach and professional speaker, publishing her first book on digital identity in 2015 – Online Reputation:…

THE CASE INVOLVED a Foxton tenant who let her dogs urinate in the house she rented – even though the tenancy agreement specified no pets were allowed. The damage was such that carpets throughout the house had to be replaced. However, the Tribunal adjudicator found that, although the tenant had breached the agreement, the landlord had not established the damage was intentional and, therefore, the tenant did not have to pay for the carpet. Landlord David Russ says the rental property was in good condition before the tenancy and the tenant had hidden the damage on inspections. The extent of the damage was discovered only after the tenancy ended. While the property was insured, Russ said the way the damage would have been assessed by his insurance company would have…

 ACCORDING TO RECENT DATA released, the average gross rental yield in Auckland is hovering just below 5% – although in my recent experience, even this is hard to find. The same data suggests most of the rest of New Zealand (on average) is just above 5%. LOOKING FOR WAYS TO ADD INCOME SOURCES IS AN EFFECTIVE WAY OF INCREASING BOTH PROPERTY VALUE AND YIELD Of course there are a few areas getting more than these numbers, but let’s work on the averages for now – it’s easier to talk to. With the Reserve Bank LVR changes (and generally below par rental yields) now is the time for investors to be looking to maximise their existing portfolio and increase return (where buying more properties is not an option). As the old…

• What are your qualifications? • Are you a specialised property manager or a real estate agent who also does property management? • Are you affiliated with any particular professional body with a code of ethics? • How many properties does your business manage, and what percentage is currently vacant? • What’s the average length of time it takes to fill a vacancy in the area? • What kind of insurance coverage do you have? Is there any fidelity fund coverage? • What computer system and software do you use? • May I see an example of a monthly reporting package? • Do you operate a trust account? “I think that your readers would be surprised to know how many property managers don’t operate a separate trust account,” says Withers.…

• Set a budget Set a budget based on the lowest yield you would be prepared to accept. • Market knowledge Keep up to date with sales prices, rents, vacancy levels, yields and listings in your area. There is lots of research out there, but arguably the best source is working with local agents. • Look at leases The standard commercial lease used in New Zealand is the Auckland District Law Society Incorporated (ADLSI) Commercial Deed of Lease. Have a working knowledge of this document before you sign up a tenant. • Know the market • Sort out your finance You’ll need to have your lender up to speed on your plans or funds in place in order to move quickly to secure a hot property – especially at auction.…

NEW DWELLINGS HAVE SOME UNIQUE BENEFITS AND SHOULD BE DESIRABLE TO TENANTS; THEY HAVE LIMITED MAINTENANCE COSTS FOR INVESTORS – JEREMY STAPLETON  PROPERTY INVESTORS WILL be interested in the latest Reserve Bank of New Zealand (RBNZ) announcement and looking to interpret what this means for their investment activity and strategy. The RBNZ has confirmed a minimum loan-to-valuation ratio (LVR) requiring 40% equity for investment properties, effective from October 1. The entire country will become subject to uniform LVR rules, so it will no longer matter where an investment property is located. The LVR rule changes are already in effect, because the Reserve Bank expects trading banks to observe the “spirit” of its regulatory proposals. There are some exemptions to the 40% rule. It is important to understand these exemptions…

IF THEY’VE BEEN PAYING FOR PARKING EVERY DAY NEAR THEIR APARTMENT THEY MAY SEE A LOT OF VALUE IN OWNING A PARK - AARON TUNSTALL WHEN A RELATIVE TOLD ME HE WANTED to invest in car parks, I told him he was crazy. But my crystal ball is a little cloudy; is it possible that he’s onto something? Car parks are – both literally and metaphorically – a niche investment. There are some compelling reasons why they’re an attractive idea, but the numbers don’t really stack up. Let me show you what I mean. SIX GREAT REASONS TO INVEST IN CAR PARKS: 1) The tenants are no trouble – they can’t really damage your car park or devalue it in any way. 2) No maintenance! If the whole parking area…

FITZROY One of New Plymouth’s most desirable residential suburbs. Traditionally larger 1920-1950 villas on quarter acre sections. Serviced by a popular suburban shopping centre, easy access to schools and one of New Plymouth’s top swimming beaches. Fitzroy is now seeing a slow change as land values increase, resulting in subdividing of sections and in-filling of executive houses with easier care smaller sections. WAITARA Approximately 12km from New Plymouth, this small community is ideal for families looking for reasonably priced rental accommodation. Great amenities in this township including schools and CBD. BELL BLOCK A great range of homes are offered in this area. From traditional 3 bedroom houses built in the 1960-70s, offering reasonable rental prices through to new developments where executive houses are available. This is a growing suburb with…

 TALK AROUND THE TRAPS recently has revolved around whether the country’s superhot housing market might start to slow down. THE SLUGGISH PROPERTY MARKET WE’VE SEEN RECENTLY IS STARTING TO GAIN SOME TRACTION AGAIN AS WE SHIFT INTO SPRING – NIGEL JEFFRIES The thinking is that now the Unitary Plan has been passed, clearing the way for increased supply in Auckland, and the new LVR rules are coming into force, theoretically limiting demand, the market might start to turn. Despite the chatter of a looming crash, it’s hard to see an end in sight. Prices seem locked into their upward trajectory. And the supply shortage is not going to disappear anytime soon. But data suggesting impact from the LVRs has started to trickle in. The only question is how long that…

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 RON HOY FONG As a successful property investor and mentor, Ron has built an impressive portfolio and a wealth of investment strategies and experience. Contact Ron today on 021 888 298 or ronhoyfong@gmail.com 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 KRISTER SAMUEL Krister specialises in selling high yielding apartments for…

Banks are required to enforce a 40% deposit for 95% of mortgage loans for investors. This is up from 30%. Banks are required to enforce a 20% deposit for 90% of mortgage loans to owner-occupiers. This is unchanged. Exemptions to the new LVRs include new builds; bridging finance; refinancing existing high LVR loans; funding for non-routine extensive repairs; and a cross collateral exemption. For investors and owner-occupiers alike, the LVR requirement for new builds remains a 10% deposit – although some banks might require 20%. Non-bank lenders do not have to abide by the LVR requirements. They can make loans at the levels they choose – although their interest rates may be higher. New builds and non-bank lenders are considered key solutions to the new LVR rules by most industry…

• What does their website look like? Is the content consistent with what they say when you meet them? • Are they knowledgeable on the latest law changes? • Do they have a policy on meth contamination? • Check the contract carefully. What are the fees? How do you cancel? Some companies stipulate a 12-month minimum term. If you're not comfortable with this, negotiate or don't sign. • Keep track of payments. Make sure the company is passing on rent payments promptly. If there's a delay, contact the company immediately to find out why. • Request detailed inspection reports. You may want to inspect the property yourself periodically. • Stipulate if you have a preferred tradesperson. Property managers will usually have their own tradespeople and they might not be the…

Commercial property values are traditionally calculated using ‘cap rates’. Cap is short for capitalisation and it is the ratio of net operating income to property asset value. The lower the cap rate, the more you’ll pay for a property. A typical Auckland cap rate was 8% in around 2000, now it’s nearer to 6%. That means if a building rents for $100,000 annually it was worth $1.25 million; now it’s increased to around $1.65 million. By understanding cap rate calculations, you may be able to spot opportunities to buy below value. Changing the cap rate on your building is a great way to add value – this usually means negotiating a higher rent, but there are other ways, too. You can improve the premises by adding carparks or more offi…

THOSE LOOKING AT WINDFALL GAINS FROM REZONING WOULD BE WELL ADVISED TO SEEK ADVICE AND COMMISSION REGISTERED VALUATIONS THAT SPECIFICALLY ADDRESS THE QUESTION OF HOW MUCH VALUE IS ADDED TO THE LAND AS A RESULT OF THE ZONING CHANGE – MARK WITHERS WITH THE UNITARY PLAN NOW passed, property owners are busy contemplating what zoning changes may mean for the value of their land. It’s timely then to consider section CB14 which is one of the specific land taxing provisions in the income tax Act. CB14 taxes gains on land sold where the increase in the land value is attributable 20% or more to the zoning change. For example, you own a corner site that you purchased five years ago for $600,000. As a result of the house price increases…

INVESTMENT BUYERS DON’T NEED A SHOW HOME, THEY NEED AN EXPERT INVESTMENT AGENT WHO CAN ARTICULATE THE NUMBERS TO THEM AS IT’S ALL ABOUT THE NUMBERS, NOT THE COLOURS - CAMPBELL VENNING  HAVE YOU GOT WHAT IT TAKES? Successful investors are those that put in the hard yards, do their homework meticulously and have their eyes open for opportunities that may be somewhere other than directly under their nose. New builds are an under-utilised investment opportunity – one that many investors just haven’t really considered. Yet while those hard yards might be somewhat less straightforward than buying an existing property, those ever-important investment dollars can go a long way further with them. Typically, in New Zealand, investors buy old stock. Why? Because that’s generally what they’ve seen, or what…

What makes it tick: New Plymouth now has a broad mix of cultural and sporting attractions that are bringing people to the area. It has a pleasant climate, strong retail scene, good schools, and steady housing subdivision growth. Rents: Average rents are $337, up from $330 in May 2016 (compares with average New Zealand rent of $385, up from $360 in May 2016). Average house value: $389,690, up 8.3% from July 2015. Number of sales: 86 in July 2016. Gross yields: 5.3% (New Plymouth central).…

IT IS CLEARLY UNJUST TO HOLD PROPERTY OWNERS FINANCIALLY RESPONSIBLE FOR TENANTS’ ACTIONS CAUSING DAMAGE, NO MATTER HOW LARGE OR SMALL - ANDREW KING IN LAST MONTH'S ARTICLE I discussed the ramifications of the court's decision to absolve tenants from responsibility for any damage they cause to their rental property. Since then we have been working with the Minister of Housing Nick Smith and other political parties seeking to correct the unjust situation that has been caused – potentially unintentionally – by the court decision. We had meetings with Labour leader Andrew Little and housing spokesman Phil Twyford, along with ACT leader David Seymour, to explain what was happening and to seek their support for the Government to rectify the situation. Unfortunately, we couldn't organise meetings with other parties. We…

NORTHLAND NEXT MEETING: Wednesday October 26 , 7pm at Distinction Whangarei, 7 Riverside Dr. Whangarei. TOPIC: We welcome Ron Hoy Fong to Northland for another 'not to be missed' property investors evening event and breakfast meeting. Come along and learn expert techniques towards building your property portfolio. MEMBERSHIP: $180 single or $210 couple; includes subscription to the 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 October 11, Dorothy Winstone Centre, Auckland Girls Grammar School, 14 Howe St, Freemans Bay. Admission closes at 7.30pm. Free for APIA members and $75 for non members with prior registration. TOPIC: Is property still a safe bet investment? To fully understand what is going on with the property…

         NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of August 2015 and August 2016, based on figures from the Ministry of Business, Innovation & Employment. 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 latest month Gross Yield: Annualised median rent as a percentage of median…