Innholdsfortegnelse for May 2020 i NZ Property Investor

New Zealand might now be emerging from the strict bubble of level four lockdown, but life is not set to be the same. The move into level three mean there are hints of a return to normal, but it’s a “new normal”, we are told. The threat of Covid-19 has not disappeared and the economic fallout from the crisis is something we’ll be dealing with for a long time. That fallout will affect most of us in some way, just as the lockdown did. Here at NZ Property Investor magazine, the lockdown didn’t stop us publishing. But it did force some changes. The April issue of the magazine was 95% completed, with just the cover to go, when the Government closed our printer down. That meant we had no option…

Q I currently have a rental property in a look-through company (LTC) with a mortgage maturing in eight years. I top this up out of my salary. I live in my own home freehold which is in a trust under my name. I don’t plan on selling either of these houses within the foreseeable future (possibly retirement 20 years away). I have a new partner and we are planning on purchasing a house together, 50/50 for our blended family to all move into. We would be borrowing 100% using the equity we have in both parties’ houses. I pay child support direct to IRD if this has any bearing on my question. My question is in relation to tax structure in particular for me (trust/LTC). I plan on raising the…

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PART I It’s not so long ago that the commercial property sector was tempting lots of residential investors to switch their allegiances. In the face of sky-high house prices, low yields and a swathe of tax and tenancy law changes, the higher yields and less troublesome tenancy arrangements were highly attractive. But as the weeks of struggle against Covid-19 continue, it looks as though it could take a particularly heavy toll on the commercial property sector. While much attention has focused on the arrangements between residential tenants and landlords, it’s actually those between commercial landlords and their tenants which are more precarious. That’s because people always need somewhere to live. But if a business is not able to operate, or is put out of business permanently, it does not need…

Coronavirus has pushed us into unprecedented times. Policymakers are rewriting the rulebook and experimenting with unconventional policies. It’s not unimaginable that structural changes could flow into the property market. That’s why we’re going to imagine three different “structural change” scenarios and their impact on the property market. SCENARIO #1 THE MAXIMUM MORTGAGE TERM INCREASES FROM 30 TO 35 OR 40 YEARS In an attempt to help first home buyers get into the property market, the Government, in partnership with the RBNZ, encourage banks to extend the maximum loan terms given to young New Zealanders. Instead of paying off their mortgage over 30 years, the Government considers proposals to lengthen this time to 35 or 40 years. The Impact: increasing the loan term from 30 to 35 years would increase the…

Well, it has certainly been an interesting past four weeks. Like the rest of the nation, our business has been in alert level four lockdown, which has meant adapting to working from home (while simultaneously homeschooling the kids). There are always positives to take out of adverse situations. Like many businesses, we now realise that you do not necessarily need to be physically in the office to operate as an effective business. A fair proportion of the work we do as engineers can be done quite efficiently at home. On a personal note, I have had a good opportunity to spend more time with the kids and to check their progress in schooling (the maths needs a bit of work – which is concerning given that both parents are engineers).…

Often when we are confronted by a tenant asking for a discount on their rent or a rental holiday we start to panic. Yes, it’s fine for them to ask, but do they understand the financial impact this could have? The media, coalition Government and even letters from the Ministry of Education have been advising tenants to ask their landlords for a rent reduction or a rental holiday. We know that in many smaller rural towns around New Zealand most tenants know each other and often know the landlords and property managers in the area. So, whether you agree or not to give a tenant a rent reduction or rental holiday, they will talk to their friends, family and peers about how good or bad you, their landlord, has been.…

NATIONAL RENTAL PRICE MOVEMENT This map represents change in the average rental price between the months of March 2019 and March 2020, 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…

RealESmart.co.nz is an app that draws on reliable market data to help investors work out the likely returns, and decide on potential residential property investments. It does this by calculating the borrowing required, factoring in the expenses associated with owning residential property, and working out net/gross yields on a property. It also provides handy information on market trends and property data, saves multiple properties to compare the relevant data and generates reports for property professionals like mortgage advisers and accountants. Developed by property consultant Vesna Wells and her husband Tony, the original concept came about back in 2002 when they wanted to get into property investment themselves. “We set up an Excel spreadsheet to help us make property decisions on properties. Sixteen years on, we were looking for an app…

REINZ HOUSE SALES: DOWN In March, sales nationwide dropped by 4.8% year-on-year, although Auckland bucked the trend with sales up 10.8% year-on-year. According to REINZ, nationwide sales numbers likely saw the impact of the first six days of lockdown. INTEREST RATES: DOWN The Reserve Bank’s emergency OCR cut in March was passed on by the banks. Rates have now dropped to unprecedented new lows and the situation is unlikely to change in the near future. OCR: DOWN Prompted by the Covid-19 crisis, the Reserve Bank made an emergency 75 basis point cut to the OCR in March. This took it to a new record low of 0.25% - and it’s set to stay there for at least 12 months. IMMIGRATION: DOWN In a bid to contain Covid-19, the Government closed New Zealand’s borders…

At face value it seems like not much has changed in the world, if comparing rates in this magazine with last month’s issue – however we all know it has. The Reserve Bank has launched a $33 billion quantitative easing programme with estimates that it may double this over time. This provides more liquidity into the system, which is a positive, as while everyone keeps an eye on rates this is probably a larger concern. It also drives down longer-term wholesale interest rates, so there doesn’t appear much of a need at present to look to fix “long” to lock in certainty, especially when there is circa 80 basis points (0.8%) difference between most one-year and five-year rates offered. Another point of interest is there is some commentary about the…

The economic recession caused by Covid-19 has only strengthened Riyaan Mohamed’s belief in property as an outstanding investment vehicle. “KiwiSaver and the share market have dropped, businesses have struggled, and house prices will probably drop – but the rent is still coming in. What else is still providing cashflow right now? That’s how strong the property market is.” People were keen to buy right before coronavirus when prices were going up, but now when there are good deals around, people will sit on their hands until prices begin rising again – which doesn’t make any sense to Riyaan. He’s hoping to use this time to buy as many excellent deals as possible. If the market remains flat, he says he’ll have to wait longer to buy, but when it does…

Property investors probably consider themselves to have mixed blessings as a result of the pandemic. On the one hand, the immediacy of losses to stocks and equities and KiwiSaver funds has us relieved to be in property. On the other hand, the property sector is not, and will not, be immune to the fallout we will experience as the impacts on the economy become more widely felt. The income-generating properties we hold are not liquid assets in times when confidence dries up and buyers become scarce. For many investors, the focus will be on managing struggling tenants through the crisis and trying to ensure that rent payments, at some level, can be maintained, particularly as restrictions to terminate tenancies for rent arrears come in. It is clear that the Government…

As we move into the colder months, the need for proper protection against increasing rainfall is irrefutable. It can take just one rainstorm and a single blocked downpipe to cause significant damage to your property investment. As both a property manager and an investor, I’ve seen it happen countless times. Fortunately, the Healthy Homes legislation directly addresses this often overlooked area. The moisture ingress and drainage standard calls for an efficient drainage system, an appropriate outfall and if the rental property has an enclosed subfloor, a ground moisture barrier. With a compliance date of July 1, 2021, it can be tempting to treat these standards like a “set and forget” checklist. However, the Healthy Homes Standards need to become a new focus for routine property inspections. After all, adopting the…

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 SUPPLIED BY…

1 Life at Level-3 for residential landlords It won’t be a full release from lockdown, but moving to alert Level-3 will mean businesses that can operate safely will be able to reopen. So what does that mean when it comes to residential property? 2 What lies ahead for the housing market? As New Zealand begins to settle into the “new normal” of the Covid-19 lockdown, commentators have started releasing their (tentative) outlooks for the housing market. Here’s a summary of some of them. 3 Commercial sector facing hundreds of millions in lost revenue Some large commercial tenants are refusing to pay rent and this could devastate the commercial property sector, the Property Council New Zealand is warning. The Property Council is calling for property owners, tenants and the Government to…

Covid-19 is a health crisis and in New Zealand it will be largely gone by the time this article is published. We’ll still be in level three or perhaps migrating to level two. It is the economic aftermath that investors will live with for years to come. 20-30% of businesses might never reopen and forecasts have unemployment ranging between 10-20% of the workforce. More than ever, the current economic crisis has highlighted the importance of (1) having a clear investment strategy and (2) managing your risks. According to the NZ Property Investor survey this year, roughly half of property investors still think it is smart to have all their lending with one bank. Maybe they can negotiate a better deal, or squeeze out another loan by giving up all of…

I write this as we head into the last weekend of the level four lockdown and I can say with great confidence that we do not know what is going to happen in the property market. On one hand, the country is at an economic standstill, waiting to start trading again. It looks like NZ Inc. will start to do business with at least itself from next week, however our trading partners are all on their own health, political and economic timelines. On the other hand, interest rates have plunged; the Government is going to do everything they possibly can to support people financially; we still have a massive housing shortage; and home will be looking more and more appealing to Kiwis based overseas (happily Australia is starting to get…