Innholdsfortegnelse for September 2020 i NZ Property Investor

It wasn’t the news that most New Zealanders expected to hear. Late on the night of August 11, Prime Minister Jacinda Ardern announced that community transmission of Covid-19 had returned to Auckland. And that meant lockdown 2.0 with Auckland at alert level three and the rest of the country at level two. Like most New Zealanders, I was dismayed and concerned by the news. On a personal level, the prospect of yet more weeks of attempting to home school my son while putting together a magazine was not an appealing one! On a professional level, my first response was that it signalled more upheaval for the production of the magazine. That’s because the first lockdown meant that at NZ Property Investor we weren’t able to publish print copies of the…

According to a recent Trade Me Property survey, 82% of the 1,700 survey respondents say the timing and result of the election will have no impact on their intention to buy or sell property. The survey aimed to find out what New Zealanders think will happen to the property market in the lead up to this year’s general election – which has now been postponed till October 17 due to Auckland’s Covid-19 outbreak. Trade Me Property spokesperson Aaron Clancy says their data shows that activity in the property market during an election year does not differ all that much from other years. “That said, obviously this year we have some added challenges with Covid-19 playing on people’s minds.” Outside of the election, over half (52%) of Kiwis said other events…

REINZ HOUSE SALES: UP July saw the highest number of sales for the month of July in five years both nationwide and in Auckland. Year-on-year, sales were up by 24.6% nationwide and by 30.3% in Auckland. INTEREST RATES: DOWN March’s record OCR cut continues to be passed on by the banks. There’s now an ongoing mortgage rates war, with rates at unprecedented lows and the situation unlikely to change in the near future. OCR: DOWN The Reserve Bank held the OCR at its Covid-19 prompted record low of 0.25% in August – and also gave its clearest indication yet that it is likely to use negative interest rates to stimulate the economy. IMMIGRATION: DOWN Net migration in April, May, and June 2020 was low due to Covid-19 border restrictions. Despite this, Stats NZ’s provisional estimates…

We’re well into the second half of 2020, and also in the second stages of lockdown for New Zealand. Covid-19 has had a dramatic impact on our economy and it’s likely to have an impact in the future too. In terms of interest rates we’ve seen a dramatic dip since earlier this year, so the cost of borrowing is significantly lower. Even as recent as three months ago you had one-year rates around 0.50% higher than they are now. In terms of borrowing on a $1 million loan, this is a savings of $5,000 per annum. This is just shy of $100 per week (after tax) income saved. If you go back a little bit further the rate was about 0.25-0.5% higher even than this. This is a large part…

• These days everyone likes to have an opinion, but don’t let other people’s fear (of the market, risk, the unknown, making a mistake) create your reality - and prevent you from investing. • If you are going to get opinions from people, make sure they are successful investors themselves. • It’s important to understand what you want to achieve and what you want to get out of investing. Then you can research markets and create a formula of what a good buy is to you. • Don’t get too emotional about a rental purchase. If you do, you’ll end up over-paying for a place you would love to live in yourself and the numbers won’t work. • Buy houses that need a simple cosmetic make over. These are fast…

What can you do, as a landlord, to successfully navigate the new rules? Our experts have some tips. • Consider using a property manager – it’s their job to stay on top of all 52 unlawful acts in the legislation as well as any new regulations. “A property is a large asset and you want to make sure it’s protected,” says Norwell. “When it comes to understanding the ins and outs of the legislation, doing due diligence and reporting requirements for Tenancy Tribunal, it’s best to have it in the hands of a professional.” • Vet tenants carefully before signing them up – perhaps at no other point in the tenancy process do you have so much opportunity to change the outcome of the tenancy. Take your time when it…

Us Kiwis are humble people. Even if we set goals, we certainly don’t talk about them - even among friends. That makes it hard for first-time investors to know what to aim for. It’s hard to know how to set a realistic goal. To tackle this, I’ve just completed a study of 148 property investors’ goals. This looks into what each investor’s goal is, how close they are to completing it, and how many properties they’ll need to achieve that goal. Because this data comes directly from our portfolio planning tool at Opes Partners, we can start to answer a whole heap of different questions. For instance, you’d expect people who earn higher incomes to set more ambitious goals. That’s not the case based on the data. In one case,…

Do you have property maintenance plans for your rental? Now that we’ve officially entered spring, it’s the perfect time to start thinking about fixes and upgrades. But before you dive into your glow-up, it’s essential that you understand your health and safety obligations as a rental property owner or manager. Health and safety are often-overlooked when it comes to choosing contractors and planning maintenance work. After all, it’s not a professional construction site, right? In fact, as a rental property owner or manager, you are considered a Person Conducting a Business or Undertaking (PCBU). According to WorkSafe NZ, this means you have a “duty of care, so far as is reasonably practicable, to ensure the health and safety of everyone involved with or affected by work on or at your…

THE DATA Rental data is sourced from the Ministry of Business, Innovation and Employment based on rental bonds lodged. This 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 property 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 property value calculated using our E-Valuer. MARKET COMPOSITION The rental property market across the Wairarapa area is dominated by houses, with only a handful of flats (all in Masterton) and no apartments. Of the 229 properties recently on the market…

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

1 Radical tenancy reforms now law Shock and dismay. That’s what landlords around New Zealand are feeling after Parliament passed the Government’s controversial tenancy law reforms into law late Wednesday. 2 New rental laws will have unexpected outcomes Watch out – some of the tenancy reforms now set to become law will have unintended consequences and cause more harm than good, REINZ is warning. 3 The return of Covid and what it means for landlords After 102 days, Covid-19 is back and that means Auckland is returning to alert level three, while the rest of New Zealand will go to alert level two, on Wednesday. So what does that mean for landlords? 4 Changes to RTA now in force The Government’s controversial tenancy law reforms are now law after the…

Back in June I made a prediction that we’re in for another housing boom and the average house price will increase to $1 million by 2030. I still feel strongly about that and I think that there is reasonable science to support it. Household incomes will continue to increase, albeit gradually for a while, and that will tend to push up house prices on its own. Most economists are picking that New Zealand will have a fruitful decade with growth out of Asia once we get through this recession. Another reason is very low interest rates and by all accounts they are here to stay for a long time yet. In my previous article I pointed to affordability being unchanged and that low interest rates will push up prices. On…

“Trust busting” is the term often used to describe instances where a court finds in favour of a claimant trying to access trust assets. Here, though, I do not want to talk about “trust busting”. Instead I want to bust some trust myths. There has been a lot of media coverage recently as a result of the new Trusts Act passing, much of which has suggested that trusts are now ineffective. This approach is regrettable and founded on a number of myths. MYTH ONE: TRUSTS DON’T PROVIDE EFFECTIVE ASSET PROTECTION While there have been some notable relationship property cases where claimants successfully accessed trust property, you have to look “under the hood” of those cases to truly understand their impact. Often the trust deed or the trust admin (or both)…

Over the last few months, we’ve all witnessed the debate around the Residential Tenancies Act (RTA) changes. A lot of industry feedback went to the Government, who summarily ignored it. You now have a few months to wrap up problem tenancies before you welcome the new order. I’m not going to rehash everything that brighter minds than mine have already written and spoken about the RTA changes. This article is about what comes next, and I think there will be a rapid increase in social housing providers that will give a viable option for private owners to continue to rent in low sociodemographic areas. HERE’S WHY • If you have a problematic tenant under the new RTA rules, you will have a real problem trying to end that lease. •…

Changes in planning rules are resulting in more and more landowners investigating the possibility of undertaking infill housing developments, often with multiple units and without carparking on single sites. Often investors approach these projects with a desire to retain and rent the dwellings they develop. However, lending criteria for developments such as this means frequently landowners can’t qualify for finance without committing to sell some of the units they develop. This scenario of keep some, sell some, provides some interesting tax planning issues. PERPETUAL TAINTING The most significant issue can be found in section CB 15 which serves as an anti-avoidance provision by taxing gains on any property an associated person to a developer sells if that property emerged from revenue account property of a development entity. This effectively creates…

In a dramatic last minute effort on the last day of the House sitting before closing to enable the commencement of election campaigns, the Government pushed through the Residential Tenancies Amendment Bill. This bill went through Parliament under urgency with the second reading, Committee of the Whole House, and the third reading all being heard within a few hours. Reactions to the passing of the Bill have been equally dramatic and have ranged from professional landlords predicting negative unintended consequences to tenant protection groups heralding a new age of security for tenants. There is no doubt that the Bill will make substantial changes to the way landlords run their businesses. No longer will a landlord “take a chance” on someone who does not have an impeccable rental history. Things like…

The policy has some ambitious goals, most of which revolve around social housing. One is to deliver enough affordable rental homes to clear the social housing waiting list, which currently numbers 18,000 people, within five years. Another is to stimulate a sustainable non-profit rental sector by offering Crown financial guarantees for community providers to build new rental properties. But they also want to “make renting fairer” by requiring landlords to be registered and by extending the current regulatory framework for real estate agents to include property managers. Further, they want to introduce a WoF for rental properties as an enforcement mechanism. This would require all rental properties to be independently assessed for compliance with the Healthy Homes Standards. Green Party co-leader Marama Davidson says successive governments have sold off too…

Justice Minister Andrew Little says the Government is allocating $40 million towards mediation and arbitration costs for businesses and landlords to resolve rent issues as they face the economic impacts of Covid-19. The funding is to improve access to arbitration in a timely and cost-effective way, to support small or medium businesses to reach agreement on a fair rent. It will also cover mediation for commercial landlords and tenants whose leases do not provide for a reduction of rent in the event of an emergency. Little says it is critical that businesses who have not reached an agreement be assisted to find a solution that will help New Zealand recover from the economic impacts of Covid-19. “This funding will ensure that tenants and landlords, even if financially constrained, will be…

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 30 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…

Not so long ago rent negotations between commercial property owners and their tenants were not something that factored on the public radar much, if at all. But New Zealand’s Covid-19 alert level four lockdown earlier this year changed that. That’s because the rent tussles between commercial landlords and their tenants, big and small on both sides, garnered media attention at the height of the crisis. In many ways, they came to represent the economic dilemmas emerging. While residential landlords and tenants, by and large, managed to navigate the crisis relatively smoothly, that was not the case in the commercial sector. Various factors contributed to this, but one major factor was no access emergency clauses, or the lack of, in lease agreements. In turn, this served to highlight that the deed…

There has been a lot of talk over the past five or six years regarding the Resource Management Act (RMA) and its adverse effect on development projects. The debate has become political, with various political parties (in particular National) proposing to overhaul the act. In fact, National attempted, but failed, to get a Bill through Parliament in the last year of their government, to do just that. Recently, Labour have announced that they intend to repeal the RMA, if they are voted back in for another term. It’s likely that National will do the same, if they get into government. No matter how you slice it, the RMA’s days seem numbered. Being an engineering and surveying company, we are very familiar with the RMA, as a lot of what we…