Innholdsfortegnelse for January 2022 i NZ Property Investor

At the beginning of every year we get out the crystal ball and ask our property experts what they foresee in the year ahead. Although we don’t think anyone could have predicted the vertiginous rise in property prices that 2020-2021 brought, it’s always interesting to get people’s informed opinions on the forces that are likely to shape the market in the next 12 months. The general consensus is that 2022 is going to be challenging. With interest rates rising, the possible introduction of debt-to-income ratios, more stringent criteria for loans from banks, and the removal of interest rate deductibility, investors may start to feel the screws tighten. Our experts are predicting everything from a credit crunch (which is already being witnessed firsthand by investors as banks tighten lending criteria), and…

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. 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 phone 09 376 8860, www.wt.co.nz RYAN WEIR Ryan is owner of Propertyscouts Auckland Metro and has a half share of Propertyscouts NZ. He’s a member of PROMINZ and passionate about the property management industry and in particular raising industry standards. SHANE CAMPBELL A Partner in Wynn Williams’ Dispute Resolution…

How could the Government have got it so wrong with the recent consumer finance law changes? Introduced to protect vulnerable borrowers from shop trucks and predatory lenders, the blanket legislative changes have seen lenders forced to dive deeper into the details of borrowers’ lives as part of the decision-making process. Vulnerable borrowers don’t buy houses, and yet for those of us in the home loan market, the changes still apply. It means any semblance of trust is gone, and the flexibility and discretion we rely on to make fair and accurate lending decisions is no longer possible. As CEO of Squirrel, one of NZ’s largest mortgage brokers, I’m deeply concerned about the lack of consideration from the Government around what these changes will mean for regular Kiwis. The unintended consequences…

We spoke to eight of our regular property investment commentators. Here’s their expert opinions on what will influence the market in 2022. THE ECONOMISTS TONY ALEXANDER, INDEPENDENT ECONOMIST House price growth will flatten out this year and price increases should drop to about 5% by the middle of the year. The factors leading to lower house price increases include a brain drain, higher interest rates, tightened lending and investors staying away from the market. When the borders reopen properly there will be an exodus, by mainly young people, to Australia for better wages and lower house prices. Investors will not come back into the market. There will be a slight increase in the number of investors selling property, but the vast majority see rentals as a long-term game and are…

Generation rent was coined a few years ago to describe the increasing gap between renting and getting on the property ladder. While it’s a sweeping generalisation to suggest that everyone renting is there because they have no other option, it certainly captures most people renting in New Zealand. It’s long been the quintessential Kiwi dream to own a slice of Aotearoa. The idea of a large number of people renting all their lives is a new concept. In Europe this is nothing new, and rental properties pass through generations. It’s down to numbers. When looking at the difference between renting and paying a mortgage, there’s often no difference. The problems are saving and accumulating enough money to put down a 20% deposit and a lack of new builds. Based on…

1 BROOKFIELD/OTUMOETAI/MATUA Easy access to town, close to schools and all other amenities. Consists mainly of older two to four-bedroom good quality homes. Some executive-style living close to the water’s edge with views. Pulls solid rent and always high demand. 2 BETHLEHEM Modern homes, good access to Tauranga, very sought-after. Residents enjoy modern surroundings with shopping, excellent dining, wine tasting, and great schooling – attracts executive families paying higher rents. 3 TAURANGA CENTRAL – AVENUES New and modernised office buildings and retail space, refurbishment of older structures, and the new university campus. Mix of options drawing good rents. Attracts CBD professionals and students. 4 GATE PA, GREERTON Older community with classic brick and wooden homes. Some pockets of lower income homes, caution suggested in selecting streets. Can offer good buys…

“Key shifts this year have been for mortgaged multiple property owners (i.e. investors) – who had a high share at the start of the year but then saw deposit requirements raised and taxes changed, which saw their share fall back – and first home buyers, who have still be seeing opportunities, helped by KiwiSaver, the low deposit lending speed limits, and a willingness to compromise on either location or type of property in order to get a cheaper price.”…

Major changes to the Credit Contracts and Consumer Finance Act (CCCFA) that came into force from December 1 are already having a detrimental effect on house buyers. Banks are declining mortgages at a bigger rate after taking a fine-toothed comb to people’s spending habits, missed payments and unarranged overdrafts. Lenders are now forced to trawl through bank statements in detail looking at every aspect of an applicant’s life, including where they shop and what they buy. In some cases rejection can boil down to how many coffees people buy and how often they visit KFC or McDonald’s. AdviceHQ director David Green says this has always been the case to some extent, but banks’ tolerance levels are now significantly reduced. “It means more compliance, more delays, less time spent on quality…

CoreLogic says there will be a switch to a buyer’s market late next year as the recent ebb in listings turns to a flow. In its latest Market Pulse report, CoreLogic says there could even be a fall in prices. Over the past few months listing flows have recovered and achieved sales have dipped. Since the recent trough, the total number of listings has risen by almost 40%, and is now back up to the highest level since March. “That’s still a low level,” says Kelvin Davidson, CoreLogic’s senior property economist. “The gap to where they were at the same time in previous years is nevertheless steadily closing. It’s conceivable that by the end of the year listings will have recovered to where they were — or even above —…

In the last few days of 2021, looking back it can be said that we have certainly had a year with many unexpected twists and turns. The property market on all fronts has changed dramatically, with LVR restrictions coming in, affecting first home buyers and property investors. We’re also in a space from a funding perspective where things have got harder due to increased regulation and unprecedented levels of demand for funding — to the point where many non-bank lenders are out of funds to lend this side of Christmas/New Year. Focusing on interest rates specifically, we have seen rates continue to increase as time marches on. The recent Official Cash Rate (OCR) has been increased 0.50%. As a result, we have seen some two and three-year rates lower than…

THE SITUATION I met Alexandra three years ago. She owned her own home and two investments back then – one in north Auckland and one in Tauranga. Since then, she’s invested in three new builds over two years. These properties will continue to have interest deductions as part of the Government’s new regime. Before reviewing her portfolio she owned five investment properties in total – a very good-sized portfolio. She wanted to analyse her portfolio so she could: a) set a plan to slow down working and b) get rid of her personal mortgage. THE ISSUES Before the interest deductibility changes, Alexandra’s portfolio was predicted to earn positive cashflow of $156,000 over the next 15 years. That’s just over $10,000 per year. But under the Government’s new tax rules, that…

One thing’s for sure, there certainly is a lot of change in our industry, and 2021 was no exception. Early in the year we saw the introduction of the most of the Residential Tenancies Act changes, followed by the announcement that private rental property providers could no longer deduct mortgage interest as an expense. The Healthy Homes Standards were implemented for any new or renewed tenancy agreement from the July 1; Resource Management changes were announced in November along with new Privacy Commission guidelines; and in early December there were additional changes to the Healthy Homes regulations. In February phase two of the Residential Tenancies Act was implemented. This included most of the changes to the policy. In March, the government’s surprise announcement that rental property providers could no longer…

HOUSE PRICES: UP Median prices for residential property across New Zealand increased 23.8% from $747,000 in November 2020 to $925,000 in November 2021 — a new record high. While the median house price for New Zealand excluding Auckland increased annually by 26.0% from $615,000 to a new record of $775,000. The median property price in Auckland increased 26.2% annually from $1,030,000 in November 2020 to $1,300,000 in November 2021. OCR: UP The Reserve Bank has lifted the OCR 0.5% in November to now sit at 0.75%. INTEREST RATES: DOWN ASB has cut its 4.35% two-year fixed home loan rate, taking it down to 4.15%. That could have been prompted by wholesale swap rates falling slightly. The two-year swap rate rose to 2.45% by November 22, and the mortgage rate rose…

ILSE WOLFE I have scaled up recently: as an investment coach I need to have a number of purchasing models so I can lead from the front. I am looking at doing my first terrace house development; this is currently at the feasibility stage. This will be on a section of a home I already own in Mangere. ‘Most people don’t read or do their research, and a lot of people thought the prices would keep going up’JASMEET SINGH The surveyor I have been working with says we can develop either six terraces, or 16-20 apartments here, but it’s an equation of money and time. I have noticed another development of 10 townhouses along the road, so it’s making me wonder why they chose that option. Today I settled on…

In 2021, Builderscrack.co.nz facilitated $67 million of residential property improvements across 95,000 jobs posted. Looking back, our 14 years of data shows a clear relationship between house price inflation and trade activity, and 2021 was a heightened year for both. A likely lift in the OCR, loan-to-value restrictions, record consents, inflation and a weaning of all Covid subsidies will work against property prices; especially when combined with the recent policies to slow investor appetite. However, easing border restrictions, southern migration, and materials supply issues are less predictable factors which together may work to steady property prices. Maximising a home’s rental and market value is a great way to buffer against what I believe will be a more settled period for property prices in 2022 than we’ve seen in 2021. So…

Way back in 1866 New Zealand introduced death duties. When we had death duties an exemption was provided for the family home and the first $450,000 of wealth the individual held. Beyond that, every dollar of wealth was taxed at 40% payable in cash on death. Forty percent, payable in cash. Can you imagine the pain that created? We also had land tax, where tax was levied annually at 2% on the government valuation of investment land regardless of the income the land produced. Death duties were abolished in NZ in 1992. But the legislation has not actually been repealed. The rate of tax was simply moved from 40% to zero. Thirty long years ago when I was a junior clerk I watched the panic in my bosses’ eyes when…

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 market in Tauranga is concentrated on houses, as tends to be the case in most parts of the country. Of the 681 properties recently available for rent, 89% have been…