Innholdsfortegnelse for March 2022 i NZ Property Investor

Property prices are a Kiwi obsession and everyone is an armchair expert … or think they are. So, in this issue we have decided to ask the real experts, data analysts, economists and mortgage advisers which direction they think prices will head this year. This is always a case of “crystal ball gazing” and our experts may or may not be proven right. But there are definitely market headwinds (tightening credit, interest deduction removal, et al) that will dampen enthusiasm for property and almost certainly help flatten the growth curve. Tightening credit is also the subject of our second lead, written by Luke Jackson of Resimac. He explains how some investors are moving to commercial loans in the wake of extremely stringent credit criteria, and how this can work well…

‘The tenants claimed the premises were unsafe and had no smoke alarms for the first few months of the tenancy’ A Gisborne landlord who thought she was being kind to her tenants, who in turn left her a card and chocolates when they quit the premises, still ended up before the Tenancy Tribunal with claims for rent arrears and breaches of quiet enjoyment. Tenants Joanne and Adam Manger had nowhere to live and landlord Helen Macdonald offered them the use of a bus and caravan on her property. Then, when Macdonald’s circumstances changed, she offered them her house and she and her son moved into the caravan and bus. She described the arrangement as “a shared helping out, a lovely shared whanau arrangement”. Macdonald says she “was no landlord” by…

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…

In last month’s column I spent a bit of time talking about the implications that all the recent legislative and bank policy changes are set to have for Kiwi property investors as credit conditions tighten massively. Between that and the increasing likelihood of a recession – hinted at by the latest inflation statistics – it looks like we should be hunkering down for a period of pretty significant uncertainty in the coming months and years. So, how can property investors protect themselves in the current environment? In a world that’s looking increasingly risky, diversification is your best friend, offering far greater predictability and certainty in terms of financial outcomes. For investors that’s not just about where and what sort of properties you’re investing in – but about your spread across…

When it comes to tax, much of the focus is on minimisation, but of equal importance is understanding the process by which it becomes payable and falls due. Ensuring the right amount of tax is paid at the right time minimises penalties and money interest charges that can add significantly to the overall tax burden. The ever-increasing number of investors looking to develop intensive housing on rezoned land means that new understandings are needed in respect to when income from land division and property development must be recognised and managed. So, let’s look at a few fundamentals and gain an understanding of the drivers of income in the land division and property development games. Firstly, let’s explore the concept of “revenue account property”. Revenue account property is land that is…

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 across Lower Hutt is strongly dominated by houses, with a handful of flats, but a very small number of apartments. Of the 384 properties recently available for rent, 82%…

The rise in construction costs could hit double digits this year after increasing at the fastest rate in almost four years. Last year alone, construction costs rose 6.1%.  The high costs come from a rise in timber prices and record building consents, according to new data from the Cordell Construction Cost Index.  With an already overheated housing market, expensive construction costs are expected to add further affordability challenges.  A tightening up of the supply chain and capacity restraints have also caused costs to increase, as well as strong demand for new housing encouraged by government rules allowing investors to still claim interest as a deductible expense and keeping the bright-line test at five years. It’s a perfect storm of demand and supply. Industry pundits say they wouldn’t be surprised if…

As I write this we are a week out from the first Official Cash Rate review of 2022. Most commentators at this stage are predicting a 0.25% increase at the February 23 review, taking it to 1%. How high it goes from there becomes interesting although inflation remains the largest concern. At present ANZ economists believe the OCR could top out at 3%, which would push one-year interest rates up significantly higher than they are now. There are seven reviews across 2022 and at this stage there is an expectation we are likely to see the Reserve Bank raise the cash rate at each review. Many borrowers have ended up on the right side of rates by rolling one-year terms over in the last few years, which has proven to…

With the challenges facing the construction sector, difficulties in deducting loan interest as an expense, and Healthy Homes legislation that requires capital investment to bring existing properties up to standard, many are considering buying “off the plan”. “Off the plan” refers to signing up to buy a future property, typically subject to completion of a subdivision of the land and a new-build dwelling. On the face of it this all seems relatively straightforward and risk-free. However, in the current construction environment there may be obstacles to a straight run, so it pays to be fully au fait with the details of the contract – especially the sunset clause. Generally, a developer takes new properties to market in the early stages, before obtaining consents and beginning construction, to obtain unconditional sales…

Throughout the country landlords, contractors and real estate agents will find themselves having to negotiate access to a rental property with a tenant who could be reluctant to grant entry because of Covid concerns. This is a highly delicate and sensitive situation. In a case that we have had to deal with a tenant simply refused to allow access to a real estate agent as she had concerns about the wellbeing of her children, whom she said could not be vaccinated. Situations like this are complex, and emotions can run high. A landlord has the right to access their property and sell it, yet you must ensure you listen to the tenant’s genuine concerns. Each situation must be handled delicately. First, you need to understand what the RTA (Residential Tenancies…

Recently the New Zealand Property Investors’ Federation, in conjunction with the New Zealand Property Investor magazine, surveyed more than 900 property investors throughout the country. Out of the 913 respondents, 38.4% had used the Tenancy Tribunal or mediation services. The survey highlighted that the Tenancy Tribunal had given name suppression to 17 tenants within the last 12 months, even though the landlord had won the case in each instance. Landlords and tenants have the ability to resolve any disputes by self-resolution, FastTrack Resolution, mediation or a Tenancy Tribunal hearing. A Tenancy Tribunal hearing is often preferred as it is an independent judicial body that can issue a binding decision. The cost of applying for a tribunal hearing is $20.44 (including GST). The Tenancy Tribunal hears about 20,000 cases each year,…

Q I’ve got a new build under construction, where the timeline has blown out and we are getting close to the sunset clause date. I’m worried that the developer will cancel and put up the price. Is there anything I can do? Can I claim a breach of the Fair Trading Act if they’re intentionally slowing down construction? A Questions about sunset clauses are difficult to answer in the abstract. Ultimately the outcome will be dependent on what the actual clause says. For example, a sunset clause can be inserted for the benefit of the purchaser, vendor or both. There can be conditions or limitations on the right to cancel. There can be requirements that a vendor/developer take all reasonable steps to obtain consent (building or resource consent), to undertake…

HOUSE PRICES: DOWN REINZ data shows the national median selling price dropped to $880,000 in January, down by $20,000 compared to December’s $900,000 median. It was the second month in a row it dropped from its November peak of $920,143. Auckland bore the brunt of the price fall where the median selling price dropped by $80,000 from $1.28 million in December to $1.2 million in January. OCR: UP The OCR will lift from 0.75%, reaching a peak of 2.6% in 2023, but that might change with inflation now at 5.9% and expected to rise. The financial markets are expecting the year to end with an OCR rate of 2.25%. INTEREST RATES: UP Banks are still encouraging new builds. ASB’s fixed mortgage rates for existing homes sit at 3.65% for one…

When your canvas is literally as big as a house, you want to ensure you get the paint colours right. It can be a daunting task deciding on a scheme for the exterior, especially given the cost of materials and labour. Exterior colours will look lighter in the bright sun. It’s often best to avoid white or light off-whites to avoid glare. If you are choosing between two colours, choose the darker colour. Allow extra contrast on adjacent surfaces so they don’t end up looking the same. Dark colours absorb more of the sun’s heat and can put stress on cladding. With any darker colour, consider using the Resene Cool Colour range, formulated with special pigment technology to reflect more of the sun’s energy. This keeps the coating and substrate…

THE SITUATION Carina walked into my office early this year. She’s a successful businesswoman in her late 30s. Currently, she owns two properties – her own home and an investment property on Waiheke Island. She bought the Waiheke property 10 years ago for $1.2 million, which is now worth $2.2 million. This property earns $45,000 in rent per year and has a mortgage of $850,000. On top of this she’s saved a significant amount of money. She has $100,000 in shares and $390,000 in cash. Her goal was to build a passive income of about $100,000 over the next three-to-five years. She wanted to know whether this was realistic, and what strategies she could use to create this passive income using a passive buy-and-hold strategy. THE CHALLENGES The first challenge…