Innholdsfortegnelse for May 2022 i NZ Property Investor

Social housing, community housing, public housing. Whatever name you want to call it, providing housing for vulnerable people is embedded in New Zealand’s ethos. While Kāinga Ora (formerly Housing New Zealand) does a great job of creating homes for those in need, the ever increasing cost of housing in our country is making it hard for supply to catch up with demand. Enter private landlords. Partnering with community housing providers (CHP), private landlords can do much to help address the shortfall in social housing by leasing their properties to a CHP. The government has incentivised this by allowing landlords who lease their homes to CHPs to continue claiming back interest as a tax expense. While this announcement has caused consternation for some private landlords (it’s been called a “bribe” on…

The big talk in April in the interest rate market was the fact that the OCR was increased by 0.50 per cent, which has put us at 1.50 per cent. This is the first time in over two decades that the OCR has increased by more than 0.25 per cent in one review. There is no doubt this will influence the interest rate market, with many banks already increasing their floating rates, and some also increasing their fixed rates. If you compare this month’s rates table with last month’s issue you’ll see quite a noticeable difference in interest rates offered. The RBNZ currently has a role of trying to curb inflationary pressures while also trying not to go too far at the risk of having a detrimental effect on other…

Q We bought our current home, Property A, in 2009 for $531,000. The online experts estimate it is worth $1.15 million. The house is old but we have a sea view and it is close to town, so the land value could be up to $900,000. We wish to take the house off the site and relocate it onto a section within half-an-hour’s drive of the city. This will become Property B and we would move in once it is liveable. We would then develop Property B over the next year while undertaking a subdivision of our now vacant Property A land into two lots. The aim is to maintain our position while building one house, selling it and using the funds to build another house on the other lot,…

Not many investors can claim to have undertaken a major property makeover when 37 weeks pregnant, but that’s exactly what Christchurch investor Ana Meredith did late last year. Her 1960’s two-bedroom unit, which was turned into Airbnb accommodation, was transformed from dated to dazzling in seven days. And Meredith’s hard work paid off: the home had zero vacancies in late December and January. “I am very pleased with the outcome,” says Ana. “Airbnb is such a great, easy model to use.” Ana and her husband Matthew have been investors for eight years, but this is the first short-term rental in their portfolio. It was bought as a family bach, but the couple realised it would need to “pay its way”. Located on a hill overlooking the harbour, the unit has…

Unit title ownership typically relates to high-rise commercial and residential buildings, but it can also apply to stand-alone houses which may or may not adjoin each other. Buying a unit title is the same as buying a house in that it has its own title. However, when you buy a unit title you become a member of a body corporate along with the owners of all the units within the unit title development. As a unit title owner you get exclusive use to your unit/dwelling area together with the right, along with all the other members of the body corporate, to use the common property. Together with the other members there will be maintenance and upkeep of the common property. As an entity, the body corporate is responsible for the…

‘To suggest that an individual can do two days of study and then work unsupervised as a manager is nothing short of an insult’ By the time this article is published, submissions will have been closed for feedback to the government over proposed regulation of the residential property management industry. Reading the discussion document, overall I am incredibly supportive of its proposed recommendations. It appears to be suggesting that the Real Estate Authority will extend its jurisdiction to encompass the regulation of property management. However, one aspect of the discussion document does not go far enough. The document suggests that someone should be able to engage in work as a property manager after sitting an introductory entry course that would take about 15 hours of study. This is inadequate. I…

Landlord of the Year (LLOTY) is a very important award for the NZ Property Investors’ Federation (NZPIF), and Resene has become the new sponsor for 2022. This new sponsor will stimulate a greater emphasis on providing a well-maintained rental and the award will continue to highlight for rental providers the good tenant relationships and property management skills to which they can aspire. NZPIF believes this will be excellent for the greater industry and not just for NZPIF. Since 2008 the NZPIF has partnered with the previous Department of Building and Housing and later the renamed Ministry of Business, Innovation and Employment (MBIE) for the annual Landlord of the Year award. Although excited by the opportunity a new sponsor brings, NZPIF would like to sincerely thank MBIE for its 13 years…

Despite all participants at recent Housing and Urban Development Ministry (HUD) workshops urging it to lobby the government to include private landlords, senior officials say it is not in their remit to recommend it. The reason: private landlords are covered by the Residential Tenancies Act, says Residential Property Managers’ Association president David Pearse. HUD ran workshops to discuss submissions on the proposed legislation. More than 100 were received during the first few days. Pearse says Associate Housing Minister Poto Williams, who is promoting the legislation, found it unusual for everyone across the industry to agree private landlords should be included or at least registered, but he got the impression there will be no change to the proposed regulations. She invited the association to make submissions. The government’s proposed regulations include…

Almost a year since the government announced rules to eliminate tax deductions on interest for property investors, the legislation has all but reached its final destination. The Select Committee report on the first draft of the legislation has been released and amendments have been made reflecting these recommendations. Here are some of the notable changes in the latest draft. PROPERTY TRANSFERS “Rollover relief” is a concession in tax legislation that allows property to be transferred from one party to another without triggering the application of the bright-line rule, and without seeing the new owner denied the ability to claim interest because they have bought a non-exempt rental property on or after March 27, 2021. In the initial draft, it was proposed that rollover relief would apply when property is transferred…

PROFESSIONAL MANAGEMENT IS A MUST While tax deduction of interest may be attractive, calculate its worth within the context of your situation. CHPs will sell themselves to landlords as providing “free” property management and 365-day rent over a (typically) three-year lease. To be absolutely clear, the CHP works on the government and tenants’ behalf, and will make zero allowances for a private landlord’s inability to keep up with Healthy Home regulations. “I know of a landlord who was taken to the Tenancy Tribunal for a full-term rent reclaim by a CHP after the landlord jumped ship from professional management to take up the free management. “They had fallen behind HHS at the latest changes and now are facing having to refund rent to the CHP.” FULL DISCLOSURE – INSURANCE This…

THE SITUATION Derek is a successful businessman. He and his wife Jess own four Christchurch-based rental properties, all four considered “existing” under the new interest deductibility tax rules. So soon they’ll pay significantly more tax. They plan to start a family in the future and will potentially go down to one income when that happens. Because of that the couple wants their portfolio to remain positively geared even after interest rates rise and the new tax laws are phased in. THE CHALLENGES Without the new tax rules, their portfolio was forecast to generate $170,000 in cash flow over the next 15 years. That’s even after accounting for higher interest rates. However, with the new tax laws a reality, their portfolio (as it stands today) will be negatively geared by $111,000…

HOUSE PRICES: UP Median prices for residential property across NZ increased 7.9 per cent annually, from $825,000 in March last year to $890,000 in March this year. Moving from February to March, the median property price rose a marginal 0.6 per cent. However, the seasonally adjusted figure shows a drop of 4.8 per cent, indicating a weaker price increase than expected moving from February into March. OCR: UP The Reserve Bank has lifted the official cash rate (OCR) by 50 basis points to 1.5 per cent. The bank is expected to lift the OCR again this month. INTEREST RATES: UP The country’s biggest home lender, ANZ, raised its mortgage interest rates as soon as the OCR increased last month. Its one-year rate is 4.55 per cent, two-year 5.25 per cent,…

No matter your investment of choice, it’s a risky market to be operating in right now. Putting money into shares feels crazy. Fixed-interest managed funds are performing terribly. And whichever way you spin it, the property market is facing into some level of falling house prices. High inflation, removal of tax deductibility, CCCFA changes and tighter LVR restriction have all played a part in falling prices. But more than anything, this shift is being driven by interest rates. After 30 years of declining interest rates, where house prices have gone ballistic, we’re now in a very clear rising rate environment. The increases we’ve seen already should result in at least a 10 per cent drop in prices across the market. So, as a property investor, where do you put your…

‘Ultimately, your surveyor has a whole toolkit of ideas that can help you unlock potential’ For many first-time developers, the step of subdividing land for development is often a long way through the thought process. Often, land investors and developers understand the benefits of getting finance locked in and a good build team on side, but may overlook the process of choosing the right surveying team to work with to find the true land potential. Different surveying teams may identify different solutions for the same section of land, and so it pays to spend time explaining your development goals to your surveyor so they can help you locate the best location for your project. Step one is to get help with your land research. If you’re developing for the first…

‘This report runs to 215 pages. So much for the commitment to ensure new rules minimise compliance costs’ Inland Revenue has recently released a special report on the enactment of the changes to interest deductibility and bright-line rules. This report, designed to assist taxpayers to understand and interpret the new rules, runs to 215 pages. So much for the government’s commitment to ensure new rules minimise compliance costs. In this article I want to cover off changes to rollover relief as it relates to bright-line. Rollover relief from bright-line has previously only been granted in very limited circumstances, including changes of ownership pursuant to relationship property settlements and transfers following death of a taxpayer and movement of property to executors and beneficiaries of an estate. Rollover relief means the transferor…

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 Nelson/ Tasman is dominated by houses, with small numbers of flats and apartments. Of the 408 properties recently for rent, 88 per cent have been houses (360), with…