Innholdsfortegnelse for July 2022 i NZ Property Investor

It’s a turbulent world out there. The daily headlines are screaming doom and gloom; New Zealand’s GDP for the first quarter dropped 0.2 per cent; Omicron continues to rage; and the war in Ukraine shows no sign of abating. House prices are slowing and inflation is rising, along with mortgage rates. It’s enough to keep you awake at night. Given the state of the nation (and the world) at present, we thought it timely to ask experts about their predictions for the housing market in the next 12 months. Are house prices, which soared in 2020-21, going to drop off the cliff? Are property investors in for a rough ride, that some may not survive? While our five experts acknowledge there are storm clouds ahead, there doesn’t seem to 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. 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 managing director and franchisor of Propertyscouts NZ. He’s deputy chairman of the RPMA and is passionate about the property management industry, particularly, raising industry standards. SHANE CAMPBELL A Partner in Wynn Williams’ Dispute Resolution Team, Shane specialises in complex commercial…

HOUSE PRICES: DOWN Across New Zealand, median prices for residential property increased 2.4 per cent annually, from $820,000 in May 2021 to $840,000 in May 2022. Month-on-month, this represents a 4 per cent drop from $875,000 in April. The median price for NZ, excluding Auckland, increased 7.6 per cent annually from $678,500 in May 2021 to $730,000 in May 2022. There was a month-on-month decline of 3.3 per cent from $755,000 in April. OCR: UP The Reserve Bank has lifted the official cash rate (OCR) by 50 basis points to 2 per cent. INTEREST RATES: UP ANZ has upped its mortgage interest rates again. Its five-year rate is 6.95% and it has no carded offers below 5% now. The new fixed rates at 5.95% for one year, 6.40% for two…

A“roller-coaster ride” is an understatement when exploring the life of Aucklander Nichole Lewis. Her early life began with tragedy, and she’s made, lost, and remade a fortune in the property game. But in 2022 she’s still standing (thriving in fact) and has an inspiring story to tell anyone who is interested in how to make money out of property. Hers is a story of resilience, determination, and an ability to see opportunity beyond her immediate situation: qualities that ensured her success as an investor. When Nichole was just a few months old, her mother passed away. Her Scottish dad and Kiwi mum had relocated to South Africa for work in the 1970s, but tragically her mother was killed in a car accident on her 26th birthday. Her father had also…

New Zealand’s young and ageing populations are driving investment in commercial property occupied by early education and healthcare centres, such as daycare, medical practices and specialist health businesses. Property investment company Erskine & Owen director Alan Henderson says properties used by specific sectors such as early education and healthcare can command a premium for rental space, making it an attractive option for residential investors wanting to step into commercial investment without the hassles of owning a property outright. “With an increasing number of New Zealanders in the older age bracket it means this demographic has ongoing healthcare needs that help to significantly underpin the revenues of the tenants in these types of buildings,” says Henderson. According to Stats New Zealand the number of people aged 65+ doubled between 1991 and…

An investment property can be a valuable part of your portfolio, but the property dream can quickly become a nightmare if you don’t find the right tenants or have the right insurance. It goes without saying that you need to insure your rental property. Since the Canterbury earthquakes, most insurance policies have a set sum insured rather than providing full replacement up to an agreed floor area. Online calculators can help with setting your sum insured. If you choose to use an online calculator, keep a record of it, as under some policies being able to produce this is a precondition to accessing additional policy benefits. Obtaining a quantity surveyor’s rebuild cost estimate may well provide greater peace of mind, particularly given house building costs have increased over 20 per…

‘Significant investment in smart home devices will be required to measure a property’s performance’ As winter bites many tenants across New Zealand will benefit from the introduction of the Healthy Homes standards. Although few will protest the necessity of the standards, implementation has been far from perfect. Issues around the heating standards have plagued its introduction, especially for homes built to the 2008 building code requirements. This will be of huge frustration for landlords who have had to install top-up heaters in new builds. As frustrating as the moving target for the Healthy Homes standards has been, change was necessary. The quality of much of the rental stock in NZ is not where it needs to be and in the provinces many towns have aged housing stock, requiring more investment.…

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 Whangarei’s rental property market is strongly tilted towards houses, with only a handful of apartments and flats. Of the 333 properties recently on the rental market, 291 (87 per cent) have been…

NORTHLAND NEXT MEETING: Wednesday July 27, 7pm, Whangarei Club, 18 Rust Avenue, Whangarei. TOPIC: Guest speaker is Peter Lewis, NZPIF Vice-President. As NZPIF Northern Area Representative, Peter will present an update on the current activities of the NZ Property Investors’ Federation, with an emphasis on the recently released “Plan to Fix the Rental Crisis”. As a highly experienced property investor, Peter will make the evening’s main presentation ‘How to invest right so that you can afford to leave the rat race’. MEMBERSHIP: $180 single or $210 couple; includes many benefits. Please email npiacontact@gmail.com for more information. PO Box 1640, Whangarei. AUCKLAND NEXT MEETING: APIA hosts 100+ meetings for its members each year. Go to www.apia.org.nz/events for details of upcoming meetings. MEMBERSHIP: From $75; can be purchased on www.apia.org.nz/join. For more…

The popularity of a recent webinar prompts this coverage of the success factors required to help investors improve the income potential of existing build rentals. The Buy, Renovate, Rent, Refinance, Repeat (BRRRR) strategy is how renovation-focused property investors accelerate growth, but there are certain things you can do in order to double your rental return even quicker. Ilse Wolfe, of Opes Accelerate, says she recently worked with an investor who was able to use $50,000 to transform a two-bed standalone house into a five-bed social housing rental in Whangarei. The rent doubled from $350 to $695 a week, and the overall value increased by $159,000. And all this was achieved in a mere 18 days. Here are some of Wolfe’s pointers to how this quick turnaround was achieved. A clear…

‘As always, one size does not fit all when it comes to mortgage strategy’ It’s the middle of the year and we’ve seen a massive increase in every fixed-rate term since January. The official cash rate (OCR) increased again in late May by another 0.50 per cent, and we’re expecting to see further increases to the same extent over the next few reviews, the first of which is in early July. Given the fact there are further rate expectations for the remainder of the year, it seems we are likely to continually see fixed rates increasing, at least until the end of the year. In addition there are high inflation statistics overseas. As other countries look to get this under control we are also likely to see further increases to…

‘You’ll definitely need to be smart and have a good strategy you can work from’ When it comes to property development most people would know this as the transformation of Auckland housing. Every time you go out you will most definitely see a piece of land that once housed a little bungalow of a home, now levelled to make space for five or more townhouses, or even an apartment building. It is very clear Auckland is growing, so this begs the question: “Where are we going to house everyone?” Even Auckland City Council has publicly acknowledged this by wanting to change its rules on building height and density, changing various zonings under Auckland’s Unitary Plan. But why let the council have all the fun? You, too, can join in Auckland’s…

‘Financially, upgrading their rental and purchasing investments makes more sense’ THE SITUATION I was working with a Wellington-based couple (Jeff and Vanessa) who owned three investment properties around the country; two in Wellington and one in Auckland. They were renting and wanted to start a family. That’s why they were thinking about buying their own home in the capital. But at the same time they were also wondering: “Should we just buy more rental properties instead?” They wanted to spend $2-$3 million if they were going to purchase their own home. But, if they did that, it would mean they wouldn’t be able to grow their investment portfolio further because they would run out of borrowing ability. So there was a trade-off; it was one or the other. They couldn’t…

‘Being a rental property owner can be a very isolating thing for many people’ I appreciate that many of us likely roll our eyes at some of the weird and whacky national days and weeks for this cause and that. But at the time of writing this column it is National Volunteer Week, and this got me thinking about all the wonderful volunteers who run Property Investors’ Associations around the country. There are 17 Property Investors’ Associations (PIA) around New Zealand, mostly organised by enthusiastic and dedicated volunteers who are passionate about property. Some are there to learn more about rental property and some are there to give back to an industry that has helped them become financially secure. They are a mixed bunch with different personalities, skills and experiences…

These looks at all transactions across the market and groups them based on who the buyer was. Overall property market activity levels continue to weaken (in terms of the number of deals), but there are some interesting underlying trends in terms of market share. Indeed, the latest CoreLogic Buyer Classification figures show that the shares of property purchases being made by first home buyers and mortgaged multiple property owners (MPOs/ investors) both continue to hover at around 22-23%, with ‘movers’ – i.e. relocating owner occupiers – also fairly steady in the high 20%’s. But perhaps the most striking shift so far in 2022 has been for cash multiple property owners, who have seen their share of purchases increase to 14%. Some of these purchases may actually just involve reshuffling debt…

Thousands of borrowers will come up against much higher interest rates when their mortgages roll off fixed interest rates over the next year. About $160 billion in fixed-rate housing loans come up for review in the next 12 months. Many borrowers will be forced to pay much higher interest rates, some from 2.5 to 5 per cent, and face economic stress. Even further pressure will go on the mortgage market after the latest OCR hike. Independent economist Tony Alexander believes interest rates will go higher quicker. He is picking the OCR will peak at 3.5 per cent, floating interest rates at 7 per cent, while one-year fixed rates will rise 1-1.5 per cent. House prices will fall 10 to 15 per cent on average. Mortgage rates have increased rapidly in…

‘There are a few things you can do, or at least be mindful of, to try and soften the blow’ In last month’s column I took a look at the way bank dominance across the mortgage lending market has started to bite borrowers in recent months. Finding themselves particularly hard hit are investors who strayed down the treacherous path of putting all their loans with one bank. Under new, stricter lending and servicing criteria, we’re seeing too many instances of banks claiming full proceeds of a sale (at the final hour) when they deem borrowers unable to service the rest of their debt. And anyone wanting to split their banking now to avoid this worst-case scenario is likely to find themselves paying more for a solution – that’s if they…

Adding bedrooms or making extensions can add value to your home. But you need t o consider: 1. HOW: Your budget, space available and structural requirements will dictate whether you move insides, extend upwards or outwards, or build somewhere new on your property. 2. WHO: Whether you opt for an extension, a new room, additional story or self-contained unit, begin planning early with a designer. It’s generally always a good idea to consult your chosen builder at the same time. 3. CONSENTS: All home extensions require a building consent, and the work must be done or supervised by a Licensed Building Practitioner. 4. INSURANCE: Regular home insurance often won’t cover loss or damage while structural alterations are being made. Give yourself peace of mind by checking for any exclusions, and…

‘It pays to understand the local rules, which are frequently changing’ The main challenges facing rural landowners and investors are the regulations and restrictions around how the land can be subdivided for development or sale. Council planners are generally aiming to stop the urban sprawl from major cities and protect the density of existing settled rural areas. They aim to limit residential development in rural areas to ensure that rural land remains primarily focused on production, and not detract from farming operations, and rules are changing to ensure this remains the case. Waimakariri District Council, for example, has recently changed subdivision rules from a minimum lot size of 4ha throughout the whole district to 20ha throughout most of the district, the aim being to preserve land for farming. They have…

The bank of mum and dad is said to now be the largest bank in NZ with many first home buyers turning to their parents to help them get onto the property ladder. There are many ways to approach the dilemma of how best to respond to the pressure of helping the kids into a property. Common options include equity share, buying the property yourself and renting it to the kids for purchase down the track, guaranteeing their lending, or gifting and/or lending them the deposit. So, what’s the best option and what are the key issues, tax and financial, to watch out for? Firstly, let’s deal with tax. The bright-line rules have significantly altered the option list. Going onto the title and planning to transfer the property to children…