Innholdsfortegnelse for October 2022 i NZ Property Investor

Apartments are an interesting investment option. Some investors include them in their portfolio as they have a low entry point price wise and (traditionally, in large centres) attract students visiting from overseas. But that was before Covid. It’s been well publicised that the border closures turned the tap off on international students, and since then the apartment market has languished. Sale prices have shrunk: a 40m2 apartment on Queen Street recently sold for sub-$300,000; it was selling for $400,000 pre-pandemic. Experts are predicting the tide is about to turn, however. The bottom has been hit and the only way is up (according to some). This is particularly true in Christchurch. The city is considered undervalued and one local real estate agent, who specialises in apartment, says investors are getting much…

YOUR RATES The cost of borrowing is still increasing, generally speaking. In September there were some increases as a result of events in the United States because there was an expectation inflation would be lower. However, given the result was higher, this (much like what is happening in New Zealand) puts upward pressure on interest rates. In NZ we have seen the floating and half-year rates increase in the last month as a result of the previous official cash rate (OCR) review, and it is still widely expected we will see borrowing costs increase between now and the end of the year. Until recently there had been consensus between economists that our OCR would peak around 4 per cent, and the expectation was that it would be this year (0.5…

COMMERCIAL SPONSORED BY The argument in favour of keeping property management in-house is now heard loudly, and in the same breath the perceived benefits of outsourcing these tasks is losing its pull. A big reason for this shift is just the fact there are now systems available allowing landlords to manage their own portfolio. Re-Leased is one of these systems. It was founded in New Zealand by Tom Wallace in 2012 as a better property management tool that placed automation, design and great user experience at its core. After an initial product was released in 2013, Re-Leased launched its Landlord App in 2018, providing landlords with real-time data on their properties and portfolios, and a year later the Property Manager App was launched. Because of its success, the company now…

YOUR SURVEYOR Those of you keeping an eye on the legislation for property development will know all about the changes to the Resource Management Act (RMA) that have set the landscape for the government’s plan to increase residential housing supply in our main cities and suburbs. Under the Medium Density Residential Standards (MDRS) councils have to allow three-storey developments and three units per site without requiring resource consent, removing previous height-to-boundary standards on an average-sized lot. However, private land covenants are the last line of defence, or block, to a developer’s property dreams, and if you are buying or selling you need to pay close attention to these rules. So what does this mean for landowners? You may have already seen multi-unit dwellings popping up on sites that were originally…

NZPIF FROM THE PRESIDENT'S DESK ANDREW KING It has been way too long since the last NZPIF conference, but it was well worth the wait. Despite problematic new tax rules and a falling market, there was an upbeat mood among delegates that was infectious. Even the AGM was fun! We were first reminded that although the market had peaked and was now in a decline phase, this had happened many times before. Property prices move in cycles, affected by many factors. Two lead indicators for property price are sales volumes and the number of days to sell. These are stats that are worth watching to gain an idea of where general market prices may go. This period of the property cycle also presents good buying opportunities. As Warren Buffet says:…

Commentators’ views that the property downturn “on the ground” may come to an end within the next six to nine months seems to be borne out by the latest Auckland data from real estate agency, Barfoot & Thompson. The agency sells one in three houses across the Auckland region and says the monthly downward slide in house prices in the country’s biggest city came to a halt in August, with the median sales price remaining constant with that for July, while the average price increased. However, where the market is really seeing change is in the number of properties being sold. Just 578 were sold in August, the lowest number in a month since the Covid-affected sales months in mid-2020. “Given that there are buyers in the market, the combination…

YOUR MORTGAGE Property investors are probably feeling a bit disillusioned with the lack of easy “opportunities” out in the market of late. Existing property has lost its appeal with the removal of tax deductibility. Commercial’s an option, but a relatively low yield and not as liquid, and there’s always the risk of a space sitting untenanted for ages (especially in this climate). New builds are plugged by property marketing firms and with lots of developers needing to move stock right now there are opportunities, especially for anyone rethinking their portfolio to become more tax efficient. Buying new from a developer is one way to do it, but I want to talk about the option to develop-and-hold yourself. Develop-and-hold is exactly what it sounds like: developing property and holding onto it…

A fresh lick of paint is guaranteed to transform any property. Repainting completely changes the look and feel of a home, whether it’s inside or outside, because painted surfaces take up such a large proportion of what you see. There are endless painting projects you can tackle, and almost anything can be painted when you have proper preparation and the right paint. An internal repaint has to be one of the most effective ways to freshen up. You may have tired and dated surfaces, damage, or maintenance needs, or you may want to attract new tenants or make a sale. Whatever the reason, if your property is in need of an internal refresh here are my simple steps to get you going. DEFINE THE SCOPE As almost every surface in…

YOUR PROPERTY MANAGER In recent weeks we’ve seen tenant advocate groups as well as the Human Rights Commission demand improvements for tenant rights and, once again, we see a call for rent controls. Tenant advocate groups, such as Renters United, continue to apply pressure to improve tenant conditions, acting as a lobby group. They have directed their focus on councils with local body elections taking place, which isn’t a silly idea. Local councils have significant, often under-utilised power, including the right to inspect properties, ensuring they comply with relevant legislation. Paul Hunt, the Chief Human Rights Commissioner, made similar demands in a recent opinion piece in Stuff. Hunt believes it’s unfair to burden tenants with enforcing compliance and that Tenancy Services should do this. The ideology of such demands isn’t…

YOUR ACCOUNTANT Investors can be forgiven for being confused by the detail associated with complying with the government's rules to phase out deductibility of residential investment loans. This article attempts to shed light on some of the scenarios and recap some of the fundamentals. Firstly, deductibility of interest is determined by what borrowed money is used for, not the security provided. If a residential rental property is mortgaged to provide finance to purchase a commercial property the interest remains deductible, but the fact that residential property provides security is irrelevant to the deductibility. While straightforward in principle, all sorts of issues crop up with the passage of time. Loans across a property portfolio are typically repaid, refinanced, re-borrowed, cross-collateralised and redocumented as opportunities to add and remove a mix of…

A new study reveals Airbnb listings help to increase rents for landlords in apartment-heavy areas, such as CBDs, but the accommodation platform can reduce rents in low-density, house-dominated neighbourhoods. Auckland University business school senior property lecturer William Cheung and associate professor Edward Yiu say the impact of landlords’ Airbnb rentals on different neighbourhoods shows a need for designated zoning laws. Cheung and Yiu say changes to Airbnb accommodation indicated by some councils will not fix the impacts of Airbnb allowed to operate anywhere. Their paper, published in Tourism Management, explores the effects of “touristification” on rent, catalysed by Airbnb. “Touristification”, says Cheung, is a process that sees unplanned tourism transform a space into one that caters mainly to tourists, provoking displacement pressure on local neighbourhoods. He says the impact of…

HOUSE PRICES: DOWN The median house price across the country is $800,000, down $10,000 (-1.2 per cent) compared to July, and down $50,000 (-5.9 per cent) compared to August last year. However, sales might have bottomed out with 91 more than in July. OCR: STILL UP The Reserve Bank's official cash rate (OCR) sits at 3 per cent. INTEREST RATES: UP The ASB and ANZ now have no interest rates under five per cent after the ASB raised its one-year and 18 month rates. That hasn't been seen since 2015. The interest rate curve appears to be flattening as rates rise incrementally. BUILDING CONSENTS: UP In July consents for new houses rose 5 per cent after falling 2.2 per cent in June. In the year to the end of July…

YOUR STRATEGY Property Investment, to the everyday normal person, has a bit of a negative stigma behind it. In my mind, the typical investor may look like someone who has a lot of knowledge, is ambitious, drives a luxury car, has cash to burn, and someone who wears a business suit all week. As someone who’s dedicated 10 years of his professional career in the marketing and digital content industry, the idea of investing in property was not even a thought I wanted to have in my life plan. Did that change? Yeah, it kind of did. This piece explores what it takes for someone like me to fully dive head first into the property industry and slowly take an interest in it. As for context, I have been working…