Innholdsfortegnelse for May 2023 i NZ Property Investor

Relocatable homes have come of age recently. No longer are they just old, formerly unwanted properties shipped to a new location; innovations in technology around construction have seen these morph into attractive, highly liveable portable homes. In our May issue we discover all there is to know about relocatable homes. Interestingly, those of us who were born in New Zealand are far less likely to choose relocatable homes when looking to add value. According to Mike Forde, of Forde Brothers House Removals, 99 per cent of Forde's relocatable homes are sold to Chinese investors. “Most home-grown Kiwi property investors will not look at a relocatable home – moving a house to the back of a section and making room for another one, two or three relocatable homes as rentals,” he…

Debt-to-income levels will become a reality for mortgage borrowers next March, says Kelvin Davidson, CoreLogic's chief economist. Although the Reserve Bank hasn't said it will introduce DTIs, it has indicated March next year is the date they will become a formal tool along with LVRs to restrict residential mortgage lending. Davidson says the RBNZ will activate DTIs next year, but it won't be to curb lending in this housing cycle but for subsequent cycles so house prices never rise 40 per cent over two years as they did during the Covid pandemic. Davidson says the RBNZ's recent release about the debt-to-income ratios didn't say anything new. “There was no indication of the limit – whether it would be five, six or seven times income – exemptions for new builds, although…

Property investors Doug and Sue saw an opportunity to source a quality relocatable family home for the back of their 607m2 section, which had a house at the front. Their objective was to increase their equity in a cost-effective way and receive a cash flow positive rental return for their future lifestyle needs. They sourced a three-bedroom listing with The Relocatable Home Company. Given Doug's engineering background and attention to detail, he sought plenty of information up-front about the process of house relocation. A site audit report was completed to ensure an optimised fit of the house onto their property. Doug and Sue were able to provide a survey and site plan to assist with this report. The company's house plus relocation package included filing the necessary council consents and…

Territorial authorities have different regulations, but buildings are classed the same throughout the country. Adding a new dwelling on an existing property always involves a consent of some type. The complexity and cost depends on things like how big you want the new dwelling to be, if you're looking to establish a new title for it (subdivide), and how it will be used. Different territorial authorities have different rules, but buildings are classed the same throughout the country. Sleepouts can't have food preparation facilities or a bathroom, and are generally classed as “accessory buildings” rather than dwellings. These are the simplest to consent and build. In some cases, no consent is needed. “Minor dwellings” include sleepouts with food preparation facilities and a bathroom, up to a size of 60 or…

With early forecasts for the market to reach over US$256 billion by 2030, many property owners want to know which model is more profitable, short-term or long-term rentals. Both rental markets come with unique benefits and specific needs to excel, but more often than not, short-term renting holds the trump card. Here's why. PROFITS UP The earning potential for short-term rentals can be exponentially greater, moving away from the linear and fixed long-term pricing model. Daily rates are higher and optimised throughout the year depending on seasons, entertainment, holidays, and demand. During the summer events such as the upcoming FIFA Women's World Cup, headline concerts and long weekends bring increased demand which pushes occupancy, pricing and profits. These are fluctuations not seen in long-term renting. A key consideration for maximising…

This article is a no-frills hard look at the cash flow reality facing heavily leveraged residential property investors holding property that is not new builds, and whether, if you are amongst them, you need to make tough decisions to sell and retire debt. Many residential investors have a portfolio of disallowed residential property funded by debt that is now subject to the deductibility of its interest being progressively disallowed. Since the removal of deductibility we have seen interest rates more than double, so we are now seeing rates generally being re-fixed at 6.5 per cent, or more, if you are subject to commercial lending criteria. And we may not have seen the end of interest rate rises. For the 2024 year we are entering, 50 per cent of the actual…

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 and Tasman is dominated by houses, with smaller proportions of flats and apartments. Of the 429 properties recently available for rent, 360 (84 per cent) have been…

NZPIF FROM THE PRESIDENT'S DESK SUE HARRISON As the value of properties throughout the country falls dramatically we have survey results that prove the structural damage caused to the rental marketplace. The marketplace relies very heavily on private ownership of around 85 per cent of rental homes. Owning rental homes is a business with a range of expenses beyond the mortgage involved, so there needs to be some rewards as part of the risks of the investment involved. The Reserve Bank only has eyes for bringing down inflation, which has brought a sledgehammer to the property market. As yet nothing is being done to help ease the pain for landlords and therefore tenants, who are the end users of our mostly privately funded rental market place. Instead, the financial burden…

The Healthy Homes Standards and tenancy law changes have been blamed for higher average rents of more than $500 a week. Of 700 landlords answering a recent Kantar survey commissioned by the Housing and Urban Development (HUD) Ministry, 47 per cent had raised rents by more than $20 a week to the end of November. Of those landlords who had not raised rent in the past six months, 23 per cent were considering increasing rent in the next three months. Key reasons for 41 per cent of landlords considering a rent increase include a desire to cover increased costs, for 51 per cent it is matching market rates, and for 57 per cent it was raising rents after a year of no increases. Two out of five, or 39 per…

HOUSE PRICES: DOWN Nationwide March's median house price dropped 12.9 per cent annually to $775,000, REINZ data show. For New Zealand, excluding Auckland, median prices were down 9.7 per cent to $695,000. Sales counts eased across the country by 15 per cent annually. The number of residential property sales increased month-on-month by 42.9 per cent. Nationally, new listings dropped 17.7 per cent, from 11,224 listings in March last year to 9,242 listings in March this year. OCR: UP The Reserve Bank's official cash rate sits at 5.25 per cent after an unexpected 50bps rise at the beginning of April, with the bank indicating more rises are to come, up to possibly 5.5 per cent. INTEREST RATES: UP Westpac and ANZ have made changes to lending and deposit interest rates. ANZ's…

OPINION Many of our clients are asking what's on offer from the various parties for the 2023 election, so I thought it would be useful to recap the tax changes made by Labour in their past two terms, and then canvass the offerings from political parties to reverse their changes. As a disclaimer, I'm not a fan of this government's tax policy on residential landlords (being a landlord myself), so if you are left-leaning investor you might be better to move on to the next article. When Labour astonished investors with bombshell tax changes in early 2021, I said I would remind our clients and readers of the “about face” the government did on tax policy in the run-up to the 2023 election. Let's not forget Grant Robertson swore black…

DIY PROJECT CALEB AND ALICE PEARSON When it comes to your tenants’ belongings there is a high probability the most valuable possession they own is their vehicle. As a landlord we place much value on ensuring the property they occupy is up to a high, healthy and maintained standard, and rightly so. Outside what is under your ownership, it is prudent to consider whether you can cater and provide options for your tenants’ belongings, the items they place value on, and where and how they are located and protected on your property. I discussed storage solutions in a previous issue, but want to specifically focus on vehicle parking. For most tenants it would be a safe bet they have a car (or multiple cars), and that they are mindful of…

Having worked in property management for nearly two decades, I can assure you there has never been a dull moment. One of the most challenging aspects we deal with is Healthy Homes. Firstly, we do need minimum standards. Every tenant deserves a warm, dry and safe environment. However, with Healthy Homes we have created a bureaucratically confusing set of standards with moving goalposts, criteria and dates. The heating calculator, for example, has seen landlords waste thousands of dollars on top-up heat pumps that were not required and will probably never be used. The government had to move dates around when it became clear they would fail to meet their own standards. When I started in the industry a Tenancy Agreement was two pages long. It is now a 25-page document,…

YOUR REVIEW OPES PARTNERS A couple of debt-free homeowners were in their early 50s when they bought their first investment properties, worth $2 million. But even though they had no personal mortgage, Opes Property partner Stevie Waring suggested they take out an interest-only loan. So, how would this benefit our mortgage-free, first time investors? Here's how it worked. Auckland couple Joan and John describe themselves as “relatively conservative”. They were in their early 50s, had paid off the mortgage on their own home, but had never invested. However, they had received a large inheritance of $1 million and wanted to use the money wisely. HOW MUCH MONEY? To create a property investment plan you first need to figure out what you're investing for. In other words: “How much money do you…

Q I have a rental owned in a trust. The trust is quite old, and we have been advised by our solicitor to wind it up and disperse the assets. Selling is not practical due to falling house prices and I need the rental income in my financial circumstances. Can the trust deed be updated and is it expensive? A Unfortunately, without reading the trust deed I cannot provide a definitive answer. However, I have a few thoughts that hopefully are of use. First, whether or not you can update the trust deed depends on whether there is a clause in the deed that enables trustees to make changes. If such a clause exists, then you likely will be able to update it. On the other hand, if no such…

YOUR RATES The first quarter is well and truly over and we started off the second quarter with an increase to our OCR by 0.50 per cent on April 5. At the time of writing not all banks have actually passed this on to clients, with only two banks having increased their floating rates and short-term fixed rates (six months-24 months), being Westpac and ANZ. ANZ have decided to keep their longterm interest rates the same (3-5 year) while Westpac have actually decreased theirs to 5.99 per cent, for special rates. When you have an inverted interest rate curve like this, it is usually due to the fact that there is a market expectation that we will see interest rates decrease in the mid-term. SHOP AROUND It can be tempting…

Compliance with Healthy Homes has resulted in more pressure and workload for landlords who also have to understand what the legislation means. The government has not helped itself because there have been issues with the heating calculator that resulted in amendments in May 2022. These needed to be made as the previous calculator did not take into account correct building requirements under the 2008 building code. This led to frustration as landlords not familiar with the legislation could not understand how new builds were failing the calculation. There are many benefits to using a professional property manager in dealing with such complex matters. They should have a solid understanding of the legislation as they are working with it daily, and they typically have access to Healthy Homes assessors who can…

Commercial property investors may have a lot to consider over the coming months. In particular, investors with leases expiring, leases coming up for renewal or due a rent review will benefit from having frank discussions with prospective or existing tenants on their current and projected financial status. The current economic hardships don't hit all industries in the same way. The following summarises our thoughts on the industrial, office and retail/hospitality sectors and provides some considerations for affected landlords. Seeking assistance from valuers and other professionals in your team will prove helpful for investors navigating this period. Industrial investment continues to be a solid performer, with low occupancy rates driven by lack of industrial land, reduced development activity and tenants who often operate in sectors with reliable incomes. Landlords nearing expiry…