Innholdsfortegnelse for June 2023 i NZ Property Investor

The April figures from REINZ (the most up-to-date figures at time of print) reveal the market has slipped yet again. Across New Zealand the median price for residential property has decreased nearly 11 per cent annually, down to $780,000. The price plummet continues, driven by our tight economy, and it’s worth asking ourselves - how low will we go? Our lead story this issue, written by Sally Lindsay, looks at this question. Drawing on data, and the opinion of experts, she explores if we have reached the bottom of the market or if there are still drops to come. The prediction of property values is an imprecise science: it’s impossible to make judgements with 100 per cent accuracy. And the experts we speak to are mixed in their opinions. Kelvin…

The recent moves by the Reserve Bank to finalise its debt-to-income (DTI) restrictions tool has sparked discussion and surprise amongst property investors. Changes seem almost certain to be imposed from about March 2024 and have become an even greater likelihood since the RBNZ’s surprise move to loosen loan-to-value (LVR) ratio restrictions earlier than anticipated. Here’s where things stand and some key unknowns: No-one knows what the DTI limits will be. Will the RBNZ introduce a cap of seven times that of income, regardless of borrower type? Could there be exemptions introduced for new builds? Is a speed limit system likely, as per the existing LVR rules? Banks will look at “all” income and debt when calculating DTIs, incorporating existing loans as well as the potential new mortgage being assessed. The…

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…

YOUR RATES Just when it appeared that we may have hit the top of the official cash rate increases, a combination of surging migration numbers (the annual gain is sitting at circa 65,000 in comparison to losing 19,000 a year ago) and our finance minister spending more than he should (economist Cameron Bagrie pointed out that government spending as a percentage of GDP is increasing roughly 1 per cent a year since 2018 and this trend definitely continued at the budget) has meant that the cash rate has been increased by a further 25 basis points (0.25 per cent). It was only a month or so ago that the general consensus was that the OCR either had already peaked or we would have a final rise of 25 basis points…

Open plan living is key for small spaces, and a recent renovation of a 98m2 property in Whangarei was a prime example. This two-bedroom, internal access townhouse was a rental in need of a refresh for a more functional, welcoming interior, practical in form and function. FIRST THINGS FIRST The key change for this renovation was twofold, affecting the laundry and kitchen. The laundry was to be repositioned from its current spot in the kitchen. By doing this (transferring the laundry into the bathroom) it was then possible to create a more aesthetic kitchen design. As this was a two-bedroom unit, there was no family requirement for a bath, so there was more value added by having the laundry sited in a discreet location, with noise reduction. No-one wants to…

YOUR SHORT-TERM RENTAL Airbnb is one of the most popular travel platforms, though it may come as a surprise it is not the largest. There are many other top contenders, with travellers frequently choosing websites based on what’s popular in their country. According to the most recent travel research from Apptopia, Airbnb held a global market share of 25.97 per cent in 2021, with Booking.com sitting at 34.57 per cent. Hopper, the fastest-growing platform, sprung to a global share of 7.68 per cent. Expedia reached 7.31 per cent, and their group brand Vrbo achieved 5.26 per cent. Brands under Booking Holdings, Expedia and Trip.com comprised the remainder of the global market. While Expedia brands have smaller shares, 2023 Expedia Group data lists their monthly traffic at over 100 million unique…

YOUR ACCOUNTANT Investors who have investigated or undertaken division or development with their investment property are likely to have had to come to grips with section CB12 of the Income Tax Act. Section CB12 is one of the commonly cited land taxing provisions which can tax the disposal gains from land developed or divided within 10 years of acquisition where the work associated is “more than minor”. The section has four exclusions which include schemes that result in residential occupation by the taxpayer; the creation of business premises; farming and agricultural businesses; and developments undertaken to derive investment income like rent. So what’s an example of a scheme of development that might be subject to tax under CB12? NEW SECTION Here’s an example. Joe purchases a rental property for the…

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 Queenstown’s rental market is dominated by houses, although it also has a reasonable spread of apartments and flats. Of the 288 properties recently available for rent, 222 (77 per cent) have been…

NZPIF FROM THE PRESIDENT'S DESK SUE HARRISON Turning landlords and tenants into adversaries has been a popular narrative with the media and helps the current government bring in some heavy disincentives to own rental properties. There have been so many levers pulled to ensure that house prices come down while interest rates, council rates, insurance, maintenance and associated costs go up. The government says it is helping tenants, but the tax grab and extra rules have brought significant negative impacts. Rents have increased in New Zealand ahead of what is already a big influx of people migrating here. A Trade Me rental price index in February showed the median weekly rent had hit $600 for the first time and is up 15 per cent on the same month in 2020.…

UP FRONT NEWS Investors’ market share of new purchases has slumped to a new low of 19.9 per cent. Low yields, high mortgage rates, high deposits and interest deductibility changes are deterring mortgaged multiple property owners (investors) from buying, CoreLogic’s Buyer Classification data shows. While mortgaged investors’ market share drops, the share of first home buyers and cashed-up investors is running at record highs. CoreLogic chief property economist Kelvin Davidson says the record low is slightly below the previous mark of 20 per cent in September last year. ‘We’re not seeing existing investors sell off to any great degree’ KELVIN DAVIDSON He says market conditions are particularly tough for mortgaged investors. “The 40 per cent deposit requirement has also been a hurdle. However, the prospect of that loosening to 35 per…

Luke Nicholls started investing early, building a rental portfolio while also growing a tech startup that helps landlords manage their own properties. Buying and renovating properties feels like home for Nicholls, who grew up with a father who was an active investor, buying and flipping houses across New Zealand. “When I grew up we often lived on construction sites, or we were going around doing up properties on the weekend, helping Dad out,” he says. “That was a big thing for me – it instilled in us the mindset of ‘hands up, not hands out’, of asking what I can do to help out instead of asking for a hand-out … my Dad is a bloody hard-arse!” ‘I always had a vision to purchase my first property as soon as…

The modern laundry room is no longer just a space for washing machines and tubs; it is now a multifunctional area that can serve various purposes in the home. When renovating, consider these trends to maximise a laundry area’s potential: 1 Additional storage space: If it is located close to the kitchen, consider adding pantry space for food and benchtop appliances, as well as deep cupboards for cleaning items. Benchtops can be used for rollover space for meal preparation when entertaining. 2 Multifunctional entry space: If your laundry room is located near an external door or entrance to the home, it can be converted into a coat closet or mudroom, providing a space to store jackets and shoes. This will keep living spaces free from clutter and make the home…

YOUR PROPERTY MANAGER Many will be aware that National has stated it will reverse the law change made under this Labour Government, allowing landlords to give tenants notice without a valid reason. There will be many landlords who support this move. Landlords should have the ability to remove problematic tenants quickly and easily. The current law does not allow for this and it can be challenging to obtain sufficient evidence to seek termination through the Tenancy Tribunal against a troublesome tenant who is antisocial and proving to be a problem within the neighbourhood. Even if you do, there is no guarantee that the adjudicator will terminate the tenancy. In 2020, we witnessed significant changes to the Residential Tenancies Act that strengthened tenants’ rights. One of the many changes was the…

YOUR DEVELOPER Due to the nation’s housing shortage, build-to-rent developments are growing in popularity across New Zealand. Build-to-rent includes multiple residential units, where the whole development is owned by the investor rather than just one unit. And build-torent possibilities are offering a housing solution that will benefit tenants and property investors as more people struggle to secure affordable housing. DURABLE CONSTRUCTION When beginning a build-to-rent project, investors have a variety of construction systems to take into account. The investor would aim to meet the needs of their renters, while also looking for a good return. Insulated concrete formwork (ICF) construction is a choice that is advantageous to the investor and the tenant. ICF is a method of construction where poured in place, steel reinforced, waterproof concrete fills the space between…

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: DOWN Three banks have trimmed back their three-year fixed interest mortgage rates below 6…

1 Build a strong relationship with your mortgage broker “They’re able to help advise you, and provide value over and above connecting you with a bank. Get someone on your side who you can trust, and who understands what you’re trying to achieve.” 2 Buy in areas where you feel confident “I’ve got a couple of mates who keep telling me to [buy in] Christchurch, but I don’t like to gamble. I like to be certain, and know the area intimately, and all the council plans. I feel safe and confident buying where I know.” 3 Save money by doing as much work as you can Renovations are expensive and tradies can be hard to pin down, so when you’re starting out it helps to do as much work as you can. Cleaning,…

DIY PROJECT CALEB AND ALICE PEARSON When it comes to property ownership, it is not without expense. Property materials deteriorate over time: paint wears thin, carpet wears out, and the day-to-day life of tenants takes its toll. During the lifetime of a property investment there will almost certainly be a cost to maintain the standard of your property and its life expectancy. Many of these costs can give you a shock, along with uncertainty on how you will afford them, but they need not be a surprise. By taking a little time to develop a longterm strategy you can plan for many of these projects well in advance. MASTER PLAN As a landlord we commonly deal with projects and expenses on a case-bycase basis as issues are discovered and need…

We’ve all seen the news stories about damp properties where dampness has caused mould build-up and sickness for the tenants, especially children. However, dampness can also ruin the structure of a home, cause problems with walls, carpets, ceilings, furnishings and even foundations. Nobody wants a damp home and nobody wants a damp investment. Damp, mouldy homes aren’t just undesirable to live in; they could have you spending more money on basic upkeep and see you lose money on your Investment. The Healthy Homes ventilation standard has been put in place to address the damp issue in New Zealand housing. Depending on the age of the property and when the tenancy agreement renews, all rental properties must comply with these standards from July 1, 2025, or 90 days from a new…

YOUR REVIEW A career-driven couple spent years saving for their ideal “forever home” only to discover it wasn’t the happy ending they thought it would be. Here’s how the pair sold their dream property to create the retirement of their dreams instead. THE INVESTORS Married couple Sammy and Leon, 41 and 42, had saved for years to buy the ultimate property: a 400m2 house on a seven-hectare section. Together they were earning just shy of $290,000 a year, $155,000 and $135,000 respectively. Life seemed great, but it was soon clear their long-desired dream had flaws. Their huge, luxurious home was far too expensive to run (eg cleaning, maintenance, electricity, rates and insurance). And not only that, it was incredibly inconvenient to live 60 kilometres out of the city centre, often…