Innholdsfortegnelse for July 2023 i NZ Property Investor

Being a property investor involves a sound understanding of the numbers that lie behind each property. If we get the numbers wrong, it can spell trouble. And so, our lead story this issue focuses on the importance of getting the numbers right. We commissioned financial data service Canstar to run numbers for us: it showed that Bay of Plenty and Auckland investment mortgage holders need to have gross household income of $44,527 and $41,368 (respectively) above the average income to be able to service their debt without slipping into mortgage stress (30 per cent of household income). Of course, rental income needs to be factored into the equation, but it's an interesting exercise and one that reveals how much many of us are paying in the current housing market. Sally…

HOUSE PRICES: DOWN The median price dropped 8.2 per cent year-on-year to $780,000, the latest REINZ data show. NZ, excluding Auckland, had a drop in the median price of 6.5 per cent to $685,000 and a 2.1 per cent decline month-on-month. Nelson had the biggest median price rise in May at 2.7 per cent year-on-year and 6.9 per cent month-on-month to $770,000. The West Coast had another increase with a monthonmonth rise of 3.1 per cent. The total number of properties sold across NZ in May was 5,752, down from 5,776 in May last year (-0.4 per cent), and up 30 per cent month-on-month. OCR: UP The Reserve Bank's official cash rate sits at 5.5 per cent after a 25bps rise in May. The RBNZ says it is at the…

PROFILE CHARLOTTE GRIMSHAW Charlotte Grimshaw had a head start when it comes to property investment. The child of property investors, she was immersed in the world of property from a young age. Her parents instilled the value of property ownership in her from the beginning, encouraging her (and her twin sister) to jump on the property ladder early. Christchurch-based Grimshaw and her sister were just 25 when they bought their first home. Located in Redcliffs, near her family home in Sumner, it was the “worst house in the best street”. “We knew that we wanted to stay on this side of town. Not because we are snobs (ha ha), but because we know it would have good capital growth.” The sisters both had good jobs; Charlotte a property lawyer and…

OPES ACCELERATE A week after an electrician rewired Wolfe's laundry, her appliances went on the fritz. “First it was the drier, then the dishwasher, then the range hood,” she says. “The fuse would be triggered every other day. Something was going awry.” Her standard electrician was away on holiday, so she'd hired an unknown tradesman through a recommendation. She had a hunch the rewiring was shoddy. Here's the process she went through to address the fault. SECOND OPINION It's always a good idea to get a second expert opinion before confronting any tradesman on “potentially shoddy” work, Wolfe says. In this instance, her original sparky had returned from holiday and came to inspect the site. “Without going into all the technical details, the electrician had completely overloaded the electricity in…

With climate change causing above-average rainfall around the country, the Healthy Homes provisions around drainage and moisture ingress are timely. All these standards need to be met by July 1, 2025 for all rentals: with any new or renewed tenancy requiring full adherence to the provisions immediately. The correct drainage systems, and the prevention of moisture ingress, are imperative for keeping homes warm and dry. The specifications for correct drainage are listed on the Tenancy Services website and the requirements are multifaceted. The following are needed for all rental homes: efficient, clean and working gutters that carry water away from all parts of the roof; gutters connected to downpipes; gutters installed sufficiently and maintained to eliminate water build-up or stagnant water. Downpipes from guttering usually flow out to stormwater drains.…

YOUR REVIEW Parents Josh and Jodie have centred their entire lives around their five children. Even though the two of them struggled with debt and living pay cheque to pay cheque, their kids wanted for nothing. But now their grown-up family has whittled down to just the two of them, Josh and Jodie have decided it's time for a change. Here's how these middleaged parents became first-time property investors. THE INVESTORS With all their children grown up, Jodie was able to switch her focus. She started researching how to improve her and her husband's life financially. And, to her dismay, she learned how illiterate they had been. Together they decided enough was enough. It was time for a change. The first thing they did was improve their incomes. Josh jumped…

YOUR LAWYER Leveraging your estate for an investment property can be a great way to generate passive income and build wealth, but it's crucial to consider the legal aspects before diving in. A little due diligence upfront can be the difference between making a smart investment that sets you up for success and gambling it all away. Here are some top tips: Legal compliance: Before proceeding with any investment property it's essential to ensure compliance with all applicable laws and regulations. Familiarise yourself with the brightline test as it applies to real estate investments, landlord-tenant relationships, property management, zoning and any other relevant regulations. Financing and contracts: When obtaining financing for your investment property, review and understand all the legal terms and conditions of the mortgage or loan agreement. Consider…

REGIONAL REVIEW SOUTH AUCKLAND Thriving economic and industrial centres sit alongside art, history and nature in the south, Manukau at its heart – a cosmopolitan centre, commercial hub, and home to the largest Polynesian community in the world. With significant population and employment growth expected over the next 30 years, plenty of developments and improvements are planned for Manukau, including new public spaces, residential apartments and urban renewal projects in and around its centre. The area's growing population has also led to attractive new subdivisions popping up and more are in the pipeline. Manukau Institute of Technology (MIT), one of Auckland's biggest education providers, is located in central Manukau along with the South Campus of Auckland University of Technology (AUT), which is ranked in the top 1 per cent of…

NEW ZEALAND PROPERTY INVESTORS FEDERATION NZPIF SPOTLIGHT ON YOUR REGION – OTAGO The Otago Property Investors’ Association has hosted a meeting to look at historic buildings. Architect and OPIA executive member, Mike Ovens, led the panel discussion with Mark Mawdsley, (DCC Advisory Services); Peter Christos, (Urban Design) and Sarah Gallagher (Heritage New Zealand Pouhere Taonga) who identified services and financial support for historic building developments. While the focus was Dunedin and Otago, the information is relevant across the country where every city/town has pockets of historic buildings often looking for new uses. Dunedin has a rich history, being of course a key destination for many early settlers, and so there are many examples of early construction. Mark Mawdsley spoke first with an overview of urban design, heritage and biodiversity in…

NZPIF FROM THE PRESIDENT'S DESK SUE HARRISON As investors we play a valuable role in the New Zealand housing system. Around 86 per cent of rental homes are supplied by private owners and this is one of the best examples of a public/private housing system in the world. Privately-owned rental homes have been the first and fastest to comply with Healthy Homes legislation, most of which our property investor associations supported as good for our tenants. Owners are eager to keep good tenants who look after their home and aspire to fix any issues quickly for them. Our network of owner-investors care about knowing the rules and complying and, more importantly, care about providing good accommodation for tenants. One of New Zealand Property Investors Federation's key functions is to advocate…

With net migration surging to new highs and the residential construction sector slowing on the back of rising interest rates, new demand for housing is now significantly outstripping new supply, ANZ says in its latest Property Focus report. “In other words, New Zealand has a widening housing deficit,” says Sharon Zollner, ANZ's chief economist. By ANZ's estimates the housing deficit had largely been eroded by the third quarter of last year. HOUSE PRICES However, new demand for housing outstripped new supply in both the fourth quarter of last year and the first quarter of this year. Together, over these two quarters alone, the shortfall between new housing supply and demand has come in at around 5,500 dwellings, taking the net migration numbers of 72,000 people arriving in New Zealand on…

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 It appears that the mortgage interest rates have reached their peak, as indicated by the Reserve Bank of New Zealand, our primary regulatory authority responsible for controlling interest rates through managing inflation. While it is not certain whether property prices have hit rock bottom, the current trend of interest rates stabilising, coupled with very strong migration data, presents numerous opportunities for those in a position to explore them. Recently, I had the pleasure of participating in a webinar featuring a chief economist from a prominent bank. He suggested that property prices are nearing their lowest point and expressed hope that the substantial increase in the official cash rate (OCR) (525 basis points or 5.25 per cent since the rate hikes began) and the speed at which these increases…

If you've been a long-time reader of New Zealand Property Investor magazine, the name Michael Burge may ring a bell. The former personal trainer was featured in the June 2020 issue of this magazine after he singlehandedly built a portfolio of 17 houses that he's worked his BRRRR (buy, renovate, rent, refinance, repeat) magic on. His insights are now being shared with others through his property mentoring course (he's in the property coaching feature on page 28). His most recent reno project, completed in March, has been his most successful. With a budget of $60,000 he's managed to add six-figures’ worth of value. And he's providing the people of Rotorua with two new dwellings for the social housing pool as a bonus. NO-ONE BITING The home-and-income Burge bought in the…

YOUR SHORT-TERM RENTAL Throughout the pandemic businesses adjusted to a new way of life with the rise of remote workers and as we return to normality this trend is set to continue driving short-term rental demand. Airbnb CEO Brian Chesky has stated they “wouldn't have recovered so quickly from the pandemic had it not been for millions of people working from Airbnbs”. Supply growth for the global travel giant saw them end 2022 with 6.6 million listings. With a revenue of $8.4 billion, Airbnb grew 40 per cent year-over-year for 2022. The growing popularity of “digital nomadism” and working while travelling has fueled new ways of travelling and contributed to a swift market comeback. BUSINESS TRAVEL For 2023, the Global Business Travel Association has projected a spend of just under…

YOUR ACCOUNTANT Despite the government's promise of no new taxes in the Budget, the increase of the trust tax rate to 39 per cent did not come as a huge surprise. With the release of the IRD report into high net wealth effective tax rates and talk of wealth taxes it was inevitable we would see some change. I would say the top marginal rate for individuals at 39 per cent and the trust rate at 33 per cent was a ridiculous anomaly. It served to incentivise those earning over $180,000 to channel their energies into sheltering income-earning assets in trusts where the tax rate was 6 per cent less. This, of course, they were perfectly entitled to do to minimise their tax burden within the confines of what was…

YOUR DEVELOPED As sustainability becomes a focal point in New Zealand's construction industry, modern construction systems have taken the spotlight, transforming the way we build our communities and elevating our building standards. Eco-friendly construction systems have emerged in response to irresponsible, short-term construction solutions, by placing priority on the environmental impact of the build and overall sustainability of the development. Among these innovative systems, Insulated Concrete Formwork (ICF) has risen in popularity. A system relatively new to NZ that is sure to revolutionise the construction industry by significantly contributing to greener buildings. WHAT IS ICF? Insulated Concrete Formwork (ICF) is an advanced building technology that exceeds NZ's building standards. ICFs are hollow, lightweight insulated EPS forms that are interlocked and reinforced with steel. They are erected at the construction site…

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 key (selected) parts of South Auckland is dominated by houses, with much smaller shares of flats and apartments. Indeed, of the 720 properties recently available for rent, 606…

October's election will have the biggest impact on property investors in decades. The difference in housing policies between Labour and National is a divide so deep it will take years to untangle. During the past six years of Labour's turn at the helm, it has taken away the ability for investors to use mortgage interest payments against rental income for tax deduction purposes, extended the bright-line test to 10 years, banned “no-cause” rental terminations, limited rent increases to once a year, introduced Healthy Homes legislation, increased tax on trusts, which many investors use to hold property assets, and allowed three units of three-storeys high each on almost any residential section across the country without resource consent. National has vowed if it is elected it will reinstate the tax deduction on…

Auckland University Associate Professor of Economics, Ryan Greenaway-McGrevy, says in a paper published last week that if Auckland Council had not introduced zoning reforms through the Unitary Plan in 2016, rental costs for three-bedroom houses would be between 28-54 per cent higher and two-bedroom homes 16-28 per cent more expensive. The paper compared rents in Auckland to a weighted average of rents from other urban areas that were similar to the city prior to zoning reform. The Unitary Plan precipitated a construction boom and gave Greenaway-McGrevy six years of data to examine the impact of the reforms on housing costs. The findings suggest large-scale zoning reforms in Auckland enhanced affordability of family-sized housing when evaluated by rents. FOCUS ON RENTS Greenaway-McGrevy chose rents for the paper rather than house prices,…

Jason Tan started investing in his 20s, and amassed three properties over nine years. He says he was doing OK and felt he didn't need property coaching to improve his portfolio. Interestingly, Tan's mother was friends with well-known coach Ron Hoy Fong's wife. She encouraged his mum (who had purchased an investment property with Fong's help 10 years prior) to become more active in her investment journey. And one night she invited Tan to join her at a Ronovationz members’ classroom. “After dinner she drove us [Tan, plus his brother and sister] to a Ronovationz member's classroom. “There was a lot of sharing, people talking about how they had successfully bought properties in central Auckland. “And although some of the people in the group had the same amount of properties…

Builderscrack sees a broad variety of jobs come through related to building additional revenue streams from properties. From simple home offices through to Airbnb rentals; beautician, hairdresser and massage spaces and more. Renovating a space to rent out on Airbnb is simple and popular. Typically the renovation involves creating a selfcontained bedroom and ensuite. Adding an external entrance helps to segment off the shortterm area from the remainder of the home to retain privacy. Working spaces for beauticians, hairdressers and massage therapists often have specific requirements depending on the services being offered. Home hair salons have to meet various council requirements, for example. We see garage spaces being converted to studios for various creative enterprises including crafts, photography, woodworking and 3D printing to name a few. The biggest investments are…

NEW BUILDS G.J. GARDNER Investment properties can come with the added workload of extra maintenance. However, when building new you have the opportunity to reduce this. Building new offers a variety of benefits for investment properties, including meeting the Healthy Homes standards, and the choice to design with low maintenance in mind. Considering low maintenance design and materials creates the possibility to reduce the time and cost associated with rental property upkeep for you and your tenants. It's therefore important when planning to invest in a rental property to consider the long term as choices made in the design stage of a home can have significant cost and time saving benefits in the future. TIME AND EXPENSE All homes require maintenance to perform correctly. Low maintenance design focuses on reducing…

PROPERTY INSIGHTS Many people are happy to discuss their thoughts on the real estate market with me. The most common question is “What is happening with the real estate market?” The second most common question is “Is it still wise to invest in residential property?” The answer almost always is “Yes, but do your sums.” New Zealand's residential property market has long been a popular investment choice, offering stability and potential for capital gains over time. The “starting position” financially in the current market means it can take considerably longer for some properties to become cash flow positive. Existing investors are finding that the additional costs over recent years have made both lending and servicing loans much more difficult, and many I work with are consolidating their position rather than…

YOUR PROPERTY MANAGER After spending two days at the AREC 2023 event with over 4,000 real estate agents and property management professionals, I was fortunate to visit Image Real Estate in Brisbane, which manages nearly 5,000 residential rental properties across Queensland. What became evident at AREC 2023 is that many Australian-based companies use virtual assistants (VAs), predominately from the Philippines. Some Kiwi companies have been using VAs for some time, but we simply scratch the surface compared to our Australian counterparts. The benefits are obvious, as many tasks in property management can be mundane and repetitive. It frees up a property manager's time to focus on relationship-building with their landlords. Also, there is a sufficient cost saving. One company says they are paying their outsourcing company a $30,000 per annum…