Innholdsfortegnelse for June 2024 i NZ Property Investor

To insure or not to insure – that is the question. Bad Shakespeare appropriation aside, the question of whether (or not) to get landlord insurance is a sticky one. Insurance can be a big expense – especially in this economic climate. But the alternative – being uninsured for damages, lost rent and meth contamination – will be much more costly. Sally Lindsay investigates landlord insurance in our lead story this month. She outlines how specialist insurance can be a lifesaver when the worst (or even the just slightly annoying) happens – covering everything from carpet stains to missing rent after a natural disaster. Specialist brokers are the best go-to regarding your specific needs. Some insurance policies cover rent arrears, some don't. Some cover damage that isn't accidental (for an extra…

The central bank says it probably won't start cutting the official cash rate until the middle of next year, but some bank economists and the financial markets think otherwise. ASB, ANZ and Kiwibank have recently cut their mortgage rates. Kiwibank is the first to have its one-year fixed rate drop to below 7 per cent. RBNZ data for March shows residential investor lending, although in the doldrums compared to the 2021 peak when investors were knocking first home buyers out of the market, rose to $1.3 billion last month and 45.7 per cent of that was on a one-year fixed term, up from 41.4 per cent in February. In the owner-occupier market, the one-year fixed term accounted for 42.1 per cent of all new mortgages, up from 38.9 per cent…

Q My husband has owned a property for 12 years in his own name with no mortgage, making about $30,000 a year in profit. He is also settlor of our family trust, which owns another property bought on behalf of our kids, unfortunately now making a large loss of about $40,000 a year, with the increase in interest rates and other costs. The trust owns our family home, which we are paid $13,000 a year in rent for an office for our business which we run from home full time. We have thought about selling my husband's inner-city Auckland investment property, but it is down in value. However, it's likely to come back in value quicker than the other property. We are prepared to fund the loss but would like…

YOUR RATES As expected, the official cash rate stayed at 5.50 per cent when the Reserve Bank completed its latest review on May 22. We have just ticked over the 12-month mark since the last increase. There was brief concern about the chance of a hike on the back of worse than expected domestic inflation numbers followed by worse than expected job losses. But a survey showed business expectations around inflation were not as bad as the Reserve Bank had thought. This last point is positive news because it means businesses are less likely to feel they must continually hike their prices to keep up. Wage growth is getting more under control. One point of concern at the latest review is that the Reserve Bank put a 60 per cent…

Owning a rental property can be an excellent investment, but it inevitably comes with risks when renting to people a landlord doesn't know. Landlords will be footing the bill if things go wrong with tenants or property. Mitigating potential losses, and understanding these risks, is essential to success as a landlord if there is an accident. Standard home insurance will not be enough. A house insurance policy may offer some cover for a rental, with a standard house policy covering the property's structure, says Richard Godman, Vero Insurance manager technical underwriting, consumer insurance. “Typically, though, it won't cover any furniture provided for tenants’ belongings – as a rule of thumb, it will only cover anything that is permanently affixed to the house such as a fitted kitchen, a bathtub or…

YOUR LAWYER Landlords of commercial properties must contend with a myriad of issues, from tenant retention in a competitive market to undertaking ongoing property maintenance. One issue easy to overlook, yet affects both, is seismic risk assessment. THE RISK A commercial building's ability to withstand an earthquake and protect against loss of life is measured using the New Building Standard (NBS). A building with a 100 per cent NBS rating is considered to meet the seismic performance objectives of the current Building Code. A rating of 34-67 per cent NBS means a building is considered an Earthquake Risk Building, and a rating below 34 per cent means an EarthquakeProne Building. Seismic assessments can be done by a suitably qualified engineer. These ratings often affect leases of commercial properties. OBLIGATIONS Landlords…

THE DATA Rental data is sourced from the Ministry of Business, Innovation and Employment based on rental bonds lodged. This data is supplied 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 Queenstown-Lakes is dominated by houses, which is normal for most parts of the country, although this area also has a fair share of apartments. Of the 369 properties recently available…

Many property investors haven't returned to the market despite the reintroduction of 80 per cent interest deductibility for landlords and the lowering in July of the bright-line test from 10 years to two, QV says in its latest update. QV operations manager James Wilson says the looming introduction of debt-toincome restrictions will almost certainly hamper their ability to buy existing property when it eventually happens. “Residential property values have mainly plateaued across the country, domestic inflation remains stubbornly high, the unemployment rate is rising, business confidence is low, and cost of living pressures remain a significant challenge for many households,” he says. Waikato registered valuer Marshall Wu says cost of living pressures remain a significant challenge for many households, resulting in lower savings rates, persistently low sentiment, and increased uncertainty…

Mark and Denise Fincher have been ordered by the Tenancy Tribunal to pay their tenants $334.72, which is four days of rent paid for a self-contained apartment on the ground floor of their Northland house. Before the tenancy started, one of the tenants had accepted a job in Paihia, had seen the property advertised for rent, applied for it, was sent a video, agreed to rent the property and signed a tenancy agreement for a fixed term from August 18 last year to February 18 this year. The tenants, who were given name suppression by the tribunal although they did not apply for it, did not have the full $1,650 bond and the Finchers’ agreed to initially accept $500 and two weeks rent in advance on the understanding the tenancy…

OPINION GRA As most readers will be aware, the bright-line period officially reduces to two years for all residential property from July 1. This means if you enter into a sale and purchase agreement on or after July 1, the bright-line rule will only apply if you have owned the property for less than two years. The usual date for measuring when ownership of the property starts for the purposes of the bright-line rule is the date that you settled the purchase. As a result, if a purchase settled prior to July 1, 2022 any sale on or after July 1, 2024, will not be taxable under the bright-line rule. While settlement is typically the start date of the bright-line period, it can be the date you enter into the…

YOUR DEVELOPER Property development in New Zealand is a lucrative industry, but not one without risks. There are various hiccups that can arise in the planning and construction process that can cause delays, cost blowouts, or a project's suspension. To steer your project towards success and maximise returns it's critical that effective risk management is implemented. A developer would be wise to engage professionals that have experience with overcoming property development hurdles, communication with councils, and are confident to navigate expected and unexpected challenges to ensure your project crosses the line. SOLID PLANNING A project that stands on solid planning is much more likely to succeed. Navigating the legal and regulatory landscape is an aspect of project management. This includes understanding zoning restrictions, land controls and designations, and compliance obligations…

YOUR REVIEW High school sweethearts Sera and Quentin come from humble beginnings. At 16, they rented a flat with no fridge or washing machine. They had five jobs between them, just to make ends meet and finish high school. The couple never dreamed they would be property owners, let alone property investors. Here's how Sera and Quentin rose from poverty to property investors. GETTING STARTED The couple paid off their mortgage in five years. “That's how nuts we are,” Sera says. The goal was to be debt-free, and they did it. Property investment was never one of their goals, because it seemed too far removed. Even when they paid off their property, they never considered buying a second one. But then Sera started listening to the Property Academy Podcast. She…

NZPIF FROM THE PRESIDENT'S DESK SUE HARRISON Here is a new take on the first home buyers I want to run by you. It's convenient to separate FHBs (first home buyers) from investors and, of course, they often behave differently. However, the outcome is the same; an investment property has been bought. Owning a home is a dream shared by many that symbolises stability, security, and a place to call your own. Traditionally, the concept of purchasing a first home revolves around finding the perfect abode to live in, raise a family, and create lasting memories. However, in today's dynamic real estate landscape, the notion of a first home transcends mere residence; it's also a strategic investment opportunity. A “first home buyer” typically refers to someone who is purchasing their…

FINAL WORD The Healthy Homes standards, introduced on July 1, 2019, aimed to improve substandard rental properties, a move widely celebrated by many groups. The standards have undoubtedly improved the quality of our properties. However, after reviewing their implementation I have concluded they are no longer fit for purpose. I certainly do not argue against having minimum standards. We need them to ensure tenants are protected. However, there have been many issues with the implementation and plenty of missed opportunities along the way. DATABASE IDEA In hindsight, the state should have collected all Healthy Homes reports to create a database of compliant and noncompliant properties. This would allow prospective tenants to check the Healthy Homes status of any address. Over time, the state would have captured records of every rental…

As a landlord, you want to protect your investment, but you don't want your rental to remain vacant for a long period of time, which damages profit potential. While you might be tempted to rent the property quickly, renting your unit to unqualified tenants may cause costly, time-consuming problems down the track. For example, if you end up with a tenant who fails to pay rent, you may end up having to evict them and start again. All landlords will have their own ideas on what makes an ideal tenant, but there are three basics that can't be ignored. • Respect: For example, they don't have six people sleeping there when the property is only for a family of four. They also don't keep pets secretly when the rental agreement…

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 propertyrelated transactions, valuation and restructure services, and tax planning. Withers Tsang, phone 09 376 8860, www.pfkwt.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: UP REINZ data shows April's national median house sale price increased 1.3 per cent year-on-year, from $780,000 to $790,000, and dropped 1.3 per cent compared with March, from $800,000 to $790,000. For NZ, excluding Auckland, the median price of $700,000 was the same as for April last year; month-on-month, it declined 1.7 per cent, from $712,000 to $700,000. The median national sale price has now increased year-on-year for the third consecutive month. OCR: STEADY The Reserve Bank's official cash rate has been held at 5.5 per cent since July last year after the RBNZ indicated it was at the end of its tightening cycle. It's not expecting to make changes until next year. INTEREST RATES: DOWN BNZ is the last of the main banks to trim fixed home…

DIY PROJECT CALEB AND ALICE PEARSON If you're thinking about a bathroom renovation, take a step back before you rush in removing that sink. These small spaces can be filled with challenges, so taking time to understand, prepare and make decisions before you start will help your bathroom project run smoother. Here are some of our essentials when we're getting ready for a bathroom project. 1. A SOLID PLAN Making decisions on the go won't cut it when you're renovating a bathroom, unless you have a whole lot of spare time and money. Bathrooms require considered planning and decisionmaking in advance. In a bathroom, with the sequential nature of trades and requirement to install fittings and services behind walls, changes can be costly. A consent may also be required, depending…

YOUR ACCOUNTANT Throughout the leaky building crisis there has been a lack of certainty around whether the remediation of leaky buildings is deductible repairs or non-deductible capital works. Precedent cases are typically very old law, dating to cases around remediation of railways and gas pipe systems. The lack of a modern case is probably due to the financial devastation of going through a leaky building issue and finding oneself without the financial or personal resources to then take on the IRD in another fight. However, we have a recent decision in the case of E & G Lawrence v CIR that offers some clarity on the question, but unfortunately does not end with a decision that will assist investors facing extensive remediations. The Lawrences purchased a freestanding fibrolite-clad house in…