Innholdsfortegnelse for August 2024 i NZ Property Investor

The release of an MBIE discussion document around New Zealand First’s “granny flat” proposal has caused a bit of a stir. The document puts forward the case for changes to the Building and Resource Management acts, which would allow granny flats to be built on properties with existing homes in rural and residential zones. The dwellings will need to meet certain criteria (aimed at reducing the risk of structural failure etc) and be constructed by licensed building practitioners, but the consent process (and associated expenses) would be removed. At first glance it seems like a great way to increase housing stock - and boost cashflow - for minimal cost. But in our lead story, Sally Lindsay explores if this is the silver bullet it appears to be. The words “granny…

If key data, particularly the August 7 labour data and various inflation expectation measures are weak enough, then an RBNZ official cash rate cut could be on the cards. ASB chief economist Nick Tuffley says that every RBNZ meeting from now on will be conceivably “live” and there could be OCR cuts of 75 basis points by the end of the year. Even if there is not a cut next month, the bank expects 25 basis points OCR cuts in both October and November as core inflation cools for both imported and domestic measures. “A 25 basis points cut in November is the bare minimum of what the RBNZ needs to deliver over the rest of the year,” Tuffley says. He says importantly, the sequence of data revisions is now…

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 Withers and his team specialise in advising on property-related transactions, valuation and restructure services, and tax planning. Withers Tsang, phone 09 376 8860, www.pfkwt.co.nz RYAN WEIR Ryan Weir 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 Campbell specialises…

HOUSE PRICES: DOWN REINZ data shows the national median price for June declined 1.3 per cent year-on-year, from $780,000 to $770,000. Six of the 16 regions REINZ monitors increased year-on-year. Taranaki and Gisborne stood out, with Taranaki’s median price increasing 10.7 per cent year-on-year, from $570,000 to $631,000 and Gisborne up by 7 per cent, from $575,000 to $615,000. Five regions had an increase month-on-month - Taranaki, up 9.7 per cent to $631,000; Gisborne, up 3.4 per cent to $615,000; Auckland, up 2.7 per cent to $1,048,000, Canterbury, up 1.5 per cent to $690,000; and, Tasman, up 0.4 per cent to $777,000. 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…

YOUR LAWYER Although the real estate sector has been relatively slow to adopt this transformative technology, GenAI holds the potential to streamline and enhance various aspects of it - including the legal due diligence process of a property transaction. As property investors understand, “due diligence” involves a comprehensive examination and analysis of various aspects of a property to assess its viability, potential risks and financial performance - a process enabling buyers to make informed decisions. In short, GenAI can inform your decision in relation to a property transaction, but it falls short of the necessary (human) judgment and expertise. As is often the case, it comes down to leverage. GenAI refers to Al systems that create new content based on patterns learned from existing data. In this context, GenAI includes…

NZPIF FROM THE PRESIDENT’S DESK SUE HARRISON Aloud voice in the politics of rental housing is what members of property investor associations around the country expect from the New Zealand Property Investors’ Federation, their umbrella organisation. Speaking to politicians and government departments is a role we take seriously as a noncommercial not-for-profit advocacy group for investors, and the only group representing self-managing landlords. A negative media narrative towards the owners of rental homes, taxes and termination rules have detrimentally impacted rental housing supply. We are working to change this by educating journalists, politicians and officials towards acknowledging that owners are part of the housing solution. As we are seeing with the new government, laws can be changed, with some equality restored. But change is constant, and we have much more…

A raft of government changes will set house zoning targets for councils; abolish urbanrural limits; scrap minimum floor sizes and balcony requirements for apartments; encourage mixed use zoning and more tightly define high density transport corridors eligible for development. They are part of plans by Housing Minister Chris Bishop to “flood the market” with enough land to end the country’s housing crisis after he called for average house prices to drop. But at least one specialist has questioned the effectiveness of the changes. The biggest change relates to the land under development. District and unitary councils such as Auckland, Wellington, Christchurch, Tauranga, Hamilton and Dunedin will be required to zone for 30 years’ housing growth. This will allow councils to opt out of the Labour-National bi-partisan Medium Density Residential Zone…

The property manager said the premises were let without any time between tenancies because the owner/landlord did not want to lose rent. But Tenancy Tribunal Adjudicator W Lang said it was generally unreasonable for a landlord to arrange for a tenancy to begin the day after an earlier tenancy ended. A mother and her adult children, one a severe asthmatic, viewed the fourbedroomed home while the previous tenants were still living in the property along with their cats and dogs. They signed a tenancy agreement in September last year for a year and intended to move in on October 4. Their names and that of the landlord have been suppressed by the tribunal. Meeting with the property manager at the house the day before the tenancy started, they were concerned…

Q Is it worth looking into setting up a company and potentially selling two investment properties ($901,000 total debt) valued at $1.1 million to the company and then put money to pay owner-occupier debt from the sale, to take advantage of interest deductibility? The first investment property was bought in January 2021 and the second in May this year (potentially no increase in value and no sales tax). Owner-occupied property debt $377,000, valued at $880,000-$900,000. We are in the process of refinancing, so are there any advantages in doing this? A That is an excellent question and in my view the answer is likely “yes” but is subject to some caveats. First, before any change in ownership occurs in relation to property you need to work carefully through the tax…

YOUR RATES The Reserve Bank’s tone has suddenly changed from the May official cash rate (OCR) review where they were jawboning the market by suggesting there wouldn’t be any respite on rate cuts until well into 2025. Now, in the bank’s most recent review on July 10, they have removed any talk about the cash rate needing to stay restrictive or potentially tighten further. A week later, on July 17, we had the updated inflation numbers which showed the slowest pace in inflation growth since the June quarter in 2021. We all know what happened since that quarter three years back, with the bank having to play catch up after the genie well and truly jumped out of the bottle: the cash rate increased from its all-time low of 0.25…

YOUR ACCOUNTANT Who would have thought lending rates would start to drop despite an unchanged OCR. It certainly came much sooner than most experts expected and at a seemingly accelerated pace. So, it’s an opportune time now to dive back into the property market. Let us take stock of the lessons learned before planning for opportunities that lie ahead. THE MARKET In the current property market, there are more sellers than buyers. Apart from the usual cycle, the excess supply was in part caused by owners who are freed from the shackle of the five-year bright-line test (if they purchased after 2018) and new property owners who purchased at the post-Covid peak, but need to sell as they cannot service much higher interest rate. The immediate prospect remains subdued. As…

YOUR REVIEW People in the property industry tend to apply their areas of expertise to their own investment strategies. And Abe, 29, who deals with subdivisions, is a good example and has a sharp eye for spotting a deal. He found a property in Alexandra, Central Otago, where he could negotiate from $320,000 to $210,000. It was a bit of land with some services already installed, but no sewer or pipework. It was the kind of deal a layperson might not have spotted. Nonetheless, the subdivision was substantial. PROJECT DETAIL It would cost Abe $140,000 to dig up the driveway to put the necessary pipes and cables in, but a valuation projected the property would be worth $600,000 after he finished. He stood to make quite a lot of money,…

NZPIF SPOTLIGHT The need for real change in the Tenancy Tribunal has never been clearer. Recent data from the tribunal has revealed applications by landlords on all matters is now at the highest level in four years. In Q1 2024, landlords made 6,315 applications, up from 5,140 the previous quarter and beating the previous record of 6,239 set in Q1 2020. A total of 5,692 of the Q1 applications this year were for rent arrears … that’s 90 per cent of all landlord applications and 75 per cent of all applications from landlords and tenants combined. This isn’t a new problem. It has been the case for years that most Tenancy Tribunal hearings are for rent arrears, where the evidence is straightforward and factual. Often, when these matters go to…

UP FRONT NEWS The CoreLogic Buyer Classification figures for June were “more of the same”, with most buyer groups holding their percentage market share of property purchases at steady levels. The big news in the past few weeks has been a slightly softer tone from the Reserve Bank in terms of when the official cash rate (OCR) will be cut. But until that path becomes clearer, and mortgage rates start to fall more significantly, I suspect mortgaged investors will continue to watch and wait. Taking a look at the actual figures, across the second quarter of the year, first-home buyers (FHBs) accounted for 26 per cent of property purchases nationally, still more or less hovering at record highs. They were 27 per cent in Auckland, 34 per cent in Wellington,…

Inspections help landlords/property managers check everything’s working well, there’s no damage, and tenants are keeping things reasonably clean and tidy. Tenancy Services says it’s also important to note that some insurance providers require the landlord to prove that regular property inspections have been done. Inspections can occur between 8am and 7pm for rental properties, and between 8am and 6pm for boarding houses. The maximum frequency for inspections is once every four weeks. Notice of an inspection must be given to the tenant at least 48 hours before inspection, and not more than 14 days in advance. If a landlord/property manager is testing the property for methamphetamine, at least 48 hours’ notice needs to be given. For a boarding house, 24 hours’ notice is required. The landlord/property manager needs to provide…

In 2010, James Kirkland was deployed to one of the world’s most dangerous and politically volatile countries, Afghanistan. Working as a mechanic with the New Zealand Defence Force, he kept his head down, worked hard and saved. These savings fuelled the purchase of a house in Mangere that same year. The home has since tripled in value - his dangerous mission rewarded by substantial equity gains. Kirkland’s property investment story is unique. Not many investors work in the most dangerous country in the world to get on the property ladder. But his risks have proven fruitful and he’s building wealth through longterm investment and keen to share his knowledge with others. THE SAVINGS BUG Raised in Invercargill, Kirkland wasn’t born into a family of investors. But his parents and grandparents…

The laundry is often overlooked when it comes to renovations. Not often photographed and promoted as a focus for a rental or property listing, it’s based on its size and use … it’s a workhorse space. It’s an underrated room that you don’t fully appreciate when it’s functioning well, but definitely notice when it’s not. But whatever size the area you’re working with or creating, make it count. When planning your next laundry project here’s our favourite lessons to keep in mind. FUNCTION THE KEY Function is key in the laundry so prioritise this in planning. It doesn’t matter how pretty it looks; it needs to deliver on its core function. In order of priority these are washing, drying, sink space and storage. What you can fit in depends on…

YOUR DEVELOPER The world is quickly advancing with new technologies, yet the construction industry lags behind in many areas. This industry needs to embrace new technology such as Al and adapt to digitalisation of processes and management to keep up with the complexities of modern construction. Reluctance to change is understandable, especially by those who have been in the industry for decades and have stuck with traditional paper-based management methods. This shift requires upskilling and learning new systems which can be challenging. But learning these new systems and looking forward to how Al can be used is crucial in maintaining relevance in the industry and ensuring longevity. STREAMLINING The construction industry is becoming increasingly complex with additional building requirements and more demanding deadlines, and this makes efforts towards streamlining processes…

AUCKLAND NEXT MEETING: Go to www.apia.org.nz/events for details on upcoming meetings. APIA hosts 100 events and presentations for its members each year. WAIKATO NEXT MEETING: Wednesday, August 14, 7.30pm - 9pm, Waikato Commerce Club, 197 Collingwood Street, Hamilton Lake. TOPIC: Leigh Bradet - investor story. TARANAKI NEXT MEETING: August 20 at Plymouth International Hotel, 220 Courtney Street, New Plymouth. TOPIC: We are very excited to have Peter Lewis, Vice-President of the NZPIF and VP of Auckland Property Investors’ Association. MANAWATU NEXT MEETING: August 7 at SALT Auditorium, 35 Matipo Street, Palmerston North. TOPIC: What’s your ideal exit strategy? WELLINGTON NEXT MEETING: August 8 at Lifepoint Church, 61 Hopper Street, Mount Cook. TOPIC: “Realise Your Dreams” when planning and implementing your ideal exit strategy with Tania and Kyle Elmer. NELSON NEXT…

FINAL WORD The Tenancy Tribunal is crucial in resolving disputes between landlords and tenants under the Residential Tenancies Act. However, a significant portion of its workload involves rent arrears cases, which do not always require the nuanced adjudication that other tenancy disputes might. There’s a strong case for removing rent arrears cases from the Tenancy Tribunal and proposing an alternative method to handle these situations more efficiently. The biggest issue is the current burden on the tribunal. You can find yourself waiting for months to get a hearing, and while you are waiting the arrears continue accumulating. This helps no-one. The landlord is out of pocket and the tenant could find themselves evicted with a bad credit rating. About 75 per cent of tribunal hearings include a component of rent…