FIRST HOME BUYERS OUT IN THE COLD

First Home Buyer Affordability Report
25 May 2015

Housing has only become unaffordable for first home buyer households in Auckland in the last 21 months – AMP360 First Home Buyer Affordability Report.

New Zealand has a property market of two halves – Auckland and everywhere else, according to the latest AMP360 First Home Buyer Affordability Report.

Housing remains affordable for first home buyer households everywhere but Auckland, where it is severely unaffordable, the report has found.

The report found that first home buying affordability improved slightly in April compared to March, driven mainly by declines in lower quartile selling prices in many regions.

However the improvement was so small that home buyers were unlikely to have noticed the difference.

Link:

http://www.scoop.co.nz/stories/BU1505/S00732/amp360-first-home-buyer-affordability-report.htm

LATEST COMMERCIAL SALES

AUCKLAND


27-31 Park Rd, Grafton
A 379m2 property with two retail tenants was sold for $2,580,000 ($8000/m2). The property,which has a seismic rating of 71%, is just a few hundred metres from Auckland Hospital and Auckland Domain. The two ground floor retail tenancies generate a net annual income of $45,506. The property includes a two bedroom, fully refurbished, top floor apartment, two undercover car parks, a large yard and off street access offering two garages and car parks.

5C, 331 Rosedale Rd Avondale
A 221m2 office space in Rosedale Office Park, Albany, North Shore, has been sold for $815,000. The unit was bought by a private owner.

9 Corinthian Drive, Albany
A five-level, 5579m2 commercial and retail property has been fully subscribed in a syndication that raised $15.6 million equity on behalf of Oyster Group.
36 Fort St, CBD  
A vacant building on a freehold 282m2 sold for $3 million.

26-28 Inlet Rd, Takanini
A 6428m2 block of land in two separate titles was sold for $1.6 million to an owner-occupier.

Cnr Tristram and Clarence Sts  Hamilton
A large format, 602m2 retail property sold for $1.2 million at a yield of 6.77%.

 

Source NBR

RENTS JUMP $25 PER WEEK

Rents jump rises as tenants pay $25 per week more than a year ago.


Median weekly rents continued to grow steadily in the 12 months to April, rising 6.3 per cent to a record-equaling $420 per week, says Trade Me Property’s figures based on current landlord charges.
Head of Trade Me Property Nigel Jeffries said that equated to tenants paying $25 more per week in April 2015 than they were a year ago.

“In basic terms, across New Zealand tenants are digging into their bank accounts to pay about $1300 more per annum to rent a property.

“Across the country, the rental market has consistently delivered median rental growth north of 7 per cent year-on-year in 2015, accelerating on growth of about 5 per cent over the same period last year.”

Mr Jeffries said it was too early to assess the impact of the raft of property and tax changes announced by the Government over recent weeks.

The Rental Price Index measures trends in the expectations of median weekly rents for residential properties on Trade Me Property that have been rented out by real estate property managers and private landlords over the past month.
Around 11,000 rental properties are let out via Trade Me Property each month.
Over the past 5 years, the median weekly rent across New Zealand has risen by 23.5 per cent from $340 per week in April 2010 to $420 per week last month. Mr Jeffries said the majority of this $120 per week increase had occurred since the middle of 2013.

Four regions reported double-digit rental growth in the year to April 2015. Leading the way was Gisborne (+20 per cent), followed by Marlborough (+12.3 per cent), Bay of Plenty (+10.9 per cent) and Southland (+10.0 per cent).

Source: NZ Herald  NZ Herald (Wayne Thompson)

“Capital Gains Tax” as from 1st October

This is a very good move from what we have learnt today. It will hopefully catch the speculators who are ramping up the market while hiding in the shadows.  It will mean that anyone who buys and sells a property inside two years will have to pass the “tax test” to see if tax is payable or not.

Overseas speculators too, who may hide behind dirty money, will have to give their details as well, and then pay their share of tax.

Locally, the spruiker outfits that promise unlimited profits from real estate will feel the pain, as their clients come to realise that from now on they too will be under the spotlight, warts and all.

Property investment is a hard slog, but with the right advice and over the time it can be very profitable.

The new rules will likely have to be legislated and tweaked but from 1st October, it will be game on.

The Reserve Bank may as well shelve their LVR rules, which only favour the rich, as this new  move will be far more effective in stabilising the market and blowing the froth of the top.

Genuine investors, who seek security, passive income, and long term growth will surely welcome this move positively.

 

“The Government’s 2015 Budget will contain several measures to ensure property developers, including overseas buyers, “pay their fair share of tax”, the Prime Minister announced today.

Speaking at the National Party’s lower North Island’s regional conference in Lower Hutt today, John Key said everyone – whether from New Zealand or overseas – should pay their fair share of tax according to the law.

“People calling for a new capital gains tax often overlook the fact that under existing rules, anyone buying property with the intention of selling for a gain is liable for tax on that gain,” he said.

Mr Key said this week’s 2015 Budget announcement will contain several measures to bolster tax rules on property transactions and to help Inland Revenue enforce them.

Such measures will include providing Inland Revenue with extra funding for compliance and enforcement, requiring non-residents and New Zealanders buying and selling any property other than their main home to provide an IRD number, requiring non-residents to have a New Zealand bank account, and introducing a new “bright line” test to tax gains from residential property sold within two years of purchase.

The bright line test will not apply to a seller’s main home or an inherited and transferred property.

link:

http://tvnz.co.nz/national-news/budget-force-overseas-property-investors-pay-their-tax-6314275

 

and

 

http://www.3news.co.nz/nznews/new-tax-rules-will-discourage-foreign-investors–experts-2015051718#axzz3aLjxPyDz

 

CV’s Useless For Assessing Valuations

Modest two bedroom Auckland unit sells for $797K, 77 per cent above its valuation.


Property market advisor Olly Newland said the sale showed just how out of date CVs had become in Auckland’s booming market.

“CV values are now totally artificial. When they were released last year they were based on 2013 values, so they are already two years out of date.

“CVs are now useless 99 per cent of the time. An educated guess would be that they are 20 to 25 per cent below market rate in most cases,” Newland said.

The 1960s brick and tile unit had undergone renovations since its CV and Newland said this was one reason for the high sale price.

“They say for every dollar you spend on renovations you make five dollars back.”

More than 25 registered bidders were at the auction for this Mt Albert unit, which sold for a price 77 per cent over its CV.

A modest two-bedroom unit in the Auckland suburb of Mt Albert has sold for 77 per cent above its current valuation, as the city’s red-hot housing market shows no signs of cooling.

The Preston Ave property sold for $797,000, way over its $450,000 CV, in an auction held on the same day the Reserve Bank announced it would force residential property investors in the Auckland Council area to have a deposit of at least 30 per cent.

It was described tenuously as the “The Bachelor” of units by Barfoot and Thompson real estate agents Matthew O’Rourke and Ryan Harding, who added: “Tall, dark, handsome, funny, eats well, a total charmer anyone would be proud to bring home to mum! Well folks… Don’t despair, we present to you – ‘The Bachelor’ of units!”

And the “charmer” attracted a crowd of more than

20 registered bidders and five phone bidders to the auction on Wednesday.

O’Rourke and Harding said on their Facebook page they had more than 100 groups through four open homes at the property in two weeks.

Facebook users had plenty to say about the high price.

Joe Snowden Fletcher posted: “Good news for the seller and real estate agents. Not so great news for everyone else.

 

Source: Stuff.co

Reserve Bank Ignores The Law Of Unintended Consequences

Announces LVR restrictions for Auckland investors; must have  30% deposit; LVR relaxed outside of Auckland


The announcement today  by the Governor of the Reserve Bank Mr Wheeler, has one simple aim in mind.
To “shock” investors and the public in general into believing that these new rules will dampen the property market.

It will do just the opposite and I predict the “shelf life” of the suggested new rules  will be less than 30 days.

 

There will be unintended consequences which will play right into the hands of investors to the detriment of the ordinary first home home buyer and to the renters.

 

The problem is that the academics who dream these ideas up have no idea how these rules will work, relying on text book theories and not on practical solutions, let alone getting advice from experts in the market.

I have genuine sympathy for the Governor and his task to keep economic stability and it’s true that the Auckland market is frothy and needs settling down..but by force?
Let us look at some of the  “rules” the Governor wants to introduce:

  1. 1.The new rules will come into affect on 1st October effecting the Auckland City area only.  That gives investors plenty of time to re arrange their affairs, and to buy more properties.

2. There will be a “discussion paper” introduced by the Governor for input in the meanwhile and I will bet that by the time that discussion paper comes out the other end there will be more holes in it than a slice of Swiss cheese.

 3.  The proposed 30% deposit rule will not affect two thirds of the market, the Mums and Dads selling their homes, who will continue buying and selling free from any hindrance thus setting the price for property as they have been doing all along .

 4.   The biggest affect will be to push investors into the provinces where prices are much more reasonable. If you are living in Hamilton, Huntly, Mercer, Cambridge , Tauranga, Thames and all the other  areas North and South of Auckland City you might be either getting very nervous or gearing up for a bonanza.  
The good Governor has even raised the amount allowed by banks for lending in these in these areas from 10% to to 15% so look around and take note.              
There could well be a wave of investors heading out of Auckland to a place near you.

5.  Another effect could well play right into the hands of investors with rental property. One of the reasons that Auckland rents are still so reasonable is that investors are providing large amounts of rentals which keeps prices down. If investors withdraw from the Auckland market, the long term effect will be fewer houses to rent and higher rents as a result.
Those investors who hang in may soon thank the Governor for his foresight and generosity.

6.  No doubt investors will now form partnerships using group assets and leveraging in combination so as to continue buying up big so long as the market stays hot.

7.  Second Tier lenders will have a field day.
Already several have appeared and announced their willingness to top up any shortfalls in deposits or even provide 100% finance.
This is exactly how the old Finance Companies got started in the 1960’s and 70’s when harsh lending distorted the market at the time ( I know I was there).
Has no one learned anything from the collapse of the Finance companies only a few years ago?

8. An interesting question will be what or who is an “investor” .
If Mum and Dad decide to buy an investment house so their solo Mum daughter and two kids can have some where to live, will they be classed as investors?
Likewise if the same Mum and Dad want to buy a city pad for work convenience, will that be an “investment” as well ?

9. There is of course there is the small matter of the overseas buyers (Asians as they are commonly classified as). These people don’t need our local banks.
They can borrow all they went from their local banks at almost zero percent.
They will have even less competition than before, and for them the new rules will hardly tinkle the tea cups.

10. It is also interesting to note that commercial property is not mentioned, and as that field of investment is on the boil already it could get hotter yet.

11.  What happens to those who have an equity of less than 30% now? If their mortgage needs rolling over will it be renewed by their lender or will it cause a problem?

 

This is how I see it playing out. So long as the market remains strong, there will be countless ways investors will get around the rules.

That would be  a shame as bad rules make a mockery of order and good business.

 

Best summary from Mike Hosking:

http://tvnz.co.nz/national-news/new-housing-regulations-more-holes-than-slice-swiss-cheese-6312328
Olly Newland
13.5.15

LVR RULES CHALLENGED

Olly Newland March 2013″  
“Alternative finance sources are beginning to appear in response to the Reserve Bank’s LVR restrictions  which only apply to trading banks”.


LendMe says high loan-to-value restrictions do not apply as it is not a registered bank.
LendMe founder Mark Kirkland said the high loan-to-value (LVR) restrictions introduced in October 2013 did not apply to LendMe as it was not a registered bank. Photo / Natalie Slade
LendMe founder Mark Kirkland said the high loan-to-value (LVR) restrictions introduced in October 2013 did not apply to LendMe as it was not a registered bank. Photo / Natalie Slade
A newly licensed online lending service is targeting prospective homeowners who have been shut out of the mainstream mortgage market by low-equity loan restrictions introduced by the Reserve Bank.

LendMe announced yesterday that it had become the second peer-to-peer lender to receive a licence from the Financial Markets Authority.

Peer-to-peer lending involves borrowers and lenders being matched through an online platform.

LendMe will offer secured loans, meaning its lending will be secured by mortgage over borrowers’ existing assets.

The firm said it would specialise in secured loans from $25,000 to $2 million for a range of purposes including home purchases, residential investments, commercial property, business growth and rural finance.

link:  NZ Herald 12.5.15

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11446958

 

Get in quick: Register with Lendme at: http://www.lendme.co.nz/

Earthquake Rules Relaxed

Major changes to earthquake strengthening rules
AIMEE GULLIVER May 10 2015

L Housing Minister Nick Smith has announced major changes to the rules to assess and strengthen buildings for earthquake risk.

Housing Minister Nick Smith has announced major changes to the rules to assess and strengthen buildings for earthquake risk.

Major changes to the rules around assessing buildings means the number of structures needing inspection has dropped from 500,000 to 30,000.

The Government was revising its policy on managing earthquake risk by better targeting regulations on buildings which posed the greatest risk to life, Building and Housing Minister Nick Smith announced on Sunday.

The policy’s priority was public safety and minimising future fatalities, he said.

Link:

http://www.stuff.co.nz/national/68421102/major-changes-to-earthquake-strengthening-rules

 

Residential property prices have risen so much in Auckland that higher yielding commercial properties are a viable investment alternative

May 08, 2015  Greg Ninness

Residential property prices in Auckland have risen so much that commercial properties can be a viable alternative for mum and dad investors.

The latest sales results from commercial real estate agency Knight Frank include a warehouse/office building in Mt Wellington that sold for $730,000, and a ground floor office in Penrose that sold for $830,000 (see results below).

Those prices are comparable to average residential property prices in many parts of Auckland and are even within striking distance of better quality apartments in the city.

At this week’s Ray White City Apartments auction, a two bedroom apartment in Grey Lynn (pictured) was passed in with a highest bid of $680,000, with the owner holding out for $700,000 (see results below).

Those prices are putting commercial properties within reach of investors who would otherwise be considering residential investments.

Commercial properties have the advantage of generally offering higher rental yields than residential, and in most commercial leases the tenant pays outgoings such as rates, insurance and often some maintenance costs, which boosts investor returns even further.

link:

http://www.interest.co.nz/property/75374/residential-property-prices-have-risen-so-much-auckland-higher-yielding-commercial