by Catherine Harris stuff.co.nz
Canterbury’s earthquake is expected to compound a shortage of rental properties, despite reports of shocked tenants leaving town.
Property managers say the city was already experiencing a chronic shortage of accommodation for helpers and displaced tenants after the quake in September.
“Now there’s been a lot more houses [damaged] so that problem’s just escalated, so there will be a shortage,” said Martin Evans of A-1 Property Management.
Mr Evans, who is also the national president of the Property Investors Federation, said many of his tenants appeared to have understandably decamped.
“Some are traumatised, some have no water or power so they’re just going, they don’t care what we do about it.” He said people had vowed to leave for good but believed that was the human factor talking.
“A lot of people have said that under stress … I’m sure the people who have taken off will come back.”
Harcourts chief executive Hayden Duncan said there was “no indication at this stage” of an exodus of tenants and was braced for an accommodation shortage.
Read on at stuff.co.nz
As a rule of thumb: What, typically, would you currently expect to earn (net per annum before tax) from: a) A clean & tidy 3 bed residential property in say, Balmoral/Sandringham? b) A tidy $2m commercial property in industrial East Tamaki? What do you reckon is the quickest and least painful way to really learn about commercial property? (Work as a researcher for you for free?) Do you think we are experiencing a Great Property Market Correction where, instead of house prices seriously tanking, rents will climb to the point where it will become worthwhile to hold residential in the absence of significant annual appreciation? I conscientiously read and enjoy your newsletters.
Best wishes Diana
PS Didn’t attend ’2011:The Outlook’ but I did get the workbook and audio programme (Queens Road, Panmure – brilliant!)
Dear Diana
As a rough guide you can expect around 3-4% yield from the Balmoral/Sandringham property- but it all depends on the number of bedrooms, condition and many other factors so this figure cannot be relied upon.
The commercial property in East Tamaki could return anywhere form 6.5% to 10% depending on the quality of the tenant and the property. There are so many variables in these exercises that far more detail would be required to come up with a better answer. I think rents are due for a big correction
again depending on position ad quality. Poorer areas cannot afford big rent rises so investing to more affluent areas would be the way to go.
Cheers, Olly
From stuff.co.nz today …
Rising vacancies and softening rents have hammered Auckland’s commercial property sector leaving a mammoth 240,000 square metres of office space empty.
Vacant Auckland central business district, CBD, space is now 140,000 sq m, or 14.6 per cent, the highest it has been since the mid-1990s while the 100,000 sq m available outside the core CBD has tripled in the past two years due to new supply. …
Hi Olly,
I really enjoy reading your articles. With all the talk about house prices and the market, I am surprised not to see any commentary (from you or others) about the next ‘lot’ of teaser loans that will come off the books in the USA. For others benefit, the teaser loans were a pre cursor in the sub prime market in USA. Low interest loans for a couple of years, that then have the interest rates jacked up = people cannot afford the new repayments = they lose their house. Could you possibly offer your opinion on this, as I feel it may have an impact in NZ in 2012/13.
Many thanks, Rob
Dear Rob
I too have heard about the “teaser loans” but NZ didn’t go in for these to the same extent so the impact here will hopefully be limited.
Furthermore I believe the Authorities in the US will not allow them to get out of control by printing more money = inflation.
They have had plenty of notice and practice.
Cheers, Olly
Olly Newland’s Column, February 2011
THE NEW YEAR has started with a bang (or shall we say a whimper? It depends on your viewpoint) when it comes to property and investment. A whole lot of new information has been released, some of which paints a confusing picture of what is happening in the market.
Some say that the market is about to nosedive (they have been saying that for over two years now), while others say there will be another boom sooner rather than later. I called ‘a flat market’ 2 years ago … and that has been more or less correct up until now.
But as the facts emerge and the reality on the ground is experienced, I think we have turned the corner. I am NOT predicting a boom in house prices. But I AM predicting a crisis in housing in general, and rents in particular.
This being election year the “for and against” factions will dig in … so we should avoid taking extreme positions. Housing is a popular subject for politicians to fight over, especially when an election is close, we will likely see much more finger-pointing on the subject.
This is par for the course, but even so, there is a problem and it is getting worse. No amount of window dressing or political hot air will change the facts of the matter.
Nevertheless there are facts about the current market that cannot be overlooked…
Agents offering cut-price deals, says real estate commentator NZ Herald 16 Feb 2011
Commentator Olly Newland wished Pero “the best of luck”, but said most agents were negotiable on their fees anyway – if homeowners were willing to speak up.
“Kiwis aren’t good at haggling – they usually get very embarrassed about it. I’m used to it, but that’s my game.
“The tricky bit is knowing whether to haggle at the beginning or when the pen is poised over the paper,” Newland said.
Pero slashes commissions on top home sales NZ Herald 17 Feb 2011
Property investor Olly Newland said the move could prove to be a “watershed” moment for the industry if Pero lasted the distance.
“All power to him if he can hang in there – he may have started a mini-revolution,” Newland said, adding that lower commission rates were common in many other countries.
Rival agents would be “gnashing their teeth” and “putting pins in their waxed dolls” upon hearing the news, Newland said.
Click to download to the report (PDF 70KB)
Courtesy of Crockers, here’s a report of the latest Auckland rental prices. Updward, as predicted (ahem).
Click the image at right or this link to download the report (PDF 70KB)
Hello Olly,
My wife and I are looking at a leasehold property in Kohimarama, there is 1 year remaining on the lease which is owned by [snip] Holdings, the lease is currently $7500 per annum. According to the CV the house is worth $150,000 but it needs some serious TLC to make it liveable, asking price $95,000,. The land is valued $560,000.
Is there a maximum amount they can increase the lease?
If we contact [snip] Holdings are they obligated in telling us how much they intend to increase the lease?
Is there any way for us to get information like this?
We don’t want to buy the place and get stung by a huge increase in the land lease. Do you think it is wise to buy a leasehold property? The property in question is in a great location in a very quiet cul-da-sac, walking distance to school and walking distance to beach, just a few steps from [snip], we think it would be a great investment if the land lease won’t reach an outrageous amount.
What’s your opinion and your advice?
Thank you so much for your time,
Kind Regards,
Matthew.
Dear Matthew
The Lessor may give you an indication of what the lease rental will be, so there is no harm in asking them. However you can get a good idea by yourself by taking the land value (in this case $560,000) and use 6%-7% as the likely ground rent to be charged i.e. $33,600-$39,200 per annum.
Should the land be worth less, then naturally the likely rental will be less but it will give you a rough idea … should the lessor not want commit themselves just yet.
Regards
Olly
