Which of the following strategies seems like the best for someone entering retirement; 1. Buy one 4BR new townhouse 500K 2. Buy one 2 BR new townhouse 320K 3. Buy two 2 BR 25y/o flats 450K I’m assuming for retirement that no mortgage is best?? — Rick

Dear Rick
I would buy the two x 2 brm units as 25 years is not a great age for property. Remember new properties carry a 15% GST component in  them which makes any capital growth that much harder to get.
In general the rent from a tidy but older unit is not proportionally less as compared to a new unit so you would get a little more rent for the same outlay.
No mortgage in retirement is best of course, but a property with a manageable mortgage is no bad thing in any event.
Regards
Olly

The chart below proves once again that rents are steadily rising right across the Auckland Region as has been predicted in these columns on several occasions. Naturally there are some odd results but that is the nature of statistics. It is the general trend that has to be looked at.
As costs, prices, disincentives and tax changes bite into investors pockets these rent increases will become more and more pronounced. The Rugby World Cup will also accelerate rents. Even though the event will pass, new levels will be set and it is doubtful that rents will fall to the same extent they rose.
I foresee better times for investors who ignore the sniping from the uninformed and envious. I have no doubts that the ultimate rewards will be great.

Crockers - Auckland rental table - April 2011 (click to enlarge)

The Aussies Government budget is due next week (as is our one) and it comes as no surprise
that the timing is the same. And lo and behold some of the matters likely to be addressed may be the same as suggested for us.

Read the article:

CRACKDOWN on the use of family trusts to reduce tax, and changes to salary sacrifice arrangements for motor vehicles, are expected in next week’s federal budget.

 

With Federal Treasurer Wayne Swan looking to restore the budget to surplus, no one is expecting any major reform of the tax system or substantial new tax goodies.

Some cutback in negative gearing arrangement for investing in property has been floated in recent weeks, particularly for people with more than one property.

But, in the final days before the budget, speculation about changes to the negative gearing system – which could have widespread implication for the property market – has eased.

Personal investors are hoping the budget will provide more clarity about the operation of the superannuation system, including an easing of the draconian tax regime for people accidentally making excess contributions to their superannuation funds.

They are also hoping for more details about proposals to cut the caps on pre-tax superannuation contributions for people older than 50 from $50,000 to $25,000 a year, which is expected to apply from July 1 next year – and an announcement on the future of minimum drawdowns for super funds in pension mode.

The biggest change in personal tax is expected to be in the area of family trusts. The government has signalled that it is looking closely at the situation where children younger than 18 can receive more than $3000 a year tax-free from a family trust as a result of the $1500 low-income tax offset.

The $1500 offset is generally seen as a good idea, but its use in connection with family trusts has allowed people to use the trusts for tax minimisation by distributing tax-protected income to their children.

Read the rest of the article here:

http://www.theaustralian.com.au/business/wealth/family-trust-crackdown-likely-in-budget-tighter-rules-on-payments-to-children-are-expected/story-e6frgac6-1226051385501

 

The market for the cheap shoe-box apartments, remains strong- but it all depends which building we are talking about. Some apartment blocks are leaky ant hills with no redeeming features and as a consequence prices are on the floor. All the more reason to research carefully and take good advice before plunging in.

Published 9 May 2011
Bob Dey Report

Interest was strong in 3 units offered at Ray White City Apartments’ auction on Thursday, but dropped away for a receivership sale and a larger unit on Federal St. Auction results:

Learning Quarter

Princeton, 30 Symonds St, unit 15H, 27m², 2 bedrooms, rates & body corp levy $4809/year, managed by Zeta Management Group, income about $6056/year, passed in at $88,000 in receivership sale (Damian Piggin & Daniel Horrobin)

Queen St Valley

The Federal, 207 Federal St, unit 806, 61m² plus balcony, 2 bedrooms, parking space, furniture optional at extra cost, rates & body corp levy $5848/year, current rent $420/week, passed in (Damian Piggin & Daniel Horrobin)

Uptown

Amora Hotel (ex-Duxton Hotel), 100 Greys Avenue, unit 3K, 39m² studio, body corp levy paid by hotel, rates $1274/year, fully furnished, in hotel pool, net income about $994/month, sold for $132,000 (Damian Piggin & Daniel Horrobin)

Nova en Scotia, 18 Scotia Place, unit 10B, 53m², 2 bedrooms, furnished, rates & body corp levy $4198/year, current rent $330/week, sold for $190,500 (Bain Duigan)

Victoria Quarter

Imperial Gardens, 135 Hobson St, unit 401, 63m², fully furnished 3 bedrooms, 2 bathrooms, one parking space plus storage locker, rates & body corp levy $6397/year, current rent $530/week, sold for $283,000 (Damian Piggin & Daniel Horrobin)

Published 6 May 2011

Bob Dey report

CB Richard Ellis research director Zoltan Moricz said this week the growing belief that Auckland’s property market was emerging from the downturn – if it hasn’t already done so – was backed up by facts.

He said, in CBRE’s first quarter market outlook, net absorption was positive in 2010 across the office, retail & industrial sectors and leasing activity in early 2011 appeared to be similar to the level at the end of last year. Office absorption was a net 35,000m² after losses of 17,000m² in 2008 and 22,000m² in 2009.

The supply pipeline had been brought under control – by AMP NZ Office Ltd’s success in retaining the ANZ National Bank on Albert St, cancelling the bank’s intention to go to new premises on Customs St East and, in the industrial sector, by the supply of new space being the lowest since 1993.

In addition, rents & yields had stabilised and in some cases improved.

Nevertheless, Mr Moricz said the market wasn’t all positive: “Retailer activity – the first sector to improve last year – has been patchier in the first quarter of 2011, and conditions in some retail precincts such as Newmarket are yet to improve.

“Also, the office supply pipeline, while lower than last year, is largely speculative with little current precommitment aside from ASB (in the Wynyard Quarter).”

Perhaps of greater concern, though, was the pricing gap still existing between buyer & vendor expectations, particularly for secondary stock: “This is likely to continue for some time, given the volume of troubled stock yet to be offered for sale.”

The CBRE research showed prime cbd office vacancy at 9.1%, net rent at $270/m² and the yield average at 8.93%. Secondary office vacancy was 16.9%, net rent averaging $152/m² and the yield 10.13%. The overall vacancy rate was 13.8% (190,000m²), up 1% (20,000m²) from mid-2010.

Mr Moricz said the rental stability this year was in contrast with last year, when rents slid every quarter, especially for prime property. Net effective prime office rents had declined by 4.2% over the past year, and secondary by 2.2%. Incentives were around 17.2 months on a 9-year lease for prime and 15.9 months on a 6-year lease for secondary.

“Over the course of the downturn, prime net effective rents have fallen 27% from their peak, while secondary rents have fallen 29%. The rent stabilisation reflects improving demand & increased confidence by landlords that, while vacancy is high and the leasing market remains competitive, there is leasing activity and the end of the downturn is in sight.”

Prime industrial vacancy was down at 2.7%, net rent $110/m², the yield 8.29%. Secondary industrial’s vacancy was 5.4%, net rent averaging $69/m², the yield the same as secondary office at 10.13%.

In retail, prime cbd rent was at $2400/m² and the yield 6.65%. There was virtually no vacancy in regional shopping centres, where rent averaged $921/m² and the yield was 7.97%.

Once again we are reminded that building consents are falling and this time to a new all-time low. From the investors point of view this is good news because anything that tightens the market results in the chance for better rent and capital gains. However from the social and economic point of view it’s a disgrace that the market is so slack because it reinforces unemployment and lengthens the recession.

Building consents hit a low

New home building consents have fallen 28 per cent in the past year to the lowest levels since official figures started in 1982, with a big dive in consents for Canterbury after the big quake.

Statistics NZ said in March there were consents issued for 1047 new homes around the country, excluding apartments. There were consents issued for just 40 apartments.

The value of consents issued for homes was $420 million in March down 20 per cent compared with March last year.

read the rest here  www.stuff.co.nz