Our fourth meeting of the year is being held at the Nelson Suburban Club, Tahunanui Drive on Tuesday 23 June. This month we have Jackie Thomas-Teague speaking on property inspections. What to look for, how to react when you find #%***, and how to bring the ship back on course by encouragement, threats, and the court process. Finding damage and the associated costs of repairs can managed well if it is done correctly. Jackie has honed her skills doing this as the vibrant owner of Rental Results Property Management Company and the President of Wellington Property Investors Association. Jackie spoke a couple of years ago and she was great.
The meeting proper commences at 7.30 pm with the meal at 6pm. We will be eating in the Club Cafe which is cheaper but slower so attendees need to arrive at 5:45 pm. If you are coming to the meal please email Glenn by return email. The Suburban Club reserves seats on the basis of my bookings.
Note: Well I shall be on holiday for the 4 August scheduled meeting. Yes this time it is hiking in Greenland for me. But for the rest of you, life carries on. I will not be able to write the regular newsletter and bombard you all with all those emails before the August meeting so please write this meeting date down NOW. Andrew King the Executive Officer of the New Zealand Property Investors Federation is flying in to speak. Andrew is an ex journalist and of course is a highly successful investor. He speaks and writes well. He will bring us up to date on the latest war of words and ideas that is spewing out of Wellington. The NZPIF is gathering up more and more fantastic discounts and special privileges for members. This is your chance to hear what you get back in return for your annual subscriptions.
NICK’S PANCIA
I was delighted with the good turnout for the May meeting and the fantastic address that Nick Smith gave. He covered a wide spectrum of interest to property investors.
At times I despair that landlord’s voices and interests are ignored by our Government. I wonder if a large room full of respectable investors helps to balance the scales in our favour. Nick’s story certainly seemed to make sense at the time. However the next day I scratched my head and wondered if in fact I understood what a housing accord was. I wrote to him and he supplied this link of the Tasman Accord. http://www.beehive.govt.nz/release/new-tasman-housing-accord-agreed-between-govt-and-council I encourage you to persist and read and attempt to understand the proposal. My knowledge of developments is limited. Some horror stories of delays and council planners imposed ideas are swopped behind closed doors. I have suffered a two year delay in Tasman on a simple project that cost me lots. I know of other much bigger projects that have fared much worse than mine.
Your attention is drawn to this interesting paragraph. “The Council will establish a Developers’ Forum for the purpose of discussing issues of common interest about housing supply and housing affordability.”
I wonder who will be on this forum and what impact it will have on us, the investors and occasional developers of residential housing. Since when did developers and the Council have a common interest?
A number of people in power in Government are saying we have a supply problem and this is what is causing high prices in those areas of the country with high population growth. I wonder how they came to that conclusion. There is no doubt they have got that part of the equation correct.
Why don’t they just put into the housing accords a requirement for the councils to suddenly become “pro-growth” and dare I suggest “anti conservation.” Goodness they might even introduce an award for those council officials who figure out how to get around the most planning rules in a year and how many proposals they approve without notifying the public.
HEALTH AND HOUSING
Every landlord knows that they need to look after their property or else soon the roof will leak, the drains will get blocked and the properties will not be attractive nice places to live in. As I get older I monitor my vital statistics carefully. Recently I was surprised to notice my weight was creeping up a little bit despite doing more hiking and mountain biking in my increased leisure time. I did not connect my change in the use of sachet coffee packets with the weight increase. After all I was still not putting sugar in the drink! Then my sister in law pointed out the small print on the packets. “Don’t you see that these have sugar added already” she said. Oh my goodness. How could I be so silly and careless I thought. Then I thought this is just like the property market. Some market changes have occurred and we wonder if something has changed up stream to cause this. The way the Government and the central bank has been reacting one wonders if they have stopped to think about what has caused the problem. So what has happened? Something serious has happened that has produced multiple actions from both the Government and the central bank.
Clearly Auckland sale prices have shot up well above the trend line. There have been some increases in other parts of the country in the usual selective distribution but these have been modest. The general consensus view of why house price increases in areas outside of Auckland have been limited is blamed on the high deposit requirements killing off first home buyers. The central bank’s LVR restrictions can be blamed for worsening the ratio of owner occupiers to renters which has continued to decrease throughout the whole of New Zealand. The annual increase of new rental dwellings is not much less than the total number of new dwellings built. Because the bulk of the new houses are 200 sq m + it is reasonably clear that property investors are not building new rental stock. Instead they are buying up existing dwellings that used to be occupied by owners. Rents for the most part have been heading up since the two tax changes occurred for property investors. The major change was the stopping of depreciation on buildings and the lesser one on structural changes to LAQC’s. Those two changes and their associated rent increases have improved the rate of return in cities like Nelson but not Auckland.
Unfortunately for us the investor / landlords we are being targeted to solve the problem of Auckland. The LVR changes just made things better for investors because most investors are not dependent on high LVR loans. In fact if the experts had thought about it they would have figured that only those investors with assets greater than perhaps 40% across their portfolio or those buying above average high return properties actually make any money at all.
So what is the issue? High prices are not the problem it is affordability recorded as the ratio of rentals to owner occupier. As the ratio keeps going up we the investors are going to see more and more laws passed controlling our industry. These rules will not just be financial ones related to interest, LVR and business structures. In some parts of the USA and Europe the ratio has passed 50%. Landlord groups from these areas report in newsletters and on forum posts a whole raft of problems that we have not yet seen. Those in power stop being owner occupiers. The slaves take over the power of the state. The changes have already started locally. For instance in Nelson not all elected councillors own their own homes. It is not that they are not capable honest people. They just have different priorities.
AGM TIME
Yes a whole year has slipped by whilst we had fun. We will take the opportunity to hold our regular short AGM before the speaker gets going. We have to review the income and expenditure and elect the officials for the coming year.
THE MARKET
The familiar winter conditions are prevailing at the moment. The advertisements of properties to let are increasing rapidly. As of 14 June 170 properties in the Nelson City are advertised on Trade Me. When you compare that with the 93 recorded in January it is clear why it is taking longer to let properties at the moment. If the same pattern as last year is followed it should get better from now onwards. In June last year there were 214 properties advertised which was the peak for 2014. But there are other things happening that impacts on our market. Canterbury now has 1920 properties advertised. This is an all-time record. Despite what the news headlines are reporting their prices there are falling like a stone. There are now three bedroom dwellings in the city area being advertised as low as $300 per week with a reasonable number at not much more. I am not really sure but I think we are starting to see people choosing to settle there rather than Nelson.
Glenn Morris
Secretary
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NELSON PROPERTY INVESTORS ASSOCIATION
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NelsonPIA@xtra.co.nz
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