20 April 2015
March 2014 was $375k. March 2015 is $350k. Does that mean the Hamilton market is dropping?
NO, it is probably just timing and if you look at November/December the Median was $380,000. The graph on the Lodge website is a great place to get information and it will be interesting to see the next 6 months. I'm expecting steady growth with all the Auckland buyers in the market!
20 March 2015
I was shocked a few weeks ago with the level of advice given by another accounting firm recently to a commercial property investor. Unfortunately most accountants don't specialise in property and miss some major deductions that can save thousands in tax for the investor.
In this example, a client had purchased a motel and the building alone was $1.9 million. The accountant hadn't recommended a chattels valuation, and with no more building depreciation from 1/04/11, they had claimed $0 depreciation. This is appalling!
While talking to the valuer, he mentioned a childcare centre he had recently valued and the depreciation was $50,000 for the first year! If taxed at 33%, this would mean a $16,500 tax saving!
So please' if you have a commercial property or a residential rental with high value chattels, talk to me about chattels depreciation! Or look at www.valuit.co.nz
26th February 2015
Over the last few years I have been watching Christchurch with interest. I see there being a big opportunity for investors who really know Christchurch well, but also a large risk for other investors.
Reading articles and listening to economic commentators, I’ve formed the view that at some point many in the construction industry will move from Christchurch, leaving an over supply of houses for sale and to rent. This would normally lead to a reduction in house prices and rents received.
The difficult part is the ‘when’ and ‘how bad’?
Click here to view a Vero report on Christchurch that gives some interesting information:
Interesting figures on page 38 re jobs created. I would have thought that the number of jobs would have dropped off quicker, but the work is still predicted to be creating a lot of jobs in 10 years time. But still between 2014 and 2020, number of jobs created by Vero is expected to drop by one-third. If this is the same over the constuction industry, that is a large number of people who will move out over the next six years, as they will no longer have construction related jobs.
The graph above shows median sale prices from 1995 to 2014. From the scale on the right, recent monthly sales are 400 per month. From the Vero report on the number of construction workers being 15,000, there might be 4 per house (2.7 people per house is around the NZ average), so 3,750 houses. If this number of houses were put on the market, it would take almost a year of normal sales to sell them all. So this comparison shows the huge impact the construction workers and their houses could have on the Christchurch market!
If you are looking to buy rental properties in Christchurch, I would suggest you exercise caution and research thoroughly. Obviously a major area is the rent you are likely to receive, and for most investors I suggest they talk to at least two property managers to discuss the demand of renters, how easy it is to rent, and likely rent they will receive. For Christchurch, I would also suggest discussing the likely long term demand with the property managers, as this could give you relevant information from the people closest to the action.
I hope this information has been interesting!
Ross
4th March 2015
The Waikato Property Investors Association (WPIA) has secured well known property investor and author, Graeme Fowler, to speak at their March meeting.
Graeme owns over 40 investment properties that generate thousands in passive income. In 2013, Graeme set a new goal. His aim was to begin with just a 20% deposit for one house, which he would then parlay into a portfolio of 10 investment properties within a three year time frame. So completely separate to his other wealth and income.
Just nine months later, in November 2014, Graeme was on the front page of the NZ Property Investment Magazine and had already secured 13 investment properties under a new Trust, and had to reset his goal to 20 investment properties in under three years!
Whether you are new or an old hand to property investment, I suggest you come along to hear Graeme speak.
If you are not a member of WPIA, I would highly recommend that any Waikato property investor joins WPIA, as it is only $245 for individual members or $325 for couples.
However, if you aren’t a member, you can still come along for $30, and if you do decide to join WPIA later, this comes off your subscription.
Coombe Smith are property accountants and property experts in Hamilton, who help the Waikato property community and are proud to have property clients throughout New Zealand and the World. Do you need a property accountant to help with your rental properties?
16th February 2015
Last Wednesday night, I attended a Waikato Property Investor Association monthly meeting and heard Rodney Dickens from Strategic Risk Analysis Ltd (www.sra.co.nz) speak. His expertise is in following trends and in giving his clients early warning of major changes to the economy, interest rates, property prices, etc.
There were two main points of interest from the presentation:
1. Future capital gain and house prices
Rodney indicated that the next 18 months to 2 years could be good for property in the Waikato, but was cautious of the long term possibilities. He spoke about the trends of NZ compared to Waikato, and that the NZ median price had gone up over the last few years but that Waikato was lagging more than it normally did. Attached is a graph from a seminar we did with Lodge Real Estate that highlights this gap. As you can see from the graph below, Waikato is normally close to the NZ median, but currently there is a large gap, which in theory should close.
A Major reason Rodney thought that Waikato prices may not increase long term, is the possibility of a housing accord, or low cost housing being provided in the Waikato in conjunction with government initiatives. I found this quite interesting, as I personally hadn’t thought this would have a big impact on prices, but Rodney’s opinion was that this could provide sections cheaper, so stop section and house prices in the Waikato increasing too much.
Auckland – Rodney thought that the large number of new houses being provided through housing accords and initiatives with the government and private firms would have a large impact on the supply of housing and slow down future capital growth in Auckland.
Christchurch - Long term there is concern that a large number of houses are getting built in Christchurch and that both rents and house prices have boomed too much. At some point the builders and construction workers will no longer be required and this will create a huge oversupply of housing, which would then lead to large drops in rents and house prices. I personally recommend investors be very careful with investing in Christchurch. If you really know what you are doing, there are large opportunities, but for most investors there is a large risk of buying at too high values and losing substantially.
Obviously with house price predictions, no one has a crystal ball, so you cannot rely on other people’s predictions. But it is interesting to hear others’ opinions and remember any key parts. Click here to read an article about Rodney Dickens.
2. Future interest rates
Rodney talked about other factors that affect the economy such as the unemployment rate. He thought that interest rates would remain low for a year or so, but that long term the unemployment rate was at an unsustainably low rate that would cause the Reserve Bank to raise interest rates over the longer term, say two years.
Following on from this information and my own thoughts, I recommend that investors look at spreading their risk. Having some short, some medium and some long term interest rates.
I think the TSB rate of 5.89% for 10 years is a great product and reduces long term risk. Or the 5.29% for 5 years just out by HSBC is also a great rate. I also look for a rate and term that suits me, and gives my desired outcome, rather than chasing the best rate. Under 6% for 5 years, to me this gives great long term stablility and at a great rate when compared to historic rates.
If you would like some help with your loans, or interest rates, we have some great mortgage brokers we can refer you to. Just flick me an email and I can put you in touch with the best mortgage broker for your circumstances.
“ANZ – The Basics of Property Investment Seminar”
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