By David Whitburn*
There are a number of market forces that come into play to set rental prices. It is important to set the right rents too. If you charge too much you will have a longer vacancy period or be left not able to rent out your property at all. If you charge too little you will be subsidising your tenants and make it harder to achieve your own financial goals. The drivers of rent are based on the economic laws of supply and demand.
Supply
The supply side of the equation is constrained in our country’s economic hub Auckland, which is where the rents are rising the most. Auckland vacancy rate is just 0.7% at present on residential properties. I make up a portion of this statistic with a West Harbour property undergoing a complete transformation with new kitchen, bathroom, paint, carpet and light fittings, being vacant and off the market currently.
Building consents
I think that Interest.co.nz’s building consent issuance graphs (see interactive chart below) show the undersupply issue brilliantly. If you click the third tab along for Auckland, you can see just how high the building consents where in 2002 – 2006, before heading rapidly down to well under 300 per month (we hit a record low with just 193 issued in the December 2010 calendar month).
In total New Zealand needs over 26,000 building consents to cater for current demand. I need to point out that this figure doesn’t meet everyone’s approval. I got questioned by a guest at one of my company’s quarterly market updates who personally thought that this figure is higher than the 21,000 he thought we need, however I pointed out to him that:
1. many building consents don’t get acted upon owing to issues like being unable to get construction finance, relationship issues, ill health and life getting in the way.
2. many of these consents are for lifestyle homes, bachs and other secondary dwellings.
3. updated or replacement building consents for new dwellings
In any event we only saw 15,602 building consents issued in total for the 2010 calendar year (source: Statistics New Zealand).
Government and Local Government Changes Needed
The supply is kept artificially low by the Resource Management Act (“RMA”) which puts a number of significant hurdles in the way of developers, investors and home-owners alike, and the Local Government Act which with respect many of the councils in New Zealand interpret in their own “special” way. Lets look at minor dwellings, which are small townhouses with a kitchen, bathroom, lounge and 2 or 3 bedrooms capable of being let separately to tenants or housing extended family. Why can’t an owner on Bolton Street in Blockhouse Bay with just over 700 square metres build a minor dwelling, whereas another owner on Bolton Street in New Lynn with less land at just over 600 square metres can build a minor dwelling. This doesn’t make sense to me, yet there are situations like this when the owners are basically neighbours and yet they have different rules applying to them.
The Auckland Council has a lot of work to do and allowing infill housing as Auckland rapidly approaches 1.5 million people needs to happen. Why can’t minor dwellings, self contained flats, sleepouts and secondary units all built to certain minimum standards (ie. building code) to ensure safety and protection to occupiers and future owners.
The Government has a lot of work to do to reign in many of the councils and territorial authorities with their overly cautious approach and interpretation of the Local Government Act, as well as the RMA and Building Act. This will bolster the supply of more houses and units to allow the lid to come off the pressure cooker, which will help rents rise less swiftly. If this doesn’t happen or takes too long to happen the undersupply will continue and rents will continue to rise and the rental growth will ripple out from the inner suburbs to the CBD more quickly.
Landlords Exiting
There have been a number of landlord’s exiting the market and the fact that we are in a downturn in the property cycle exacerbates this. However Government changes such as the Inland Revenue Interpretation Statement IS10/01 which was issued in April 2010 which deemed many items previously classified and separately depreciated as items of building fit-out (eg. tiles and vinyl flooring), to be part of the building structure.
Then the 20 May 2010 budget had the removal of the tax deduction for depreciation on building structure. The New Zealand Property Investors’ Federation did a nationwide survey of its members and this reported the average depreciation lost was $46/week. My own survey of NZ Wealth Mentor property investment clients in Auckland and Auckland Property Investors’ Association (“APIA”) members indicated the figure to be higher at just over $60/week for the average Auckland property.
When combined with the latest rounds of rates increasing, insurance premiums rising, repairs and maintenance charges going up, and the GST increase on the above rising expenses (since landlords cannot charge GST as residential rentals are an exempt item under section 14(1)(c) of the GST Act), many property investors have had enough and simply exited the market. This means less supply of properties to rent.
Demand
There is a lot of demand in Auckland for housing. The 2006 census showed that there were 432,000 houses in Auckland. The Centre for Housing Research Aoteroa New Zealand (“CHRANZ”) have stated that 601,000 houses are needed by 2026. This means that 170,000 more houses needed in Auckland. This demand comes from the fact that Auckland’s population growth is the strongest in our country. Contributors to this are:
- Aucklandhas the largest natural population increase in New Zealand
- Aucklandoverwhelmingly attracts the largest pool of internal migrants in New Zealand (there is a long standing northward drift phenomenon, and a move into cities too)
- Aucklandoverwhelmingly attracts the largest pool of international migrants of all areas in New Zealand.
Location factors
The demand is the very strongest in the inner suburbs of Auckland, eg. Grey Lynn, Ponsonby, Kingsland, Mt Eden, Parnell, and also the luxurious Eastern Suburbs like Kohimarama, Orakei, and on North Shore suburbs like Milford, Takapuna and Devonport.
I was an in-studio guest on TV One’s Close Up current affairs show a couple of weeks ago and they reported nearly 100 tenants looking at a 3 bedroom property in Mt Eden. This is by no means an exceptional case, as I found out when talking with attendees of my seminar last weekend who were numbers 41, 32, 64 in line for properties in trendy and well located suburbs like Grey Lynn and Herne Bay. The NZ Herald have run a number of similar stories telling of how rents have risen $100/week in the past 12 months in some of these areas.
It is very competitive to rent in these areas right now. Prospective tenants are doing what I had to do in 2002 and 2003 and prepare a mini CV for the property manager or private landlord and nowadays it is useful to have photocopies of your identification handy, your credit file (download one free at www.mycreditfile.co.nz), prior landlord and employer’s references, such is the intense demand in these central suburbs.
This has left a number of members of APIA confused as to what rents they should be charging. One member listed a property in Papatoetoe (South Auckland) and forgot to pull off the TradeMe ad and had over 20 calls from prospective tenants and as a result are kicking themselves for not renting their place out for $30/week more.
So if I were an Auckland tenant again I would expect a rent increase shortly and budget for this, and I would also consider looking for places that can offer the security of a fixed term tenancy. I would also strongly consider home ownership opportunities as the prices are relatively stable and the outlook for the medium and long-term (not short-term) is great. My advice to fellow landlords is to charge market rents, and to be aware that they are changing. To do this watch the market rents closely and see what other accommodation providers in your suburb or area are charging for a similar property on sites like TradeMe.
* David Whitburn, Property Investor, Director of NZ Wealth Mentor and President of the Auckland Property Investors’ Association (Incorporated)
Building consents - residential
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114 Comments
"When combined with the latest rounds of rates increasing, insurance premiums rising, repairs and maintenance charges going up, and the GST increase on the above rising expenses (since landlords cannot charge GST as residential rentals are an exempt item under section 14(1)(c) of the GST Act), many property investors have had enough and simply exited the market. This means less supply of properties to rent"
Zero sum game, that same property has been sold to some one as a home, thus reducing the demand, or to another speculator who will rent it out anyway. The property has not magically disappeared...
and this guy is President.....beggers belief really...
Its time to review BH's data. Opinion is not facts.
No mention of the softness of demand created by tenants doubling up because of lack of affordability or kids returning home to family.
The market is a lot more flexible at that end and therefore resistant to price hiking than Whitburn would like to believe.
And where have all those sold ex-rentals gone?
Are they empty?
Am I missing something here??!! Did he not say that only 601,000 houses were needed by 2016 or within the next 15 yrs & we currently have 432,000 homes. By my calculations instead of needing circa 25,000 + homes reported then we only need just under 12,000 p.a. to meet this so called influx of population & attain stated 632k requirement.
You do the math: 601k less 432k = 169k / 15 = 11,266 p.a.
Sure he's a spruiker but I thought he made some quite good points, offered a lot more than the usual Olly nonsense
This is a very good point and one I sympathise with:
"Why can’t minor dwellings, self contained flats, sleepouts and secondary units all built to certain minimum standards (ie. building code) to ensure safety and protection to occupiers and future owners."
Lots of progressive North American cities allow secondary suites on sites over a certain size, eg. 600 square metres. The secondary suite usually has a floor area limit, like 70 square metres. They increase the supply of housing and provide a more affordable option (remembering that 1/2 person housholds will become very common in the next 20 years) . And because of their small floor area and single storey they have minimum impact on the neighbourhood
Olly had already described much of what Whitburn tries to claim as his ideas.
Why BH didn’t pick him up on that is a mystery.
e.g.
Olly " Game Changers" 18 March
“we as investors are effectively subsidising tenants out of our own pockets”
Whitburn
“If you charge too little you will be subsidising your tenants and make it harder to achieve your own financial goals”
Whitburn is sailing very close to plagiarism so he better go carefully.
The last lot that tried that paid dearly for it:
http://www.empowereducation.com/article.bz?connect=true&key=art_copyrig…
If you charge too little you will be subsidising your tenants and make it harder to achieve your own financial goals.
This comment defies belief really, and the cheek of it to bring up copyright law.
Sort of shows up the sort of bloated leeches these clown are, those that chase capital gains. Without those endless gains that the vultures hope to get rich off, rents would actually be stable because they would match the capital invested. But no these scum don't generally put up capital and do it on borrowed money.
Subsidising tennants, haha my heart bleeds.
I suspect than when the crunch really comes that Olly might have to go away and hide in a hole.
Would this be a good idea?
Sell the state housing in Meadowbank, Glen Innes and Kepa road area. With these funds raised build more statehousing in growth area's which are served by good public transport. I'm sure you could build many more state housing with the funds raised than the number that were sold.
These would provide more state housing than is presently available. This would also release housing to the private market increasing supply with no cost to the tax payer and would create jobs. Good idea?
Not really DC...tearing down and building back takes longer than doing it in the brain..there is a time lag...where you have all the families who are displaced with no where to live...how about you put them up at your place...and that thought made me wonder why Annette "I'm a real socialist" King, was renting a fun and games pad to "dear Darren"...when a real socialist would be housing one of Wellington's destitute families for free......and she could have used "Darren's pad"
Yes. Ive got a property 2 streets from Paratai Drive. Next door is a 2brm state house on 800m2. Across the road are 2 x 2 brm state houses on about 1200m2.
All of the other houses in this street are 7 figures or very close to it.
There is a massive taxpayer subsidy in having small state houses on prime land....the proceeds from these properties could be used to build a number of new, more suitable (ie 3 / 4 brm) state houses in other locations.
Aucklandoverwhelmingly attracts the largest pool of international migrants of all areas in New Zealand.
............
Immigration policy benefits landsords, however Property Council press releases always blame urban limits.
It's time for New Zealanders to take back their country.
Really ? Every year ? 1 April is the magic number is it ? None of them were from Chch were they ?
While there is not necessarily a crisis out there, there is upward pressure in some areas.
Tenancy is being signed off as we speak at $ 20pw higher than asking price which was $ 15pw higher than previous tenant which was $15pw higher than the tenant before that so not going to lose any sleep........
That's the key. The ability to pay.
It's clear now that the benefits of last year's tax cuts for the rich are going where most income growth has gone in recent years. Into the values of properties and into the pockets of landlords.
Hard to believe now that the tax package last year will actually transform the economy from being a real estate sinkhole into an exporting powerhouse.
Particularly when the government borrows NZ$950 mln in a week and pushes up the currency to 75 USc
cheers
Bernard
This rent crisis is a blooming myth! There are always lots of people looking at 'good' rentals and certain areas will always creare a higher demand! This is just the same ol' suspects desperately trying to push the market up up up! A shortage in the above mentioned areas are all down to location and potential demand for the World Cup! That said the World Cup will be over in a few months and then what? Also am wondering if a home rented to a bunch of drunken overseas rugby supporting yobs (who rightly feel they are being ripped off by greedy landlords) will be in as good a state at the end as it was at the start of the WC?
You can see just how much of a myth it is on Trademe:
Click on property to rent - CBD apartments
keep in mind that until the begining of this year there were usually 800-900 to choose from (other than middle of last year when it dropped below 600 for a bit).
Click on houses to rent in the suburb of Mt Roskil which has lots of rental houses. For years there's been up to 90 to choose from. See how many 3 bedroom houses are available for under $400 per week - there's usually been 30 or so.
I can see 2 for under 400$ - and zero that I would want to live in.
In fact I would not want to live in Mt Roskill anyway - so there you go - the rental shortage is not just Kingsland/pons/grey lynn - the ripples are moving outwards.
What will it take for you provincial minded bitter lot to just accept that this is a fact?
And why is it such a personal issue for you lot anyway?
2 observations.
Last weekend was talking to a cousin who is a valuer. He said a lot of buyer action in Auckland is coming from Asians.
Have a son looking for a house to rent in Tauranga. Quinovic agent there told him 80% of rental placements he's doing at present is Chch people who have come to Tauranga. There was something on TV last night about Chch students at Tauranga Girls College
FYI Stats NZ reports that 7,287 Christchurch schoolchildren had enrolled elsewhere as at March 23.
Details here
http://www.stats.govt.nz/browse_for_stats/education_and_training/earthq…
cheers
bernard
Of different reasons immigration applications for AU/ NZ will increase sharply. The government can/ will stimulate the economy in letting in more foreigners. Of course the property market will profit. As a consequence prices are rising.
....and considering the situation in Japan, the government should accommodate as many people as we can from Japan among 5’000 experienced engineers, trade’s people working in the building sector to urgently help Christchurch.
Just a thought:
Bernard - why not point the camera more towards your guests ?
Kunst, while your social benevolence is to be admired, it might be, as an outlander, from another place, before you start throwing the doors open, could you spend some time immersed in learning the history of new zealand, and even perhaps spend some time down at the local marae, talk to the local elders and see if they share your philanthropy.
The next vicious cycle ?
The fact is, we see an unbalanced economy - structurally (entire segments missing) and financially – what’s left - the government will soften immigration policies to re-activate the economy.
The result is - a booming property industry, rising prices and houses unaffordable for our younger generation, Kiwis who don’t have decent job opportunities to compete in the housing market.
well i got over 1000 hits in the first day and a half for a 2 beddy in ellerslie, auckland, and potential clients sound tired and wary on the phone after struggling to find a place ahead of the throngs...
lots of people aware of national and international events pushing up demand, quite a few from ChCH, and my sympathy to them
but no sympathy for the two sweet innocents ladies falsly claiming to be relocating from ChCh (sympathy vote - almost got me) but actually part of a racket with their gangster mobster mates/minders hiding up the drive - gotta watch out for that trick of the P heads. Turns out all my existing tenants said directly to the gangsters as they walked past them further up the driveway that there are no longer any places to rent around here or you must have the wrong place...
anyway rented out pretty much immediately to a perfect tenant (friend of existing great tenant - nice when they like their place/landlord enough to recommend their friends). i was left with just enough time for a quick dolly up between tenants since it had been 4 years since last vacated...
so to summarise - massive rise in demand for two bedroom units too...(from all sectors)
I wish this site, or somehting similar, was about when my sister in Melbourne rented her first ( and only) flat a few years back. She didn't know about your type of story, and rented her newly renovated flat to a lovely couple, who paid their bond etc. by cheque up front and gave the references to be checked on Monday. You guessed it! The cheque bounced and when she went to sort things out, they'd left. And taken everything, including the toilet, the shower, everything, including the door knobs.
Great article David and keep up the great work you continue to do for us property investors. My husband and I have been putting my rents up in areas like Panmure, Mt Wellington, Onehunga and Mt Roskill lately and we haven't been getting much resistance from our tenants for $30/week rent increases. Tenants in Auckland know rents are going up and are grateful to have good landlords to maintain their home properly and don't have to sell (like so many of my fellow baby boomer property investor friends are doing).
As far as we are concerned these $30/week rent rises are not keeping up with the increases in insurance, rates, GST rises and most importantly the loss in my depreciation claims.
David - just ignore the ignorant sprooker/spruiker comments as they don't know what the term means, and would do anything to have a go at us buy & hold property investors. We have never understood the sheer volume of anti-property comments on this site. As serious property investors, we are proud to provide shelter, a vital social need, and especially at a time when we are borrowing well over $300 million dollars each and every week. And just what is so wrong to provide for your own financial future without being a burden on the Government?
As for half-baked accusations like plagiarism for using the word "subsidising", there is always someone. A shame that intellectual pygmies from the far left seem to frequent the site and make up law as they go along and take every opportunity to harass property investors, and those providers of accommodation for the workers, unemployed and some of most vulnerable citizens of our country.
We shall be reviewing my rents as more investors exit the market and the under-supply continues. I think in 6 months time another $30/week rent increases will be easy to get as the rents ripple out into the suburbs we invest in. The World Cup effect is merely a red herring - it only helps a tiny bit. The undersupply is just so obvious to see.
The Auckland Council and Government should be ashamed with themselves for making the red tape so thick. The development contributions are awfully high and the length of time to get building consents and cost of them are scary. Why so many people bother getting building & resource consents is a source of constant amazement to me? It is time to have far more infill and multiple units in Auckland. I would vote for any politician that would do this, and free the supply up.
At the end of the day if you don't like seeing rent increases, you need to stop complaining, get a serious financial plan and buy your own home!!!
How do you expect them to buy a home Elizabeth when you and your fellow baby boomers have pushed up the prices of houses so much over the last eight years as you strove to set yourselves up for retirement. You sound like you have quite a few rentals. I have dealt with a lot of investors over the last ten years or so. As prices went up they got very confident and went out and borrowed as much as they could to get as many rentals as they could. They literally climbed over each others shoulders to get another investment, just like the farmers who borrowed to buy as many farms as they could. Now the less fortunate and lowly paid are being hit by rising food and energy costs. They will never be able to buy as it is impossible for them to build up a deposit
In 2002/2003 baby boomers with low levels of debt and in employment were lucky. Assets were cheap,interest rates were low,the cost of living was low and they saw the need to set. themselves up for retirement. They could not resist the temptation. They went for it. But did they think of the consequences. What about the less fortunate and the younger generations. No they didn't. And now our lowly paid and younger professionals and tradesman are going to Australia in record numbers. Who could blame them. It will not be better over there for many of them but it certainly looks more attractive over there when you have such pathetic incomes here for many and no chance of getting ahead.
She used the words "fellow bbs " in her comment Iconclast. POP they were cheap in 2002/2003 and that is why in many parts of NZ they doubled in price in the years up until 2007 which is when the market started to stall as interest rate increases started to bite and slow things down. Have the PI's got any idea of what the rental increases are doing to their serfs who are suffering from major price increases for food and other daily costs such as the price of petrol as they go to work for their meagre wages. What are they feeding their children with?
It does not matter really Iconclast. Baby boomers or the generation before them. I am a baby boomer. I have been as greedy as the best of them. I am happy to admit it. I had the equity, the tertiary qualifications, the income and the opportunity to take advantage of the conditions of the early 2000's. But in doing what I did I helped make it much harder for those less fortunate and the lowly paid who followed us and who have no show at all of ever owning a house like the BB's and the generations before them. The generation before the BB's have been involved in the property frenzy but not in the numbers of the BB's. Why would a person in her seventies have fifty odd rentals in Hamilton other than because of personal greed. She does not need so many surely. And the fact she borrowed so much to buy them shows just how determined she and her late husband were. Why are people so afraid to admit they are greedy and selfish. It is a very common human trait after all. I regret what I did and now I am trying to make amends by helping others financially and with my time.
Couldn't agree more ex-agent.
I happen to be of the younger generation (under 30) but I am fortunate enough to have a couple of properties in NZ. Where do I live though Australia ! I became an accidental landlord by buying property where I was working then renting them out when I moved on. I have no intention at all of putting up rents on my properties (and one of them I am subsidising quite a bit) whilst the other is basically self funding.
I managed to buy property by working my arse off shearing in the outback in Auzzie and in the u.k and taking money back to NZ - but how the hell are most young NZers meant to get there ? I wouldn't recommend my route and most arn't capable of earning that sort of money anyway.
Yet these BB's put up their rents - skite about it and wonder why they will never to see their grandkids ! I think it going to by quite funny when they all go tell sell and find out my generation can't even come up with half the required deposit because they have given up and simply dont earn enough.
Ex-Agent - please note. When I purchased multiple properties in may 2003 i was told by everyone the bubble was about to burst. I risked a lot at the time, but figured my purchases and accounting gave sound investing principles given NPV and all. I went against the trend, as i did my own research rather than listen to someone with no skin in the game. As a resut it has paid off - but don't you dare say assets were cheap, they were at their peak. The thing is the peak just kept climbing, but doesn't mean in retrospect you can say they were cheap, for at the time the prices were already high, before the real demand kicked in...
think then scribe rather than scribe then think
2003...Bubble? Wasn't that into the early stages of the BBQ talk of 'how smart we are to have bought an investment property-why have'nt you got one" etc? The market had really only just recovered from the lows of Sept. 2001. I can't say I saw any talk of a Bubble, pre Gareth Morgan starting to write about it in the MSM late '06. "Bubble' talk, only kicked in seriously in early 2008...( For instance,Bernard started posting here about it, March 08, I think?) Perhaps you're thinking of Olly Newlands 2004 Book, and that turned out to be as right as his current predictions will be !
I am younger but hold no grudge towards BB's, every generation has their moments. For BB's they went through 2 oil shocks in late 70's-early 80's, followed by horrendous interest rates for borrowing, and then of course the '87 stock market crash . So spare the crocodile tears ex-Agent, we don't need them. Younger people have every opportunity today, including interest free loans for getting qualifications, and if prepared to work hard and display a bit of enterprise, getting ahead is not a problem. And that applies for Maoris and Polynesians as well, instead of playing the grievance line. People just get on with it, like all the previous generations did.
Muzza you are not being realistic. A significant part of the community do not have the ability to go to university let alone get a trade, In the past even they could get a modest home of their own. They cannot do that today especially in parts of Auckland. When you have to borrow 6,7 even 8 times your income how many can do that. Incomes need to lift in NZ significantly if you want a healthy housing market.
I find the comment that many can't get a uni education or a trade a bit condescending. My parents didn't have any qualifications, didn't stop my sister or myself getting some. If you set some goals and are prepared to study and work for them, there is little reason why one in this day and age in NZ can't do so. Truth be told there are too many younger, and some not so young, people who want instant gratification. Fair enough but don't wail on their behalf when they might get nowhere. Can't work out why you defend such people as you seem to be someone who has worked towards being successful. My observation is that every generation has some major difficulties to deal with, and those under 40 have had little in comparison to events faced by previous generations. It's just a matter of us getting on with things, and making excuses why some don't may be well intended but is not all that helpful.
OMFG the smug, complacent condescension of you. Hope those tenants aren't so ungrateful as to neglect to curtsey and tug their forelocks when you go round at Christmas with a rent increase notice, some watery soup and an orange for the children.
Pround of providing a vital social service my arse. If that was even partially true you wouldn't be gloating about hiking the rents up in a time of job loss and recession.
Olly picked the trend a long time ago through is iron clad logic and vast past exerience.
He was predicting rising rents and rising confidence when the whingers and whiners were still shivering under the sheets.
Not like the "wet behind the ears" Whitburn and his lot who jump on the band waggon
full of confident predictions- but long after the facts have smacked them on the nose,
The market is gaining confidence as it dawns on everyone that the Game Changers ( tax changes, no new builds, immigration, leaky homes, earthquakes etc) have combined into a potent concoction of shortages and rising rents and prices.
Renters: You have no more than 6 months maximum to buy or be locked out for ever.
Investors: Get your knife and fork ready, and tuck in your napkins. The feast is about to begin.
Just to drive the point home and spot on with Olly's predictions, read what this serious resarcher says about the current property market in this excellent article:
Only one way for most property punters – upward
NBR 25.3.11 copy right
Apart from Christchurch, and regardless of recent dismal economic forecasts, property investor confidence is taking off.
Colliers researcher Alan McMahon said it’s probably because property investor cycles are governed by different drivers.
Although consumer and general confidence may be fragile, investors are anticipating improved rentals ahead, driven by the current low level of building and development.
“We ask specific questions about such things as rentals that drive property cycles.
“The low Christchurch result compared with December is probably because we ask how respondents view the year ahead.
“In December, Christchurch investors were seeing the light at the end of the tunnel but now the scale of the disaster is much larger and maybe they don’t see much to be positive about 12 months ahead.
“Auckland is probably leading the country out of recession and that accounts for the positive results there.
“Similarly in Queenstown there was strong confidence because presumably, people think prices have been re-rated and things are going upwards.
“Why Nelson is so positive I’m not sure. Maybe it’s an alternative centre to Christchurch or has a high resident population without much debt.”
Nelson scored a positive net 19% confidence score followed by Queenstown at 18%, Auckland 16%, Tauranga 10%, Dunedin 8%, Hamilton 1%, Napier/Hastings -5%, Palmerston North -11%, Wellington -14%, Whangarei -18% and Christchurch -33% (retail investor confidence is weaker than office or industrial confidence in Christchurch).
In all of the main centres, investors in industrial property are the most optimistic.
"through is iron clad logic and vast past exerience."
"logic" sorry but I can see holes in it, logic no wishful thinking, yes.
"past" He wasnt investing in 1925~1935 for a start.....and has never lived through an event like peak oil which he simply ignores.
"Renters: You have no more than 6 months maximum to buy or be locked out for ever." or plenty of time to sit and watch substantial drops over the next 6months, or slow drops over the next 6 years.....this is the neg side to PI, risk of loss.
If you are a PI why tell renters? why not tell them "its a terrible time to buy" and live off your uh "winnings" or maybe just maybe you are looking for the needy to buy so you can offload...
There is a difference between confidence and action....I know ppl who are blindly confident in their ability.....actual delivery is un-inspiring to say the least.
Most of the interesting posters in here post URLs, comments on trends, happenings and possibilities....discuss the possibilites and not attempts to dictate blindly....
By all means go with Olly faith, I hope you get what you deserve.
regards
It's a bit rough this guy having a moan about minor dwellings in Blockhouse Bay...the simple fact is Waitakere Council allowed minor dwellings - Massey is covered with them, and Auckland City Council didn't allow them...the Super City hasn't got around to rezoning Auckland yet because it's only been in effect since Nov 2010...a raging debate is underway at the moment about the spatial plan, once that's in place then expect to see some rezoning action.
"past" He wasnt investing in 1925~1935 for a start.....and has never lived through an event like peak oil which he simply ignores.
Wrong Steven. Olly was in the middle of "Peak Oil" in the 1970's which saw oil prices sprial through the roof to the extent that there was no petrol to buy and car-less days were mandatory.
He also saw and experienced first hand what it did to property prices and rents and wrote about it in his excellent book "The Coming NZ Property Boom" (1978).
From 1979 through to 1987 the boom of all booms rolled across the land as is well recorded
for those who have the wit to learn
The wheel has almost come full circle and history will soon be repeated.
peak oil was not the 1970s.....that was an oil price spike....and caused a recession sure....ignorance means unknwon risk and the degre of impact unappreciated.....The other interesting point as laid out by many and the WSj is the latest the last 6 oil price spikes have all triggered a recession.....this time will be no different, so jump on now....uh no.
Peak oil is a whole different ball game....
Full circle, that would be the Great Depression, as you say its coming around....
Wit, no eveyone always knows better it cant be a bubble, want to buy a tulip?
regards
well i remember first meeting olly back in '98 testing the market with one of his as it turns out keepers when first doing real estate sales in remmers back in those for me early days. this was after reading about bob jones and olly earlier in life. i still remember my father saying about O.N. was that he was a real see you next tuesday kinda guy after sending thousands of investors and grannies broke and next to if not bankrupt and then going on about the marvels of property
i also remember selling a home close to me for the early to mid $400's around mid year in 2000 that had been extensively improved and it was sticky but sold for around the previous sales price before renovations were done. and don't harp on about how useless i must have been as that was how it was.this was due to a mini recession if you were around to witness it. that same house was on the market after an extension for $1.4m in 2006, of which the valuation remains the same as that new price, goodness knows how much more it would be worth now
and my tenants don't complain, i don't jump on every chance to up the rent and that is appreciated... some of us are human....
and those same sticky prices in 2000 had my first home with some effort and work go from a house in 2000 to a house with section at the back. it also went from 300k to 800k by 2006
i also really enjoy it when tenants go on to buy their own home, which does happen. although there is a part of me i ignore that says i should have been charging more rent if they saved up a deposit... buying a home under the right conditions is a blessing.
and i don't listen to O.N other than when it is good to listen to like minded individuals, which is some of the time for him.
President of Property...
Agree - we lost money in Olly's Landmark Corporation - a spectacular failure. How Newland avoided bankruptcy in the early 90s when the Development Finance Corporation pulled the plug on his geared portfolio must have meant a lot of quality time for him at his local synagogue.
The Torah says: "If you do good, won't there be special privilege? And if you do not do good, sin waits at the door. It lusts after you, but you can dominate it." (Genesis 4:7)
Newland is trying to redeem his sins now - but it is too just late in the judgment of too many people who trusted Olly and were let down by him badly, like me and my now deceased parents.
"As far as we are concerned these $30/week rent rises are not keeping up with the increases in insurance, rates, GST rises and most importantly the loss in my depreciation claims ". Who isn't paying more GST and insurance? Don't be sad you can't depreciate a property that "always goes up in value" who was subsidising who?
How long before people begin to decide that there is more to life then just working to pay the rent and eat. I'm not sure how many people get a $30 payrise every 6 months, I'm sure those that do really feel like they are getting ahead.
It's a pretty sad world we live in when people who are making it harder for people to get ahead think they are helping.
Who can afford rent rises?
Perhaps it's those that have lost their life's saving in the finance company debacle? Or maybe those who have lost everything in the earthquake? Or those who have lost it all in the 'leaky housing' scandal? Or those who have just been displaced from their job by the economic downturn? Or those who have a student debt to pay off? Or those that are maxed out on consumer debt? Or those who have not asked for a pay rise, just to hang on to some income source?
There must be some people out there that can afford the $30 per week rises; but not as many as some would have us believe....
One of our tenants gave us notice early this month as they are buying their own home. Six years of hard savings, excellent achivement for the couple! A school teacher is going to fill the house next Friday.
Also overheard a few people's conversation at work talking about now is a good time to buy a home or an extra house and how the market will go back to a sellers market within a year or so time...etc. Now people might laugh (including me still skeptical) about this, but this just goes to show how ordinary people are thinking out there.
Property is planted deeply in people's believe system, thats why prices go up over time, debates about properties are so senstive and people argue over this same topic every 10 years or so. if you dont care, you wont be talking /complaining about it.
Do you think people in Japan's 'belief system' is/was any less deeply planted than ours? They believed that 'property only goes up' over 20 years ago; and it's gone down pretty much ever since. (Sure; they have different factors at play. But the belief system was exactly the same.) Or people in the States 4 years ago? Or people in Ireland 5 years ago? Or people in the UK 4 years ago? And perhaps those in China, doing it today, believe the same as New Zealanders. What makes our property belief system so bullet proof and different to other deveolped nations, especially when it's funded predominantly by the same thing - debt? Answer: It's not.
the difference my friend is that one can drive past a property and no high rolling exectutive is going to piss off with all your hard earned dough.
do you not understand there is no good alternative to living in shelter,
there is also no other robust, bullet proof, tried and tested other investments in New Zealand which do not allow some phucker from somewhere to gain access and just steal your investment funds and piss off overseas with them.
i think the reason Japan property is flat is because they are better off investing their funds offshore rather than in property
as for the rest who cares - different hemisphere... things go down the gurgler the opposite direction on the other side of the world..
Hmmm.... I'd guess some property owners in Merivale or Fendalton might not like the look of 'their only investment choice', they drive past this afternoon. On the otherhand; I like to look of what I see on the net this afternoon for the balance of my accounts :) . So I understand exactly how risk works. And there is a time and place for all forms of investment, property amongst them. Now, in my opinion, is not that time. Later? We'll see.
That's if the insurance comes through! Debate on other threads indicates that there is somewhat of a debate over 'who pays for what', or indeed, 'who pays at all'....Are there any more Herbet types out there? If there are, this earthquake event could shake them out......
The debate on here mirrors exactly the points of view in the LA time blogg just before their crash...we will see how it plays out. Personally think if property crashed this country economy has crashed or subsequently crashes which is unfortunate as those that invested in property only deserve to be burnt for their lazy approach to life. Still you reap what you..
They are dreaming Small Kev. We are going into times you and I have never experienced before in our life times. An explosion in basic living costs inflation in the areas of food, energy, utilities and now insurance premiums. How the heck are ordinary NZers who are the majority of our population going to go out and borrow more than they currently are and push up house prices in the near to medium future. To do that they need significant wage and salary increases to just cope with their current daily costs then once that is under control increases to cover bigger mortgages. Talk to the majority of business owners and they are not in the position to give their staff increases in wages and salary. They also are just coping with the recession we are still in. People need to think some reality not pie in the sky thoughts of wealth being created by property value increases. Just because you buy a lotto ticket does not mean you will win the 25 million available. Yet many do of course.
dude - how many times do you need to hear the answer budget until you accept that as the answer. you remind me of those people that whine to everyone until they finally find someone that agrees with them - even if they too are way off left field in their cognitive processors...
How do you budget and put money aside for a deposit when you have a family to feed and shelter which costs are rapidly rising as we speak. The average kiwi family is on $50 to $60k if you are lucky. Try to keep the family body and soul together including paying silly rental figures because people have paid too much for their uninsultated shit boxes and need to get a certain rental return to keep then away from mortgagee sale and budget for a deposit. You are in la la land POP. You should sell down now as the buyers are going to reduce in numbers as food and energy increases keep coming. Talk to people around you and ask how life is treating them at present.It is not great out there for the majority of New Zealanders. I am the chairperson of a school board and the principal has told me recently the school is feeding more and more children daily and she is noticing that she is suprised at some of the families who are starting to show signs of financial stress. This school is a high decile school in a very middle class suburb.
Back in the 60s, teachers were being refused mortgages on the grounds they were not earning enough! or some such BS.....those were the days....banks were different then....Piggy was in town...the Beehive was a sketch on a bit of paper...the Gold standard was something real...a computer was the size of a building....chocolate fish were 3p each...the govt owned bloody near everything...and half the country 'worked' on the railway.
one thing you property boom proponents forget... all other booms have bubbled on cheap and easy loans. That there is no such thing any more seems to have been forgotten... maybe that's an age thing with BBs???
Oh yeah... don't waste your time responding to my comments with your barbed and vitrioloc commentry... I can't be bothered to read them.
oh yeah...
http://www.stuff.co.nz/business/4814129/Businesses-believe-it-ll-get-gloomier
banks are really going to start throwing money around now!
as before -
... don't waste your time responding to my comments with your barbed and vitrioloc commentry... I can't be bothered to read them.
Interesting that Tony alexander really believes the Chch re-build will add to NZ's GDP growth in 2012 ...... as GDP is a lagging indicator , that suggests the re-build will begin in 2011 ....... !
Seriously ? ..
.... Nowt has been achieved in the 5 months between Sept. 4 2010 , and Feb. 22 2011 .....
..... What makes anyone believe that the bureaucrats will get their fat fingers out of their lard-arses and allow people to get their houses and businesses mended this year at all ???
Labour ....... National .......... CHCH City Council ........ Ecan't ......... ACC ...... ..... the unions ........... yadda yadda ................. lard-arsed busy-body bureaucrats who think that they know best . Layer after fecking layer of the useless wastrals .............
Part of the reason the Govt has to borrow as much as it does is because these "investors" haven't paid any tax, as this lawyer virtually confesses in the interview.
If your financial plan involves cheating on your taxes, it's not a plan, it's a scam.
No sympathy for these people when they go to wall in the coming years when they can't shift their dirt for more than they (borrowed to) pay for it.
Queensland property plummeting ( finally on MSM in Oz..)... and the 'vendor' at the end of the clip is actually...a Real Estate professional!
http://www.youtube.com/watch?v=DGCZ-_4Xs4E&feature=player_embedded
Only the rich will be able to afford to drive in Auckland as the council targets motorists to pay for its public transport plans, the Automobile Association says.
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10715394
.......
See! subsidizing developers. When will the left discover land taxes?
Through reading the posts on this subject I would just like to make a few points, just to get my two cents in.
1. I back ex-agent, because he is an ex-greedy babyboomer as has realised that its not all about the mighty dollar, and that the best things in life are free. And he realises that the way property is going in this country is totally unsustainable.
2. Those people that say things like they provide a need etc are self serving, and know that they are in it for their own financial gains (which in time will turn out to be losses.
3. I know of a landlord who is hiking their rent by $30 per week, and it is a leaky house. I think this is absolutely ridiculous, and don't believe that this kind of crap can continue.
4. If I don't buy a property in 6 months I will be renting for life? That is rubbish and Olly knows it, because its basically saying that my children will forever rent in their own country, sorry I don't buy it.
5. Finally I would like to quote Buffet. "When the tide goes out, you can see who is not wearing any pants". This statement is excellent, and I am seeing it more and more, the tide is going out, and those who weren't wearing pants are getting owned.
I sold my house in 2008 and I have been waiting to buy it back in a cheapr price. I have suffered thing like:
1) The house price is only slightly cheaper in AUckland, Actually the price has risen in the areas I want to buy(Mt Eden, Sandringham, Three Kings);
2) All the complains from family;
3) The rent increased $50.00
4) This one is the biggy. I could increase the house value for over $50k in three years through my weekend work(landscaping, fencing, painting, building deck, extending outdoor living area, etc).
But I will keep waiting becase I believe the house is still overpriced.
President,
A tsunami, earthquake, flood, hurricane or eruption can come along and take it all. Thats happenned to plenty recently, and not just in poor countries - I have to say that (aside from the enormous financial risk of buying into a housing bubble) I am now a lot more wary of NZ and Aus having seen the devastating impact of Christchurch and Japan as well as flooding/cyclones in Aus. Its a reminder that NOWHERE is 100% safe, so having 100% of your wealth tied up in the family home carries ENORMOUS risk. A diversified portfolio (of not just property in one region) is a far better way to go. Renters can walk away. We live on the ring of fire for pete's sake. The most expensive proeprty in Auckland costs a heap because it has a view of a volcano only formed 500 years ago. Wellington's most expensive property will slide down a hill or get sucked into a swamp when we get the long awaited big one.
This is real life experience; I'm off to Aus and have rented my central Auckland house out few weeks back for over $1000/wk. 14 groups went through open home and all wanted the house right there and then. Our new tenant said that there isn't any decent house to rent around Auckland central and they have been looking since September last year. Lots of cold damp places and not many nice ones. So there...
A perfect snapshot of what's happening Chairman Moa. You are renting to another resident ( they've been here since September, after all) and going off to Australia. That's one less property needed in Auckland, as you don't need an alternative one here; either to rent or buy. ( But what happened to your new tenant's last accommodation? I guess that went back into the rental pool - one in, one out?) Multiply that by a thousand or two, and the place will be awash with rentals that are untenanted! Because what's missing in New Zealand ( and maybe why you're going?) is ....work. And certainly the work that allows the first $75,000 p.a. to be earned, and then spent on rent.
I see. You did specify 'new tenant', singular, in your original post. And either; that's two ex-rental now on the market ( the two couples are now in one house and not two?) or just confrmation that the occupany density is moving out from 2.35 per household to 4 in your case? As I said, either way, the market will soon be awash with rentals with no tenant. That leads to a rent cutting excercise in the face of reducing Government tax suppliments. As any rental income to defer costs will be better than none.
That is an unbelievably nasty comment.
In defence of BBs, this is my take. I am now in my early 50s and, yes, my prevous partner and I bought, did up then sold a few houses. We made money from the added value we brought to the house in terms of the labour we put in. Why did we do it? From the time we were teenagers we were constantly being warned that there would be "no money" for us in our retirement. It was a frightening prospect. BUT we couldn't save. We both worked, had to work, to pay our living expenses and bring up our two children. We had NOTHING left at the end of the week. We could not save for a deposit for a house. In the end we borrowed money at 21% interest, sold every asset we could find to buy our first property. It was a small 2 bed on the motorway. We spent every waking hour making it habitable. We sold, increased our mortgage, found better jobs and gradually moved upward in the hierarchy. But this wasn't greed (although I admit there are greedy speculators, most BBs are not, and there are plenty of Gen Ys who are). It was a real and human attempt to provide for our future because we kept being told that we were on our own. And it is clear that we will be.
And do you still have a mortgage now, janey? Because unless you are living in a mortgage free home today, you still have a debt that has to be paid off ( obviously!), and may not be any better off than having stayed renting all these years. You've just paid interest to the bank ( 21%, Golly..!) instead of rent. And depending upon the size of that mortgage ( and I hope there aren't 'investment' properties in the mix that are 'dominoed') versus your income, at early 50's the task of discharging it before 'retirement' may be beyond you. (NB: This is a generalised comment, janey, not a specific response to your post ;)
What is to happen when the BBs begin to cark it in their droves...when the demand for the mcmansions is not there...will Winston be pm then...will he be busy learning Mandarin and welcoming new immigrants with BIG families to fill the boxes and save the bubbles for the banks...probably!
They wont even have to die off.....before that they will ned increasing levels of medical care...so they will ahve to sell down their assets, or vote in limitless free healthcare, vote for Whinney I guess.
One of the problems I have with the neo-con Treasury, they count our savings/assets by assuming house sales individually where there are too few in number to effect/depress prices.....this wont be the case...then think of ever increasing rates on McMansions forcing ppl to downsize, at that point you just have to wonder how little property will be worth....
and Olly etc think its pointed upwards....
regards
Mr Whitburn et al are correct. Rents are on the rise in New Zealand and the days of 'happy renters' are drawing to a close.
As Olly Newland touched on recently, following on from the boom in house prices in the last decade, rents have fallen behind in relative terms. This situation is unsustainable.
The minimal new house building of recent years will see the gathering shortage only get worse.
The happy ones will be landlords.
Even the pious Nicholas Arrand will admit renting as a strategy has gone awry.
Renting will be fabulous for years to come. I really don't mind paying $500 per week more to rent when the property that I rent falls $25,000 per annum - not that I think I'll have to pay any more rent with the glut of rentals that will hit the market as our populations falls/redensifies. That is just a zero sum game, and the game is going to be far more weighted in favour of renters as asset prices collapse. Pious? No...just sensible.
Where you are?
I took a back seat after chatting with Chris_J the day before the last 'quake, and discussng the clamity that was about to befall the property market, and his haloperidol ! . I described a 'Yasi like" event that was coming. Not that I saw it as the next Christchurch earhquake. And quipped that I was boarding my ark and set for 40 days and nights of drama. Out of respect for Chris' views ( not that I agree with them!) and the damage it may have caused him, I though it better to watch from the sidelines. I do, and I shall :)
Err....no. As I have posted many times, I never expect to buy a house again in my lifetime. I expect to live in many; in many different locations, and renting gives me just that flexibility. It's what 'us' older people wmay choose to do from now on! Sell; rent and move.....and watch the benefits of a decline is asset prices ultimatley feed back through into lower necessity prices.
As a landlord I am pleased to hear your view that older people may choose to rent...means more tenants for me to choose from.
You will need to be 'well heeled' older folk if you rent though, as rents will rise much more from here on.
Consider The Age newspaper today and the article saying Australian tenants are paying 40, 50, 60 percent of their incomes in rent.
Scary stuff...and on its way to a neighbourhood near you.
Rents will fall from about here, as more ex-homes come onto the rental market, and sadly those in the older cohort die off. ( they need to 'live' somewhere more permannet). Initially it's a zero sum game. I sold my home; I rent somewone elses ex-home. But rent is after all a relative thing. Relative to the price of the underlying. And as property prices fall rental yields will 'improve', but not nominally. People are going to have less and less to spend, and can't cut back on all the necessities at the same time. When petrol is too expensive; food is too expensive, one moves to cheaper accommodation. That leaves a 'gap' at the top, eventually. Then, those top end rentals drop their prices to get a tenant, and the whole market curve...drops. And that's all without any more regulatory 'tinkering' to re-balance our economy!
Oh. And if it's 'this' atricle you refer to....hasn't it always been a battle for those on the minimum wage?
"To rent a typical three-bedroom home in any major metropolitan city, a family of four living on the minimum wage of $29,500 a year would be paying between 35 per cent and 60 "
The population is growing and the number of houses being built is falling, so if your "move to cheaper accommodation" scenario was correct people will find they can't move to cheaper accomodation as it will already be tenanted.
And those landlords with the cheaper accomodation are going to see this demand and respond by pushing up rents.
Forget about moving around...there ain't enough houses to house everyone and until the price signals adjust, there wont be enough being built.
The first price signal will be rents changing...up.
NB why will people pay for all the other necessities you mention, but not the higher necessity of rents? If power companies, telephone, food etc etc all can go up, I as a landlord can put up my prices as well.
It's only fair, given the important service I provide, that I be justly recompensed for it after all.
You can put your rents up to where-ever you like! So why haven't you been doing that for all these years? Why are they lagging true economic cost? Answer: You have been charging what the market would bear. And now 'you' are going to try improve the equation into the teeth of all other necessities going up! Good luck with that.....People always have/do and will pay whatever they can afford for rent. If they have $500 pw to spend, that's what they pay, and try to get the best fit of property that they can. The actuall property to some extent is irrelevant. It's cost that matters. And in the face of stagnant wages and rising costs the aggregate pool of rents charged can not go up! People will move, as I have said, and if you want to be left with an untenanted property in an uncertain legislative environment, well, again good luck. Remember: Any rent, is better than no rent if there is no negative gearing etc. to compensate the landlord.
For years PIs have received huge capital gains so rents were not so important to the economic equation regarding property investing.
But the capital gains are over for the time being and so all renters should beware.
Because, to make up for the lack of profits, the market will compensate PIs by paying them more in rental income. Mr Market really will be the long-term PIs friend.
Yes, I have been raising my rents, slowly in some areas and quickly in others. I am certainly not losing tenants. Property managers tell me to buy more houses as they have tenants they want to house.
NB How long will wages remain stagnant in an inflationary enviroment and, crucially, as China begins to feel the effects of its "one child" policy on their labour market, resulting in a growing labour shortage in that country?
My advise is hedge yourself now Nick and buy a house. Then shout me a beer for the rational advice I have given you.
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