Posts tagged house
Property investment advice from NZ's top experts...
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Only being interested when the market is hot

A lot of people decide to become property investors when house prices are rising.

In reality, you should have been buying three or four years ago. When it is doom and gloom, that is when you should be buying.

Buying in the wrong location

Investors should look for places where there was population growth, infrastructure and employment.

You've got to invest in those locations for growth. It helps people get the next deposit and keeps cashflow robust.

Not getting advice

Property investors should have an accountant with experience in property investment, a property mentor or a financial adviser to talk to. Local property investors associations can be helpful also.

It's important to have a plan and review it regularly

Talk to a lawyer and accountant to get the right ownership structure in place.

Trusts are great for asset protection but bad for tax efficiency. If the property is making losses, you could get stuck there.

Thinking finance is just about getting a loan

Fix parts of your loans on different terms, such as some floating, some fixed for a year, two years and three years, so they would come up for renewal at staggered intervals.

It smooths out the interest expense and means you can avail yourself of opportunities when low interest rates are offered.

Olly Newland cautioned against borrowing too heavily on your own home. "You shouldn't borrow more than the rent from the property will cover."

Not doing the numbers

People don't know the difference between the gross yield of a property - a basic calculation of the rent coming in as a percentage of the purchase price - and the net yield - what they would earn after all the costs were taken into account.

Costs could easily make the difference between a purchase being a good opportunity or a long-term drain on finances. - David Whitburn, project manager at Fuzo Property

Not managing the property well

Investors should ensure they had enough money aside to cover repairs and maintenance, and keep on top of it. Many would end up not putting rents up often enough or not knowing how to deal with problem tenants.

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Shannon's Manukau market wrap

So how is the market?

If you were to ask me how the market is now, I would say not bad. I might even say pretty good. It continues to be a good time to buy, prices are the lowest they'll probably go, and (thanks to the RBNZ lowering the OCR to 1%) interest rates remain low and look set to stay there for quite some time.

With that said, it’s not a bad time to sell either for most properties — assuming you’ve adjusted your pricing expectations to the new norm in Manukau and Auckland overall. Will the low interest rates see an upturn in the market? It is unlikely in the immediate term, however it has already increased confidence and activity in the market. With further relaxing of the LVR rules expected (and perhaps some relaxing of the banks’ lending criteria), predictions point to an upturn maybe late 2020, but more likely 2021–22.

Market highlights

The monthly property report from REINZ shows for the first time in eight months, the number of residential properties sold across NZ in July increased by 3.7% from the same time last year to 6,118. This number is also the highest for the month of July in 3 years.

This suggests we’re starting to see some early signs of growth. We can attribute this to more certainty post the removal of the Capital Gains Tax bill, renewed confidence as parts of the market adopt the new norm in terms of pricing, and the warmer weather we’re looking forward to (which is when we tend to see more activity in the market).

Manukau’s statistics

We are seeing many positive signs for the road ahead. Manukau’s median sale price for July 2019 was $820,000 and when we compare this to July 2018 this figure was $828,000. Auckland's average asking price lifted by 1.5% compared to June 2019 to $928,152 for the second month in a row — that’s still some way off the region’s 2019 peak average asking price of $960,715 in February. I'll be watching with interest to see what happens during the rest of this quarter.

In summary

Across Auckland, prices haven’t really fallen that much; volume yes, but prices have been pretty static for quite some time. We can expect a nice stable market for the foreseeable future.

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Can you subdivide?

Before you begin, check first if your section can be sub divided under The Auckland Unitary Plan

To check on your property's zone in the Auckland Unitary Plan, click here and enter your address in the search box at the top. It should highlight your property on the map.

On the left hand side you should see a description of your property including the land zone, for example Residential - Mixed Housing Suburban Zone

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Engage with a registered land surveyor - The Process

Stage 1

A good starting point to provide relevant information about your property. The surveyor will investigate all potential options specific to your site and compile a detailed report highlighting the financial costs and potential returns of the project.

Stage 2

Under the newly operative Auckland Unitary Plan we will investigate and determine whether your property is potentially subdividable. They will then talk you through the process of subdividing and Auckland Council's new rulebook around land development.

Stage 3

The first stage of land subdivision is preparing the subdivision resource consent application. They will organise and compile the required information including topographical survey and scheme plan, engineering/flood report, geotechnical report, CCTV investigation and concept house design.

Stage 4

The decision whether or not to go ahead and subdivide your property is all yours. They will provide you with all the information and guidance imperative to a successful and lucrative outcome.

Stage 5

After the resource consent for the subdivision has been granted we will continue with engineering approval and the installation of the civil services including waste and storm water, power, phone, fibre, water and gas. Finally we will ensure all works have been carried out in accordance with the approved subdivision plan.

Get an idea of overall costs

The subdivision of one residential property into two lots can vary significantly in cost due to a range of factors, in particular infrastructure issues.

Generally, the average two-lot subdivision can cost around $120,000 - $150,000 for an approved consent, a new certificate of title, professional fees and other requirements. It is also likely to be development contributions on top of this.

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