Residential Building Work and Licensed Building Practitioners

Since 1 March 2012 if you are undertaking any ‘residential building work’, which relates to the design and structural integrity or weather tightness of a house or apartment building, now known as Residential Building Work (RBW), it’s highly likely you will need to the help of a Licensed Building Practitioner (LBP) to either complete or supervise the work. It will be an offence for RWB to be undertaken unless it is completed by an LBP.

What is RBW?
RBW is work which is essential to the structural integrity of a residential house or a small to medium-sized apartment building, including design work and moisture penetration (weather tightness). Therefore any works to load-bearing walls, foundations, roofs and cladding will be included as RBW.

Who is an LBP?
An LBP can include designers, carpenters, site managers, roofers, external plasterers, brick and block layers, and foundation specialists. Registered engineers and architects, plumbers and gasfitters are also LBPs due to their existing professional registration, therefore they can complete some RBW.

Can you still complete the work yourself?
Under the scheme, owner-builders are able to complete RBW without the help or supervision of a LBP. An owner-builder is classified as someone who has an interest in the property; either reside in the home or intend to reside in the home; complete the work themselves or with the help of unpaid friends or family; and they have not undertaken RBW on another property within the previous 3 years. The purpose of this is to enable homeowners to build and alter their own homes.

An owner-builder who intends to complete RBW will have to make a statutory declaration showing that they comply with the owner-builder exemption above and file this with the Council. This will be kept on the property’s Council file so that future buyers know the work was completed by an unlicensed practitioner.

Implications
The new requirements are intended to ensure that LBPs are competent and that property owners are informed of their contracted LPBs’ abilities. Consequently this puts some responsibility on home owners to ensure they have the right trades people engaged for the appropriate work.

Although not required by law, it will be beneficial for homeowners to have a written contract with the LBP, which sets out a full description of the building work to be completed, start and finish dates, what materials will be used and how it will be paid for, the obligations and responsibilities of each of the parties, how any variations to the contract will be dealt with, and how a dispute will be handled should one arise.

The Building Act 2004 however does still apply; providing home owners with implied warranties within a building contract should the contract fail to include them. Under the new scheme, home owners may also bring complaints to the Building Practitioners Board regarding LBPs or to the appropriate complaints authority for those who hold separate licences, such as architects, plumbers, engineers and gas fitters.

Although these changes do hold building contractors more accountable for their work, the new regime also places significant responsibilities on home owners to engage the right LBP and keep the council informed. It would seem that the responsibility for RBW is being shifted away from building consent authorities. Although this may mean an increase in building costs for home owners, as contractors ensure compliance with regulations and seek advice on insurance and liabilities, these changes should cause a decrease in building related disputes and litigation, and provide greater efficiency in the building regulatory industry.

For more information on the above do not hesitate to contact Anne Needham or Holly Brown of Rennie Cox, Solicitors, Auckland

By Anne Needham: Urban Legal

Property CASH FLOW and INFLATION in the USA

This month we enter our third year of providing CASH FLOW solution for investors utilizing US residential property. I get a constant stream of people wanting to know how to “make a killing” in the US market and if they are kiwis, Aussies or Asians their mindset is all around buying and selling to “make” money.
But this strategy isn’t about trading it is about investing for cash flow. And it is critical to understand that about the US market. Yes there are opportunities to make money, of course there are, however the US market overall is a flat growth market.

You see if you strip out inflation form the US housing market their current prices are at 1986 levels. And 1955 levels. And 1895 levels.
That’s because the natural rate of price appreciation for houses is more or less zero after inflation.
Prices arguably have stopped falling. And like every property cycle they’ll start rising. But over the long term, they’re unlikely to rise faster than inflation.
That’s why smart investors must focus on the “functional” value real estate provides.
You see few things escape the gravitational pull of the inflation rate forever. U.S. housing had spectacular booms and busts in the 1920s and mid-2000s, but smoothing out the swings and adjusting for inflation, prices have gone nowhere for more than a century.

Houses are made out of consumable goods: wood, stone and metal plus labour. There’s no reason to believe they should enjoy a special rate of return distinct from those for, say, apples and shoes.
The good news is that houses—like apples and shoes—have functional value, To come up with a very simplistic formula divide the purchase price by the rental income and you have a “gross yield” or gross return on your money. Subtract all additional real and notional costs and you have a net return on your money or net yield.

In more than half of U.S. housing markets, the NET rent yield is over 10%.

That’s a pretty good deal at a time when 10-year corporate bonds of decent credit quality pay only 3%. And money in the bank is at 4 to 5% with no chance of inflation proofing.
So if you wish to enter the US market remember you are doing it to inflation proof your capital and achieve a net return of 10% plus. That alone should be good enough reason for us all to have at least 3 to 5 homes in the US but if that doesn’t excite you DON’T DO IT!!

IF you’d like more information on this strategy we’d love to send you our info pack and arrange a free consult for you anytime. Just email team@turnkeypropertyinvestment.com.

9 Things to Consider To Make Some Extra Money

One of the key things I did when I was starting out financially was get a part time job. In fact when I was in high school I had three of them and I also worked close to full time when I was at university. Not everyone is quite that keen and it was hard work. It did give me a great start financially in life which I am really grateful for.

Getting a part time job or creating a part time business is a great way to get extra money to help make ends meet, pay off your debts, make extra payments on your mortgage, save for something or add to your investments.

Some key things to consider are:
1. What is your overall objective? (flexibility, freedom, no boss, make money)

2. How does your decision fit into your short, medium, long term lifestyle or financial objectives?

3. What is your timeframe? Is it short term to meet a specific purpose or something you want to do for the long term? If you start a part time business do you want to make full time in the future?

4. Have you carefully thought through the reasons why you want a part time job/business or is it an emotional decision?

5. What is your current financial position and levels of expenditure? Specifically how would this extra money be best used?

6. Realistically what levels of income will you receive from the part time job/business? Have you thought through how you will manage this extra income so that it gets to where you have planned it to go and not get lost within your usual spending. A good idea is to get this income paid into a separate bank account.

7. Are there any risks involved? Is there a downside, ie time. Are you okay with the trade off?

8. If you are looking for a part time job have you evaluated what your strengths are and looked at what kind of part time jobs might be available and thought about the best potential fit.

9. If you are considering starting a business have you developed a business plan (this is maybe only a page or two)? Does it include marketing, revenue targets, expenses, developing a team of professionals so you have the right advice from day one, resources/training needed, etc.

Visit www.homebusinessresource.co.nz to get a FREE Report entitled “The 7 Biggest Mistakes When Starting A Home Business”

By Lisa Dudson

What is the one thing that monetarily affects everyone?

It is interest rate. Under the current banking system, central banks around the world manipulate the cost of money (interest rate) in their countries.
The US Central Bank (or the Federal Reserve Bank), however, is the single most influential central bank compared to anywhere else in the world. And their decision to keep interest rates low will have a major impact on every New Zealander, whether or not you invest in properties. This because the interest rates will majorly influence the consumer’s decision to save, invest, or borrow.

Part of the wholesale financing in New Zaland is from the US. And thus it’s important that you need to understand what’s going on in America, regardless of where you invest, or whether you invest at all.

The Federal Open Market Committee is a part of the Federal Reserve Bank that deals with Open Market Operations (OMO). One of their  “jobs” is to intervene in the open market on the levels of interest rates. On April 25, 2012, they stated that they “decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions…are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”

(Retrieved: www.FederalReserve.gov/newsevents/press/monetary/20120425a.htm)

Let’s look at some of the headlines from the US media in recent months.

“Mortgage rates fall to another record low.” Arizona Central. Feb 2, 2012.

“15 Year Mortgage Rates Enter Record Low Territory.” 24-7 Press Release. April 16, 2012

“Mortgage rates hit record lows” CNN Money. May 3, 2012.

“Another record low for mortgage rates” CNN May 10, 2012.

“Mortgage Rates in U.S. Fall to Record Lows With 30-Year at 3.83%” Bloomberg. May 10, 2012.

Despite, the interest rates already being at historic lows, there is a continuing downward pressure on interest rates. And with the European Crisis, the slowdown of Chinese and Indian economy, it looks like the world will needs a lot of available cheap credit to be to be able to prevent us from entering another global recession (or even a depression). In short, the Fed has indicated to the market that they are willing to do whatever it takes (and with the power that they have, they will succeed) to keep the interest as low as it is for the next 3 years. Also, it’s a good bet that the interest rate in New Zealand and Australia will still be kept relatively low during that same period. This means great news if you are a property investor looking to create passive income through properties (and not so much if you park your money in the banks).

If you are interested in learning more about how you can take advantage of the current crisis in America, please feel free to contact me at: chayot@property4prosperity.com

In my next article, I will be writing about how one market in the US has already seen a double digit increase in capital gain while also providing a double digit yield. And consequently, which other markets are very likely to follow next.

To Your Financial Freedom,

Chayot Ing-aram
BBS (Hons) & M(Fin)
International Property Professional
http://www.property4prosperity.com

Learn Investing the Easy Way

As a successful property investor you already know that investing can be great fun, but can you get the kids interested? Times are hard economically all over the world and we can’t open the paper without reading about yet another Euro debt write off or another IMF bailout. So in these difficult financial times, when we are all being told that things are going to be economically hard for at least a generation, you owe it to your kids to ensure that they get a good feel for how to make money from investments and as they say – it’s never too early to start.

There is little doubt that good secure well paid jobs are fast becoming a thing of the past. A degree counts for nothing if everyone has one. A simple way to give your kids a taste for money making may well be a board game that all the family can play.
There are money-based board games on the market that you might think would give children a taste for investing. An example is Monopoly, which is 75 years old and was originally designed to show that Capitalism wouldn’t work. To a certain extent it demonstrates that very well, because as soon as one player starts to dominate the game and owns most of the properties, the other players start to lose interest. Or there’s The Game of Life which is 50 years old and concentrates on the importance of getting a good education for success in life. It is of course important that your children do well at school and university, but it is doubly important in these difficult times that they are also financially savvy.

Well you may be interested to know that now there’s a really enjoyable way that you can introduce financial awareness in a fun way through a new money-based game called Realism. This easy to play game for 2 to 6 players is particularly relevant, as it encourages individuals to think more deeply about the financial decisions they make.

You can start to experience Realism NOW by CLICKING HERE and visiting the website.

This new board game aimed at adults and the family has just come on the market in New Zealand. It is designed for adults, but is suitable for the over 10’s and designed to get the kids away from their computers so they can sit down as a family and play a traditional style board game. There are no batteries, DVDs or other gizmos. Playing a board game together as a family, especially one that is designed to educate as well as to entertain is an excellent way for families to bond.

Realism lets you enter the unpredictable world of speculation and business deals. Helps challenge young minds as they attempt to build business empires and realise the consequences of their financial decisions. All the family can enjoy the many roles that Realism offers them as financial uncertainty chimes with the times! The object of the game is to try to become a virtual millionaire by buying property, shares & other assets. The winner is the player with the most net assets when play finishes.

It’s a sophisticated game which is easy to play at the basic level with a subtle form of competition where winners do not succeed at the expense of other players, so everyone can make their fortune and enjoy the game. So don’t delay, have a look at our web site and buy Realism for you and your family today.

More details on the company web site www.RealismGame.com .

To your financial success,

The Team at The Property Investors Network

Property Limited Titles

Background

Some titles have the wording “Limited as to Parcels” appearing underneath the title heading. This does not mean that the title is defective. It does mean that the area and boundaries of the land are not guaranteed.

It was not always a requirement that land had to be surveyed as part of the subdivision process. Although not common, this practice was still used as late as the 1960’s before legislation made it compulsory that all subdivisions had to be surveyed.

Implications

What does it mean in practical terms to the land owner or developer when their title is limited as to parcels?

• The actual area and boundaries of the site may be different from that on the title.

• As the property was never surveyed, the Survey Act and Rules prohibit a redefinition survey, i.e. should a person need to know where their boundaries are, a land surveyor is not allowed to peg the site. A survey has to be undertaken to remove the limitations and a guaranteed title issued. As part of this procedure the boundaries will be pegged.

• Some Councils will not accept resource consent applications for development where the title is limited as to parcels. This is particularly prevalent for commercial sites where development occurs either on or very close to the boundaries.

Removal of limitations survey

A surveyor generally follows the same procedures for a removal of limitation survey as for a normal subdivision. More attention is given to occupation, particularly fences, walls or other structures older than 30 years that may be evidence of a boundary position.

A normal land transfer plan is prepared, approved by LINZ and lodged with the District Land Registrar for registration. Prior to registration, the consent of adjoining owners must be obtained. It may be that an adjoining land owner disputes the position of the boundary. There are two ways of obtaining consent from adjoining owners:-

• The surveyor prepares a copy of the survey plan with the names of the registered owners of adjoining properties thereon. The surveyor or owner can then call on the adjoining owners in person and request them to sign the plan. This way can be quick should all adjoining owners agree. The downside of this way is that people will not sign for frivolous reasons that bear no relation to the position of the boundaries.

• The second approach is for the District Land Registrar to serve notice on adjoining owners. The owners must respond within a statutory time frame if they object to the position of the boundaries. If they do not respond, it is deemed that they have no objection and registration can proceed.

If an adjoining owner wants to object, they arrange for a caveat to be placed against the current title that will prevent the guaranteed title from being issued. The boundary dispute is then resolved through negotiation or due legal process.

We advise that you contact RPC Land Surveyors to assist you with further advice that you may require on limited titles or the removal of limitations.

By Andre Conradie - RPC Land Surveyors

www.RPC.co.nz

+64 9 2737505 or +64 (0)272712070

If you are thinking about Property  Developing in the next 12 months it may be worth getting your building or resource consent application in before 1 July to take advantage of potential savings contained within the transitional provisions of Auckland Council’s new Development Contributions Policy.

As part of the preparation of the Council’s new long term planning documents, a new Development Contributions Policy has been prepared (as noted within Andre Conradie’s article last month) to replace the current (Interim) contributions polices of the various former Councils. This new Policy will come into effect on July 1st this year.

When it comes into effect, the new Policy may increase the amount of money that you will have to pay to the Council for permission to undertake certain types of development. The increase in contributions is potentially significant. For example, in the old Rodney District Council area, we are aware of (in some cases) increases of 20% for a new subdivided Lot all the way to a whopping 70% increase (from around $4,900 to $8,200) for new Minor Units in rural areas.

There is, however, a transitional period where the lower of either the current/interim or new policy contributions will be used and this depends on when your application is submitted and when it is approved.

There are four scenarios:
1. If you lodge for consent in the next 2 and a bit months and are granted permission prior to 1 July 2012, you will be assessed against the current policy.

2. If you lodge for consent after 1 July 2012 you will be assessed against the new policy and potentially pay more.

3. If you lodge for consent before 1 July 2012 and the application is approved before 30 June 2013 you will pay the lower of either the current (Interim) policy or the new policy.

4. if you lodge before 1 July 2012 but your consent is not granted until after 1 July 2013 then you will be assessed against the new policy (or any new later version)

As noted, it is possible that the new policy will result in the contribution increasing significantly if you do not submit your application before the new policy comes into effect on the 1st of July. On the other hand, if you are about to submit it may be worth checking to ensure that you are not paying too much.

For the above example of Minor Units, the saving is in the region of $3,300 which would likely cover most of the cost of the Council’s Building and Resource Consent Fees.

So, if you are thinking about developing in the next year, give us a call on 09 426 7007 to see whether there is a cost saving available by taking advantage of the transitional arrangements.

Interest Deductibility for Non Residents

Summary

• The Thin Cap rules apply to non-resident individuals, trusts and companies with non-resident shareholders
• The Thin Cap rules limit the deductible interest that may be claimed if the debt percentage is more than 60% of the property cost or value
• The Thin Cap rules should be considered if:
o you have rental property in NZ and you are looking to relocate overseas
o you are a non-resident looking to purchase property in NZ

Thin Capitalisation Rules (“Thin Cap Rules”)

If you’re based overseas and have an investment property in NZ, then you need to be aware of the Thin Cap rules. These are not new rules, just rules not widely known. The purpose of the Thin Cap rules is to set a limit on the level of debt funding that an overseas resident can have on an investment property situated in NZ.

The Thin Cap rules apply to a non-resident individual or trust and to a NZ company whose shares are owned 50% or more by non-residents. We see the Thin Cap rules applying to three groups of clients that we regularly deal with:

• Individuals living overseas (such as Australia, the UK or any other country) that purchase an investment property in NZ
• Individuals that own property in NZ and decide to move overseas and rent out their property in NZ
• Companies that own property in NZ where the shareholders decide to relocate overseas

From 1 April 2011, the debt percentage threshold under the Thin Cap Rules has been set at 60%. The debt percentage is the total debt (excluding non-interest bearing debt such as shareholder loans) divided by the either the value of the assets shown in the financial statements or the market value of those assets (your choice) on the first day of the relevant tax year.

In simple terms, that means that a non-resident can only claim interest on their loans up to 60% of the property cost or market value.

Let’s look at a few examples:

Example 1:

An Australian resident purchases a NZ investment property for $200,000. They put $40,000 of their own cash into the purchase and borrow the remaining $160,000 from the bank at a 7% interest rate. The debt percentage is 80% ($160,000 / $200,000).

Total Interest Paid $11,200 ($160,000 x 7%)

Interest Limited To $8,400 ($200,000 x 60% x 7%)

Under this example, the deductible interest has been reduced by $2,800 due to the debt percentage being more than the 60% threshold.

Example 2:

A NZ company purchases a NZ investment property for $200,000. The shareholders put in $20,000 of their own cash into the purchase and borrow the remaining $180,000 from the bank at a 7% interest rate. The debt percentage is 90% ($180,000 / $200,000). After two years, the property value is still $200,000. The shareholders move to the UK at this time.

Total Interest Paid $12,600 ($180,000 x 7%)

Interest Limited To $8,400 ($200,000 x 60% x 7%)

Under this example, the deductible interest has been reduced by $4,200 due to the debt percentage being more than the 60% threshold.

Example 3:

Following on from the figures in example 2, in the next year the property value has increased to $240,000. The debt percentage is now 75% ($180,000 / $240,000).

Total Interest Paid $12,600 ($180,000 x 7%)

Interest Limited To $10,080 ($240,000 x 60% x 7%)

Under this example, the deductible interest has only been reduced by $2,520 due to the debt percentage decreasing as the property value increased.

Conclusion

The Thin Cap rules may not be a large concern to those non-residents that have properties with a low rental yield as the property may still make a tax loss even if the interest is limited.

Those that should be more concerned are non-residents that have properties with a high rental yield as the property may make profit that is subject to NZ income tax without actually making a cash profit.

If this is the case, then you need to get regular market valuations for your NZ properties so that the increased value will result in increased deductible interest.

Tony Thorne
www.ThorneAccounting.co.nz

What Rental Property is in demand?

As we come out of the peak Rental Property letting season it is an interesting time to begin to review what kind of property has been popular. Although the main statistics are not yet out, so a full review is not yet possible, it appears that the world wide trend for people to live in smaller household units is also hitting New Zealand. As more and more people choose to have smaller families or no kids and the general population gets older we are finding that large homes, especially on big sections are not proving as popular as they once were.

Property Management, Dunedin wide and nationally, is a rapidly changing business at times and noting and reacting to these kinds of changes in trends can be the difference between hassle free property investing and constantly fire fighting problems. This year has seen a number of properties, in all sectors of the market, student and residential, struggle for the first time in many years. The gut feeling being that this year may have seen an oversupply of bigger, 4-5 bedroom properties as some reasonable properties in good locations have stuck or remain unrented or heavily discounted. This is even on properties that have had almost full occupancy for close to 20years.

So what to do, if you have had a property sitting vacant a bit longer this year or even still vacant? If you haven’t already adjusted the price and the advertising to freshen the ad, ‘losing’ a bedroom but gaining a 2nd living space can sometimes be all it needs to get some activity on a sticky property. Now is the time to bite the bullet and get it rented through the winter and maybe take a short term lease. The other benefit of this is it gives you some time to plan what if any renovations could help remove the problem for next season and the work could this way be done so the property is finished in time for next years peak season.

If you are not experienced in renovations speak to your property manager, they will either be able to help with work in house or have contacts to be able to out source this work. Also if they are a respected firm some of the deals they get should mean you may not be paying much if anymore for them to arrange everything for you due to there bulk buying and on going work relationships with the local trades and suppliers, you may well even pay less than you would of if you had done it yourself.

The other option may be to change the mix of your portfolio, sell an underperforming or out of style building and change it for a more popular one. Rather than selling it may be possible to redevelop an existing site and change a building you have to provide the type of accommodation that the market is now requesting in that area. Both of these options need a lot more planning and information to make this level of decision. So again getting the property rented at whatever level necessary whilst gathering all the necessary information should be high on your list of priorities.

Again your Dunedin property management team should have the experience and access to information to help you make these decisions, so keep them in the loop with your thoughts and use their knowledge and contacts where you can.

Tania and Kyle Elmer
Directors
Mana Property Management Ltd
www.ManaProperty.co.nz

What is happening with the Current NZ Property Market

Back in January 2011 I asked the question “Is this the optimum time to be buying property investment?”

I mentioned that I don’t have a crystal ball, but what I can share with you is my personal view about what I see happening in the current market.

So, to start with, unfortunately no one could have predicted the devastating earthquake that struck Christchurch on 22 February 2011 and shook the economy and shocked most of New Zealand.

The Christchurch property market is recovering, especially the suburbs at the west, north, and south of the city. Sections in new subdivisions are selling well, and towns like Timaru to the south and Rangiora to the north are experiencing reasonable population growth. The starting point for any property transaction in Christchurch is insurance. Insurance companies in general currently don’t want more exposure and mostly will not provide new insurance coverage for properties that don’t have current insurance at the time of sale. So if you buy or sell a property in Christchurch in the near future (until the insurance companies relax their exposure tolerance), make sure the insurance is transferable whether you are a seller or a buyer or the deal can fail.

Most insurance companies will allow policy transfer provided the recipient side doesn’t have a criminal record. (It is best to be prepared and check with your insurance company or adviser beforehand).

For new buildings in the outer suburbs or Green Zone areas, some building companies offer insurance coverage for the first 18-24 months or more.

Hopefully, Christchurch will not have any further major earthquakes so things can continue to improve on all fronts.

So let’s revisit my 2011 observation and see where things are at today, 15 months later.

Back in January 2011 I observed the following:

“We have less competition in today’s market as most Mum and Dad investors are sitting on the fence waiting for the 20%+ further property prices decrease that will never happen.”

Here my comments referring mainly to the Auckland and Christchurch markets:
In Auckland, especially the central city, city fringe, and higher socio-economic areas, home buyers are very actively buying at record high prices at auctions. If not at auction, then a multi-offer situation is very common. 15 months later, home buyers in the major cities now acknowledge that interest rates are historically low and current affordability levels will not last once interest rates start to rise.

This is noticeable also in the desirable parts of Christchurch where there is minimum earthquake damage or none at all.

In these areas of both cities, the market is very hot, and thus it is very hard for the average investor to find a “bargain”.

“Interest rates are STILL at historically low levels and it is only a matter of time until they start going up again, some economists are predicting later in 2011, I second this, and cannot see it happening earlier like in the first or second quarter.”

Interest rates did not go up in 2011; in fact, the Reserve Bank of NZ lowered the Official Cash Rate following the February 2011 earthquake with hope that lower rates will ease the burden and stimulate the economy. Considering the current high levels of the Kiwi Dollar and the sluggish pace at which NZ is stepping out of the “recession”, I personally don’t think we will see the RBNZ increasing the Official Cash Rate this year. I do think that it is possible that some banks will start increasing the interest rate perhaps later this year because of increasing overseas borrowing costs.

“Some Lenders are starting to ease their lending criteria, and 90% loans are available for those who can show reasonable serviceability.”

Some lenders have continued to relax their lending criteria, and the relaxed criteria are most welcome by property investors and home buyers.

“There is an increasing supply of properties on the market, and they are taking longer to sell; this gives us better negotiation power.”

The observation above should be now changed to “there is a reasonable supply of properties on the market in most parts of NZ”. However, in general the number of inventories is decreasing, especially in Auckland and in the desirable suburbs of Christchurch. This is starting to affect the value in those areas, and we see that in some of those suburbs prices have passed the 2007 top of the market level.

One of the main indications that the property cycle is in full recovery or is heading towards the boom stage is the high number of sales vs the lower time it takes to sell properties, what we call “time on the market”.
At this stage we are not seeing the high level of sales we have seen in the previous boom, when sales were at a record high: this could be explained because of shortage of inventory. As the REINZ latest report indicates, there is a considerable drop in the long term average for number of available properties on the market. As an active property buyer in today’s market, we are definitely noticing a shortage of properties to choose from.

On the property development front, it is evident that building consent levels are still very low and will probably stay at these historically low levels until the rebuilding in Christchurch is in full swing. This will only start when the earthquake claims are settled and the insurance companies are willing to extend their exposure.

In Christchurch, property developers cannot actually build within the inner city, fringe, or outer suburbs, as they cannot obtain insurance, and so development land is not that easy to move in these areas.

In Auckland it is a different story altogether. Properties which are zoned 6a or 7a are in high demand and have been selling for premium prices to local and international investors.

“I believe the Rugby world cup (and the new film the Hobbit) will have a positive effect on the NZ economy, Immigration, tourism, and the property market. While New Zealand is viewed by millions of people around the globe this year, I think 12 months from then the effect would be felt as it takes time for those who plan to Immigrate, invest, or visit to actually do so.”

Now, the above observation is the one that took many of us by surprise.
The Rugby World Cup didn’t have that much of a major impact on the economy or the property market at large. We all heard about some Auckland vendors who capitalised on their close proximity to Eden Park and while the RWC was on they charged ridiculously high nightly rates from international Rugby enthusiasts.

A note to mention: is that I recently had a conversation with Christchurch based business owners within the tourism industry who advised me that since most of the large Hotels in the central city are close, as they are located in the no go red zone, the Motel industry in Christchurch is doing very well, as we can see every cloud has a silver lining.

Due to lack of supply and strong demand, rents in Christchurch in the desirable suburbs are going through the roof and are basically starting to catch up with Auckland levels. The increase of rent in Christchurch is so strong that again there are literally positive cash flow properties in some areas.

The rental market in Auckland is also pushing higher new levels at $500 per week for a 3 bedroom house which is a $150 higher then the national average.

This happening especially in the central city area, where there is strong demand from young professional couples and families who want to live near central Auckland.

In both cities these days often at the first open house for a rental property a property manager or landlord will have over 40 prospective tenants turn up in single day wishing to sign for the property as the new tenants resulting at bidding wars.

Although the world economy is not out of the woods yet, in New Zealand we are starting to see shoots of recovery in the property market. These will most likely ripple to the rest of the country over the next few years, and then the next boom will come, which will most likely be smaller and shorter than the previous one.

It also is increasingly possible that the Auckland and Christchurch property markets will experience their own mini-boom in the short – medium term.

This is true provided Europe, the US, and the world don’t experience a second round of banking collapse or, heaven forbid, a major natural disaster.

This is the time to take action and stay safe.

Successful investing,

Hadar Orkibi