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NELSON PROPERTY INVESTORS ASSOCIATION
May 2011 NEWSLETTER
PO Box 198 Nelson
Our next meeting is being held at the Nelson SuburbanClub, Tahunanui Driveon Tuesday 17 May. The meeting proper commences at 7.30 pm with the everpopular meal at 6pm when you will have the opportunity to chat to otherinvestors. Cliff Seque a Dunedinlandlord extraordinaire with 37 years experience is coming to share his wealthof knowledge with us. He is planning on talking about a range of things closeto our hearts like clever clauses you should have in your tenancy agreement,bullet proofing your student flat, and wonderful discount deals with nationalsuppliers. Cliff has been the president of the Otago Property investorsassociation for a number of years. OPIA is one of the most successfulprogressive associations in the country with over 800 members.
Don’t forget to book that meal in advance by emailingme.
THE MARKET
Quite a lot haschanged in our market since I wrote that last newsletter a little over a monthago. The local newspaper republished that article and it resulted in a torrentof vitriolic abuse directed at me and Nelson landlords. I talked over theissues with the reporter trying to figure out what all the fuss was about.Clearly us landlords have a different agenda and see things differently to lotsof other people. Extreme exception was taken with the comment that many NelsonCBD businesses were thriving. Well the trend continues unabated, and we are nowstarting to see some Christchurchapplicants becoming aggressive with their demands for cheap rentalaccommodation. Have you noticed it is getting hard again to find a car park inthe CBD. Now this is what Tony Alexanderis saying this week.
HOUSING MARKET UPDATE
Turnover is improving, construction falling, andprices essentially flat on average but veering toward the upside.
And So It Starts
If you have been a regular reader of the WeeklyOverview you will know that our view on the housing market has been differentfrom practically all other analysts for a number of years now – and we havebeen if not always right at least considerably less wrong. In particular wepredicted only a 10% - 15% fall in average house prices as a result of theglobal recession and not the silly 40% falls some pretenders were forecasting.In the event house prices fell on average by 11% and now sit just over 5% awayfrom the peaks reached in late-2007.
Our analysis has been based around theidentification not of an oversupply of property as was and is the problem inmany other countries, but an undersupply. Recently, in the WO of February 3, wediscussed a recent report from the Department of Building and Housing which weutilised to estimate a 28,000 shortage of dwellings early this year. We havesince lifted that estimate to 39,000 courtesy of the Christchurch earthquakeand the simple passage of time bringing monthly consent issuance at less thanhalf that needed to meet population growth.
Our view for the past couple of years has been thatat some point probably this year we will see increasing pressure on rents as aresult of this shortage. This pressure we opined would be greatest in Auckland because thehousing cycle of the 2000s involved the strongest buying and excessconstruction happening in the regions and not in our biggest city. They hadtheir boom in the 1990s. Our pick is that this cycle will once again belong to Auckland.
We have picked that the tightening of the rentalmarket will translate into greater awareness of the shortage and discussion ofa lack of property will become common.
And we have picked that from late this year houseprices will be rising again because of the very simple interaction between thisworsening shortage of property and not just economic growth but a potentially rapidlytightening labour market, especially over 2012.
And so how do we find ourselves now? First theawareness of a housing shortage is so great that the
Minister of Finance has decided to duplicate thework already done by the Commerce Select Committee over 2007-08 and holdanother enquiry into NZ housing costs, this time to be run by the newly formed ProductivityCommission. Tony does not think much will comeof that study.
This newsletter has beensponsored by SBS bank.
Meanwhile backin our back yard of Nelson we can see the to-lets in the Nelson Mail are at anall time low. Trade me is hovering on 150. A number of TM properties are shortterm so generally the supply is shrinking while the demand is increasing. We areseeing evidence of an ongoing drift of Christchurchpeople moving out of temporary or unsanitary properties to our rentals. In Christchurch there is avery large pool of social housing with over 8000 rentals owned or managed bythe public sector. There is a large concentration of these social housing unitsin the most quake affected areas of Christchurchwhich explains the high percentage of high risk tenants seeking accommodationhere.
My guess is theBNZ have got their predictions wrong about Auckland leading the way with priceincreases.
QV haveindicated little old Nelson has emerged as one of the star performers duringthe recession as far as house prices goes. With small centres it does not takeas many people moving around to create an aberration in prices.
The unnaturalquake induced population injection into the city has to have an impact on rentlevels. Once investors have got over the shock of the tax changes or thegovernment does something to correct their ideological blunder buyers will feedon those rent increases and selling prices are bound to follow. Of course thisis all wishful thinking but we have seen it before with Nelson leading therecovery and why not again.
THE QUAKE DID MORE THAN SHAKEBUILDINGS DOWN
Things are not good in our beloved DBH. The quake tookout the Canterburyoffices of DBH and the rest of the country has been carrying them in an interimarrangement. This has meant that tribunal applications are now co ordinated outof places like Hamilton and South Auckland. The latest rumour is all of the Christchurch DBH will beseconded to the new Quake recovery authority. With them goes lots of experienceand local knowledge. I am not sure if it is all related but tribunal hearingsare now taking six to eight weeks from application to hearing. You can stillget mediation quickly but if the tenant suddenly stops paying deliberately itis unlikely they will willingly agree to being evicted immediately atmediation. I wonder if the Government would consider an urgent amendment to theRTA to compensate us.
How about permitting 3 months rent bonds like they doin some countries, or a rent guarantee to cover the first few months rent lostwhilst waiting for a court case. Oh dear dream on and rant again.
TENANCY AGREEMENTS
Reading the recent newsletter from our Marlborough PIAfriends over the hill reminds me about tenancy agreements. The law requires youto have tenancy agreements in writing but then states that even if it is not inwriting you are bound by the law or what might have been verbally agreed to.Most (but not all) people use the DBH produced agreement that can either bepurchased or accessed on line. It however does need to be filled in correctly.Please pay attention to the sections that require you to cross out portions. Irecently had to deal with a tenancy agreement the owner had not crossed out the periodic / fixed term clauses. He gave thetenants notice and they claimed they had a fixed term which could not beterminated by notice. In another case of my own the tenant claimed in courtthat I had agreed to permit the reassignment of the tenancy to her son. I wasable to show I had crossed out the clause in bold that forbade reassignmentthus easily proving her verbal claim was false. Section 8 says those types oftenancies excluded from the RTA such as family members can be covered if youagree but then you can exclude or modify the normal provisions of the act. Thisis very handy if you letting something like a caravan or holiday home you canspecify special conditions for termination or lack of facilities like a stoveor bathroom.
AGM TIME
We will hold our AGM this meeting also. Finances andre election times are all good and do not take long.
It is always encouraging to see satisfied memberstaking an interest their own organisation.
This newsletter has beensponsored by SBS bank.
Please note. NPIA is a voluntary supportorganisation by landlord for landlords. Any ideas advice or suggestionsobtained at our meetings or from our newsletters is not intended to replace professionallegal, accounting, or valuation advice
Anyone stupid enough to act withoutthinking for them selves, deserve to suffer the consequences.
Presidents Comments
Maybe it’s because I’m getting older, butboy oh boy the days seem to be flying by and a third of the year is almost gonealready!
Two small but important annual events willbe happening shortly that impact on our Association. The first of these is thatyour annual subscription will be due. Please do not put the account asidethinking you will pay for it later as it is too easy to forget about it (ashappened last year for quite a few people). The annual subscription is only$180 and in my view very good value when you take into account the PropertyInvestor magazine and speakers that are provided. The other very importantcontribution you make in paying your subscription (and I have mentioned thisbefore) is that you provide support to the New Zealand Property InvestorsFederation. The Federation is the organisation that keeps an eye on ourinterests at a national level and lobbies on our behalf to ensure somesemblance of balance and reasonableness in government policy (you may not thinkso sometimes but believe me things would be far worse without theirconsiderable input). The reaction to Glenn’s comments in our last newsletterdemonstrate yet again that a lot of people are all to ready to assume the worstabout property investors and it is vitally important that we maintain a strongFederation and local Association to ensure our interests are protected andvoices heard.
The second event is the AGM and election ofcommittee members. We are always looking for people who are keen to help outand support the association. It’s not too onerous and your input would begreatly appreciated. To paraphrase from President Kennedy - Think not what yourAssociation can do for you but what you can do for your Association.
Happy Investing
Godfrey Watson
President