Report on the NZPIF Conference held at New Plymouth 14th - 16th October

[flyernzl]

Andrew King opened the conference with a brief summary of changes in the property investment area during the last twelve months.

Housing Minister Nick Smith announced that the Government accepts the need to change the RTA in light of the Osaki decision. Their thoughts are to make tenants liable for accidental damage to the property up to the value of the tenants bond or the value of the insurance excess. There may be the option to vary these limits by mutual agreement at the time the tenancy agreement is signed at the start of the tenancy. He made the point that HNZ do not insure their houses so the ruling on insurance cover does not apply to them.

The Government also expects to have the substantive part of the meth standard completed by January 2017.

Australian builder-developer Martin Ayles presented on adding value to existing property by extending, renovating, or redeveloping existing sites. Although probably more of interest to developers/renovators, he made good points about assessing property on its potential rather than on its current use.

Wendy Kerr of Auckland University discussed goal setting and the importance of setting long term and short term goals. Thinking deliberately about your life goals, working out a way to get to them, and overcoming the self-doubt that we all feel were all part of her presentation.

Bryce Barnett started his business life collecting tree fungus and exporting it to a dealer in Singapore while still at school. He is now a major shareholder in a commercial property fund manager and is active in the New Plymouth business world. He talked on adopting the ‘can do’ attitude, the importance of collaboration with others and diversification of your investments. He also pointed out the hazards of being over-leveraged and the importance of maintaining good relations with commercial property tenants.

Bryce also remarked on the apparent paucity of younger investors at the Conference, and recommended that both the Federation and regional associations take active steps to attract and inspire future investors who may now be in their 20s. A point worth considering.

Among the afternoon breakout sessions Martin Ayles continued to present on successful property investment, Bryce Barnett discussed analysing risk, Brian Kerr talked on managing rental properties, Kesh Maharaj worked on how to decide if your property portfolio was a hobby or a business and the elderly gents Darryl Fisher, Peter Lewis and Selwyn Mexted jointly talked on their succession plans for passing their property on to future generations. Each presentation was repeated three times over the afternoon.

Logically I was only able to be at one of these presentations, but both Darryl and Selwyn had life stories and future plans that are quite different to mine, and there it did make for an interesting discussion that our audiences seemed to find quite helpful.

At the evening dinner event the Landlord of the year winner and runner-up were announced, the winner from Otago and the runner-up from Auckland. Sorry, I don’t have names.

The winner of the Harry Lawson Cup for the best-achieving regional association of the year was Hawkes Bay, taking it off last years winner Taranaki.

The early Sunday morning presentations were on creating property wealth in the provinces, Martin Ayles (again) and a local New Plymouth Council planner discussing their future plans for the city. I was not particularly attracted to any of these so settled for a lazy Sunday start to the day.

Mid-morning sociologist Kay Saville-Smith talked of the changes in the residential housing market over the years. She made the point that owner-occupied housing (excluding houses owned by family trusts) now represent under 50% of NZ’s housing stock. The highest level of owner-occupied housing occurred among the generation of NZers born in the years 1927-1931, for whom it reached 87%, and the percentage has steadily dropped over subsequent years.

Thus more people are renting and renting for longer time periods. If someone has not become a home-owner by the age of 40 then it is likely that they will be renting for the rest of their lives. This means that the profile of tenants is changing from younger short-term residencies to long-term tenants who will grow old in their rentals and who may require different facilities in those rentals as they age.

As the proportion of renters in the population increases they become more socially powerful and this will inevitably lead to more regulation and policing of the tenancy process (as we are already experiencing with the latest changes).

MBIE gave a brief outline of the latest regulatory changes, particularly as they now been given an interventionist role. In particular, if landlords are required to carry out repairs or other upgrading work by the Tenancy Tribunal and fail to do so, the tenant can now apply to MBIE for permission to pay their rent directly to MBIE who will then hold it until enough funds have been accumulated for the work to be carried out. Could play hell with your own cashflow.

ANZ mortgage head Glenn Stevenson showed us graphs of the latest movements in the NZ housing markets, and explained the background reasons for the recent Reserve Bank moves and the subsequent actions of the trading banks. Right now, there is a funding shortfall between the amount of money deposited by NZers with the banks and the amount they are lending out. This shortfall must be made up by money borrowed from overseas at a higher cost to the banks.

The RB is trying to get inflation up, household debt down, asset prices to stabilize, and to prevent the NZ dollar from getting too high. A complex balancing act. The short answer is that we can expect more restrictions from the RB including debt-to-income ratio limits and interest rates to move independently from the OCR.

Ultra-marathon runner Lisa Tamati talked of pushing your limits, setting big goals and the drive to achieve them.

The NZPIF 2017 Conference will be held in Napier. The HBPIA made a presentation promoting this event.

Peter Lewis
Executive Board Member, NZPIF

[sidinz]

Mid-morning sociologist Kay Saville-Smith talked of the changes in the residential housing market over the years. She made the point that owner-occupied housing (excluding houses owned by family trusts) now represent under 50% of NZ’s housing stock. The highest level of owner-occupied housing occurred among the generation of NZers born in the years 1927-1931, for whom it reached 87%, and the percentage has steadily dropped over subsequent years.

Thus more people are renting and renting for longer time periods. If someone has not become a home-owner by the age of 40 then it is likely that they will be renting for the rest of their lives. This means that the profile of tenants is changing from younger short-term residencies to long-term tenants who will grow old in their rentals and who may require different facilities in those rentals as they age.

Excluding trust-owned homes in effect makes the statistic rather meaningless and it follows that any conclusions based on it may be built on sand. Did they say why they'd excluded trust-owned homes?

[Perry]

Thanks for the report, Peter.

At the evening dinner event the Landlord of the year winner and runner-up were announced, the winner from Otago and the runner-up from Auckland. Sorry, I don’t have names.

Don't worry about names - the thing's a charade, anyway. As it's a non-inclusive award, it's therefore a sham.

[flyernzl]

Kay did explain reasons for excluding family trust-owned homes. It is apparently difficult to ascertain if they are actually 'owner occupied' (i.e. by the beneficiary of the relevant trust) or rented out on an arms-length basis.
I, too, think that this does skew the figures. Most recent reports that I have seen put the level of residential rentals at around 40%, but anyway this is her take on it.

[donna]

Perfect summary - much appreciated.

The introduction of DTI ratio limits is due out soon too. I recall the RB saying they may have an announcement around Nov-Dec 16.


cheers,

Donna

[artemis]

Kay did explain reasons for excluding family trust-owned homes. It is apparently difficult to ascertain if they are actually 'owner occupied' (i.e. by the beneficiary of the relevant trust) or rented out on an arms-length basis.
I, too, think that this does skew the figures. Most recent reports that I have seen put the level of residential rentals at around 40%, but anyway this is her take on it.

Believe that from the 2006 census on, those households living in homes owned by a trust in which they are members, are classified as home owners. Some earlier census data has been adjusted (the Briggs adjustment) to apply same to that earlier data.

[flyernzl]

Federation President Terry le Grove's report to the AGM of the NZPIF 14 October 2016

It is pleasure to welcome you to this AGM, the 32nd since the first NZ Property Investors’ Federation AGM in 1984. This has been an eventful year for landlords and NZPIF. I would suggest that never has the existence of a body advocating for landlords and property investors been more important. We have seen the introduction of new legislation with regard to insulation and smoke alarms, of which we are fully supportive, and we have the implications of the Osaki Court ruling that absolves tenants of all responsibility for any accidental or negligent damage they may cause. On top of that we have all the problems associated with what seems, an ever increasing use of meth in this country. There has also been a rising tide of anti-investor sentiment, with property investors almost exclusively being portrayed as solely responsible for all the problems of the housing market, a viewpoint which a number of the media’s selective “ go to” commentators seem only too willing to reinforce.


Without a single representative voice advocating for landlords, there is no doubt what so ever, that we would be faced with far different environment than we currently have.


At the discussion meetings on any pending legislation there is almost exclusively only one voice representing private landlords and that is our voice. In most cases there are generally only two of us representing landlords. In the case of the meth standards committee, we only have one representative. On the other side of the table there are some industry representatives, who tend to see any legislation, and the compulsion that goes with it, as an opportunity to promote the Rolls Royce option, with little or no thought given to what the cost is and who foots the bill. It is not easy to continually have to defend ourselves and to promote the only contrary point of view all of the time.

Fortunately within MBIE there are policy personal and advisors who are not only practical, but who also see that there needs to be a reasonable relationship between costs and benefits.
In the case of meth contamination, as mentioned a Standards committee has been formed to establish NZ standards around testing and clean up procedures. This process has been bought forward by Government with a view to having these guidelines in place as soon as practically possible. However on the Standards committee there is only one voice representing private landlords, and that is our voice.


We owe a great deal of thanks to Andrew King for his efforts, for the research he has put in and for his dogged persistence in endeavouring to get the best outcome for landlords.
(Subsequently the Ministry of Health has put forward revised guidelines for discussion)
Most of you are probably aware of the Osaki case and the ruling by the Court which absolved tenants of all responsibility for any damage they may cause whether it be accidental or just plainly negligent. The consequences of this ruling didn’t take long to emerge and we’ve seen some of these outlined in the media. An example is where a dog, which wasn’t even supposed to be on the property, defecated numerous times in the house and the tenant was absolved of all responsibility for the costs incurred in bringing the house back to a liveable standard. There have been many many more cases in a short space of time where landlords have had to foot the entire cost of tenant damage. To this end Andrew and myself have had numerous meetings right across the political spectrum in an endeavour to achieve some working solution. These discussions are in confidence but there is general consensus from all concerned that the current situation can’t continue and you can be rest assured we will use our best efforts to work for a satisfactory outcome.

Last year in my report I stated that “Growing the New Zealand wide membership is a continuing concern and that we seem to have this ceiling of around 3000 memberships”. This has stimulated discussion over the past year about how we can increase our membership and become more relevant to a wider range of investors. Once again over 23% of our membership has not renewed in the past year. In the last four years we have lost virtually our entire current membership numbers. For these people the Association model, which is all we can currently offer, is no longer relevant to them. This is despite all the hard work of Associations around the country, who invariably put on such a good event at their meetings. With the property market as buoyant as it is you would think the climate is just ripe for us to grow.


Taking the three areas that I alluded to earlier as an example - the legislation on insulation, the ramifications of the Osaki ruling and pending standards on Meth testing –these demonstrate the imperative need, that there is strong single voice advocating the viewpoint of landlords. You fund everything we at the NZPIF do, but the results which we do achieve affect every landlord in the country. Would it not be beneficial to have more people contributing to the cost of that work?


The Executive Committee of the NZPIF is convinced that all parts of the organisation need to grow in order to have more and more influence over these issues which affect landlords so much. Therefore it is imperative to attract more members.


Later on this afternoon you are going to vote on two motions that the Executive Committee has put forward for your consideration. We have had some considerable feedback from Associations, and it seems from some of the comments our intentions have been misconstrued. We have been accused of just Empire building and such like. It is not Empire building – as we are all volunteers. Some of us may not even be here next year. Some of us will not even be here after today. We are all in this for the same reason. We’re all landlords just like every one of you. We all want the best results we can achieve as landlords and we all want an environment in which we can work in order to successfully manage our business.


We as an Executive Committee fervently believe it is time for a different approach – with a different membership offering to not only attract new members but, just as importantly, to endeavour to retain our existing members, around 25% -30% of which we lose every single year. The easiest customer to get is the one you’ve already got, and having a membership offering that goes someway to helping retain those existing members should be a priority.


We believe that any new membership type should be a single national offering, the makeup of which will decided by you. Whatever the makeup of that offering, it needs to be consistent throughout the country and we believe run under the administration of the NZPIF to maintain a consistency and to minimise the pressure on local administrators whether these be voluntary or paid.


We ask for your support of those two motions.


It is time for a different approach. If you keep on doing what you’ve always done, you will always have the same result and at next year’s AGM someone will be here addressing you and saying “ and this year our membership is just over 3000 and 25 % of our membership has not renewed” .


The annual accounts, which have already been circulated to all Associations, outline the sound financial position of the NZPIF. Many thanks must go to our Treasurer Amanda Watt for the work she puts in and the expertise she brings to the role of Treasurer. Most importantly under her direction, the NZPIF has been able, once again to share with Associations, some of the rebates gathered from business partners. This is possible due to the excellent support shown by members for the National Business Partners programme of the NZPIF. While some of this money is used to operate the NZPIF and help keep the capitation rate to its current level, when the level of rebates during any one financial year is higher than expected the NZPIF Executive Committee wants to thank members by returning some of the rebates back to Associations. The more support given to these sponsors and business partners by Association members around the country, the more NZPIF will be able to share with Associations.

The support from the business community has been maintained this year. We have been able to retain the sponsorship of ANZ at the national level and increase the number of business partners. We thank all these people for their support. Ties with MBIE have been strengthened and they continue to sponsor Landlord of the Year. The reintroduction of the MBIE landlord seminars has been a welcome addition this year.

In conclusion, I would like to thank all my fellow members of the Executive Committee who have given so much time and expertise to the Federation this year. In particular a special thanks goes to Colin Comber who is not seeking re-election. Colin has made a special contribution. His clear and direct approach to meeting procedure, to process and the Constitution have been invaluable to me in my role as President. He has an intimate knowledge and expertise in forming policy and his opinions are clearly thought-out and presented to the table. He has made a special contribution and will be missed. Enjoy your travels Colin and go well sir. To the rest of the team who are restanding many thanks for your efforts during the year. A special thanks must go to Helen Marriott who took on the poisoned chalice that is PIMMS and has worked tirelessly in an endeavour to make PIMMS as user friendly as possible for as many as possible.

To the returning Executive Committee members, we look forward to working together for the coming year. We will be pleased to welcome the new Executive Committee members and will value their input in to Federation business.

[Perry]

Thanks, Peter.

I agree with the change of structure proposed, having been through the same thing, many years ago, as President of a national organisation. It works well.

Any progress on that?

If all LLs were members, then LL of the Year would be correct, instead of the present fraudulent title caused by it being restricted to NZPIF members.

The reintroduction of the MBIE landlord seminars has been a welcome addition this year.

And MBIE seminars for tenants will be starting when?

Will there be a Tenant of the Year Award, any time soon?

[flyernzl]

I agree with the change of structure proposed, having been through the same thing, many years ago, as President of a national organisation. It works well.

Any progress on that?

The motion was passed at the meeting.
The next step will be to decide exactly what the membership offering will be.
We do not want to undermine the existing regional PIAs.

If all LLs were members, then LL of the Year would be correct, instead of the present fraudulent title caused by it being restricted to NZPIF members.

I would not say that the existing title is fraudulent.
In any contest, you have to participate in the system in order to be in the race.
There may well a faster sprinter somewhere in the world than Usain Bolt, but he has won that title by virtue of joining an athletics club and then taking the time and effort to enter and compete.
Those who don't do that cannot reasonably justify their complaints.

And MBIE seminars for tenants will be starting when?

Will there be a Tenant of the Year Award, any time soon?

You need to take that up at a political level.
NZPIF are obviously dealing with things from a property investor/landlord viewpoint.

Personally, I think that we do need to co-operate more with the tenancy groups for the benefit of all those involved in this industry.

[Perry]

If all LLs were members, then LL of the Year would be correct, instead of the present fraudulent title caused by it being restricted to NZPIF members.

I would not say that the existing title is fraudulent. In any contest, you have to participate in the system in order to be in the race.

We will have to agree to disagree. In this case the 'race' is organised by the NZPIF. It does not solicit entries from everyone. Only from its members. Therefore it is the NZPIF that is restricting the entry qualification. So be it.

Accordingly, to be truthful, the title should be New Zealand Property Investors Assn Landlord of the Year.

To infer / claim it is universal is indeed a mis-representation, if not fraudulent.

[flyernzl]

I'm sure that when they announce the results of the 'Miss World' competition, the organizers have not actually eyeballed every female in the world before they make their decision.

But yes, I take your point about the title of the award.

[Perry]

Pax

I think this is something of a strained analogy, at best.

I'm sure that when they announce the results of the 'Miss World' competition, the organizers have not actually eyeballed every female in the world before they make their decision.

Obviously. But they would have eye-balled all who entered and it's likely that the entry criteria did not exclude any female entrants based upon some sort of selective membership criteria.