Hi there folks.
We have not forgotten you. The first meeting of the year is still being arranged. The planned speaker has to keep putting the date back and I am also run off my feet as the saying goes. Due to these delays I thought we had better get some news out to you. The market as I experienced it was rather slow before Christmas (as it used to be another life time ago) However it sure has picked up in the last two weeks with good demand for all types of properties. Applicants seem to be going through yet another reality check turning up to look at small two bedroom flats advertised for $180 and expecting to get a stand alone house that would normally let for around $220.
I have never seen so many low grade high risk desperate applicants. WINZ is now helping more and more high risk tenants by paying the rent directly to landlords under section 82(3) of the Social Security act where good cause exists. I recommend all landlords ask for this when letting to people with multiple collections and judgements against them as shown on the Baycorp credit checks.
I came across this article published in the Auckland Herald this morning 31 January 04.
I wrote the second article for KPI Feb issue a few weeks ago. Those of you who do not get KPI might be interested that this magazine is included in your NPIA membership package.
Regards
Glenn
Secretary
Nelson Property Investors Association
Auckland Herald article
Landlords hit rental walls
31.01.2004
By ANNE GIBSON
The bottom has fallen out of Auckland's rental housing market, going against the national trend of escalating rents.
Across the city, rents are plummeting as landlords drop their prices rather than risk losing tenants.
Reserve Bank Governor Dr Allan Bollard has been warning investors against buying residential property for months. On Thursday he showed he meant it by increasing the official cash rate.
Since the housing boom took hold about three years ago, many people have clamoured to get into rental properties, often as a form of saving for retirement.
There is concern now these investors could suffer.
Some Auckland agents have a glut of houses and units to let. Despite solid advertising, the agents' phones are staying quiet. Tenants who do bother to turn up for appointments criticise the properties available and demand lower rent.
Owners of about 11,000 inner-city Auckland apartments are suffering the most, particularly those who have "studios" - shoebox units without bedrooms.
Barfoot & Thompson's Grey Lynn rental manager, Leonie Higgins, told of the owner of a small first-floor Queen St apartment who was delighted when told by a developer he could expect at least $350 a week in rent.
But because a similar unit in the same complex was being advertised for $295 a week and had been empty nearly a month, Leonie Higgins said she doubted that the unit on her books could be rented for even that amount.
"We have an overabundance of one and two-bedroom places on our books, from the central-city through to Grey Lynn, Pt Chevalier and Western Springs," she said.
"Rents are decreasing because there's just so many properties available."
She hopes the start of the university year will help.
There is still demand for larger houses, although rents there are also dropping.
"People are choosing to live in groups because of economies of scale.
"Those who pay $300 a week for a one-bedroom unit in the city can pay $120 a week instead."
Leonie Higgins is worried about many investors who have borrowed - sometimes using the equity in their family homes - to buy small apartments.
Auckland Property Investors Association president and property adviser Andrew King said he had been telling investors to avoid small inner-city apartment for more than six months and he is also worried by the emerging rental picture.
"I could see then that the industry was out of control, with a lot of cowboys which didn't bode well and the regulations didn't seem to be there," Mr King said.
Even after spending $4000 on paint and internal renovations at a Great North Rd house near Unitec, Mr King was surprised recently when he had to drop the weekly rent from $440 to $420.
"Some of those who came to look at it were very picky too, wanting two bathrooms," Mr King said of the one-bathroom house.
Leonie Higgins said she had been telling landlords to drop rents for existing tenants because flats and houses which were being re-let were going for well under last year's rates.
"My advice to landlords at Christmas was that the market was very fluid and with the increasing volume of properties, we strongly recommended keeping on existing tenants and adjusting rents if necessary," she said.
But even larger properties are going for well under last year's rents. Leonie Higgins cited four to five-bedroom houses fetching $550 to $600 a week last year now renting for $500 to $575.
This is in contrast to November 2002 when the Weekend Herald reported Auckland flat hunters queuing, bribing landlords and offering rents above the asking price.
The rental drought has spread to many suburbs. The latest Real Estate Institute figures (for November) show rents have dropped in the East Coast Bays (down $70 a week for two bedrooms), Mt Albert (down $17 a week for three bedrooms), Mt Eden (down $65 a week for four bedrooms), from Mission Bay to St Heliers (down $140 a week for four bedrooms), Remuera (down $128 a week for four bedrooms) and Glen Innes/Panmure/Mt Wellington (down $20 a week for four bedrooms).
Tenant demand is still high elsewhere in New Zealand. In Christchurch, for example, it is reported that properties are snapped up within hours of going on the market.
Massey's Centre for Banking Studies director David Tripe said this week that big borrowers in the booming housing market could be in for a day of reckoning if the market faltered.
More than $6 billion of 12-month fixed-interest home mortgages are due to be rerated before November, so borrowers are looking for longer fixed-term rates.
We are a nation of borrowers.
The average level of household debt in relation to average household income is the highest on record: 130 per cent of income, compared with 65 per cent in 1990.
Mortgage debt is concentrated in the 25-to-45 age bracket.
Housing loans by registered banks have increased by $36 billion since June 1996 to more than $70 billion.
Of 1.3 million houses and flats nationally, 359,000 are rented, according to Statistics NZ census data for 2001.
In wider Auckland, 131,000 households have a mortgage and 101,000 are debt-free. Of a total stock of 236,000 houses and flats, 116,000 are rented, according to the Census.
Real Estate Institute vice-president Howard Morley, the chief of Auckland Property Management, said rents were cyclical.
"November to January is hard renting traditionally and it's only starting to warm up now."
He cited the loss of the America's Cup and declining foreign student numbers as factors affecting rental properties.
KPI Article
Well what a wonderful year it has been for property investors. We have seen rent increases, plenty of tenant demand, unthinkable capital gains, low interest rates, and high dollar exchange rates to make NZ an attractive place for Americans to own property in NZ and even permit those of us who have time to take cheap overseas holidays.
Will it all last. Will it get better, or will everything turn to mush next week. Now if you think I really know all the answers to these questions or in fact anyone does you are simply dreaming. But what I know is that if the interest rates go up, some, but not all investors will not have sufficient to pay their mortgages from their rents. In these circumstances they have two options. Firstly fund them from wages and secondly sell something. This and other factors will suck some money out of the economy and push down property prices. The most significant statistic that I see looming is the already falling immigration that will inevitably swing into a loss of population. Last time this occurred the most favored destinations for new immigrants being Auckland and Christchurch suffered first. Because the current net population gain has been so great this time many really small towns have taken up the surplus with some people commuting significant distances. In my opinionated view these small towns will rapidly revert to their original core populations once tenants there can find rentals close to family, friends and work. For the first time in my experience investors have bought up big in these small towns. I wonder how they will survive having a house empty for 6 months with no rent and having to fund the extra things that seem to occur to derelict empty houses. Last time we had a building contraction a lot of spec houses did not sell and many developers put tenants into them rather than locking in their losses by selling low. This caused an oversupply of rentals. The worst of this oversupply occurred in the bigger cities and caused tenants to shun low-grade rentals.
So how does one prepare and avoid the worst effects of a down turn in the economy.
Look after your tenants. Many tenants will stay on if they perceive they have good service from their landlords. Just look around your city and see which commercial properties lay empty for longest last down turn. Yes, the well known difficult landlords suffered most. Exactly the same thing occurs with residential tenancies. It is just harder to see the trends. Many of my tenants are onto their second and third tenancy with me. If tenants have two options to rent they will always choose someone that will look after them. Make sure they choose you when the chips are down.
Despite lots of gurus telling you to never pay off debt I believe in doing this.
There will be some great bargains for some of us to buy at someone else’s expense.
Be prepared to buy if the opportunity presents itself.
Glenn
We have not forgotten you. The first meeting of the year is still being arranged. The planned speaker has to keep putting the date back and I am also run off my feet as the saying goes. Due to these delays I thought we had better get some news out to you. The market as I experienced it was rather slow before Christmas (as it used to be another life time ago) However it sure has picked up in the last two weeks with good demand for all types of properties. Applicants seem to be going through yet another reality check turning up to look at small two bedroom flats advertised for $180 and expecting to get a stand alone house that would normally let for around $220.
I have never seen so many low grade high risk desperate applicants. WINZ is now helping more and more high risk tenants by paying the rent directly to landlords under section 82(3) of the Social Security act where good cause exists. I recommend all landlords ask for this when letting to people with multiple collections and judgements against them as shown on the Baycorp credit checks.
I came across this article published in the Auckland Herald this morning 31 January 04.
I wrote the second article for KPI Feb issue a few weeks ago. Those of you who do not get KPI might be interested that this magazine is included in your NPIA membership package.
Regards
Glenn
Secretary
Nelson Property Investors Association
Auckland Herald article
Landlords hit rental walls
31.01.2004
By ANNE GIBSON
The bottom has fallen out of Auckland's rental housing market, going against the national trend of escalating rents.
Across the city, rents are plummeting as landlords drop their prices rather than risk losing tenants.
Reserve Bank Governor Dr Allan Bollard has been warning investors against buying residential property for months. On Thursday he showed he meant it by increasing the official cash rate.
Since the housing boom took hold about three years ago, many people have clamoured to get into rental properties, often as a form of saving for retirement.
There is concern now these investors could suffer.
Some Auckland agents have a glut of houses and units to let. Despite solid advertising, the agents' phones are staying quiet. Tenants who do bother to turn up for appointments criticise the properties available and demand lower rent.
Owners of about 11,000 inner-city Auckland apartments are suffering the most, particularly those who have "studios" - shoebox units without bedrooms.
Barfoot & Thompson's Grey Lynn rental manager, Leonie Higgins, told of the owner of a small first-floor Queen St apartment who was delighted when told by a developer he could expect at least $350 a week in rent.
But because a similar unit in the same complex was being advertised for $295 a week and had been empty nearly a month, Leonie Higgins said she doubted that the unit on her books could be rented for even that amount.
"We have an overabundance of one and two-bedroom places on our books, from the central-city through to Grey Lynn, Pt Chevalier and Western Springs," she said.
"Rents are decreasing because there's just so many properties available."
She hopes the start of the university year will help.
There is still demand for larger houses, although rents there are also dropping.
"People are choosing to live in groups because of economies of scale.
"Those who pay $300 a week for a one-bedroom unit in the city can pay $120 a week instead."
Leonie Higgins is worried about many investors who have borrowed - sometimes using the equity in their family homes - to buy small apartments.
Auckland Property Investors Association president and property adviser Andrew King said he had been telling investors to avoid small inner-city apartment for more than six months and he is also worried by the emerging rental picture.
"I could see then that the industry was out of control, with a lot of cowboys which didn't bode well and the regulations didn't seem to be there," Mr King said.
Even after spending $4000 on paint and internal renovations at a Great North Rd house near Unitec, Mr King was surprised recently when he had to drop the weekly rent from $440 to $420.
"Some of those who came to look at it were very picky too, wanting two bathrooms," Mr King said of the one-bathroom house.
Leonie Higgins said she had been telling landlords to drop rents for existing tenants because flats and houses which were being re-let were going for well under last year's rates.
"My advice to landlords at Christmas was that the market was very fluid and with the increasing volume of properties, we strongly recommended keeping on existing tenants and adjusting rents if necessary," she said.
But even larger properties are going for well under last year's rents. Leonie Higgins cited four to five-bedroom houses fetching $550 to $600 a week last year now renting for $500 to $575.
This is in contrast to November 2002 when the Weekend Herald reported Auckland flat hunters queuing, bribing landlords and offering rents above the asking price.
The rental drought has spread to many suburbs. The latest Real Estate Institute figures (for November) show rents have dropped in the East Coast Bays (down $70 a week for two bedrooms), Mt Albert (down $17 a week for three bedrooms), Mt Eden (down $65 a week for four bedrooms), from Mission Bay to St Heliers (down $140 a week for four bedrooms), Remuera (down $128 a week for four bedrooms) and Glen Innes/Panmure/Mt Wellington (down $20 a week for four bedrooms).
Tenant demand is still high elsewhere in New Zealand. In Christchurch, for example, it is reported that properties are snapped up within hours of going on the market.
Massey's Centre for Banking Studies director David Tripe said this week that big borrowers in the booming housing market could be in for a day of reckoning if the market faltered.
More than $6 billion of 12-month fixed-interest home mortgages are due to be rerated before November, so borrowers are looking for longer fixed-term rates.
We are a nation of borrowers.
The average level of household debt in relation to average household income is the highest on record: 130 per cent of income, compared with 65 per cent in 1990.
Mortgage debt is concentrated in the 25-to-45 age bracket.
Housing loans by registered banks have increased by $36 billion since June 1996 to more than $70 billion.
Of 1.3 million houses and flats nationally, 359,000 are rented, according to Statistics NZ census data for 2001.
In wider Auckland, 131,000 households have a mortgage and 101,000 are debt-free. Of a total stock of 236,000 houses and flats, 116,000 are rented, according to the Census.
Real Estate Institute vice-president Howard Morley, the chief of Auckland Property Management, said rents were cyclical.
"November to January is hard renting traditionally and it's only starting to warm up now."
He cited the loss of the America's Cup and declining foreign student numbers as factors affecting rental properties.
KPI Article
Well what a wonderful year it has been for property investors. We have seen rent increases, plenty of tenant demand, unthinkable capital gains, low interest rates, and high dollar exchange rates to make NZ an attractive place for Americans to own property in NZ and even permit those of us who have time to take cheap overseas holidays.
Will it all last. Will it get better, or will everything turn to mush next week. Now if you think I really know all the answers to these questions or in fact anyone does you are simply dreaming. But what I know is that if the interest rates go up, some, but not all investors will not have sufficient to pay their mortgages from their rents. In these circumstances they have two options. Firstly fund them from wages and secondly sell something. This and other factors will suck some money out of the economy and push down property prices. The most significant statistic that I see looming is the already falling immigration that will inevitably swing into a loss of population. Last time this occurred the most favored destinations for new immigrants being Auckland and Christchurch suffered first. Because the current net population gain has been so great this time many really small towns have taken up the surplus with some people commuting significant distances. In my opinionated view these small towns will rapidly revert to their original core populations once tenants there can find rentals close to family, friends and work. For the first time in my experience investors have bought up big in these small towns. I wonder how they will survive having a house empty for 6 months with no rent and having to fund the extra things that seem to occur to derelict empty houses. Last time we had a building contraction a lot of spec houses did not sell and many developers put tenants into them rather than locking in their losses by selling low. This caused an oversupply of rentals. The worst of this oversupply occurred in the bigger cities and caused tenants to shun low-grade rentals.
So how does one prepare and avoid the worst effects of a down turn in the economy.
Look after your tenants. Many tenants will stay on if they perceive they have good service from their landlords. Just look around your city and see which commercial properties lay empty for longest last down turn. Yes, the well known difficult landlords suffered most. Exactly the same thing occurs with residential tenancies. It is just harder to see the trends. Many of my tenants are onto their second and third tenancy with me. If tenants have two options to rent they will always choose someone that will look after them. Make sure they choose you when the chips are down.
Despite lots of gurus telling you to never pay off debt I believe in doing this.
There will be some great bargains for some of us to buy at someone else’s expense.
Be prepared to buy if the opportunity presents itself.
Glenn