HOW WILL THE RTA CHANGES AFFECT TENANTS?
What concerns are they having?
ISSUE 246 | SPRING 2020
TAX FOR PROPERTY INVESTORS
How will the changes introduced this year affect you?
How is the sector faring now?
A member of the New Zealand Property Investorsâ&#x20AC;&#x2122; Federation
Tony Mounce Mortgages & Insurance
Tony Mounce Mortgages & Insurance specialise in advising property investors on the best finance techniques and investment strategies. Tony Mounce Mortgages & Insurance is one of the largest adviser firms in the South Island. Accordingly, we have access to a wide range of products in order to offer clients the best finance and insurance solutions. We provide our service to clients throughout New Zealand and internationally and have advisers on our team who can speak English, Cantonese and Mandarin. Our fee for a standard residential mortgage is paid by the lender. There may be a fee for commercial contracts which varies on a case-by-case basis. We offer a high level of personalised service and represent you when dealing with the lender, working on your behalf to get the best loan and insurance contracts. We are accredited with all major banks and a number of specialist lenders and so we are able to compare different providers in order to offer you the best finance solution for your requirements.
P 03 365 8625 F 03 365 8624 E email@example.com tonymounce.co.nz
From the editor
PROPERTY Investor Contact CPIA Editorial firstname.lastname@example.org Advertising email@example.com Accounts firstname.lastname@example.org Office 22 Buchan Street, Sydenham, PO Box 7382, Christchurch 8240. Phone 03-379-5251 visit www.cpia.nz. Office hours are Monday – Thursday, 8am-1pm. CPIA is a member of the New Zealand Property Investors’ Federation Inc. CPIA committee members 2020/2021 President Shirley Berryman Vice President Kit Hoeben
ne thing this year has taught us, is that it is important to be prepared for the unexpected. As investors, we take calculated risks now in order to prepare for the future, whether it’s planned events like retirement, or unexpected shocks like job loss or ill health. It has also highlighted that it’s best not to overstretch ourselves in pursuit of our goals, for the same reasons. This issue we welcome our new committee. They come with a wealth of experience, and are all here to make your experience as a member go smoothly, so you can learn all you need to know about property investment. Make sure you introduce yourself when you see them at our events. As Shirley shares her journey into property investment in her president’s message, I thought I’d share my experience in property investment. Many years ago, my grandmother and her sister inherited an island. There was a small bach there which the family used to stay at. In the 1970s, the local councils decided it was the perfect spot for a sewerage treatment plant, and bought it from them. My grandmother invested the money in some flats, and built her portfolio over the next 30 years. This investment gave her a financial independence that was rare for a woman of her age. It enabled her to travel, and in her latter years she had the means to pay for adaptations required to her home and car as her health declined. There are many reasons people decide to invest in property. You might be saving for retirement, creating a passive income for yourself, or have fallen into it by accident. We’d love to know what inspired you to become a property investor. How far along the journey are you? Have your plans changed along the way? Get in touch and let us know. We’d love to share your stories with our members and inspire them in their property investment journey! Feel free to drop me an email, or to share your story in the members Facebook group. We’ve got some great events lined up this year, with more still to be announced. We’d love to see you there – they’re a great way to learn more about property investing, while being able to connect with like-minded people.
ROSE WELLS EDITOR
In this issue…
Treasurer Lynda Stirling Secretary Danielle Thompson
From our sponsors and advertisers
6 A1 PROPERTY MANAGERS How anti-landlord is this government?
Committee Sue Harrison Melissa McGraw Tosh Prodanov John Cassidy Alan Skehill Linda Norris Stephen Tippen
7 TONY MOUNCE MORTGAGES & INSURANCE LVR and Interest rates 12 CORCORAN FRENCH Residential Tenancy Changes: What do you need to know?
Immediate Past President Hamish Wilson Disclaimer and copyright The Canterbury Property Investors’ Association does not endorse any claims made in this publication and suggests readers obtain independent advice before acting on information or suggestions contained herein. All original material in this magazine remains the property of the editor and cannot be reproduced in any way without permission from the editor. As a magazine, we accept advertising in good faith. We trust the advertisements are not misleading and expect advertisers to provide good service. We appreciate their advertising revenue and thank them for their support but we stress the Canterbury Property Investor does not endorse or guarantee the products or services of its advertisers.
4 PRESIDENT’S COMMENT CPIA president Shirley Berryman 5 HOW WILL THE RTA CHANGES AFFECT TENANTS? Penny Arthur from TPA talks about tenants’ concerns with the new rules 8 CPIA EXECUTIVE COMMITTEE 2020-2021 Get to know your new CPIA representatives 10 TAX UPDATE FOR PROPERTY INVESTORS Keep up to date on tax changes 13 TENANCY TRIBUNAL Lizzie Landlady shares her experience of being taken to the Tenancy Tribunal
15 COMMERCIAL PROPERTY UPDATE How has COVID-19 impacted the sector? 17 RENTAL STATISTICS Check out the Christchurch rent averages by suburb 17 PROVIDING A STABLE HOME FOR CLIENTS OF CORRECTIONS Could your property house people needing stability in their lives? 18 EVENTS Get your calendar ready – you’ll want to book these dates! 19 QUOTES A few snippets on property investment in the last quarter
14 BAYLEYS Are higher socio-economic areas achieving higher yields and capital growth? 16 FOLEYS Top tips for bathrooms
LETTERS TO THE EDITOR
We welcome your thoughts at Canterbury Property Investor. If you have a comment to make, you are welcome to write to email@example.com. Letters should be no more than 150 words and may be edited for spelling, grammar and legal reasons. Please supply your full name, telephone number (for our office’s reference only), and email address.
CANTERBURY PROPERTY INVESTOR | SPRING 2020
ere I am writing my first President’s note. If you had told me at the beginning of 2020 that this would be my position in the CPIA, I would have thought it impossible. Similarly, I would not have believed that our country, and indeed the whole world, could be brought to its knees by a virus. Such a surprise in this age of wonder drugs and medical expertise! It is indeed a time for us to be very grateful for our island country and our separation from some of the hardest-hit areas. As I write this, our NZPIF magazine has just arrived and I can only reiterate the editor’s words: “While we may live in challenging times, so far the property market continues to perform solidly and going forward it’s likely to represent a safe haven for many.” I was nominated as secretary in July 2017 and during this time gained valuable insights into the many and varied roles and functions of the committee. I feel privileged to be part of a strong and diverse group and can assure you all that we are well placed to serve you, our members. Many of you are familiar to me from attending our functions and I look forward to meeting many more of you during my term in office. These are exciting times and I look forward to the challenges and rewards that lie ahead. My husband Kent and I have been married for 42 years and have three grown children. One of the blessings of having children is grandchildren and we have three beautiful little people in our lives. We built our first home in 1978, purchasing a section in Heathcote Valley for $9,000 and building our modest three bedroom bungalow for $22,000. Who can relate to this? We sit here
We knew there had to be a better way to look after our long-term future and have an income in retirement. Who knew whether we would have superannuation when we no longer worked for an income? now and wonder why we did not buy the whole subdivision? Then we remember how hard this was for us at the time. I guess some young people may find this hard to believe. Then we sold our home 9 years later for $126,000. Our next home was a rambling weatherboard character home on half an acre in River Road, Avonside. We purchased this in 1987 when we had a one year old who liked to crawl into the large inground swimming pool before we were able to get it fenced. Point was it cost us $168,000. For those who remember the National government under Robert Muldoon you can maybe relate to us paying 28% interest on this loan at its peak. This home sold in 1999 for $365,000. So why do I tell our personal property story, and not my investment one? We worked very hard to pay back our mortgages and realised in the 1990s that if you are not paying off a mortgage it’s very easy to just spend extra money on luxuries. We knew there had to be a better way to look after our long-term future and have an income in retirement. Who knew whether we would have superannuation when we no longer worked for an income? So we gatecrashed a property investment seminar and ended up purchasing three new properties on the Gold Coast in Australia. Suddenly, we were property investors. Many of our family and friends thought we were crazy; they just couldn’t understand and wondered how we could sleep at night. This is one of the reasons we are so passionate about being members of our local PIA; we get to associate with people who get it! They understand us and don’t think we are crazy. We can talk LVRs, depreciation, yields etc with other members who speak the same language. Property Investors need their local PIA more than ever before with the many changes and
CANTERBURY PROPERTY INVESTOR | SPRING 2020
constant updates especially around the Healthy Homes Standards. As observed by Andrew King, the NZPIF has always seen the landlord/tenant SHIRLEY BERRYMAN relationship as a PRESIDENT service provider/ customer one. Landlords need to provide a warm, dry and well-maintained home with features that tenants likely to rent the property want. Then these tenants are more likely to look after their homes and our investments if they are invested in what we provide. It is also important that we prioritise the Healthy Homes requirements in order to avoid fines.
Healthy Homes – important dates : From 1 July 2020 - now changed to 1 December 2020 • Landlords must include a statement of their current level of compliance with the Healthy Homes Standards in any new, varied or renewed tenancy agreement. • Please note the correct link below for the RTA amendment bill: http://legislation. govt.nz/bill/government/2020/0218/latest/ LMS294929.html Just a reminder to register with NZPIF.org.nz for the Self Managing Landlords Course. This is free for members and $300 for non-members. Enrol and you will be sent a starting date. I have completed this and found it to be very worthwhile. No matter how much you already know you can learn something new on your journey as a landlord. As the general election has been postponed, you will have more time to consider which party is best to lead our country over the next three years. I am sure you will all be waiting for more surety once new governance is decided. Thank you to all members who attended our AGM and voted in our new committee. I commend this new committee to you – they are working hard to invest in our association and support you, our members. If you have any questions or concerns please direct them to the office and we will do all we can to address them. Regards, Shirley
How will the RTA changes affect tenants? Many view the current Residential Tenancies Act changes as being “for” tenants. However as with any law changes, there is uncertainty for everyone affected. With the number of rental households rising by over 108% since the RTA first became law in 1986, and a growth of children living in rental properties to 43% of children in New Zealand, changes were bound to happen. Over the last few months, we have had an opportunity to talk to tenants and tenant advocates about the changes, particularly what people are looking forward to and what people are concerned about. There are issues that have been raised with us that I will outline here. While there is not space to cover everything, this highlights the main concerns held by tenants. Firstly, there are concerns about the reduction of rent increases to once every 12 months. While this gives some certainty for tenants who are on a one-year fixed term, for many tenants an annual review raises the likelihood of their rent going up and at a greater rate than before. It is common overseas to instead focus on how much rent can go up by. For example, in Ontario rent can only be increased by 2.2% annually unless the landlord can justify a greater increase. In New Zealand, the use of ‘market rent’ creates great uncertainty for tenants, as it does for landlords. An annual rent review with no limits on the potential increase does not provide tenants with any certainty. The changes to notice periods and reasons required for a notice to end a tenancy is expected to create a lot of issues, particularly in the early stages. Many are uncertain as to how much notice they can expect, and what reasons for ending a periodic tenancy are justified. While we hope to keep these issues from the Tenancy Tribunal through clear communication between landlords and tenants, we expect there to be an increase of cases on this issue in the early stages. Our suggestion would be to make sure you have followed the RTA in giving your notice. You can refer to the section you are relying on to ensure you are clear and you tenant can see what part of the RTA you are relying on. As tenant advocates, we are pleased to see legislation that covers family violence situations. We have victims of family violence contact us about ending a tenancy. Many will choose to stay in an abusive relationship rather than try to
All the existing reasons to end a tenancy (assault, criminal behaviour, damage) are still available, and are probably easier prove on the balance of probabilities (the standard of proof for the Tenancy Tribunal) than antisocial behaviour. leave a tenancy early due to the complications and financial implications of leaving, it adds another layer of stress to the victim. The new provisions are a starting point to addressing this issue. Unfortunately, it was added to the bill after the Select Committee stage and therefore it did not have the opportunity for feedback from the public. It is unclear in its current form whether it will provide tenants with the ability to leave a violent relationship quickly or whether it will prove to be complicated and unworkable for both sides (landlord and tenant). However, it is a start, and if it creates a more secure environment for victims and their
children to leave violent situations, then it can always be amended later once it has been tested. Anti-social behaviour is a topic that has been in the media almost constantly since the latest bill was introduced. Some would have you believe that ‘anti-social behaviour’ is the only reason you can now end your tenancy with your tenant. In fact, all the existing reasons (assault, criminal behaviour, damage) are still available, and are probably easier prove on the balance of probabilities (the standard of proof for the Tenancy Tribunal) than anti-social behaviour. What is considered ‘anti-social behaviour’ is subjective, the level of disturbance each person will tolerate is different. A suggestion would be to look at the Tenancy Tribunal orders from the ‘Covid-19 lockdown’ period when a tenant could be evicted by the Tenancy Tribunal for anti-social behaviour. This will give an indication of what the Tribunal requires from a landlord in making the decision to end the tenancy. This is going to be uncertain times for both landlords and tenants as everyone adjust to the new legislation. We would recommend seeking advice early before taking action to ensure you understand the new provisions and how it ‘fits’ with existing legislation and regulations to ensure you are on the right track. PENNY ARTHUR TENANTS PROTECTION ASSOCIATION
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Has this Government been the most antilandlord Government in our history? Recently, property commentator Ashley Church, made the headlines after stating that this Government is ‘the most antilandlord Government probably in the history of our nation’. There has been no end of debate over the last few months, particularly around the Residential Tenancies Amendment Bill (RTA Bill). Whilst this Government has been in power, the rules have been constantly changing for us all. Whether Ashley is right or wrong is open to debate, though there will be plenty of landlords who agree with him. One thing that is undeniable – this Government has certainly made it more complicated and time-consuming to be a landlord.
The RTA Bill has finally been passed Now we prepare for 11 February 2021 when the bulk of the amendments will take place. This is the largest overhaul of rental legislation since the inception of the RTA in 1987. There are over 40 new sections to the RTA, plus an increase in the number
of exemplary damages and a new list of infringement offences, mainly for landlords.
Landlording in NZ has changed significantly, you must keep • Original adverts and prospective tenant communication for a year after the end of a tenancy. • Evidence of healthy homes compliance plus proof any work done complies. • Dealing with problematic tenants can be fraught with risk, as giving notice without reason, is no longer an option.
Will all of this deter people from becoming landlords? No. Property investment will continue, whether it be through owning one, two or more properties. With the world environment as it is, where else would you put your money? ‘Bricks and mortar’
CANTERBURY PROPERTY INVESTOR | SPRING 2020
(off the shelf returns of 5.5%) are everywhere in Christchurch. If you look hard and buy well, these investments are much better than a bank term deposit at 1.25%-1.40%.
We are here to help…
HAMISH WILSON A1 PROPERTY MANAGERS
If you are thinking of selling because it’s all too hard, please contact us first, we’d love to chat and offer mentoring services. Our monthly newsletters and blogs have loads of great info – a1prop.co.nz. firstname.lastname@example.org, 351 7643, a1propertymanagers.co.nz
Tony’s thoughts LVR Restrictions
ollowing on from the lending restrictions being lifted on 1 May – which was wonderful news for us property investors – the main banks (excepting Westpac) have instigated these LVR changes and are now predominantly lending on an 80/80/80 basis. General bank policies regarding interest only loans have eased, and generally investment properties can now be fully interest-only. Upon reviewing investor portfolios, and because of this change to 80/80/80, I am finding that the banks may be holding surplus security. In many cases, this security can be requested to be discharged. Property that has been discharged can potentially be used to fund new investment opportunities. In the low-equity space, it is still a general statement that low equity loans (i.e. less than 20% deposit) are not available on investment properties as it stands.
The advice is simple – have all your ducks in a row, i.e. get pre-approvals in hand and be ready. If you do need any advice in this regard, do not hesitate in contacting me.
in this regard, do not hesitate in contacting me. Also don’t forget to have a look at your mortgage break fees, to see if there is an advantage to breaking and TONY MOUNCE TONY MOUNCE re-fixing at a lower MORTGAGES & rate. We are also INSURANCE very happy to help you with that analysis, just give me and the team a call on 0800 MOUNCE.
of some agents fielding 200 enquires for one property. One would think that coming into springtime, this will gain even more momentum. The low interest rate environment obviously assists this trend. The advice is simple – have all your ducks in a row, i.e. get pre-approvals in hand and be ready. If you do need any advice
Interest Rates Along the themes of our last article, interest rates have continued to trickle down. The best rates in the market now are as low as 2.49% on a 1-year fixed basis. Many economists are predicting a negative OCR in the new year, and this may allow for 1-year fixed interest rates to dip below 2%. The New Zealand 12 month swap rate has been trickling down, and now sits at .12 of a percent. The ten year swap rate at .50% also suggests that these low interest rates will hang around for an extended period of time.
The Market The market here in Christchurch has been surprisingly buoyant recently, considering COVID-19 economics. The stories of 30 or 40 people going through open homes and vendors receiving 6 of more offers on a property are factual, with examples
Room for hire Seminar room | boardroom kitchen | toilets | AV/microphone from $20/hour For bookings, phone CPIA on 03 379 5251 or email oﬃce@cpia.nz CANTERBURY PROPERTY INVESTOR | SPRING 2020
Executive Committee PRESIDENT: SHIRLEY BERRYMAN
SECRETARY: DANIELLE THOMPSON
Shirley and her husband Kent began investing in property in the mid-1990s. They have since developed a diverse portfolio which includes several newly-built properties, established family homes, short-term apartment accommodation and a holiday home.
Danielle is new to CPIA and property investment, with herself and her husband purchasing their first investment in 2019. With a growing interest in property she is keen to learn more from her involvement with the Committee - which she is joining for the first time – and recently completed the NZPIF SelfManaging Landlord Certificate.
As much as possible, they enjoy a hands-on approach to managing their property portfolio and strive to provide a positive experience for tenants living in their homes. Shirley has recently accepted the role of President and is looking forward to working with a competent and strong committee to share relevant information and support members at association events and also online.
Danielle looks forward to working with the CPIA Committee and other stakeholders to ensure its members are well supported and to continue to grow a strong membership base.
SUE HARRISON VICE PRESIDENT: KIT HOEBEN Kit Hoeben joined the CPIA in 2006 after purchasing his first residential investment property a few years prior. This is Kit’s third term on the committee. Kit believes real estate is not only a great investment to get ahead in life, it’s also exciting and fun. Having been a passive member (enjoying many of the benefits) over many years, Kit is now looking forward to engage actively with the association and its members, and directing energy into new and challenging tasks, wherever needed.
Sue has been a CPIA member for 21 years and this is her third term on the committee. She is an owner and director of Christchurch Holiday Homes Ltd, managing nearly 50 holiday homes, and Harrison South Management Ltd, managing her own residential rentals and an industrial unit. Sue has previous experience working in television, films, marketing, fundraising and events and helped run the NZPIF conference in Christchurch in 2014. She is currently serving on the NZPIF Executive Committee as Secretary. She will work on the sponsorship committee and is keen to support CPIA’s role with Christchurch investors and landlords.
TREASURER: LYNDA STIRLING Lynda bought her first rental property, a twobed unit, in 1994 and joined the CPIA shortly after. Since then she has continued with a buyand-hold strategy, mostly consisting of more two-bed units. Like so many other investors, she finds that they are relatively affordable, easy to renovate, and popular with tenants. She did some trading in the mid-2000’s and has recently completed a small development, turning a post-earthquake write-off into two stand-alone houses and a few extra grey hairs. After many years of enjoying the benefits of CPIA membership, she feels that she’s in a position to give something back to the organisation that has helped her so much on her investing journey.
CANTERBURY PROPERTY INVESTOR | SPRING 2020
TOSH PRODANOV Tosh came to Christchurch in the early 1990’s for a scholarship at an I.T. company, and started helping his father run three rent-by-the-room properties in the inner city. After his home was red-zoned following the earthquakes, he bought and remediated some as-is-where-is properties, and currently lives in one. A member of CPIA since the mid 1990’s, Tosh has run the monthly breakfast meetings for the last several years, and has recently been appointed to the Guardians Committee. In these changing times Tosh looks forward to working with the committee to advance and promote the interests of members.
CPIA team MELISSA MCGRAW
Melissa has been a CPIA member for three years and this is her second term on the committee.
Linda has been a CPIA member for 7 years, and this is her third term on the executive committee. Linda has been involved with renovating and renting residential investment over three decades initially starting in Bristol, UK. She is a long term buy and hold residential investor in New Zealand with some properties invested with social housing. She is actively expanding her portfolio and always on the look out for the next hot property deal.
Through family influence and long term investments in property, Melissa and her husband Nathan started out with an extensive renovation on an ex-state house, which included dropping all lath and plaster ceilings and increasing the footprint. This experience made Melissa keen to learn more, she has invested time in education over the last few years, bought an investment in central Christchurch and understands the anxieties around being a first time investor. Melissa has joined the Membership Committee to help with membership growth and looks forward to a long term association with the CPIA.
Linda is also a business mentor with those focused on sustainability, and works with central and local government on asset and facilities management related projects. She is involved in both the main forum committee and women in property evenings, and helps secure the best speakers for our changing current market.
STEPHEN TIPPEN JOHN CASSIDY
Stephen has been a CPIA member since 2013, buying his first investment property in 2004 which he still owns. He and his wife own a small portfolio of properties, which they are looking to add to when the right properties come along. Stephen prefers to take a hands on approach with repairs and maintenance of their properties but leaves the day to day management of their properties with a property manager.
John has been a member of the CPIA on and off for the last twelve years. In that time as an investor John and his wife have bought, renovated and sold a couple of properties. They have also bought a couple of buy and hold properties in Christchurch and Lower Hutt. As a committee member John would like to contribute to shaping the future of CPIA and its members.
Stephen comes from a finance background working with business clients. This is Stephenâ&#x20AC;&#x2122;s first term on the Executive Committee. He wants to help provide quality diverse information to members to grow their knowledge in Property Investment. Stephen has also joined the sub-committees for Sponsorship, CPIA Magazine and the Forums.
ALAN SKEHILL Alan joins the Executive Committee after being a member since 2017. He moved to Christchurch in 2016 from Ireland and has been involved in property circles since then. Alan believes property is an incredible investment vehicle and thoroughly enjoys discussing all things property. Working as a licensed property sales consultant, he looks forward to bringing a lot of value and industry insights to the association. Alan understands the importance of continuously learning in an ever-changing environment and looks forward to helping get more educational resources out to the members.
IMMEDIATE PAST PRESIDENT: HAMISH WILSON Hamish bought his first property at 18-yearsold and has been involved with property ever since. He is a builder by trade, now the general manager of A1 Property Managers Ltd, and he loves everything to do with property investment. Hamish has been a CPIA member for 14-years, served as vice-president for a year and two terms as CPIA president.
Weâ&#x20AC;&#x2122;d like to offer a very warm welcome to our new CPIA members: Nichola Williams
Lorraine & John-Paul Gallacher
Vanessa & Paul McKenzie
Cory & Jocelyn Grant
Michael & Gina Garland
Phillip & Leanne Pascoe
Zac Wilkinson CANTERBURY PROPERTY INVESTOR | SPRING 2020
Tax update for Property Investors While 2020 has been eventful, to say the least, it has been a relatively quiet year on the tax policy front. Here is our brief summary of relevant tax matters from the 2020 year (so far).
RECENT TAX CHANGES Depreciation on non-residential buildings One important change for the property sector is the reintroduction of depreciation on buildings for non-residential buildings. This applies from the 2020-21 tax year for new or existing commercial buildings. This change was included as part of a COVID-19 recovery/ stimulus package, but the change had been signalled by Inland Revenue Policy late last year.
Loss carry-back scheme The ability to carry-back losses is another change that was announced as part of a COVID-19 stimulus package, despite also being signalled late last year. A temporary ability to carry-back 2019-20 losses to 2018-19, or 2020-21 losses to 2019-20 has been introduced as an interim measure while a permanent scheme is created. Being able to carry-back losses could be very useful to landlords who end up in a tax loss for 2020-21 due to providing rental holidays or tenant defaults or vacancies. Carrying back losses will generate refunds of prior year tax paid (if any).
Ring-fencing of losses Ring-fencing of residential rental tax losses came into force for the 2019-20 tax year, so the first tax returns under these new rules are now being filed. These rules mean that residential rental losses can no longer be used to offset a taxpayer’s other income. These rules also make filing tax returns for rental properties far more complicated.
cannot make their tax payments on time due to the cashflow impacts of COVID-19. To take advantage of this concession, affected taxpayers need to contact Inland Revenue and agree to an ‘instalment arrangement’ as soon as practicable. Generally, Inland Revenue is giving the taxpayer 24 months to pay the tax arrears. Once the tax arrears are paid off, the taxpayer can then request the write-off of interest and penalties. Also, a very recent change essentially allows taxpayers to pay provisional tax instalments based on their forecasted 2020-21 profit. If the taxpayer’s forecasts were wrong due to the uncertainty caused by COVID-19 and they did
COVID-19 TAX CHANGES Provisional tax, late payment penalties, and use of money interest The threshold for provisional tax has doubled from $2,500 to $5,000. This change will shift many taxpayers out of the provisional tax regime, giving them the cashflow advantage of having further time to pay their income tax. The Inland Revenue has been given the power to write-off penalties and interest for taxpayers who 10
CANTERBURY PROPERTY INVESTOR | SPRING 2020
If the taxpayer’s forecasts were wrong due to the uncertainty caused by COVID-19 and they did not pay enough at a given instalment date, the taxpayer can request a write-off of interest.
not pay enough at a given instalment date, the taxpayer can request a write-off of interest. The Inland Revenue expects taxpayers relying on this rule to keep records for the reasoning of the amount paid at each instalment, and to revisit their forecasts for any subsequent instalment date.
Low asset write-offs The threshold for immediately expensing the purchase price of low value assets has increased from $500 to $5,000 for the 2020-21 year. The threshold will drop back down to $1,000 in the following year.
GST registration for short-term rentals So far, the only specific tax change for the property sector due to COVID-19 is in relation to GST on short-term rentals. The border being closed has meant that many property owners who had been using their properties for Airbnb type short-term rental have had to switch the use of the property to long-term residential rental. If a property owner in this situation does not have a separate ‘taxable activity’ for GST purposes, then this change in use normally mean that they need to deregister from GST, and this would require them to pay GST on the market value of the property.
The Inland Revenue released a ‘COVID Variation’ where a property owner is given 18 months to re-commence a short-term rental activity without needing to deregister. To take advantage of this, they need to send an email to the following address: STRdisclosures@ird.govt. nz to give notice to the Inland Revenue that they are taking advantage of this concession. Where a short-term rental is used for long-term residential rental also triggers the need to make ‘change in use adjustments’ for GST purposes. Basically, the owners will need to pay back some of the GST they have claimed for each period they use the property for the GST exempt longterm rental. The COVID Variation states that the change in use adjustments are still required. These adjustments are unnecessarily complex, so affected taxpayers will suffer unnecessary compliance costs if the Inland Revenue does not remedy this. We have asked the Inland Revenue to consider some relief from change in use adjustments in these circumstances.
WHAT ELSE ARE WE SEEING? Bright-line rules are catching property sellers out
The ‘bright-line’ rules have been around since 2015, but we still regularly see property sellers being caught out. Remember, the bright-line rules are a form of capital gains tax that treat the sale of residential land/houses that are not a person’s main home as taxable if they are sold in the bright-line period. The bright-line period increased from 2 to 5 years for properties acquired on or after 29 March 2018. Residential rental properties (whether long-term or short-term) will almost always be caught by the bright-line rules, so you need to understand the consequences before selling (or otherwise transferring) a residential rental property. One trap we see often is where rental property (or holiday home) is transferred to a trust, or a trust is resettled, and then the property is later sold. The transaction involving the trust will generally start the 5-year clock running again for the bright-line rules. Commercial properties that are not on residential land are not captured by the bright-line rules. AARON CASSIDY DIRECTOR, WK ADVISORS AND ACCOUNTANTS
Specialist accounting & advisory services for Residential & Commercial Property Investors and Developers
03 379 9524 www.wk.co.nz
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Residential Tenancy Changes: What do you need to know?
he Government has recently passed the Residential Tenancies Amendment Bill. These changes fundamentally change the way in which tenancies operate and are terminated, the regulatory response to landlords who fall short of their duties under the Act as well as other measures aimed at protecting and promoting the rights of tenants in New Zealand. The majority of these changes come into effect on 11 February 2021.
Tenancy Length and Expiry A landlord can no longer terminate a periodic tenancy without having a reason that is acceptable under the Act. Some examples of valid reasons include the landlord requiring the property to live in, the landlord is obliged to provide vacant possession to a purchaser or alterations to the property are to be undertaken. A fixed term tenancy will also automatically turn into a period tenancy at the expiry of the fixed term unless the tenant and landlord both agree otherwise.
Regulatory Penalties Like with many other pieces of legislation in recent years, the regulators are now able to punish landlords that do not meet their obligations under the Act. Contrary to what has been said previously by some commentators, infringement offences and fines are not criminal offences that bring the risk of a conviction. These new measures instead allow the regulator to unilaterally apply a penalty where a landlord is in breach of their obligations under the Act.
Suppression Orders Suppression orders will now mean that for better or worse, both landlords and tenants are able to apply to have their names or other identifying information suppressed from publication by the Tenancy Tribunal. Where either a landlord or tenant has been successful (whether in whole or in part) a request for suppression must be granted by the Tribunal unless it is in the public interest for the information to be released or it is justified because of the partyâ&#x20AC;&#x2122;s conduct or
CANTERBURY PROPERTY INVESTOR | SPRING 2020
the circumstances of the case.
Other Changes There are a range of other changes RYAN KEEN that landlords CORCORAN FRENCH and tenants should familiarise themselves with. Tenants will now be able to make minor alterations to a rental property on the basis that these alterations are made good at the end of the tenancy, the rent can only be increased every 12 months and controls have also been implemented to prevent soliciting rental bids as was occurring in Wellington. For further information, visit the tenancy.govt. nz website.
irst an update on shower dome (re the mould article in the Winter issue). I finally got to try one out at an off grid, eco retreat. I found it to be snug and warm under the dome, not claustrophobic as I’d been warned. The shower dome was the perfect answer to prevent condensation in that situation. Now back to the Tenancy Tribunal hearing. So here goes – dress up a bit, but not too much, find a park and pay for ages just in case. Pass bag and body inspection at the door, see police on every level and then walk past all the damaged humanity outside the District Courts. Don’t make eye contact, a fire could erupt. It’s tinder dry with misunderstandings and lifetimes of anger. Police on every level. Past the District Courts is a spacious airport lounge type area. You are now at Tenancy Tribunal. I felt my blood pressure rise as I looked for the other party. I decided I would say ‘Hello’ and be civil. It’s rude to just ignore people. However this time my ex-tenant does not show. Later I saw on the court order that he told the adjudicator that he couldn’t come due to landlord’s threats and asked for a fourth adjournment. Sometimes people say “where there’s smoke there’s fire”. Sometimes that’s not even true. The adjudicator asked him to attend the hearing by telephone but after several attempts at contact the adjudicator gave up and ordered that his case against me for mould be dismissed. Yipee Yi Yo! That was good; except that I didn’t even get to show my photos of his mould ridden mattress left on the lawns!
You will have to defend yourself against all sorts of unexpected questions. This one asked me why it took me so long to tidy up after my tenant. The adjudicators are quite stern in their approach. Don’t expect any warm fuzzies. You will have to defend yourself against all sorts of unexpected questions. This one asked
me why it took me so long to tidy up after my tenant. Oh heck. I replied by quoting the law which I felt pretty smug about! Ha ha. That bit that says the landlord must examine every article of left belongings and decide if it is of value and if so store it or if worthless dispose of it. Three skip loads of stuff take a long time to evaluate! My company was awarded $9,000 in damage and unpaid rent. Nice – you would think ‘we won’. Yes, but now comes the long drawn out process of actually recovering that money. We haven’t seen any yet due to a technical hitch between courts and recovery centre. Somebody forgot to file something or sent papers to the wrong place – you know how it is with bureaucracy! Do you know there are some Buddhists who practise asking for adversity throughout their day, in order that they can practise patience, calm and loving kindness? Read “How to transform your life” by Geshe Kelsons Gyatso. I might come back as one of them. I don’t think I’ll make it in this lifetime. LIZZIE LANDLADY
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Myths of the Market: Are higher socio-economic areas achieving higher yields and capital growth?
or years buyers in Christchurch have been telling me that they want to buy in better socio-economic areas, as these areas achieve more capital growth.
As an investor you should always be looking to buy for medium to long term gains, buy what you can afford and where the tenant pool is strong and the cashflow works for what your end goal is.
So, taking a logical approach we have proceeded to compare capital growth against the school decile system. These deciles are used to target funding for those who may be in lower socio-economic areas and require more support. The results show the higher decile areas, 8,9,10, produced an average lower capital gains of 5.24% year on year since 2000. They also delivered lower average rental yields of 4.42%. Whereas the lowest deciles areas, 1,2,3, gave higher capital gains of 5.47% year on year since 2000, plus a higher rental yield of 5.59%. So how do the numbers work? As an example, if you purchased a $300,000 property in 2000 in one of the lower decile areas the average growth over the last 20 years would make it now worth $870,000 giving a $570,000 increase in capital. In the higher decile areas, the average increase on the same value property would now be worth $833,000 giving you a $533,000 increase in value.
tenants in all areas and it often comes down to tenant selection. Personally, I leave this to my property managers and have not had many issues over my tenure as a landlord. We have found that the property yields in Christchurch as well as the average yield since 2000, both trend downward as you move up the decile rankings. For each single value increase in the decile, you would have lost 0.16% yield and 0.05% capital growth.
Not bad when you consider that the same property would have higher cashflow over that 20-year period as well based on the current average return on these areas. The cashflow difference over the 20 years is an extra $144,000 between the two decile areas.
Not only is there higher capital growth in the lower socio-economic areas longterm, the returns are higher as well. So, you get greater cashflow to invest in more properties, without being hamstrung by topping up the income with your personal funds.
Of course, this does not consider the belief that certain tenancies may be more problematic than others, however from personal experience you have good and bad
The blue-chip suburbs – Fendalton, Merivale, Cashmere and Sumner, produce lower yields. Higher yields are found in the more affordable locations: Linwood,
Philipstown, Aranui, Hornby. Riccarton, Ilam and Upper Riccarton, typical student rentals, still have an average return around 5%. East and south of the central city also are typically good for returns, mostly higher than 5%.
ANGELA WEBB BAYLEYS
So, what does it mean for you as an investor? As an investor you should always be looking to buy for medium to long term gains, buy what you can afford and where the tenant pool is strong and the cashflow works for what your end goal is. Everyone’s situation is different and there is no need to get caught up in trying to buy in areas you can’t afford.
Why Invest in Christchurch? Christchurch is currently viewed by nonCantabrians as a great place to invest in the current market. We are a long way behind the rest of New Zealand in capital growth after a slow climb since Dec 2013 with the median house price only increasing by $60,000. The Canterbury median house price currently sits at 74.64% of national average, 15% below the long-term average. This proves Christchurch’s current market appeal for investors outside of our region. Rents have also been outpaced by the increase in property value across NZ, lowering returns, however not to the same extent in Christchurch as the rate of increase has been lower. We currently have the highest average yield of 4.5% compared to the other major regions in NZ. Bottom line, there is excellent investment opportunity right now in Christchurch. Angela is a highly experienced residential investment specialist at industry leader Bayleys. Angela is a multi-award winner in her profession, thanks to her thorough understanding of the local investment property market. This is backed by skin in the game, with more than 20 properties of her own.
Statistics sourced from https://www.educationcounts.govt.nz, and REINZ 14
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Commercial property update What a roller coaster ride we have experienced over the last few months. COVID-19, something no one could see coming, has had a huge impact on our economy and unemployment and we have the upcoming elections just around the corner. Typically in the months leading up to the elections commercial property transactions have slowed. This said, having spoken to a number of retailers, residential property brokers, manufacturers and car sales these businesses have been frantic with sales far exceeding expectation. Their major issue has been the lack of inventory arriving from overseas to replenish their dwindling stocks.
What MB Cook is experiencing Post lockdown (May onward) we immediately saw transactions coming back into play to the extent that levels mirrored those of last year. This trend has continued with both listings and enquiry coming in thick and fast. MB Cook, being strong in leasing, have since lockdown seen 78% of their transactions resulting in leases and the balance in sales. There is a good feeling of optimism out in the market place that leads us to believe that we may well be past the tough times experienced over the past six months.
Commercial Property – Buying, Selling, Leasing Have you an investment property that you are simply tired of, have you a vacant building, are you still wrestling with a building sub 67% NBS? So often we are finding, due to various reasons, people are put in a position of having to sell their buildings at short notice. Unfortunately in a lot of circumstances these buildings have a low NBS rating (sub 67%). Yes, if you have a building between 34-67% you are not obliged to do anything with it short term (unless you are seeking a change of use), however buyers and banks have a completely different approach to this. We highly recommend that you become proactive in this regard and bring your building up to the desired NBS rating for banks and insurance companies just in case you should find yourself be in a position whereby you need/want to sell in a hurry. Currently we are fielding a vast number of calls regarding vacant buildings and to that end what landlords should be doing to get them leased out. The market has changed and we simply have to accept this. The first question we so often ask is “Is your building a short term hold or
long term? This simple question will define your options going forward. A long term hold, you can meet the market as far as rent goes. A short term hold and it’s time to maximise your rent.
Investment Properties - Selling? Given interest rates are at an all time low, investors are desperate to seek alternative investment options. We are regularly fielding calls for investment stock. Now might just be the time to maximise the return on your property. If you have a well leased property that you are considering selling it might well be the right time to go to market. Yields are low, especially for well leased properties and this is driving the value of buildings up. Call MB Cook to discuss your selling options. Times have changed, we are hearing some very sad business stories out there, but for every sad story there are at least ten great stories where companies are really thriving. Money is flowing within our micro economy, people are spending up large and for Christchurch, it’s simply a great place to live. GRAEME DONALDSON PRINCIPAL MB COOK
ANGEL AWEBB P R O P E R T Y
I N V E S T M E N T
S P E C I A L I S T S
PROPERTY INVESTMENT SPECIALIST When it comes to Christchurch residential investments, join the many property investors from around New Zealand who will only work with Angela Webb.
Angela Webb Residential Licensed Sales Consultant 027 349 1997 l email@example.com propertyinvestmentchristchurch.co.nz WHALAN AND PARTNERS LTD, BAYLEYS, LICENSED UNDER THE REA ACT 2008
Residential / Commercial / Rural / Lifestyle
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Top tips for bathrooms Is it time to refresh your bathroom? We can definitely help with that! We’ve produced a Top Tips for Bathroom Renos video to help make the process of renovating your bathroom smoother. It’s available on our website: foleys.co.nz/helpful-tips There’s a range of other equally helpful videos in there too and they’re also available on our YouTube channel – Foleys Dunedin. To get a free quote for any work you require go to www.foleys.co.nz or phone 24/7 343-0763.
e are Wigram-based Master plumbers, gasfitters & drainlayers who believe in providing a level of service that is above & beyond your expectations, every time. Foleys has 11 branches across New Zealand.
Check out our helpful bathroom renos video on our website
Extended normal ho urs available Mon-Thur s 8am-8pm
Electrical Gasfitting Drainlaying
We’ll arrive within 30 minutes of the arranged time or the first hour of labour will be free. 16
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Phone us 24/7 on 0800 30 35 30 or visit www.foleys.co.nz
The following market rents table is derived solely from information gathered from bonds lodged through the Ministry of Business, Innovation and Employment. It has been adapted from its website www.tenancy.govt.nz. The figures supplied are based on houses, not flats or apartments. They cover the 6-month period from 1 March 2020 â&#x20AC;&#x201C; 31 August 2020. Suburb Addington
Bedrooms Price range 2 $332 - $395 3 $400 - $465
Suburb North Beach/New Brighton/Southshore
Bedrooms Price range 2 $330 - $390 3 $400 - $450
$325 - $365 $365 - $420
$365 - $430 $470 - $550
Avon Loop/East Christchurch
$365 - $450 $447 - $542
$350 - $422 $400 - $480
$368 - $422 $420 - $480
$330 - $420 $388 - $452
$376 - $407 $430 - $480
$340 - $390 $410 - $460
$383 - $421 $420 - $480
$335 - $375 $403 - $462
$337 - $383 $391 - $430
$330 - $380 $406 - $468
$425 - $508 $442 - $562
$355 - $400 $410 - $475
$375 - $450 $450 - $530
St Albans East/Edgeware
$350 - $410 $425 - $500
$365 - $422 $441 - $510
St Albans North/Mairehau
$357 - $456 $421 - $500
$335 - $395 $420 - $485
$350 - $400 $427 - $500
$310 - $400 $410 - $450
$327 - $392 $407 - $481
$370 - $397 $420 - $480
$320 - $410 $400 - $450
$318 - $396 $383 - $430
$370 - $425 $447 - $542
$357 - $375 $397 - $450
$350 - $383 $395 - $450
Merivale/St Albans West
$375 - $450 $467 - $597
Providing a stable home for clients of Corrections I am a Senior Advisor for Community Engagement and Reintegration with Ara Poutama (Corrections) and part of my role is assisting in finding long term stable accommodation for people in our care. When someone has long term stable accommodation they have a better chance of living a successful offence free life in the community. As an organisation we know it can be one of the biggest barriers an individual faces to access stable accommodation.
Ara Poutama would like to work along side private landlords who have an appreciation for helping others and may be open to accommodating individuals who are under our oversight. I know sometimes landlords may be slightly apprehensive about accommodating our people I would encourage them to make contact with myself to discuss how we can work together to ensure that these opportunities are successful for all parties.
If you would like to chat to me individually I am happy to take calls. We are looking for a range of single or shared accommodation options and would hear from anyone who may be open to working with us. KAREN MCLEISH SENIOR ADVISOR COMMUNITY ENGAGEMENT AND RE INTEGRATION â&#x20AC;&#x201C; COMMUNITY CORRECTIONS M: 027 221 1288 E: KAREN.MCLEISH@CORRECTIONS.GOVT.NZ
CANTERBURY PROPERTY INVESTOR | SPRING 2020
Calendar of events Upcoming forums
CPIA forums are free for CPIA members. There is a $25 door charge for non-members. All welcome.
Bookings are required for these events due to number limitations. Please visit www.cpia.nz to reserve your place. These forums are free for CPIA members, and there is a $15 door charge for non-members.
Date: 17 November, 7pm doors open, 7:30pm
Breakfast Club is a low-key property investors’ catch-up over coffee and breakfast on the first Friday of every month. It’s open to all CPIA members – buy your own breakfast. Conversation free!
Speaker: Kelvin Davidson, CoreLogic
October Date: 20 October, 7pm doors open, 7.30pm start Speaker: Mark Revis Topic: Growing a diversified portfolio Location: Gibson Centre, 59 Hewitts Road, Christchurch
Topic: Trends in the economy and property market Location: Merivale Lane Theatre, 10 Merivale Lane, Christchurch Christmas Party Date: 26 November, 7pm Speaker: Mark O’Loughlin Location: Waimairi Beach Golf Club, 460 Bower Avenue, Parklands Price: $50 per person, includes a two course meal
October Date: 21 October, 7pm doors open, 7.30pm start Speakers: Aaron Cassidy & Simon Ross Topic: Property Investing, dealing and developing – what camp do you fall into?
Bookings are not necessary. Held at a new venue, Cafe 218, at 218 Moorhouse Avenue. When:
6 November, 7-8:30am 4 December, 7-8:30am
Please note: event speakers or topics change occasionally. Visit www.cpia.nz to check for up-tothe-minute information.
Location: CPIA, 22 Buchan Street, Sydenham, Christchurch
Need help managing your rental properties under RTA Reforms?
Call today to find out how Ruby Housing can protect your investment
P: 03 379 5033 E: firstname.lastname@example.org www.rubyhousing.co.nz 67 Montreal St, Sydenham
Connect with our property investment world We’ve got advertising and sponsorship packages designed speciﬁcally for you. Contact us today to secure your spot in our next edition. E: email@example.com P: 03 379 5251
CANTERBURY PROPERTY INVESTOR | SPRING 2020
“We don’t not want development but then, in saying that, we don’t want to lose the flavour and personality of some of our communities.” HAYLEY GUGLIETTA, FROM THE RICHMOND RESIDENTS AND BUSINESS ASSOCIATION ON THE CHRISTCHURCH CITY COUNCIL’S REPORT ON URBAN DESIGN.
“In turn, this will set back economic recovery efforts and damage the countless small businesses throughout Christchurch who rely on tourism dollars brought in by Airbnb guests.” DEREK NOLAN FROM AIRBNB ON CHRISTCHURCH CITY COUNCIL’S PROPOSAL FOR REGULATING THE SHORT-TERM ACCOMMODATION INDUSTRY
The greater Christchurch area, which includes the fringes of the Selwyn District Council and the Waimakariri District Council in the west and north, built 40,325 new dwellings in the eight years to July 2020. BERNARD HICKEY ON HOW CHRISTCHURCH DEFIED THE HOUSING SHORTAGE
“Certain structures can be built for less without any unexpected holdups that may have resulted from needing building consent.” JENNY SALESA, BUILDING AND CONSTRUCTION MINISTER ON NEW EXEMPTIONS TO THE BUILDING CODE
“We’ve seen a lot of businesses reticent to commit to long leases or expensive refits. They want to be unencumbered because they’re uncertain about what’s ahead.” CHRIS WILKINSON, MANAGING DIRECTOR OF FIRST RETAIL GROUP ON THE INCREASE IN VACANCIES IN MALLS
Become a member First name
Paid by cheque
Conferences and expos Newsletters and updates Quarterly Link magazine subscription
Monthly Property Investor subscription Resources Exclusive trade discounts Industry representation
Recommended by: Or internet banking
Internet banking to account 02 0828 0101338 083
Subscription $250pa + application fee $25 - total $275
Please send completed form (and cheque) to: CPIA, PO Box 7382, Sydenham, Christchurch 8240 or email to firstname.lastname@example.org. Visa and Mastercard payments are accepted online only: visit our membership page: www.cpia.nz.
COMMERC IA L TOWER JUNCTION SHOWROOM LOCATION 66 Clarence street â&#x20AC;&#x201C; Christchurch (inside the outlet store) SUPPLIERS OF ALL DOMESTIC APPLIANCES, PROFESSIONAL COOKING, DIGITAL SIGNAGE & VISUAL DISPLAYS, PROFESSIONAL AUDIO SYSTEMS, COMMERCIAL LAUNDRY, HEATING SOLUTIONS.
Harvey Norman Commercial provides CPIA members EXCLUSIVE commercial rates only available through this channel. (These rates are not offered in the retail stores)
Please call or email Nathan Lee now for an appointment or general consultation m: 021 243 1008 | e: email@example.com