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Apr 9, 2024
Best Time To Buy
More houses for sale, the prospect of lower interest rates, and the likelihood of improved capital gain make this the optimal time to buy a home in Kerikeri. The Kerikeri market is experiencing a unique moment in time right now. Prices have settled into their new normal, lots of new stock is coming to the market and increased buyer activity is resulting in multi-offers. Some economists are suggesting that interest rates will start to decrease sooner than expected and predicting house prices to increase over the course of 2024. I have a view that the Reserve Bank has over-crunched the economy and will play catch-up policy easing from late this year. So, if I were borrowing at the moment, I would probably take a mix of 6 and 12 month rates. “Tony Alexander Economist. For buyers, this means that for the first time in years it will likely get easier to service a new mortgage over time rather than harder. This combined with expected capital gains, means now is a great time to buy. More stock means more competition for vendors. Presentation and pricing are more important now than ever. The ones that do, are likely to see a successful marketing campaign with possible multiple offers that will result in the best possible price in the current market. We expect the current market conditions to remain steady while the economy is correcting itself. First home buyers are back and this is a welcoming sign for a healthy property market. There is always a reason why someone wants to either move up or downsize. In a steady market you will find that the gap between what you are buying and what you are selling isn’t as huge. It doesn’t matter where you are, good houses always seem to find buyers, no matter what’s happening in the market. Right now is a sweet spot for buying. If you want to find out more about how our unique, high-performance system can help you achieve your property goals please give us a call or pop into our office anytime. We would be glad to show you around and make you a coffee while you are here.
Mar 27, 2024
Property Investors back in business, the bill heralding property tax change is released.
At long last, and after various “amendments” to the pre-election promise to restore interest deductibility for residential lending, the bill that will change the law to deliver on the promises has been released. This contains mostly good news for property investors. Sense and fairness are being restored in some measure. Perhaps now we will hear less from uninformed journalists reporting that “tax breaks” for landlords are to be reinstated. The ability to take a tax deduction for interest on money borrowed to buy an income earning asset, that every other industry enjoys, could hardly be described as a tax break. So what are the key changes? Interest deductibility the be phased back in for residential lending. Brightline to be returned to two years from 1 July 2024 Depreciation on commercial buildings to be removed from 1 April 2024. What’s not being done? The much-hated loss ring fencing rules that are a targeted measure at residential landlords remains, meaning that if your restored interest deductions tip you from profit to loss, these losses can only be offset against residential rental income, not your other personal income. The detail in the bill has provided answers to some of the nagging questions that remained when we were reliant solely on political promises to map our property strategies. Here are the key take aways. Interest deductibility. Residential interest deductibility will be as follows. 2024 year 50% (not the 60% promised in the coalition agreement). 2025 year 80% 2026 year 100% Importantly, the deductions will be available for all residential property, regardless of whether it was acquired before or after 27 March 2021. So, if you purchased a non-new build property after this date, you will gain 80% deductibility for the 2025 year. Accountants have been waiting for clarity on that point and thankfully, it is there. If you find yourself with a tax liability for a sale within a brightline period, you will also be allowed to claim the interest you have thus far been denied a deduction for against the brightline gain. Brightline The changes restore brightline to 2 years for brightline end date sales that occur after 1 July 2024 ie, for agreements entered into post 1 July 2024. The complex time and land area apportionment rules associated with the main home exemption will be simplified. The main home exemption will again apply as it did originally when the land has been used predominantly (more than 50%) for most of the time the person has owned the land. In a surprise and welcomed move, the current rollover relief provisions will be extended to include all transfers of land between associated persons provided the transferee was associated to the transferor for at least two years prior to the transfer. This change recognizes that transfers between associates, that include things like normal estate planning measures, are not the speculative land transactions the brightline rules were originally designed to capture. Hallelujah, some sensible flexibility that will reduce the incidence of unintended consequences from the brightline rules is to be introduced. Removal of depreciation on Commercial Buildings. One of the measures designed to fund tax cuts to middle income earners was the removal of the 2% depreciation deduction on commercial buildings. This is included in the bill and will apply to the 2025 income year. The ability to depreciate separately identified fit out and chattel item’s remains as these items are not buildings. On that point, remember the purchase price apportionment rules apply to commercial acquisitions, these rules bind both vendor and purchaser to the same split between land, buildings and fit out, so the fit-out value of an acquisition needs to be determined and negotiated with the vendor. You can no longer simply commission a fit-out valuation after settlement. So, there you have it, these are the tax measures designed to restore a functioning private landlord sector in New Zealand. Back in business. Written by Mark Withers - PKF Withers Tsang https://pkfwt.co.nz/meet-us/mark-withers/
Mar 7, 2024
Understanding different types of ownership
Fee Simple, leasehold, cross lease, unit title – what does this all mean and how does it affect you? The simplest form of ownership is a fee simple title otherwise referred to as “freehold title”. Under this form of ownership you are more free to make changes and improvements on the land you own without consideration to others unless there are registered or unregistered interests. Rights and obligations under any instruments on the title such as covenants or easements are important to understand. Leasehold is when someone else owns the land. You purchase an exclusive right to possession of the land and the buildings on it for a specific period according to the terms of the lease. Unit titles are common when there are multiple owners within a development and often come with body corporate memberships with rights and obligations and common areas that need to be understood. Cross lease titles can restrict the improvements you want to make on your property unless the other cross lessees agree to the changes. It can also come at more legal cost as flat plans need to be amended on all cross lease titles. The following link gives a great explanation of these terms and how they may effect you as a buyer or seller. https://www.settled.govt.nz/buying-a-home/finding-a-proerty/understanding-types-of-ownership
Mar 7, 2024
Market Update: February 2024
A busy start to the year! It has been a surprising start to the year for us, with massive numbers of appraisals and new listings, a slow but steady increase in buyer enquiry and a fair amount of time advising and reassuring vendors that things will get back on track. We have recorded 16 conditional sales in February but more than half of these rely on other sales chains to complete. 75% of these are under $1million. Looking back REINZ reported 12 unconditional sales for January compared with 14 in December. This is a result of the typical lower levels of buyer activity in December leading up to the Xmas period. The outlook for February at the time of writing this report looks similar to January. Record numbers of new listings and appraisals On the reverse side, the number of appraisals and new listings coming onto the market so far this year has broken all records. The paralysis caused by the uncertainty leading up to the election, the delays with forming a government and then Xmas has led to a herd of sellers coming to the market at once. Consequently, inventories have shot up with latest numbers approaching 400 listings on TradeMe up from 340 just a few months ago. This is good news for buyers and sellers. It provides more choice for buyers than they had previously except in the lower price brackets where inventory is still slim. In time, it stimulates more activity across the whole market. More inventory and fewer buyers are shifting the higher price brackets firmly into the buyer’s market category. Inventories in the over $1million bracket would take over 2 years to clear at current sales volumes and motivated vendors with deadlines are seeing the writing on the wall and reducing asking prices to meet the market. Price outlook Our feeder markets are showing signs of an upswing with Auckland prices on the rise although sales volumes are still relatively low and 70% of auctions are being passed in. Most economists are predicting that the higher interest rate levels will continue to hold the New Zealand property market at bay for at least the next 6 months of 2024. Our observations are that most of our buyers are planning to make a sideways move to Kerikeri from another area or wish to downsize. Only a few are looking to upsize. This is a sign of our economic times in New Zealand. At our current price level, even people from many Auckland suburbs find it hard to move here and release equity to live on as they have been able to in the past. Until the price differential widens again (either increases in our feeder markets or further decreases here) then some people may choose to move to more affordable parts of the country. With the majority of buyers looking to downsize, the higher demand is for lower priced properties resulting in lower inventories and leaving high inventories in the higher brackets where demand is lower. First time homebuyers remain mostly non-existent which ties to our higher than NZ average prices, lower than average wages and a challenging lending environment. Investors appear to be sitting on the fence although a few seasoned, cashed up investors are starting to play their cards as opportunities present themselves. As reported in December, much of our sales activity depends on stimulus from Auckland and other centres. Usually a major shift in these markets takes 3 to 6 months to impact on ours. We watch with interest as these markets change over coming months.
Feb 26, 2024
#roadtripnorth - Detour routes for the Brynderwyn Hills closure
Kerikeri District Business Association has designed a map to show how easy it is to get North. With all the rhetoric around in the media about the closure of the Brynderwyns for 9 weeks - we decided to simplify the directions so you can see that it is only an approximate extra 20 minutes to your drive North - bearing in mind the Puhoi to Warkworth Motorway has shaved off 20 minutes on your #roadtripnorth has only been open 8 months - the extra time should not change anyone’s decision on heading North or for that matter South! There are 3 options - so no you will not be stranded - the detour routes we have been assured have been made more resilient to ensure that it can withstand the traffic increase - AND truck and trailer units will be traveling on a different route.. and if you take the Waipu route - you could if you want to stop and have a dip in the crystal clear waters at Waipu Cove and take in the beautiful long beach - amongst other things - I love to check out the Op shops in Mangawhai and Waipu as well.. The West/ West Coast route (SH12) takes longer but if you have the time - you will gain so much! If you would like to share this map far and wide please do so - it is not to scale - and drive times are from Google maps and obviously will change depending on what is happening on the road at any given time… but we would love for the word to get out the #roadtripnorth is worth it and the Brynderwyns detour routes should not change too much to the journey! Developed with support from Kaikohe Business Association and Kaitaia Business Association download the MAP
Feb 16, 2024
Is 2024 Starting To Turn The Corner?
Say goodbye to 2023, which according to many commentators had the worst commercial sales in nearly 30 years. Buyers were nervous with the cost of living and rising inflation, with high interest rates and an election season which seemed to occupy nearly 6 months of the year. While inflation is slowly trending down, there is still significant uncertainty as to when the Official Cash Rate (OCR) will begin to track below 5%. Initial expectations aimed for a midyear adjustment, but it appears more likely to be in the last quarter of 2024. With a low volume of sales for the last 18 months, data on value and returns is limited and the first question on a seller’s mind is “What is my property worth”? This is reflected in many properties being offered as “By Negotiation”, as vendors were uncertain as to meeting buyers expectations and sought to find the middle ground. Already this year we can see a change happening with prices being stated or asking for offers over a value. Construction costs appear to have stabilised and with the prospect of lower interest rates coming, the new build option becomes more attractive. As with any cycle, well designed properties in good locations have been in demand. However the challenge has been readying properties for sale or lease where factors such as location, design, layout, or value present questions for the purchaser. Those in the market for a property may need to broaden their expectations to successfully navigate deals.
Dec 4, 2023
Market Update: December 2023
It’s no secret. Kerikeri and the Far North are on track to experience one of the lowest volumes of open market real estate sales in a calendar year for 20 years. Average timeframes to sell have quadrupled since the peak of 2021 and unless you are the top one or two value propositions in your price bracket, you are going to have to sit it out and wait longer until the buyer who just loves what you have on offer comes along. It’s no wonder some vendors are losing patience and asking where are the buyers? The quiet period after the Global Financial Crisis from 2008 to 2010 saw similarly low numbers but that was when the town was much smaller, accentuating the poor results of this last year. So, what’s behind the slow down? [button text="Sign-up to receive the latest Market Update straight to your inbox" link="https://www.realkerikeri.co.nz/newsletter-sign-up" target="_blank"] 1. Normal cyclical correction to the extraordinary hype of activity in 2020 to 2022. The Covid bubble drove property sales activity and prices in Kerikeri to unsustainable levels. There had to be a correction, not just here but right across the country. Kerikeri median prices have held up well, so far, dropping around 10%, compared to other markets where prices dropped 20 to 25%. This makes Kerikeri’s prices more expensive for people planning to move from other areas and could give them reason to pause their plans or look at other attractive provincial towns, until the gap closes again. We are hearing about prices rising in Auckland and Wellington so the gap is already starting to close. 2. Section sales are way down to their lowest levels on record. The appetite for building new homes dropped away because of escalating land costs, construction costs, compliance costs and challenges with the supply of materials. All this uncertainty means that people have favoured staying where they are and renovating or buying an existing home versus building. 3. The rise of the retirement village. Over the last four years there has been a significant rise in retirement village house package offerings at reduced prices to the open market on a license to occupy basis. There is no doubt that people choosing these packages over open market homes has resulted in lower sales volumes in the open market. However, we understand that even retirement village sales are significantly slower in 2023 than previous years. 4. Fewer people moving to Kerikeri. People often say to us they move to Kerikeri for the warmer climate, the accessibility to Auckland and the lifestyle offered with boating in the Bay of Islands and access to Far North beaches. Unusual, severe weather patterns and road closures have put a damper on all of these over the last year. The normal flow of people travelling to the north to visit or in search of a new home has been disrupted. Boats have sat in safe harbour for most of the year and the weather has left many of us wondering if we should be renamed the summer-less north. For those worried about catching up with the grandkids in the city, this recent spate of weather has presented hurdles they were not anticipating. Additionally, slower growth in the construction sector has meant that fewer “tradies” have moved into the area than during the construction boom of the last few years. Last, but not least, most people need to sell elsewhere before they move here. If sales are slower where they live, then the result is things slow down for us here. That’s the market in a small provincial town when you rely heavily on inward migration for growth. Typically, these trends are temporary. Once our feeder markets pick up, roads are open permanently again and weather patterns settle back down people adapt and life gets back to normal. The recent change of government offers a glimpse of hope as policies come into play that favour the property market across New Zealand. However, it takes time for these policies to be implemented and have an effect. The first positive signal of change is the number of new listings across the country rising by an extraordinary 20% over the last month. People who had put their plans on hold leading into the election are finally acting. It is simple maths, that the more properties on the market, the more people will move around, and some of them will start to look at moving here again. Vendors can try various strategies to sell more quickly in the current market such as increasing their exposure through higher marketing budgets, or lowering their prices to be more competitive, or spending more money on their properties to make them more attractive or even changing their agency. All of these come at some additional cost, and none are guaranteed to bring a better result unless you are prepared to give your property away. The fact is that buyers are not coming as fast as they were. This is the nature of a cyclical market folks and neither you nor any agent, no matter how clever or experienced they are, can greatly influence that. The truth is, it is the time to be patient, trust your agent to be doing their job, out there everyday promoting your property. The market is turning, the buyers are returning, your property will be sold. It’s just a matter of time. [button text="Sign-up to receive the latest Market Update straight to your inbox" link="https://www.realkerikeri.co.nz/newsletter-sign-up" target="_blank"]
Nov 24, 2023
Gearing Ratios
Apologies to the motorheads out there, but this is the financial ratio used to compare the owner’s equity (capital) or asset values to the debt borrowed. The debt-to-equity ratio is a crucial financial metric that compares the owner's equity (capital) or asset values to the borrowed debt. Its significance lies in how it compares to similar businesses, rather than the actual number. Each industry or business model operates within a specific range that may not be sustainable for others. In general, a high Debt to Asset ratio indicates that a company may be over-leveraged, meaning they have taken on too much debt in relation to their asset values. This can make the company more vulnerable to financial difficulties, particularly if they experience a downturn in business or a recession. On the other hand, a low Debt to Asset ratio may indicate that a company is less risky and has a stronger financial position. Equity to Asset and Debt to Equity ratios are also important indicators that investors and lenders consider when evaluating a company's financial health. Equity to Asset ratio measures the amount of a company's assets that are financed through equity, while Debt to Equity ratio measures the amount of a company's assets that are financed through debt. Ultimately, understanding the relationship between asset value, debt, and equity is crucial for any business owner or investor looking to make informed financial decisions. By analyzing these ratios and their implications, individuals can gain a deeper understanding of a company's financial position and potential risks. When considering debt financing for your business, it is important to understand the implications of your debt-to-equity ratio. A debt-to-equity ratio is a financial metric that compares a company's total debt to its total equity. This ratio is used to evaluate a company's financial leverage and indicates the proportion of financing provided by debt versus equity. A higher debt ratio may indicate that a company is under greater pressure to service its debt than to generate returns on its invested capital. Conversely, a lower debt ratio suggests that the company has a higher equity ratio and that its assets should be sufficient to cover external creditors. It is important to note that debt financing is not always a negative for a business. If a company operates high-value assets, a high gearing ratio (above 50%) may be normal for the industry, as raising sufficient equity to fund these assets may not be available. However, for most businesses, a debt-to-equity ratio in the range of 30% to 40% is common, and many public entities operate within this range. If a business is too lowly geared, it may indicate that the business is not growing as quickly as it could be, as the equity is tied up in fixed assets rather than in cash flow. Therefore, it is important to strike the right balance between debt and equity financing to ensure the financial stability and growth of your business. The ratio being referred to here is the debt-to-equity ratio, which is calculated by dividing a company's total liabilities by its shareholder's equity. This ratio is an important measure of a company's financial leverage, indicating the extent to which it is financing its operations through debt. A high debt-to-equity ratio suggests that a company has been aggressive in financing its growth with debt, which can be risky if the business experiences a downturn. On the other hand, a low debt-to-equity ratio may indicate that the company is not taking advantage of opportunities to expand and grow. When comparing the debt-to-equity ratio of one business to another, it is important to consider the industry and market in which the businesses operate. For example, certain industries may require more debt financing than others, and a high debt-to-equity ratio may be more common and acceptable in those industries. Overall, the debt-to-equity ratio is a useful tool for investors, lenders, and other stakeholders to assess a company's financial health and risk profile.