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May 15, 2017
Irrigation - Kerikeri’s Underappreciated Resource
One of the major appeals for people moving to and living in Kerikeri, is the prospect of living ‘the good life’. Getting their hands dirty and growing their own patch is one of these aspects. Kerikeri’s history of being one of the first horticultural areas in New Zealand was created by our free-draining volcanic soil, temperate or semi-subtropical climate and high rainfall. It all sounds perfect but over the years, it became apparent that we couldn’t always be reliant on the weather. Northland can experience drought conditions, which we’ve felt the sting of as recently as December and January.Diving right into the history of our irrigation, the Government in the early 1980s built what is now known as the Kerikeri Irrigation Scheme, to support Kerikeri’s growing horticultural industry. When it was fully operational, the Scheme was sold to the growers who owned the land inside the area of benefit at that time. It has been an incredible resource for all growers in the area and has certainly seen the region become one of the NZ’s largest citrus and kiwifruit growing areas. One of the challenges facing the Scheme today is the changing landscape within Kerikeri itself. The ideal that the Scheme was designed to service the commercial growers within the area of benefit has not changed. However, over the years, the excess water has been provided to smaller, non-commercial lifestyle and residential properties with a ‘non-commercial connection’. This is based on the understanding that in a significant drought, their supply could be cut off or restricted to ensure that commercial users weren’t short on receiving their requirements. As Kerikeri has grown, particularly in the last two years, thanks to our building boom, immense pressure has been placed on the Scheme. Part of the issue, is that of those seeking a new non-commercial connection who believe it is their right to have a supply. This is clearly not the case. SWIFT Conveyancing and Law North Limited wrote a great article recently on the subject: “Kerikeri Irrigation – Commercial and non-Commercial Water Supply Agreement Kerikeri Irrigation exercises their right to cease Commercial supply to any block with less than 2 hectares being used commercially or where there is no commercial activity regardless of property size. As soon as the Commercial User drops below the 2 irrigable hectares they cease being a Commercial User and must apply for a non-Commercial supply and they will be asked to transfer their shares back to Kerikeri Irrigation. This means a vendor cannot agree to transfer their shares to a purchaser. Kerikeri Irrigation tell us that they usually do not know of the changes to the commercial status of a property until the property sells so they are now checking when contacted regarding the sale and are enforcing the rules at that stage. In most cases, we are dealing with non-Commercial supply. With non-Commercial supply, Kerikeri Irrigation is now issuing a new Supply Agreement rather than transferring the old one. Whilst it is not an automatic transfer from the existing owner, a request to continue supply to an existing connected property is unlikely to be rejected. However, this means a vendor cannot agree to transfer the supply. There should not be any obligation on a vendor in a Sale agreement to transfer a water supply agreement or, in relation to a Commercial supply, to transfer shares. If a Purchaser requires a Commercial supply or non-Commercial supply then there needs to be an appropriate condition included in the agreement for the purchaser to secure a satisfactory supply agreement and, if commercial, an agreement for a share issue before the agreement becomes unconditional. This should be a purchaser condition whereby the purchaser (or their legal representative) approaches Kerikeri Irrigation directly. We are happy to discuss this with you if you have any questions.” - SWIFT Conveyancing and Law North Limited We hope this goes some way to explaining the history and what is involved for those seeking a connection to the Scheme. We are very privileged to live in an area where there is potential to have a non-potable water supply at one’s gate. To sign off, it’s fitting to mention that the beautiful, warm autumn days are becoming less frequent and the coolness is creeping in. So, don’t hesitate to pop in for a hot coffee and a chat any time you’re in town. We enjoy that...and that’s for Real! Pete, Steve and the REAL Team.
Apr 11, 2017
The Risks of Meth When Buying and Selling
A test to check for the presence of meth when purchasing a property is becoming more common, there is still a lot of speculation and miss-information out there, but it is something we have to deal with and there is a process to follow once there has been an indication of the presence of Meth in a home. Meth can be detected in a home where it has just been smoked casually and in more serious cases, where it has actually been produced. There is a test that can be done to ascertain the level of contamination and the results are measured against a standard that has been set by The Ministry of Health which is as follows - ‘total concentrations below 0.5mg/100cm3 are considered ‘acceptable’ for post remediation pre occupancy’. Most Building Inspectors will do a simple swab test as part of their service. This is usually a swab sample of different areas of the property and this will answer the basic question “is there Meth present?” If it is, a further, more accurate lab test is needed to give you the total amount of Meth present. The results of this will dictate the level of cost of addressing the problem to make the house ‘clear’ of the contamination. In the event that the home has been redecorated (painted over contaminated areas) you could consider a subservice meth test. This is a lot more expensive and only done by trained professionals. It’s a scary issue as we only tend to read about the really bad cases in the media, but with good information the buyers can make informed decisions based on facts instead of speculation and the home can then be bought with confidence. WHAT SHOULD YOU DO AS A BUYER? If you suspect contamination or you just want to be sure, have a clause inserted into your Sales and Purchase Agreement that the offer is conditional upon a satisfactory Methamphetamine test (your solicitor can help you with this) Ask your building inspector to conduct a swab test during a building inspection or get a professional lab in straight away to do the full test. This means if there is an unacceptable level of Meth detected, you can choose to work with the vendor to remedy the situation or you can walk away from the purchase if you feel you need to. Costs will vary with each contaminated property, if the reading is only slightly over the 0.5 standard levels then a professional clean of the home is usually all that is needed, you can make that decision when the results for the home you want to buy comes back…. And then your decision is based on facts, not scaremongering.
Mar 14, 2017
Time to Invest
The rental market is a great measure of the health and state of the real estate industry. Here in Kerikeri, we are experiencing a simple case of low supply and high demand for housing, resulting in soaring rental increases; some between 15%-20%. Below are a few tips on base improvements that can be made to substantiate the rental increases: Insulation – now required to meet certain standards, but also safeguards health and comfort Heat pumps/transfer system – for comfort, heating efficiency and keeping the home dry Car parking – depending on the location of the property, extra car parks are a real bonus A fully fenced section – security, privacy and child safety Banks often look at the health of the rental market when assessing their lending criteria. So, whether you’re buying or selling, now is a great time to come in and have a chat with the REAL Team.
Mar 7, 2017
How's the Real Estate Market?
Everybody has their own personal take on what is happening in the real estate market and depending on their circumstances, it will have a major influence on what they believe. Buyers regularly push the belief that the market is softening because this is what they want to believe. Often, they will actually make a story around the softening market to justify presenting lower offers and playing the waiting game. Sellers on the other hand, always talk the market up and make incredibly strong arguments justifying why their property value is so high. We in real estate, often start with an optimistic seller and observe the changes after they have sold and the overnight transformation into the pessimistic purchaser. The reality is that the market is the market and it doesn’t really matter how many words you wrap around it, the formula is quite simple. SUPPLY and DEMAND. In Kerikeri, we observed a very strong market right through 2015 and 2016, and we have to say, 2017 has started a little more sedately. In 2015 and 2016 the market was driven by strong buyer demand (particularly from Auckland), and an increasing shortage of houses available for sale. According to our own sales data which makes up a substantial share of sales in the Kerikeri market, there are over 500 net people (over and above those who have left) living in the area over the last two years. That’s a substantial percentage increase in our population, well above the level anticipated in local authority population growth projections. You only have to drive through town these days or try find a car park to feel the change that has happened. A large number of the new people arriving in the area have been older, retired or semi-retired couples which has helped keep the strain off the local school enrollments. As more jobs are created by service industries that wrap around the growing population and the construction boom continues, then it is likely that even more younger families will move to the area. This year, our stock levels have improved and buyer demand is steady but not as strong. Buyer motivation to make offers has decreased from peak levels in 2016, with some buyers taking a ‘wait and see’ approach as the media covers stories about lower sales figures in the Auckland area. Consequently, we are witnessing longer days to sell across the market and many auction campaigns are being handed in without the result hoped for by vendors. We have also been seeing some vendors reducing their prices to remain competitive, which is also a sign of the market losing its edge slightly. To be fair, some of this price correction is just unwinding optimistic pricing, as some properties were strategically priced ahead of the rapidly increasing market last year. We believe the market in Kerikeri, moving forward, will remain steady and here’s why: - Very strong rental demand - Shortage of houses under $500,000 - Increasing numbers of retiring baby-boomers - Record number of new houses being built, creating more jobs in the area - Shortage of fully serviced sections - Interest rates have remained low - Great summer in Northland 2015 – 2016 - Increased number of migrants from regions other than Auckland, as value and sales volumes increase elsewhere e.g. Tauranga - The most significant driver of the Kerikeri market, is undoubtedly the Auckland property market. Whilst Auckland is experiencing softer buyer demand at present, all economic indicators would point towards this being a temporary slowdown due to strong immigration figures and the strong Auckland job market Given that nobody has the perfect prediction, it’ll be business as usual for some time. Until more houses are built, stock levels increase and buyer demand softens, we in Kerikeri can enjoy more of the same. So if you’re thinking of buying or selling, call in for a coffee and chat or request a no-obligation, free appraisal – you may be pleasantly surprised!
Nov 16, 2016
Rateable Valuation vs. Market Valuation
Obviously, there are less boring things on God’s green earth to talk about than Rateable Values (RV), but it’s an important subject nonetheless. Common misconceptions of the true meaning and a bombardment of other acronyms have left a few, well, misguided. RV is also sometimes known as the Government Valuation (GV) or Capital Value (CV) and it consists of two components – the Land Value (LV) and the Improvement Value (IV) (buildings, fences etc.). The LV component of the RV is used by Local Authorities in the Far North to apportion rates amongst rate payers and it is calculated every three years based on the recent sales values of land and houses. It represents a single point in time and therefore does not reflect the dynamic nature of market forces such as supply and demand. A Registered Property Valuation done by a Registered Valuer is not an RV, but is certainly a step up in accuracy as this involves a site visit and takes into consideration a great deal more detail and is more specific in nature. Real estate agents often mention the RV in advertising because buyers often like to know the figure. Sometimes, the RV is a rough guide of the Market Value but other times it is completely irrelevant. The RV's relationship to Market Value is ultimately up to you to decide. When deciding though, consider this: the RV doesn't usually take into account anything that makes a property better or worse than others in the area. For example, the condition of the house and land, chattels included, landscaping improvements and so on. It is for this reason, that sometimes an RV can seem inaccurate, especially when a house has recently been renovated, or when a property is unusual. Home owners can choose to get their houses re-assessed by the local council if they feel that it is unsuitable. Going by the previous example, if a house has recently had renovations that required a building consent (especially if there has been an increase in the floor area), the house will automatically be visited by a QV Valuer and the RV will be adjusted appropriately. An easy way to think about this wonderful web of funny business is this: When properties sell below RV, we are more likely in a buyers’ market with low demand and high supply. When properties sell above RV, we are more likely in a sellers’ market with high demand and low supply. Currently, we are the later. Therefore, RV’s should not be looked at in isolation, but must always be looked at in conjunction with Market Values in order to get an accurate grasp on the state of the current market. The graph below clearly demonstrates the volatility over the years when comparing Market Values vs. RV. Thanks to our graphical guru Vince Buxton for pulling the stats together!
Oct 12, 2016
September Market Commentary
A huge 69 sales for Kerikeri and surrounds (inside the Kerikeri High School zone) in September sets a new record for any one month. This high number of sales was driven primarily by increased interest in bare land and lifestyle properties (land size above 1 hectare). This brings the number of unconditional property sales in the area for 2016 to 390 compared with 353 for the same time last year or just over a 10% increase. High performing sectors are bare land with 95 sales in 2016, up 70% from 2015. This excludes unrecorded Kerikeri sales of land on developments that are awaiting title issue. Also the volume of sales for homes over $800,000 is up 250% from 2015. There were 23 sales above $1million compared with only 7 by this time last year. The number of sales for houses priced below $450,000 has halved since 2015 due to low stock levels. Entry level prices have reached a level in Kerikeri where there are fewer and fewer houses to be found under $450,000. The median house price for the area in 2016 is now $560,000 ($580,000 for July through September) up from $490,000 in 2015. Strong enquiry continues across all sectors of the market with diminishing stock levels resulting in higher prices being achieved. Developers are starting to show interest in investing in the area with the likelihood of better returns than in recent years.
Oct 11, 2016
GST – Compulsory Zero Rating Rules
The introduction of the compulsory zero rating (CZR) rules for all land transactions between GST registered buyers and sellers of real estate has greatly simplified the IRD’s role in collecting GST but has significantly complicated the roles of everyone else who must work with the rules. This typically includes both vendor and purchaser, their legal advisors, valuers, tax advisors and the agents who must draft the contracts. In theory, the CZR rules are straight forward. In a case where both parties are GST registered and land is being transferred to a buyer who will use the land in their own GST taxable activity and not use the land as their primary place of residence, the sale is zero rated. However, problems can and do arise when assumptions are made about a parties GST status or proposed use of the property. Navigating the pitfalls becomes particularly complex with split supply properties, like GST registered lifestyle blocks or orchards where a portion of the supply includes the GST exempt curtilage and a remaining portion includes the taxable supply. Split supplies can also include commercial property, be it rural or rental where the supply of rented dwellings is included alongside the commercial property. Negotiations for these properties can really only be properly conducted when all parties have a full, accurate and factual understanding of their GST positions and the apportionment of value between the exempt and taxable supplies. Problems can occur when vendors have misunderstandings about the GST status of the land they own and may inadvertently provide incorrect information. Buyers making offers inclusive of GST also need to be crystal clear on whether the vendor is GST registered, because an offer that is inclusive of GST can be inclusive but at the rate of zero rather than 15%. Unfortunately, where GST mistakes become problems are often only discovered after settlement when returns are filed with IRD. At this stage, litigation becomes a very real risk. So what are the practical ways to avoid the pitfalls? Firstly, GST registered vendors and buyers should understand they are placing themselves at risk if they commit an offer to paper without having a reliable disclosure of the other party’s GST position. An agent’s role is to facilitate the gathering of the information required to enable the parties to properly negotiate the contract with full and accurate knowledge. It is not agents’ job ever to advise on GST. With due respect to solicitors, they are also unlikely to be equipped with the detail needed to accurately advise on a client’s GST position unless doing so in consultation with the client’s tax advisor. So, get the lawyers and accountants talking! Parties should be consulting with their tax advisers and ensuring they are ‘in the loop’ at an early stage, assisting the vendor to provide accurate information to the agent. Plus, when acting for the buyer, they should be advising their client on the implications of the rules and guiding them through the questions that may need answering before an offer can be properly constructed. Negotiating real estate deals is often fast moving and certainly more exciting than talking tax. But, don’t let a desire to get the deal done override the need to get the facts around GST properly imbedded in the negotiation. By Mark Withers, Withers Tsang & Co Limited Chartered Accountants
Sep 3, 2016
Latest National Sales Trends and Kerikeri’s Outlook
Sales figures for July, released earlier in the month by REINZ, show a cooling trend in the property market for all of New Zealand, driven largely by a slowdown in Auckland. This slowing of sales was also reflected in Kerikeri’s figures for July - yet enquiry from buyers is still going strong! New listings have picked up a bit in August and so have sales in the most desirable price brackets, with properties often selling within a week of being advertised. Like many provincial towns in New Zealand our property market is cyclical. Our cycles historically lag behind Auckland’s by a couple of years. Sales volumes and prices dropped significantly in 2008 with the GFC, bottoming out in 2012, steadily increasing afterwards and significantly so in the last two years. This recent growth has been primarily driven by Aucklanders moving north or securing property for the future for lifestyle/retirement. By analysing local sales statistics, we estimate that about 600 to 800 new people moved to Kerikeri last year (66% of our purchasers came from out of town) and we are expecting similar gains this year. Fewer vendors (about 20%) are leaving Kerikeri when they sell because it has become less affordable to move to other areas, especially in Auckland, than in the past. Despite a 20% increase in building consents over last year, the quantity of new homes being built is not keeping up with demand and now desirable sections are starting to run short as well. Contrary to some opinions there are not many sections available on the Kerikeri market (many advertised are multiple listings and/or under offer awaiting title issue). There are few developers in the area developing new land and the high demand to short supply is pushing land prices up fast. Prices for average size sections with no outstanding features have nearly doubled over the last two years averaging $210,000 today. Most established sewered sections are sold and there are few opportunities to add more for several years until the Far North District Council expands the sewer infrastructure. This has led to medium size homes on 500m2 sewered sites, that were selling for $400,000 a few years ago, now selling for mid $600,000s within a few days of being on the market. The majority of house buyers moving to the area have been purchasing in the $400,000 to $800,000 range using a portion of their funds from sales of their homes in Auckland to purchase, leaving the excess funds to invest or live on. Buyer focus has increased prices over the last two years as stock has diminished and prices risen, both here and in Auckland. Median house prices in Kerikeri have risen from $380,000 in 2012 to $560,000 in 2016 to date. We eagerly await the rollout of the proposed new sewer infrastructure by the Far North District Council so that more affordable sections and houses become available and we can keep up with the demand from people looking to secure a life in this terrific area we are so fortunate to live in. Planned growth has so many benefits to a small town like ours, bringing vibrancy, jobs and opportunities. We look forward with a great deal of interest to the details of how our town planners see the future of our town and their plans for introducing them. It’s safe to say there’s a fair bit of catching up to do.