We pulled 13 gems from the torrent of property news this week to keep you abreast of the most important insights affecting investors. 26 Oct – 1 Nov 2019
Subdued Market With Scarce Listings and Flat Prices
Property website Realestate.co.nz’s October new listings hit a record low for that month, while average asking prices were mostly flat and the market continued along a fairly subdued path last month.
In Auckland, new listings were down almost 20% on last year. Nationally, new listings were down 17.1%. Of the 19 regions reported, 14 had average asking prices that were down or flat on last year. Only 5 were up on last year.
Provincia Settles One Property, Acquires Another
Hot on the heels of its recent East Tamaki acquisition, Provincia Property Fund has just announced it has gone unconditional on another industrial property.
After completing the the purchase of its fifth property at 1/30 Kerwyn Ave, East Tamaki on 10 October 2019, Provincia Property Fund has announced it has just gone unconditional on a new property in Mt Wellington.
The purchase price of $7.1 million results in a 6.1% yield. Provincia asset manager Jack Revill said a registered valuation obtained during the due diligence period came in at $7.93 million, giving investors an immediate equity gain of $830,000.
Provincia’s chairman Olly Newland announced a new capital raising in conjunction with the new acquisition. Newland says the fund has 83 share parcels of $50,000 available to investors. The capital raising closes on Wednesday 11 December 2019 and more details are available at https://www.newlandburling.co.nz/property-fund.
Industrial Property Is the Flavour of the Moment
Writing in the Bob Dey Property Newsletter, Dey says, “industrial property is the flavour of the moment. As interest rates hover at record low levels, a number of funds have opened offering investors more realistic returns, while listed property entities have spread their debt by offering new shares & bonds to investors.”
“This week, Provincia (headed by Olly Newland) has opened a new offering after going unconditional on a Mt Wellington property,” says Dey, who goes on to detail more action in the sector.
Provincia Fund Buys on Carbine Rd, Announces Capital-Raising
The Bob Dey Property Report reports on Provincia’s now unconditional deal on the $7.1 million purchase of 102A Carbine Road & 4 Gabador Place, Mt Wellington.
“Provincia chair Olly Newland announced a $4.15 million capital-raising by the unlisted fund in conjunction with the new acquisition – 83 share parcels of $50,000 available to investors. The capital-raising will close on Wednesday 11 December.”
Investor Information Evenings
Provincia is hosting investor information evenings in conjunction with a new capital raising for its Carbine Road acquisition. The fund is offering 86 parcels of shares of $50,000 to investors, with a projected pre-tax return of 6% p.a. plus capital gains.
Reserve a seat here: https://www.newlandburling.co.nz/property-fund/
Low Mortgage Interest Rates Don’t Save Money, Just Encourage More Debt
Analysis by David Chaston proves what we at NBCO have always said… that low interest rates don’t save money for borrowers, they just enable them to take on a bigger mortgage for the same repayment level, and then pay more for a property.
COMMENT: Reducing interest rates are one of the two primary drivers of increasing property prices, not so-called greedy investors, or speculators, or Asians, or any of the other bogeymen that the haters and xenophobes like to trot out. It good to see some research proving it.
Chaston writes, “despite the fact that our mortgage debt is rising at the pace of more than 6% per year, the amount of interest we are paying is static. … Low interest rates keep repayments low, allowing us to borrow more.” Chaston suspects the Reserve Bank thinks that low interest rates ‘save’ borrowers money. “But borrowers aren’t behaving like that, he says. The key driver is loan payment affordability.”
“And other data clearly shows that low interest rates are allowing more first home buyers into the market, even at the elevated house prices they have to pay. In fact, their buying competition is doing its part in pushing up house prices, especially in the lower quartile end of the market.”
Only One-Third of Apartments Sold at Thursday’s Auction
In the auction world, a handful of apartment sales yesterday was more than matched by a distinct lack of interest in most of the offering.
Ray White City Apartments auction on Thursday started with 4 sales from the first 5 of 11 lots, an unusually long auction list. But that was it, the rest were passed in, 3 in a row without a bid being made.
It’s Now Easier to Get Compo From Real Estate Agents
Rule change allows people to get up to $100,000 compensation from real estate agents guilty of unsatisfactory conduct.
The threshold has been lowered for people seeking compensation for poor service provided by a real estate agent.
People will now be able to seek compensation of up to $100,000 for losses arising from the actions of a real estate agent, if the agent is found guilty of unsatisfactory conduct, according to the the Real Estate Authority (REA).
Previously, compensation could only be awarded (also to a maximum of $100,000) if an agent was found guilty of the more serious charge of misconduct.
According to the REA, the lesser charge of unsatisfactory conduct could include behaviour such as a licensee not disclosing problems with a property or misleading advertising that causes a consumer to suffer loss.
Barfoot & Thompson Auction Numbers Still Well Down on Last Year
Barfoot & Thompson’s auction numbers steady over the last four weeks but remain well down on this time last year
Activity in Barfoot & Thompson’s auction rooms appears to have settled into a fairly steady pattern over the last few weeks, with the agency achieving an overall auction sales rate of 52%. However, both the number of properties being marketed for auction and the number being sold at auction remain well down from where they were a year ago.
Federal Reserve Cuts US Interest Rates for Third Time This Year
In a statement explaining the decision, the Fed said unemployment had remained low and household spending had been growing strongly, but business investment and exports had remained weak. Inflation was below its 2% target.
High-Density Housing on the Rise
The number of new high-density homes consented grew 22 percent in the September 2019 year, reaching 14,492 consented, Stats NZ said today.
High-density or multi-unit homes include apartments, townhouses, flats and units, and retirement village units. Growth of these outpaced that of stand-alone houses, which grew 6.1 percent between the last two September years.
Growth in the number of multi-unit homes helped push the total number of new homes consented to 36,446, up 12.0 percent from the September 2018 year. This is the highest since the October 1974 year, but is still below the record 40,025 new homes consented in the February 1974 year.
The population of New Zealand in the mid-1970s was around 3 million, compared with about 4.9 million today.
“The rise in consents for multi-unit homes continues to be driven by more activity in Auckland, with over 1,000 more multi-unit homes consented there in the past 12 months than in the previous year,” construction statistics manager Melissa McKenzie said.
“More multi-unit homes have been consented in other regions too and are becoming more common in many parts of New Zealand.”
Source: media release
Home Consents Up 50% Nationally in 5 Years, Doubled in Auckland
The rate of building consents has increased by 50% nationally from the 24,139 issued 5 years ago to 36,446 issued in the September 2019 year, and has doubled in Auckland, from 7,403 in the September 2014 year to 14,634 in the September 2019 year. Auckland accounted for 40% of all building consents in the last 12 months.
Source: Statistics NZ
2-Bedroom Rents Performing Well Against Subdued Trend
Barfoot & Thompson says some pockets of Auckland’s residential rental market continued to experience relatively strong price pressure through the winter months in an otherwise subdued market.
Upmarket CBD apartments and two-bedroom properties overall, as well as homes in South Auckland and Franklin, were the standouts in the latest quarterly rental figures released by Barfoot & Thompson, reflecting real data from the company’s portfolio of more than 17,000 properties.
Larger homes are seeing the opposite, says Kiri Barfoot. “On average, weekly rents for homes with four or more bedrooms are hovering around 1% higher year on year, and some will have seen flat or declining prices during the year.”
South Auckland and Franklin properties are seeing slightly more upwards pressure on weekly rents than the norm. Price growth was lowest in Rodney and the Eastern Suburbs.