We pulled 15 gems from the torrent of property news this week to keep you abreast of the most important insights affecting investors. 29 Feb to 6 Mar 2020
In property news this week…
- Coronavirus Chaos
- Provincia Goes Unconditional on $10.45m Wiri Industrial
- Ratbag Renters and the 90-Day Headache
- More Certainty in the New Zealand Property Market Compared to Australia
- ANZ Economists See OCR Slashed to 0.25% by May
- John Mauldin Says the Fed Can’t Fix Coronavirus but Government Fiscal Stimulus Will Help Us ‘Muddle Through’
- Y2K Redux
- Runnin’ on Empty – When Will Home Listings Rise?
- QV Says Pickup in House Prices Continuing
- Housing Shortage: Mum Resorts to Airbnb to Stop Family Being Homeless
- New Building Consents Continue to Rise, Especially Multi-Unit Dwellings
- Term Deposit Rates Trimmed
- Westpac Cuts Longer-Term Fixed Mortgage Rates
- Foreign Investors Piling into US Real Estate as a Coronavirus Safe Haven
- Westpac Expects the Housing Market to Skid to a Halt as Coronavirus Starts to Bite
This article relates to financial markets rather than property, which is nowhere near as volatile as the sharemarket and financial markets. However, Covid-19 is on everyone’s minds right now so here are the great doomsayer Harry Dent’s [edited] thoughts…
“The coronavirus is really spreading throughout the world now, having made its way to both Europe and the United States. That’s had a tremendous effect on stock markets around the world, and on Thursday we saw a big drop… and Friday’s open has been nightmarish, also.
“So naturally I have people asking me whether I think this is the beginning of the big crash.
“And here’s my answer. I still don’t think we are quite there.
“I expect things to turn around today or in the next few days, and for a strong V-shaped rally to follow, and a bounce through April or May.”
After that he gets reverts to his usual doomsday predictions. One day, like the clock that doesn’t work but displays the correct time twice a day, he might be right. I have no doubt we’ll then hear lots of crowing about how he predicted it, but silence about the numerous predictions that didn’t eventuate.
In his book Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage, Harry says, “Nothing is more predictable than major bubbles. The hard part is predicting when the irrationality will finally end and burst. The most likely time, as of the writing of this book, would be in the classic crash season – around late October – of 2017.”
The 2017 crash prediction comes up repeatedly in the book. For example: “The extreme economic decline we face over the next few years – and my cycles tell me the worst time could be between late 2017 and 2020 – will only widen this split and fuel greater civil unrest.”
And this: “The current sunspot cycle peaked in February 2014 and points down until around late 2019 or early 2020, after being one of the most extreme in history. With this more precise cycle pointing down, along with my three other fundamental cycles, I say: If we don’t see a major financial crisis hit by early 2020, I’ll quit my profession and become a limo driver on the Gold Coast of Australia.”
And this: “The worst years for these Four Fundamentals will be between late 2017 and early 2020. Period! … The Geopolitical Cycle and the Boom/Bust Cycle turn up again after early 2020.”
Oops, we didn’t have a big crash in 2017, or 2018, or 2019. We seem to have got to the upturn bit without going through the downturn bit.
COMMENT: Keep calm, wash your hands, and say hello to Harry the limo driver next time you’re on the Gold Coast.
Provincia goes unconditional on $10.45m Wiri industrial
Provincia Property Fund has gone unconditional on 18 Noel Burnside Rd, Wiri. The purchase price is $10.45 million. We now invite expressions of interest from investors who would like to enjoy a projected 6% pre-tax cash return plus capital gains. On top of their 6% dividends, investors enjoyed 16.2% compound annual growth in the two years to October 2019.
Visit our Provincia Property Fund page to reserve a seat at an upcoming investor information evening.
Ratbag renters and the 90-day headache
Changes to tenancy rules may be a step too far for mum and dad property investors, reports Maria Slade for NBR.
The Residential Tenancies Amendment Bill was introduced to Parliament this month and with it the news that landlords’ ability to give a tenant 90 days’ notice of eviction without explanation is being axed.
It’s not the only provision in the bill that’s got them upset. The proposal that fixed-term tenancies become mandatory periodic tenancies when they end is also not popular, particularly with landlords who let to students who only require a flat for certain months of the year. The proposal to make parties anonymous in a Tenancy Tribunal case where they are even partially successful hasn’t been a hit either.
But calling time on the so-called ‘no cause’ notice is the biggest thing to happen for residential property investors since the Reserve Bank slapped 40% loan-to-value (LVR) ratios on them in 2016.
It is seen as yanking a structural plank of the property investment framework out from underneath them. Landlords are quick to point out that there is never no reason for getting rid of a tenant, because why would they want to go without the rental income? The 90-day notice is an effective backstop for dealing with curly customers and keeping the owner in control of their property.
Disgruntled investors are full of horror stories, such as the tenant who developed mental health issues and a propensity for repeatedly ringing the landlord in the wee small hours. The occupant of a property with a constant stream of vehicles coming and going has the street on edge but outwardly there is no illegal activity and how can the landlord gather evidence against them anyway? Meanwhile, the middle tenant in a block of three flats is aggressive toward his female neighbours, spits at council noise control officers and has tried to trespass the property manager.
Under the new proposals, landlords would be required to give a tenant notice and provide evidence of such antisocial behaviour three times within three months before they can apply to the Tenancy Tribunal for a 90-day notice. If the activity occurs outside the three-month period, the landlord starts at square one again. Combined with waiting times for a Tenancy Tribunal hearing, removing a ratbag tenant could take months if it could be done at all, landlords say.
More certainty in the New Zealand property market compared to Australia
More certainty in the New Zealand property market compared to Australia this February. The smaller regions dominate new asking price highs across the country.
“The New Zealand property market is in a good place and there’s a sense of relative stability during the month of February”, says realestate.co.nz spokesperson Vanessa Taylor.
“Unlike the Australian situation, where there’s reportedly a long-term high in the number of properties sitting on the market, that’s not the case here in New Zealand,” she says.
The total number of homes for sale nationally in February 2019 was 26,850, marginally down 0.3% compared to the previous year. Five years ago (February 2014) there were 41,731 homes listed for sale nationally as a comparison.
“We’ve been through the heady days of frantic activity and uncertainty and we have found our new normal,” says Vanessa.
“It’s characterised by a steady market, stable pricing and a pragmatic approach by buyers and sellers.”
ANZ economists see OCR slashed to 0.25% by May
ANZ economists see the RBNZ swooping in to stimulate the economy by cutting the OCR by 0.5% as soon as 25 March and then again by 0.25% in May in response the Coronavirus-led global slowdown. That will bring the OCR down to 0.25%.
Once interest rates hit rock-bottom, they say it’s government spending that will need to do the heavy lifting to support the economy.
A marked global slowdown is guaranteed, due to both demand and supply disruptions. Our forecasts assume New Zealand GDP stalls in the first half of the year, with a gradual recovery from there.
“A lower OCR can’t fix the fundamental problem, of course, but it can help by lowering the NZD, easing financial pressure on businesses (by easing debt-servicing costs, which could be very important), helping guide expectations, and helping facilitate the recovery,” they said.
ASB economists predict two rate cuts of 0.25% to bring our OCR down to 0.5%.
On Tuesday the Reserve Bank of Australia (RBA) cut its cash rate by 0.25% to a record low of 0.5% to “support the economy as it responds to the global coronavirus outbreak.”
COMMENT: Interest rate cuts are not going to help retirees with funds on term deposits though. No wonder there’s a search for higher yields. N.B. If you’re in this category, I suggest you check out our Provincia Property Fund page.
John Mauldin says the Fed can’t fix Coronavirus but government fiscal stimulus will help us ‘muddle through’
John Mauldin, my favourite macroeconomic thinker, says we will ‘muddle through’ coronavirus. Not without some damage and tragic loss of life, but it won’t be the end of the world. This is not the “zombie virus” of the post-apocalyptic movie genre, he says.
“The Federal Reserve and other central banks can’t bail us out this time. Their tools aren’t designed for this kind of problem. Rate cuts are not vaccines.
“On the economic front, I think it is safe to say that supply chains will be radically different by 2022. Technology was already bringing manufacturing closer to the consumers. I expect that trend to accelerate. That should mean significant capital investment after the COVID-19 problem is contained, providing a nice economic stimulus.”
After talking about the ‘crisis du jour’ he goes on to talk about his long-term outlook. “I am still bullish on humanity and bearish on government. The problems and the opportunities I see everywhere aren’t going away. I seem to find more every week.”
John Mauldin says, “Longtime readers may recall these letters began in the late 1990s when I was writing about the “Y2K” computer problem. Looking back, it is hard to believe how much fear it generated. Some people literally headed for the hills. I said, consistently, we would have problems but get through them. And that’s more or less what happened. A few little glitches, then it was over.”
With Covid-19, Mauldin says the likeliest scenario is that the world now has, in effect, another flu-like virus that will be with us for years. If clinical trials are positive, one or more of the vaccines currently in development could be ready later this year. Many biotech companies are working on it.
But in the absence of reliable information, well-meaning people will try to fill the void and make matters worse. A lot of misinformation is spreading on social media, and sometimes in real media, too. I saw one story calling it an “infodemic.” That’s funny but accurate.
Runnin’ on empty – when will home listings rise?
ASB economists say housing inventory is at rock bottom levels right around the country but that there is some evidence to suggest listings, at least in Auckland, should rise from here. “A failure to do so could see prices bust through our house price inflation forecasts.”
QV says pickup in house prices continuing
Quotable Value statistics, out on Wednesday, show a general upward trend in house prices around the country over the last 3 months. A lot of that is catchup outside Auckland, but Auckland has also seen rises over the summer after a year of stalled activity.
Housing shortage: Mum resorts to Airbnb to stop family being homeless
A Hamilton mum is paying a minimum of $650 a week for herself and her two teenagers to have a room in a shared house via Airbnb after they have repeatedly failed to secure a new rental.
Samantha Rose has been looking for a new home for her family for five weeks and says they are competing with up to 40 applicants over each property due to a gross shortage of rental properties in the city.
COMMENT: That’s what the current Government’s war on landlords has created – worse outcomes for tenants. Utterly predictable, if only they would listen.
Article link (paywalled)
New building consents continue to rise, especially multi-unit dwellings
The total value of building consents hit $23.2 billion in the year to January – up 8% on the previous 12 months. Growth was strongest for multi-unit dwellings, with 8,399 townhouses and home units consented in the 12 months to January, a new record and up 28% on prior year.
Term deposit rates trimmed
BNZ, Kiwibank and Westpac have all recently trimmed their 12-month term deposit rates. They now sit in a very tight range of 2.5% to 2.6%.
Visit our NZ interest rates forecast page for a full list of current rates.
Westpac cuts longer-term fixed mortgage rates
As well as trimming its term deposit rates, Westpac took a sharp knife to its 3, 4 and 5 year fixed home loan rates, making them all much lower than their main rivals. And these reductions are substantial. Their 3-year ‘special’ rate has been cut by 0.3% to 3.69%.
Foreign investors piling into US real estate as a coronavirus safe haven
In the last few weeks, Roofstock, a rental property sales website, has seen traffic from investors in Asia on its site jump 500%. CEO Gary Beasley said it is a direct result of the coronavirus.
“I think it may be people looking to invest capital into what may be perceived as more stable areas that don’t have as much of an effect, at least not yet, from the virus,” Beasley said.
“Investors are looking for the calm in the coronavirus storm, and U.S. residential real estate appears to be it,” he says.
Westpac expects the housing market to skid to a halt as coronavirus starts to bite
Westpac New Zealand’s chief economist expects the housing market to skid to a halt later this year as the effects of coronavirus start to bite.
“The currently rampant housing market is likely to skid to a halt, with price growth slowing sharply in the June quarter,” Westpac chief economist Dominick Stephens said.
The good news is that Stephens expects the economic impact of coronavirus to be relatively short-lived and the economy to recover quite strongly afterwards.
“It is important to remember, though, that this is a temporary disruption to economic activity, not a new long-run trajectory for the economy,” he said.