Industrial building consents surge. Auckland’s ‘golden mile’ reels with dozens of empty shops. And more insights in property news this week…
Distilled property news for investors. Our aim is to glean the important economic and property insights affecting investors from the torrent of information filling our newsfeeds each week so you don’t have to. We then present them in digestible snack form – tasters, if you like, for the full article.
Read on and enjoy your economic and property news this week.
In property news this week…
- Auckland’s ‘golden mile’ reels with dozens of empty shops
- Asset Plus wants to exit its Mount Roskill shopping centre
- Industrial building consents surge
- More term deposit interest rate drops
- Forest land and property managers on Labour’s election agenda
- What property managers think of the cold, damp homes they look after
- In defence of residential property investors
- Healthy Homes law whacks pensioners with 90% rent hike
- Elliot Stables tenants fighting for survival against their landlord
- Barfoot’s boomer September
- Property price rise boosted by limited listings
- Planning for affordability
- KiwiSavers ignore investing 101
- Kiwi small business recovering faster than Oz and UK
- Not munted
- A “conservative-anarchist” vision for Taiwan’s future
Covid-19: Auckland’s ‘golden mile’ reels with dozens of empty shops
Dozens of shops on Auckland’s “golden mile” of Queen Street are empty and an estate agency says it looks like it’s “done 12 rounds with boxer Mike Tyson”.
Stuff counted 27 empty shop frontages between the Town Hall and Customs Street, and three more where renovations were underway or with “leased” signs, as Covid-19 restrictions bite.
“We don’t have students, we don’t have tourists, we don’t have cruise ships and a lot of corporates are still not back in the office,” said Chris Beasleigh, the national director of retail sales and leasing for Bayleys.
“It’s like a triple whammy,” he told Stuff.
While the big brand international stores and most banks remain, the gaps are largely smaller shops which haven’t withstood six months of Covid-19 lockdowns, closed borders and a lack of tourists.
“It’s the same in Wellington, and all the cities which have big office and tourist populations, Los Angeles, New York and London,” said Beasleigh.
“The big thing is getting people back to work,” said Viv Beck, CEO of CBD promotion agency Heart of the City – referring to big CBD employers such as Auckland Council with large numbers of staff still working from home.
Asset Plus wants to exit its Mount Roskill shopping centre
Asset Plus wants to sell its shopping centre in Mount Roskill as part of a move to restructure its property portfolio to be focused more on office development in Auckland.
In an admission that the fund had not been performing as well as it could, chairman Bruce Cotterill told Stuff that the company had been working hard to change the strategy and that involved selling old assets and buying new ones with the prospect of better returns.
As well as the Mount Roskill shopping centre, Asset Plus also owns Eastgate Mall in Christchurch.
Retail centres are the commercial properties that have been hardest hit by the restrictions related to the pandemic.
Earlier in the year the company posted a $14.7 million loss because of the fall in value of its properties due to the Covid-19 pandemic.
Industrial building consents surge
Everyone wants in on the industrial property game right now. According to Stats NZ the number of building consents issued last month edged up, with a surge in the number of industrial building consents.
Although the total number of building consents issues last month edged up, the annual total is still down nearly 4% on last year.
But the data showed the value of non-residential consents climbed 19% in August, with $659 million worth of consents.
Infometrics said factory buildings contributed the most to growth, followed by warehouses.
It said the growth was concentrated in Auckland, with $77m more factory consents in the region than a year ago, accounting for 102% of the growth in the region.
“Warehouse consents also showed momentum in the last three months, possibly in preparation of shifting retail preferences in a post-Covid world, with more online and less bricks-and-mortar retailing, requiring more warehouse storage,” it said.
Earn 6% with Provincia defensive industrial property fund
Here’s how investors looking for a secure 6% p.a. projected pre-tax cash return can create a reliable passive income.
Our conservative investment strategy has resulted in Provincia Property Fund paying investors a reliable 6% p.a. quarterly dividend ever since the fund was established in 2017 💵
Dividends are paid quarterly and, as a PIE fund, it is tax effective too. You benefit from your share of Provincia’s tax deductions (e.g. depreciation), which means less of your dividend is taken by IRD than many other types of investments (e.g. term deposits) 😉
Add in capital gains and the total return compares very favourably…
Provincia Property Fund is only available to wholesale and eligible investors.
Minimum investment $50k 💵
Average investment ~$350k 💵
Maximum (to date) $2 million 💰
More term deposit interest rate drops
Things are looking more grim by the day for those relying on income from term deposits. Four of the six major banks we track dropped their 12-month term deposit rates this week.
The average 12-month term deposit rate at the beginning of 2019 was 3.36%. Current interest rates are down to only one-third of that.
There has been virtually no movement on mortgage interest rates however.
Our NZ Interest Rates Forecast page has all the detail.
Forest land and property managers on Labour’s election agenda
Labour plans more controls on planting plantation forests to protect valuable soils and water resources, will require residential property managers to be licensed and will put a framework in place to help people with properties affected by climate change.
Labour has announced some key aspects of its plans to replace the Resource Management Act, and confirmed it will introduce a licensing regime for residential property managers.
Labour leader Jacinda Ardern and environment spokesman David Parker say that if Labour is re-elected it will repeal the Resource Management Act and replace it with two new laws – a Natural and Built Environments Act and a Strategic Planning Act.
Residential property managers will also come under the government spotlight if Labour is re-elected.
Property management is currently unregulated, but Labour says it will introduce a Code of Conduct and licensing regime for property managers and require them to meet a good character test.
However the statement on this policy was short on detail as to how this would work, other than to say that it will “work with industry to develop practical standards and consider the similarities and differences with the existing regime for real estate agents.”
What property managers think of the cold, damp homes they look after
The quest for healthy rentals is often portrayed as a battle between sickly tenants and their merciless landlords, writes Michael Andrew. But where do the middlemen (and women) sit on the issue?
“It’s hard not to view New Zealand’s quest for liveable rental housing as an intense, politically-charged feud: on one side are the renters, the NGOs and the government pushing for warm, dry homes. And on the other are the wealthy landlords and property owners, seemingly ever-eager to avoid upgrades in order keep profit margins as high as possible.
“Earlier this month, Andrew King of the Property Investors Federation reportedly urged landlords to delay installing heat pumps until after the election, when a potential National government would scrap the requirements and make heat pumps and insulation optional. King’s comments were criticised by many including the NZ Green Building Council and the Real Estate Institute, while the Labour Party called them ‘deeply disappointing’.”
“Once again it appeared that an elite group of asset holders were attempting to neglect their dilapidated houses, condemning their hapless tenants to “free market” mechanisms and the toxic black mould slowly creeping up their kitchen walls.”
“But what about the property management companies – the businesses taking care of properties on behalf of landlords and presumably acting in their interests? What side are they on?
“On Monday Barfoot and Thompson made headlines when director Kiri Barfoot joined Asthma and Respiratory Foundation NZ, the Hutt Valley District Health Board, Community Housing Aotearoa, NZ Green Building Council and university researchers to sign a letter calling on National to scrap its plans to overturn the Healthy Homes Standard, set to come into effect next year.
“The standards were necessary, the letter said, to better protect the 700,000 New Zealanders affected by respiratory illnesses due to cold, damp homes.”
Barfoot said substandard homes and the landlords that permit them are an unwelcome cost that bring down the value of the housing portfolio.
“We’re not very tolerant of slum landlords,” Barfoot told The Spinoff. “The people who refuse to put in insulation or refuse to do repairs – we don’t really want them to be associated with us.”
In defence of residential property investors
Andrew King sets the record straight on whether he really did urge landlords not to install heating in rentals. It’s as much a comment on media sensationalism and leftwing journalists’ landlord vilification as anything else.
“In recent weeks I’ve had the misfortune of seeing my name in headlines suggesting that I have ‘urged’ landlords not to install heating in rentals. This is incorrect, but has been repeated in two Spinoff articles drawing on the original report – the first by Hayden Donnell and the second, yesterday, by Michael Andrew. I’d like to set the record straight.
“I had told a reporter about Property Investors’ Federation findings that many tenants don’t want heat pumps. I explained that we believe tenants should be thought of as customers and it was a good idea to involve them in the heating decision and to talk to them first. If they want a heat pump then you might as well install one sooner than later. If your tenant doesn’t want a heat pump then you could take this into consideration and not put one in until you have to. This, as best I can tell, led to the front page headline ‘Landords urged to delay heating’.”
Deeper into the article King says…
“Hayden suggested that landlords could pay the $2,000 for a heat pump and not pass this cost onto the tenant. (Actually, government officials estimate the actual cost of the Healthy Homes law is around $8,000 per property and this doesn’t include upkeep costs.)
“But, I would ask: why should landlords pay? Local authorities around the country are looking to put up their council house rents to cover the cost of the Healthy Homes standards and taxpayers are footing the bill for Kāinga Ora properties.
“The government will save $5 in health spending for every $1 spent on insulation and heating, so is it appropriate for them to pay? Sounds like a good investment.
“If a business faces increased costs, either the price goes up or they will soon be out of business. Employees expect pay increases if the cost of living goes up, so why are rental providers considered differently?”
Healthy Homes law whacks pensioners with 90% rent hike
How’s a poor old pensioner meant to make do?
When private landlords say Healthy Homes requirements will increase costs and therefore rents, they are abused and told to ‘be fair’. Yet the requirements are now having exactly the same effect on Council housing.
Council tenants in the South Otago town of Owaka are calling for a meeting with officials to discuss their anxiety over rents, which are expected to soar by as much as 90% next year.
Figures for the proposed rent increases for the council’s 97 community housing units were provided in a report during its meeting last month.
The report forms part of the council’s rental review for the units, which provide housing for lower-income residents, including many pensioners.
Because the council must comply with the Government’s healthy homes standards (HHS) by July 1 next year, the report says, this means the Owaka single-unit rent will soar to $173 a week (up 90%), to make the units, and any refurbishment, self-funding.
Rises elsewhere would range up from about 14%.
Elliot Stables tenants fighting for survival against their landlord
Businesses in an iconic central Auckland food court continue to face threats of closure from their landlord. Now they’ve turned to the public for help.
Several besieged businesses at Elliot Stables have failed to come to a resolution with their landlord, the Icon Group, which last month issued Property Law Act (PLA) notices giving the tenants 30 days to pay their arrears or face further action.
For months the businesses have grappled with reduced trade and low foot traffic because of the Covid-19 lockdowns and the construction of the City Rail Link, and have therefore been unable to pay their full monthly rent and operating expenses (OPEX).
The Icon Group – led by former Shortland Street star and Rubicon front man Paul Reid – has served several more notices through a number of different lawyers, which cost the tenants $1,700 each. Most of the tenants have until later this month to pay before they will be locked out.
Michael LeRoy-Dyson owns the struggling Attic Backpackers on the top floor and says the Icon Group has also rebuffed any attempts by lawyers representing the Elliot Stables businesses to negotiate the impasse.
“It’s all pretty dire,” he says. “Our lawyers have gone to them, but the landlord has essentially said ‘I’m not going to negotiate, period. All you need to do is pay all the money you owe me or I’m suing you.’
“Our lawyer is trying to take some kind of injunction, which would, should it succeed, hopefully prevent them from locking any of us out until things are sorted. Otherwise I’ve got until October 15 to pay or they come and turf out my last 15 customers and change the locks, and they’ve said that they’re going to do that – start locking people out systematically.”
However, with low revenue and mounting debt, the tenants are struggling to afford the costly legal fees. While LeRoy-Dyson says there’s strength in numbers, it doesn’t necessarily mean it’s going to be cheaper, as it all needs to be negotiated on a case-by-case basis. The group has therefore started a Givealittle [open in new tab] page to raise funds for their cause.
Read the rest of Michael Andrew’s extraordinary article here
Barfoot’s boomer September
Barfoot & Thompson has reported its best September sales in 5 years.
In September, the Auckland property market held on to the high price gains registered in August at the same time as recording the highest number of sales in a month since the peak of the last property cycle in 2017, according to Barfoot & Thompson.
“The key to the high sales numbers achieved in September was the number of new listings that came on to the market … the highest number in a month since October 2018, and 44% higher than in August,” said Peter Thompson, managing director of Barfoot & Thompson.
“The large increase in listings released some of the competition for properties that had built up among buyers and was influencing prices. At the same time as releasing buying pressure, the greater choice was an opportunity to which buyers were quick to respond.”
Property price rise boosted by limited listings
Property values have held firm through the worst of the economic downturn, supported by limited supply, record low interest rates and increased market confidence.
The CoreLogic House Price Index for September indicates property values increased 0.8% over the three months earlier, after generally stalling since May.
The property research firm said values rose 7.6% over the past year.
“Limited available supply, in the form of a low number of for-sale listings remains a key contributor to the property market’s resilience to lower values,” CoreLogic said.
“Additionally, the absence of any meaningful lift in unemployment (yet) has minimised the number of urgent listings or strongly motivated vendors willing to discount their price.”
Planning for affordability
Wellington housing is on an utterly unsustainable path and Wellingtonians worried about increasing housing density need to focus on solutions rather than lobbying against development, writes Dr Eric Crampton, chief economist at The New Zealand Initiative.
“Housing shortages do not just push up rents, they also worsen conditions for renters.
“Economist Stuart Donovan likens it to a giant game of musical chairs. If you have 10 players and nine chairs, the last heritage chair will find a tenant even if it is mould-ridden with two legs about to fall off – and at least one of the chairs will be overcrowded. But add two more chairs and the rickety seat can go unused.
“It doesn’t matter if the new chairs are luxurious thrones, standard-issue dining room fare or thriftier models: adding more means everyone gets a seat. And if the owner of the mouldy chair would like some rental income, the chair will need a trip to the repair shop first.
“When houses, townhouses or apartments outnumber folk needing a place to live, landlords must compete for tenants. And that competition, when housing is plentiful, is the best protection tenants can have.
“In a well-functioning rental market, tenants don’t need to go through lengthy adjudication processes to get a fair deal. They can insist that unless the landlord fixes the rotting weatherboards, they will choose another house.”
Click the link to read the rest of his excellent article.
KiwiSavers ignore investing 101
The KiwiSaver Annual Report released yesterday revealed that fund switches were up 54% on last year.
In total, there were 256,393 fund switches during the year to 30 June 2020, up 54% on 2019.
Over the course of the year, $1.5 billion flowed out of balanced and growth funds into conservative and cash investments.
Providers reported increased fund-switching in the last weeks of March as New Zealand entered lockdown and global markets dropped sharply.
Some members were switching to more conservative funds as the pandemic led to increased volatility in global markets and the fear of greater losses grew.
Those KiwiSaver members trying to “time” the market by switching funds when the markets went down, and then switching back again when things improve, have just locked in those losses and reduced the long-term growth of their KiwiSaver fund.
Some of these investors may, however, have been in an inappropriate fund going into the market turmoil given their risk appetite or their “capacity for loss”.
If they don’t have an appetite for volatility they should stay in the ‘safer’ funds and accept a lower retirement nest egg.
If they’re young and don’t have a short-term need for the money, they should stay in growth or balanced funds and accept that volatility is part of the game.
Kiwi small business recovering faster than Oz and UK
The latest Xero Small Business Insights report published yesterday showed small business revenue rose 4% in August compared to the same time last year.
This was the third consecutive month of positive revenue growth for New Zealand small businesses.
Blenheim cafe Herb and Olive owner Richard Barton said revenue for his one-year-old business was up 40% last month compared to the same time last year, despite having had to close for a month during alert level 4 earlier this year.
He said sales in July and August had been boosted by domestic travel.
“Marlborough is a popular tourism [destination]. There has also been a lot of interest in people buying properties and lifestyle blocks, particularly by expats returning to New Zealand because of Covid-19,” Barton said.
“Compared to our international counterparts, New Zealand has seen an encouraging recovery in small business revenue over the last few months. But the second lockdown in Auckland has shown how quickly things can change,” Xero NZ and Pacific managing director Craig Hudson said.
Hudson said, despite the second lockdown affecting the country’s largest city, New Zealand small businesses were outperforming their counterparts in the United Kingdom and Australia.
Tony Alexander describes his mission as “delivering a reasonable view on where things are headed, explaining stuff going on around us, and dragging people away from unreasonable views on things like house prices, changes in the pace of economic growth and so on.”
In his latest newsletter he lists 25 reasons we are not munted as a result of the Covid-19 shock. Here are four…
“We have experienced a record immigration boom amounting to a net gain of 90,000 people in the year to March. With slow relaxing of visa and entry rules, monthly net migration flows from now on could even drift back up again.
“House prices only fell 3% on average and have now recovered to sit 1.5% above March 2020 levels with few people now believing prices will fall. There is a positive house price wealth effect now running through the economy.
“The shortage of property listings is such that young buyers are increasingly contracting for new houses to be built. The downturn in residential construction looks like being relatively minor, assisted by the government’s change in Urban Development rules.
“The Reserve Bank’s bond buying (money printing) has converted private bond holdings to cash, and those cash holders have been looking to invest in other assets, contributing to prices rising for the likes of shares, houses, and commercial property.”
And finally, in not-property news this week something that is too good not to share…
A “conservative-anarchist” vision for Taiwan’s future
Future Crunch says, “We’re mildly obsessed with prodigy hacker turned activist turned digital minister of Taiwan, Audrey Tang.
“No decision maker in the world right now is doing a better job of threading the needle between digital democracy and personal privacy; and between corporate interests and the welfare state.
“Someone who actually understands the 21st century has finally gotten themselves into a position of power and is doing something genuinely new.”
After reading the article I’m mildly obsessed too. We need someone like her in New Zealand. It’s well worth the read…
Commercial Property Management
Looking for someone to manage your commercial property?
We are one of the few firms to specialise in managing commercial properties for investors.
Our clients have typically managed their commercial properties themselves before coming to us, but have better things to do with their time.
Especially considering management fees are usually paid by the tenant as part of their outgoings budget.
Why would you take on that workload yourself when we can do it at no cost to you? 🤔
We currently manage anything from large multi-million dollar commercial property portfolios right through to single units.
To find out more about tapping into our significant expertise, email firstname.lastname@example.org
This content is provided for general information only and should not be relied upon or used as a basis for making any investment or financial decision. To the extent that any information or recommendations in this content constitute financial advice, they do not take into account any person’s particular financial situation or goals. As individual circumstances differ, we strongly recommend you seek independent legal and/or financial advice prior to acting in relation to any of the matters discussed herein. Neither Newland Burling & Co Ltd nor Provincia Property Fund Management Ltd nor any person involved in this content accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this content.