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Sorry, there ain't no property rort

Sunday, December 4th 2011, 11:06PM 4 Comments

by Philip Macalister

Apparently there is no better time than now to buy rental property and this is a new development.
What planet is Bernard Hickey on ? I’ve said for a number of years that the stars have been in alignment for property investment. The two key factors, of many, are low interest rates and a housing market which hit a cyclical bottom.
However, the weight of evidence suggests that investors haven’t been jumping into the market and adding to their portfolios. So, sorry Bernard there is no great new rort for people to jump into.

There are many reasons why investors haven't taken advantage of the "perfect storm".
One is that banks haven’t been the most accommodating with finance.
Another is that the previous National-led government did plenty to discourage property investment. Don’t you recall the changes to tax rules which saw the end of LAQCs? Don’t you remember the removal of depreciation allowances?
All these, I would argue, have had a significant impact on investors and made many sell up. We talk to investors all the time and that is what they say.
The bit which is most galling is the simplistic and silly argument that we shouldn’t invest in rental property. Someone has to. The Department of Building and Housing says there is a growing trend for people to chose renting over home ownership.
Buying a property and becoming a landlord is the same as setting up a small business. This business has capital, it has debt, it provides a service (accommodation) and is 100% legitmate.
One of the biggest problems right now is the shortage of homes for New Zealanders to live in.
BNZ chief economist Tony Alexander reckons we are about 5000 houses short at the moment.
Who is going to provide the housing stock needed? Some will be individuals as owner-occupiers. Some will be investors or landlords. The group which isn’t likely to add to New Zealand’s housing stock is the government.
Former housing minster Phil Heatley has made this clear. Most of this slack will be picked up by private landlords and the social housing sector.
It is very simplistic to jump on the Act Party/ Hugh Pavletich argument the answer is to free up more land. Yes it may help, but it isn’t a one shot panacea.
The area with the biggest housing shortages and the most demand for additional housing is Auckland.
Part of the problem there is that there geographical characteristics of the isthmus constrain supply.
The Auckland City Council’s proposed plan is for more intensification rather than expansion of what is already one of the biggest cities (land area) in the world.
Sorry Mr D S Advocate, your argument is more about winding people up for fund (and traffic) rather than encouraging intelligent debate.

PS: Don't forget there is a capital gains tax and it is enforced. Indeed both Labour and National-led governments have provided millions of dollars to the PCP (Property Compliance Programme) and seen rich rewards for their investment.
« Catching the next property waveGovt not interested in affordable house prices »

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Comments from our readers

On 5 December 2011 at 7:49 am Lesley said:
I read his column yesterday in the Sunday Herald and CANNOT BELIEVE they let this guy write this stuff. He is so out of touch with what is going on with property ie the govt have cut the depreciation, also the rent has not increased everywhere. He reminds me of my lawyer who says "buy property because the interest rates are low" - he is short on conveyances and so wants me to help keep him fat. The two of them know as much about property investment as my cat!! I nearly considered cutting my subscription to this paper. It is time Bernard took a look at himself and figured out why his is so cynical and then get a life.
On 5 December 2011 at 1:35 pm Paul said:
Agree with sentiment against Hickey

Read latest (Dec) Property mag on weekend and was really interesting the 2 articles by tony alexander and his view on similar agruments + cap gains. Was really surprised with his view, but his conclusions make absolute sense unlike Hickey's
On 5 December 2011 at 2:54 pm John said:
I ceased encouraging chickey's ranting by not reading his articles online, but took exception to this - I guess ranting to drive website hits is what he is paid for so we cannot complain. great tactic when the site also advertises banking interests.

BTW, not convinced that the stats support an assumption that we are 5000 houses short, listings are only a little down from last year, suggesting household size is staying high for a bit. No solid suggestion is evident that we are running short of properties apart from in Christchurch. Auckland and Wellington listings are both on a seasonal upturn, following much the same pattern as this time last year.
On 5 December 2011 at 3:07 pm admin said:
Yes John you are correct. Looking back I think Tony was saying there is a shortage of 40,000 to 50,000 dwellings.
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Lender Flt 1yr 2yr 3yr
AIA 4.55 2.55 2.69 2.79
ANZ 4.44 3.15 3.25 3.39
ANZ Special - 2.55 2.69 2.79
ASB Bank 4.45 2.55 2.69 2.79
Bluestone 3.49 3.49 3.49 3.49
BNZ - Classic - 2.55 2.69 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.15 3.29 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 5.50 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 ▼3.85 ▼3.95 -
HSBC Premier 4.49 2.45 2.60 2.65
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 3.69 2.55 2.65 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.30 3.54 3.54
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.55 2.79 2.79
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Resimac ▼3.39 3.45 ▼2.99 ▼3.35
SBS Bank 4.54 ▼3.05 3.19 ▼3.25
Lender Flt 1yr 2yr 3yr
SBS Bank Special - ▼2.55 2.69 ▼2.75
The Co-operative Bank - Owner Occ 4.40 2.55 2.69 ▼2.79
The Co-operative Bank - Standard 4.40 3.05 3.19 ▼3.29
TSB Bank 5.34 3.35 3.49 3.79
TSB Special 4.54 2.55 2.69 2.99
Wairarapa Building Society 4.99 3.65 3.69 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - 2.55 2.69 2.79
Median 4.55 3.10 3.19 3.12

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