THE WEST AUCKLAND RESIDENTIAL LANDLORD NEWSLETTER No. 12

Hello,   

Welcome to the eleventh edition of the West Auckland monthly Residential Landlords Newsletter.

I am a landlord myself and have been for over 30 years. I have recently brought another rental investment last December in West Auckland and another in Milwater, Siverdale in May. I currently own rental properties in South Auckland, the North Shore and West Auckland. Being a high preforming Real Estate Agent (top 1% in New Zealand) for over 25 years and always working in West Auckland I know the real estate market and the rental market very well.

In this and ongoing newsletters I hope to provide ongoing up to date information relevant to landlords who own rental properties in West Auckland.

Regular features will include:

• Current sale prices
• Current mortgage rates
• Current rents
• A monthly suburb spotlight review
• A relevant feature article each month

I hope you will find it useful. I am available for free advice and opinion on any residential real estate matter.

	Sale Prices
Suburb	Median selling price June 2015	No sold	Days to sell
Titirangi	$             817,000	30	33
Green Bay	$             839,500	6	47
West Harbour	$             950,500	25	25
Glendene	$             726,000	13	25
Henderson	$             670,000	79	27
Hobsonville	$             725,000	6	27
Massey	$             670,000	46	24
Ranui	$             560,000	27	22
Sunnyvale	$             625,000	11	36
Swanson	$             638,000	5	27
Te Atatu Peninsula	$             842,000	17	36
Te Atatu South	$             777,500	20	24
Glen Eden	$             636,000	29	23
New Lynn	$             550,000	32	25
Kelston	$             721,500	4	26
Royal Heights	$             800,000	5	25
Laingholm	$             667,000	5	34

Source REINZ

Current Mortgage Rates                07/07/2015
	Float	1 yr fixed	2 yr fixed	3 yr fixed	5 yr fixed
ANZ	6.49%	4.89%	5.59%	5.59%	5.79%
ASB	6.50%	4.89%	5.10%	5.39%	5.65%
BNZ	6.34%	5.19%	4.99%	5.29%	5.75%
Westpac	6.40%	5.39%	4.89%	5.59%	5.79%
Kiwi Bank	6.40%	5.39%	4.99%	5.39%	5.60%
Best of other lenders	5.84%	4.89%	4.89%	4.99%	5.29%

Source – J Goodrum – Internet search

Current Rents
1st Jan – 31st June 15
Glen Eden	Average Rent	Bonds Paid	Royal Heights/Massey	Average Rent	Bonds Paid
2 brm apartment	$      286.00	5	1 brm flat	$              250.00	5
1 brm flat	$      250.00	8	2 brm flat	$              365.00	9
2 brm flat	$      355.00	12	3 brm flat	$              400.00	7
2 brm house	$      382.00	22	1 brm house	$              290.00	5
3 brm house	$      435.00	118	2 brm house	$              365.00	22
4 brm house	$      510.00	26	3 brm house	$              445.00	115
Glenene			4 brm house	$              520.00	27
1 brm flat	$      295.00	5	5+ brm house	$              610.00	17
2 brm flat	$      350.00	19	Te Atatu South
2 brm house	$      385.00	17	1 brm flat	$              260.00	5
3 brm house	$      430.00	56	2 brm flat	$              375.00	15
4 brm house	$      510.00	14	2 brm house	$              410.00	20
Henderson			3 brm house	$              460.00	52
1 brm flat	$      300.00	12	4 brm house	$              545.00	10
2 brm flat	$      380.00	49	Te Atatu Peninsula
3 brm flat	$      450.00	7	2 brm apartment	$              445.00	5
2 brm house	$      376.00	63	1 brm flat	$              270.00	5
3 brm house	$      455.00	210	2 brm flat	$              395.00	8
4 brm house	$      525.00	77	2 brm house	$              380.00	22
5+ brm house	$      628.00	21	3 brm house	$              470.00	62
Kelston			4 brm house	$              595.00	21
1 brm apartment	$      290.00	23	5+ brm house	$              720.00	7
2 brm apartment	$      312.00	8	Titirangi
1 brm flat	$      240.00	11	1 brm flat	$              260.00	20
2 brm flat	$      350.00	18	2 brm flat	$              350.00	7
2 brm house	$      356.00	22	1 brm house	$              325.00	7
3 brm house	$      445.00	61	2 brm house	$              395.00	23
4 brm house	$      490.00	11	3 brm house	$              480.00	81
5+ brm house	$      600.00	5	4 brm house	$              600.00	17
1 room	$      210.00	5	5+ brm house	$              655.00	6
New Lynn			West Harbour
1 brm apartment	$      295.00	21	1 brm flat	$              295.00	9
2 brm apartment	$      400.00	19	2 brm house	$              395.00	14
1 brm flat	$      290.00	15	3 brm house	$              460.00	78
2 brm flat	$      371.00	45	4 brm house	$              600.00	34
3 brm flat	$      420.00	10	5+ brm house	$              680.00	15
2 brm house	$      400.00	40	Western Beaches/Rural
3 brm house	$      460.00	91	1 brm flat	$              287.00	6
4 brm house	$      530.00	21	1 brm house	$              260.00	7
1 room	$      210.00	5	2 brm house	$              380.00	33
Ranui			3 brm house	$              455.00	54
2 brm flat	$      245.00	9	4 brm house	$              550.00	25
2 brm house	$      375.00	9	5+ brm house	$              700.00	6
3 brm house	$      420.00	72	1 room	$              220.00	5
4 brm house	$      495.00	10

Source NZ Government building & housing

Spotlight on capital gains
Hobsonville
Date	Median selling price	5 year gain %
June 1995	$                            340,000.00
June 2000	$                            335,000.00	-       1.5
June 2005	$                            528,000.00	57.6
June 2010	$                            584,750.00	10.8
June 2015	$                            725,000.00	24.0
Over 20 years		113.2%
Spotlight on capital gains
Glendene
Date	Median selling price	5 year gain %
June 1995	$                            145,500.00
June 2000	$                           185,000.00	27.1
June 2005	$                           313,000.00	69.2
June 2010	$                           345,000.00	10.2
June 2015	$                           726,000.00	110.4
Over 20 years		399.0%

Source NZ dept of statistics

The Big Picture

How does the world economies, N.Z events and local events effect my rental property?

For the serious landlord/residential rental investor it is important to know what is going on not just in Auckland or even New Zealand but in the rest of the world too.

After all the last fall in house values in Auckland (2008) had nothing to do with anything that happened in New Zealand.  The cause was the GFC (Global Financial Crisis) which was triggered by the collapse of the sup prime lending market signalled by the collapse of Lehman Brothers, a large Global Bank.

Knowing what is happening around the world and how it is likely to affect your rental investment gives you time to take action ahead of time.

So here goes a long list with very brief comments of influences.

1. World Wide
2. New Zealand
3. Auckland

World Wide

1. Greece – another bail out but with harsh conditions.  Living on other people’s money has come to an end.  A lot of pain, unemployment and suffering for Greece.  For Europe not too big a problem as the Greek economy is small by European standards.  The effect on NZ – minimal but it does not help business confidence. 
2. USA – the world’s largest economy.  Strong signs of recovery and growth.  Very good for all world economies including NZ.
   
3.  China – a slowdown has been happening but July figures suggest much better growth than previously thought.  China is NZ’s largest export market.  If that slows NZ is seriously affected.  Look what is happening to dairy prices. 
4. Australia – NZ’s 2^nd largest export market and $NZ very tied to fortunes of $A.  Their recovery is suffering mainly because of slow down in China.  Has serious effect on NZ. 
5. Europe – apart from Greece, the major European economies – Germany, U.K., are going well and France starting to tag along – good for NZ economy. 
6. Rest of the World.

India – strong economic growth.  Could become the next ‘China’ like economy.

Russia – problems with sanctions imposed by Europe and allies because of Ukraine.  Russia bans import of foodstuffs – bad for NZ exports.

Latin America – Peru, Columbia and others are among the fastest growing economies in the world – good for NZ economy.

New Zealand

1. Dairy Prices – significant falls.  Very bad for the economy as it is ZN’s largest export industry.  It will eventually slow house price rises.  Keep things in perspective though because dairy is only 5% of the NZ economy.
   
2. Christchurch Rebuild – will continue to fuel NZ economy for at least 2 more years before it reaches its peak.  Then – strong effect on Auckland prices because a lot of tradespeople freed up to build houses in Auckland. 
3. Net Migration Figures – large positive net migration gains are good for Auckland as most immigrants come to Auckland to rent and buy houses increasing values and rents.  Figures are very aligned with the Australian economy as that improves net migration to NZ is likely to fall off and probably turn negative again. 
4. Earthquake Strengthening – Throughout the country there are billions of $ to spend to upgrade buildings to new earthquake standards.  It will fuel building costs and house prices. 
5. NZ Economy – it is still growing despite the big falls in dairy prices.  The falling NZ $ will be good for all exporters.  The projected GDP growth is 2.8% per year through to 2019. 
6. Tourism – very strong at present, will rise even more due to lower oil prices (shale oil fracking in USA) and a lower NZ $ will favour tourists considering NZ.  Good for the economy, good for house prices. 
7. OCR  - The official cash rate pretty will dictates mortgage interest rates.  The first drop after 3 increases was 6 weeks ago.  All predictions are for at least 2 more falls before the end of the year.  Mortgage rates of below 4.5% are on the horizon. 
8. TPP – The Trans Pacific Partnership should now go ahead (all be it with an Obama intervention to overrule congress).  This will in the longer term be massive for NZ.  Much like the free trade agreement with China.  Very good for NZ economy and so home values. 
9. El Nino – there are indications of another El Nino weather pattern = drought for parts of NZ like that which occurred in 1997/98.  Bad for the economy, bad for property values.

Auckland

1. The Housing Shortage – In Auckland this has and still is the main driver of rising house prices.  It will continue (but possibly at a slower % increase in house prices) for I believe at least 2 more years – when Christchurch rebuild peaks. 
2. Auckland Infrastructure – Work on roads, bridges, cycle ways and perhaps rail will fuel the Auckland economy for several more years and benefit house values. 
3. 30% Investor Deposit – In Auckland from 1^st October 2015 anyone buying a residential property not to live in will need 30% deposit.  I believe it will have a very minor effect on house prices.  Also the mortgage rate will be high to those borrowers, perhaps 30% higher – again as the OCR is falling this will largely balance out those rises = minimal effect. 
4. Rental Property Insulation – All rental properties that practically can be insulated in the roof space and underfloor will need to be done by law by 2019.  Effect – nil – it will increase the value of the property to offset the cost.

So what does all this mean?

Speak to 3 economists and you will get 3 different opinions. I am not an economist but here is my opinion for what it may be worth.

1.  When the world economies are doing well house prices, wages and rents will normally increase.  USA is growing so the world economy outlook is good.  That means NZ will have strong demands for its exports = good for the NZ economy especially with a low $NZ.
   
2. New Zealand is performing brilliantly compared to most other economies.  The 2.8% average GDP growth forecasts for the next 4 years are I believe sound and mean good times will continue for property owners. 
3. The recent measures to curb house price rises in Auckland – 30% deposit and higher mortgage rates for investors and so on will have little or no effect on price rises. 
4. The shortage of houses in Auckland will take at least 3-5 years to correct so prices will continue to rise for at least the next 2-3 years and thereafter also keep rising but at a slower pace.  There is no bubble.  Auckland is not building houses or apartments to sit empty.  They are in strong demand. 
5. West Auckland’s infrastructure improvements and growth is probably the largest in Auckland.  Motorway upgrades, the motorway tunnel link to the airport.  Hobsonville Point, Westgate and more will assist property values in the West.

My conclusion – house prices will continue to rise strongly for the next 2-3 years and thereafter continue to rise at a more sedate level.  Rents will lag behind but also continue to rise but at a slower level.

Until next time, 

Best wishes, 

John Goodrum

Licensee Agent REAA 2008

thelegendofthewest@gmail.com

021945140

09 838 8895