Residential - Boom or Bust

[Basil]

Quite right, (I'm in non-work mode at present so forgot).  Other challenges as well including the extension of the bright line test to 10 years, extreme difficulty evicting a tenant, recently enacted requirements regarding healthy homes and after all that you will have the pleasure of dealing with the IRD who often take a very hard line against large items of repairs and maintenance and say they're non-deductible because they're capital improvements.  Its "lovely" for a client to hear that after a tenant has contaminated your rental property with methamphetamine and you've spent $60K on a total refurbishment and clean-up.  Most sell after experiencing this sort of thing and never go back to owning a rental property again.
https://www.oneroof.co.nz/news/42810
I reckon the headwinds facing residential property investors have never been stronger.  I reckon the market has at least another 20% downwards to go, maybe 30%.

[KW]

Quite right, (I'm in non-work mode at present so forgot).  Other challenges as well including the extension of the bright line test to 10 years, extreme difficulty evicting a tenant, recently enacted requirements regarding healthy homes and after all that you will have the pleasure of dealing with the IRD who often take a very hard line against large items of repairs and maintenance and say they're non-deductible because they're capital improvements.  Its "lovely" for a client to hear that after a tenant has contaminated your rental property with methamphetamine and you've spent $60K on a total refurbishment and clean-up.  Most sell after experiencing this sort of thing and never go back to owning a rental property again.
https://www.oneroof.co.nz/news/42810
I reckon the headwinds facing residential property investors have never been stronger.  I reckon the market has at least another 20% downwards to go, maybe 30%.

Getting interest on cash again changes everything.   A lot of them are going to think "if I sell up now, I preserve what equity I have in the house, and I can get 5% return on that money in the bank, with no risk, and I don't have to stress about tenants".  In an era of no interest, the only way to make money was to go out on the risk curve - to accept low rental yields and negative cashflow in exchange for tax free future capital gains (which are no longer guaranteed and not tax free).  Now you don't have to.  Its not just that investors are facing headwinds, their whole psychology is about to change big time as well. 

[Basil]

Agreed and its not like you have to lock it in to get a half reasonable return either.  I have a fair bit with direct broking on call earning 3.9%, likely to be ~ 4.5% next month when Orr does his thing with interest rates again and am retaining full optionality with that money around when and where to invest as the situation in the market unfolds this year.  Go back just 14 months to November 2021 and the best you could get on a one year term deposit was 2.1%. I forget what call rates were then but it was almost nothing.
A lot changed in 2022 eh.

[Shareguy]

I have been in the property game for a long time, this article reflects how I see things as well. It seems an accurate account to me of the market currently .

https://www.oneroof.co.nz/news/landlord-tax-you-can-put-up-the-rent-by-150-a-week-but-you-wont-find-a-willing-tenant-42800

[Basil]

I'd wager you've done incredibly well over the long run with property.  Are you going to ride the storm out or try and cash in some chips mate ?

[Popeye]

Spoke to an agent late last year - they stated that one of the local agencies recently had 17 tenders close ... without a single offer.  I also have noticed a number of rentals appearing (with different agencies) of recently completed multi unit developments (at least half for one 18 unit development). 

Any developers behind schedule will be feeling very nervous if pre-purchasers have an exit clause for late deliver.  Ditto for their lenders...

[KW]

I have been in the property game for a long time, this article reflects how I see things as well. It seems an accurate account to me of the market currently .

https://www.oneroof.co.nz/news/landlord-tax-you-can-put-up-the-rent-by-150-a-week-but-you-wont-find-a-willing-tenant-42800

I think it depends where you are.  There is currently only 1 property in Blenheim available to rent long term. Normally there are about 11, which was already a diabolical shortage.  Much of regional NZ has seen double digit increases in rents over the last year.  Its Auckland and Wellington that are lagging - and that is a direct result of people fleeing the country for places like Australia, and the lack of people coming in to the country to replace them.  Should immigration actually go back to what it was, then Auckland in particular should start absorbing that rental over supply and rents will rise accordingly.

If you look at Australia, rental vacancies are at record lows and rents are rising 15% a year now.  Some parts of Sydney have seen 20-40% increases in rent.  Victoria has seen a 20% increase in rents, with some areas up by 150%.  Immigration is pumping there.  NZ is just miles behind Australia in opening up the country post covid.  Hopefully in 2023 we catch up.
https://www.smh.com.au/property/news/it-s-a-crisis-rents-in-almost-every-sydney-suburb-jumped-in-the-past-year-20221013-p5bpha.html

So yes, its quite easy to put rents up $100 a week
https://www.news.com.au/finance/real-estate/renting/suburbs-where-tenants-could-pay-5200-more-a-year-in-rent/news-story/6399df33b5ae64d35970d353b0ef3d3d

[KW]

Spoke to an agent late last year - they stated that one of the local agencies recently had 17 tenders close ... without a single offer.  I also have noticed a number of rentals appearing (with different agencies) of recently completed multi unit developments (at least half for one 18 unit development). 

Any developers behind schedule will be feeling very nervous if pre-purchasers have an exit clause for late deliver.  Ditto for their lenders...

I'm seeing a lot of half built properties being advertised for sale, developers arent even waiting for completion and nice photos to be taken, but are attempting to sell construction sites 

[Shareguy]

I'd wager you've done incredibly well over the long run with property.  Are you going to ride the storm out or try and cash in some chips mate ?

Yes property has set us up for life, not shares.  A lot easier years ago. Banks were very generous with their money and taxation and depreciation made a huge difference. Huge risks but so thankful we did it. We did end up selling one 2020 during lockdown after a good agent rang us about listing ours with a neighbour who was selling. Sold as development section for obscene amount. Other than that no plans to sell. 

Still think for long term investors hard to go wrong if the sums add up. Yes property is going down , but it went up a ridiculous amount 2020 (Over 20 percent nationally) for no good reason. One thing I'm sure of is that sooner than later it will start going up again.  History supports it.

[Shareguy]

I think it depends where you are.  There is currently only 1 property in Blenheim available to rent long term. Normally there are about 11, which was already a diabolical shortage.  Much of regional NZ has seen double digit increases in rents over the last year.  Its Auckland and Wellington that are lagging - and that is a direct result of people fleeing the country for places like Australia, and the lack of people coming in to the country to replace them.  Should immigration actually go back to what it was, then Auckland in particular should start absorbing that rental over supply and rents will rise accordingly.

If you look at Australia, rental vacancies are at record lows and rents are rising 15% a year now.  Some parts of Sydney have seen 20-40% increases in rent.  Victoria has seen a 20% increase in rents, with some areas up by 150%.  Immigration is pumping there.  NZ is just miles behind Australia in opening up the country post covid.  Hopefully in 2023 we catch up.
https://www.smh.com.au/property/news/it-s-a-crisis-rents-in-almost-every-sydney-suburb-jumped-in-the-past-year-20221013-p5bpha.html

So yes, its quite easy to put rents up $100 a week
https://www.news.com.au/finance/real-estate/renting/suburbs-where-tenants-could-pay-5200-more-a-year-in-rent/news-story/6399df33b5ae64d35970d353b0ef3d3d

Your right KW. I'm only talking about the Auckland market. Outside Auckland there is shortages of properties in lots of areas and plenty of good tenants. In Auckland, especially South Auckland currently rents are stagnant as plenty of supply in a lot of areas. I agree once the immigration tap turns on that should change.  There has also been a lot of internal movement from smaller towns and cities in NZ to Auckland from younger people which I think has reversed. Now we have a lot of older people and families moving out of Auckland but hard to get numbers or a real idea of the net effect.

[Shareguy]

Foreigners now banned from buying homes in Canada https://www.bbc.co.uk/news/world-us-canada-64082923

[KW]

Foreigners now banned from buying homes in Canada https://www.bbc.co.uk/news/world-us-canada-64082923

Except they are doing exactly the same as Jacinda and handing out permanent residency to everyone. 
https://www.canada.ca/en/immigration-refugees-citizenship/news/2022/12/canada-welcomes-historic-number-of-newcomers-in-2022.html
"In 2022, IRCC processed approximately 5.2 million applications for permanent residence, temporary residence and citizenship."

[BlackPeter]

Except they are doing exactly the same as Jacinda and handing out permanent residency to everyone.
https://www.canada.ca/en/immigration-refugees-citizenship/news/2022/12/canada-welcomes-historic-number-of-newcomers-in-2022.html
"In 2022, IRCC processed approximately 5.2 million applications for permanent residence, temporary residence and citizenship."

I didn't realize that this is what Jacinda was doing .. if you are right, they did hide it very well!

This is the most xenophobe government NZ ever had ... and our anti immigration minister and department did a great job in making sure that our health system and our industries are basically running short in all essential skill areas.

You think it is easy to get PR in NZ these days (unless you have billions to buy you one)? Think again ... while dying in front of the hospital because the doctor and the nurse you need have been kicked out of the country by our government ...!

[KW]

I didn't realize that this is what Jacinda was doing .. if you are right, they did hide it very well!

This is the most xenophobe government NZ ever had ... and our anti immigration minister and department did a great job in making sure that our health system and our industries are basically running short in all essential skill areas.

You think it is easy to get PR in NZ these days (unless you have billions to buy you one)? Think again ... while dying in front of the hospital because the doctor and the nurse you need have been kicked out of the country by our government ...!

Did you miss the big revamp of the work visa rules?  In addition to making over 200,000 temporary workers in NZ permanent residents automatically, just about anyone who applies to work in NZ can now get a "straight to residence" visa.  It was introduced in September 2022
https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/tools-and-information/work-and-employment/green-list-and-highly-paid-residence-categories

[BlackPeter]

Did you miss the big revamp of the work visa rules?  In addition to making over 200,000 temporary workers in NZ permanent residents automatically, just about anyone who applies to work in NZ can now get a "straight to residence" visa.  It was introduced in September 2022
https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/tools-and-information/work-and-employment/green-list-and-highly-paid-residence-categories

Well, its not anyone ... you need to be on some list of jobs some bureaucrat decided that we need them. But I guess you are right - after pi**ing every potential immigrant off for nearly three years and treating foreigners like annoying flees, the most xenophobe NZ government ever noticed they made a mistake and are now somewhat opening the gates again for crucial workers.

Personally I think its too little, too late. People clearly don't feel welcome in NZ anymore and remember the government who broke their contractual commitments because they could and did hang out approved immigrants to dry (sorry, your visa just expired because we choose to offer approved visa holders no MIQ place -too bad you sold already your house and gave up your job because you trusted the NZ government to stick to its commitments). This government does not care about the livelihoods and families it destroyed, and I recon we all will pay for that a long time to come.

These days there are many countries competing for skilled labour - and not many have such an unkind and untrustworthy government and such a sickening pool of xenophobes egging them on.

Anyway - I digress from the thread.

I guess for the purpose of this thread this well might mean that housing might dip a bit further. People leave if they feel unwelcome, and with less workers and with less customers some more businesses will go to the wall. People leaving for greener pastures and given nobody can take their house with them ... market will keep going down.