The Property Academy Podcast

In this episode, we discuss what happens if you come to settle a property, and it is worth less than the purchase price? This is most important for investors who have signed an unconditional contract to purchase a brand new property that is currently under construction. If we do go through a period of economic downturn due to the Coronavirus, then there may be a situation where some investors come to settle a property (12 months after going unconditional), and the property is now worth less than the purchase price. In this instance, you would still need to pay the agreed price, but the bank will only lend you 80% of the valuation of the property, which means you need to come up with a larger deposit, whether in cash or by leveraging off your own home. Let’s look in the numbers: Let’s say you sign an unconditional agreement to purchase a property for $500,000 But, the property has decreased in value by 5%, down to $475,000. In the first instance, the bank would lend you $400,000 against the new property, and you might leverage your own home to make up the $100,000 deposit to make it $500K. In the second instance, now that the value of the property has decreased to $475,000, at 80%, the bank will only lend $380,000 against the new property, so you’ll need to make up the extra $120,000. That will typically be leveraged against your own home if you have enough equity. We also mention that we are holding a property investment webinar this coming Tuesday, 7th April @ 5 pm. We’re going to open up our analysis of 165,000 data points to see which parts of New Zealand are likely to see the deepest downturns and the speediest recoveries. You can sign up to the webinar here.

In this episode, we are joined by Peter Norris from Lateral Partners to discuss the Mortgage Holiday Scheme that is currently available as part of the economic response to the Coronavirus.  Property owners need to remember that the mortgage holiday is not really a holiday at all, but rather a deferral. The payments will still need to be made, but you make them at a later date. Remember too that any delayed interest payments will incur additional interest. i.e. you will be paying interest on top of the interest.  If you are to take a mortgage holiday, there are two primary ways you can pay it off.  First, you could keep your loan term the same, and increase your payments. Or, you could keep your repayments the same and extend your loan term.  On a 6-month deferral of a $500,000 loan at 4% interest, the additional repayments required would be $52 a month. Or if you were to keep your repayments the same and extend your alone term, you would need to keep up repayments for an additional 11 months.  We also discuss the Coronavirus webinar, which is happening on the 7th April 2020. We will open up our analysis of 165,000 different data points to show the areas of New Zealand that are most likely to have the deepest downturns and the speediest recoveries in the property market. If you are reading this after the 7th of April, the webinar recording will be available on the Opes Partners website. 

In this episode, we discuss how median rents in New Zealand hit a record high in February 2020. In that month the median rent hit $520 per week, up from $495 the year before.  That equates to a 5.1% increase over 12 months, compared to general inflation of 1.6%. That means that rents are increasing at a faster rate than all other goods. That's bad news for tenants as more of their income will then be going towards rent. Our conclusion is that a large part of this increase is due to the additional regulation that has been levied on landlords. Rental property owners are likely to be 'pricing in' the additional costs and risks of having tenants. These include: higher costs from the Healthy Homes Act, lower revenue through the ring-fencing legislation, and the requirement for landlords to pay a letting fee, rather than the cost be passed on to tenants. These additional costs are naturally passed on to tenants.  Another interesting finding in the podcast is in the dynamics of demand and supply. There are multiple regions highlighted where the demand for rental properties decreased, the supply of rentals increased and yet the average price increased.  This is because of the relative price sensitivity of both landlords and tenants i.e. demand and supply move in different ways and different factors will play differently.  We also mention the property investment webinar that we are holding on Tuesday 7th April at 5 pm. We are going to open up and share our analysis of over 165,000 data points to see which areas of New Zealand are most likely to be hardest hit through Coronavirus, and which are most likely to recover the most speedily. 

In this episode, we discuss how the Coronavirus might change your investment strategy. The decrease in interest rates have two effects: They decrease the return savers get through term deposits They increase the return property investors get through lower borrowing costs It is not likely that property investors can get a higher cash return from their deposit as opposed to keeping their money in the bank. These small changes in interest rates can have a big impact to the bottom line.  We also mention the Opes Partners Instagram. Follow us there to get more regular property investment content and updates.

In this episode, we discuss the Reserve Bank's announcement that it will use unconventional monetary policy to decrease interest rates further. The Reserve Bank has announced a $30 billion programme to purchase government bonds on the secondary market. This programme will operate over 12 months to decrease long term interest rates. That will likely have three effects: Lower long term interest rates will decrease the government's borrowing costs, making it cheaper to borrow and conduct expansionary fiscal policy Commercial banks set their retail interest rates based on the 10-year bond rate. That means a decrease in the government bond rates will likely filter through to the market rates Commercial banks often hold government bonds. When the Reserve Bank buys these bonds, commercial banks have higher liquidity. In essence, they have more cash. That allows commercial banks to lend more money to businesses and home buyers. The outcome for property investors is that more banks will be more willing to lend money at cheaper interest rates. This Large Scale Asset Purchase (LSAP) programme should be welcome news to business owners and investors alike. We also touch on the fact that landlords will likely convert short term rental accommodation – like Airbnbs – into standard residential tenancies. Many investors question what impact that will have on the rental market. Our view is that in the main centres the impact will be little felt. That's because the supply of rentals is highly inelastic relative to demand. That means a large increase in supply can only have a small impact on prices. Don't forget to follow us on instagram to receive regular updates about the New Zealand Property Market.

In this episode, Micky Limmer from Bayleys Canterbury joins the show to talk about the current dynamics of the Christchurch property market.  Micky mentions that the Christchurch property market tends to move in 5-year cycles, based on data crunched by Knight Frank, a valuation agency. From Micky's view, the Christchurch market has been flat for the last 3 years and he is seeing pent up frustration that is leading to house price inflation.  More people are turning up to open homes and to auction rooms. And in those auction rooms, bids are getting higher.  Most critical to this pent up frustration is the idea that Christchurch is becoming a 'viable option' for Cantabrians who moved away from Christchurch during the Canterbury earthquakes.  The city is developing, becoming more magnetic and attracting these people back into the city from Auckland and overseas.  This is not just because Christchurch is affordable relative to the rest of the country – Christchurch is the 12th most affordable city in New Zealand, yet it is the 2nd largest city – but also because of its typography.  The city is flat and by beaches and opportunities for outdoor activities surround the city. The Lyttleton port is 15 minutes drive from the centre of town, as is

In this episode, we discuss how to decrease your tenants' rent during the Coronavirus shut down the right way.  Some New Zealanders are doing it tough at the moment, struggling to get by. As landlords, that may include some of our tenants. That means that there is more risk that our tenants won't make their rental payments.  That's concerning because property investors still have mortgages and other rental property expenses to pay. So what is the best way to manage this.  Best practice suggests that property managers and self-managing landlords should reach out to their tenants early to talk about the tenant's financial position and whether they are struggling.  If they are struggling, then it is best to point the tenant towards the government subsidies that are currently available. After they have sought help, you can ascertain what the tenant is still able to pay.  You can then come to an agreement stating that you will carry forward the difference between the rent and what the tenant can afford to pay as a debt.  You should document this as a written agreement.  Once the shutdown has ended the tenant can then pay you back by a small amount each week e.g. $50.  But, be sure that the amount owed to you does not creep higher than the bond you have taken initially from the tenant. Otherwise, if the tenant leaves early it may be difficult to recoup the funds owed to you. 

In this episode, we discuss the proposed and accepted mortgage repayment holidays that the major retail banks will be offering due to the Coronavirus outbreak.  The Covid-19 outbreak will hit some New Zealanders hard. To make sure that property owners don't lose their homes due to loss of income, the Finance Minister, Grant Robertson has introduced this scheme.  If the shutdown has impacted your income then you can apply for a mortgage holiday on both the principal and interest payments on your mortgage for 6 months.  Interest will still accumulate on that loan, however. Banks will then add the interest costs on top of the loan, "capitalising" these costs. For instance, if you have a $300K mortgage at 3.5%. Over six months you will add $5,250 on to the principal of the loan. While this has accumulated over six months, it will set your mortgage back by 14-15 months.  If you need to take this mortgage holiday to keep your home, then it is well worth doing. However, if you don't need to then you will likely be better off by not applying for the mortgage holiday.  Instead, you could decrease any voluntary payments and just pay the minimum on your mortgage. Or, you could temporarily move your mortgage from principal and interest, just to interest payments. 

In this episode, we share the advice we are currently giving to clients while they are under isolation as part of New Zealand's coronavirus outbreak. The first is that it is best not to sign a contract to purchase property throughout this isolation period. That's because you won't have the opportunity to conduct due diligence properly while in isolation. You can't conduct a valuation, or do a site visit, lawyers will likely be slow and banks inundated with other requests. However, you should use this period to get in the right position where you can invest after the isolation period ends. Once we all come out from our homes in 28 days, there will be deals to be done, and opportunities will present themselves. We are predicting three periods, all starting with M: Mum – a quiet period during isolation and in the first month after we all return to normal Momentum – the property market will likely start to gain momentum as investors look for deals and pick up properties from property owners who need the cash. Investors will find the best deals in this period Mental – As the property market has pent up frustration it will likely roar back to life.

In this episode, Micky Limmer from Bayleys Canterbury joins the show to talk about the questions you should ask real estate agents when you are planning to sell your property.  Micky mentions that we should make sure that we respond well to the agent, since we'll be working with them for a few months. In addition to this, the agent will be nurturing the prospective purchasers of your property, so you want to have a sense that they will do this well to get more potential buyers interested so they bid up the price.  The agent should also understand both your property – it's major selling points and benefits – and the local market.  If the agent has a track record and has had success in today's market, then they will likely know people who missed out on other properties (along with what they bid). This means that a top agent will already come to you knowing potential buyers they can pick up the phone and call.  The agent should also have an understanding of the right sales process that is going to work for your property. If your property is in a premium and your ideal purchaser is likely going to have lots of equity or cash to use, then they can likely get themselves in the position to make an unconditional offer. That means an auction process would work better. However, if your ideal buyer is a first of second home buyer, then they will likely need a valuation and pre-approval on the home before they can go unconditional. That means a deadline sale may be more appropriate. We also mention the Opes Partners Instagram. Every second day we publish a new carousel that educates you about the property market. Follow us there to stay up to date.