The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘Renting’ Category

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Returning kiwis are eagerly looking for somewhere to rent

Posted on: October 6th, 2008 | Filed in Renting

The article in today’s NZ Herald highlights an increase in enquiry from London based kiwis seeking employment opportunities in NZ as the credit crisis wreaks its toll on the Finance and Banking sector in the UK.

One of the major recruitment firms Michael Page International which focuses on recruitment in banking, finance, accounting, marketing and sales, said that their office had been receiving an increasing number of calls and applications from Kiwis overseas. Equally Debbie Graham of Debbie Graham and Associates, which specialises in accounting, banking and financial services, said she’d had a steady stream of inquiries from the United Kingdom over the past couple of months.

It will come as no surprise then to note that the level of traffic to rental listings on realestate.co.nz by UK based visitors over the past 3 months has grown by over 34% as compared to the same period last year. On average over 1,000 people a week are logging on to check out the availability of rental property across the country. By comparison domestic visitor levels to rental listings have hardly changed.

Across the Irish sea whilst smaller in number the level of enquiry there for rental property in NZ has more than doubled as compared to a year ago.

All of this may be good news for landlords for whilst enquiry may be increasing the inventory of listings of rental property has grown by over 80% over the same period as cited in this earlier blog post to the current levels of 5,700 listings.

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Is buying a house really twice as expensive as renting? – observe the wisdom of the crowd

Posted on: July 23rd, 2008 | Filed in Buying / Selling a home, Property Investing, Renting

To buy or to rent – a perplexing question at the best of times, and as with most western societies we are conditioned largely to see home ownership as a logical path to passive investment. Whilst there is much to debate on the subject and mixed opinions, I was taken by the demonstration of balanced feedback presented on the NZ Herald website today in response to the article “Buying house – more than twice as dear as renting“.

The article quoted Property Investors Federation vice-president Andrew King with figures saying to buy the median house in NZ cost $745 per week as compared to the median rental price of $305 per week – on the face of it a bit of a no-brainer! However firstly isn’t this a clear case as “he would say that- wouldn’t he” as representing Property Investors.

However for me the most powerful element of this story is the clear demonstration of the collective The Wisdom of Crowds which is shown in the feedback comments on the Herald’s your “view section” – to provide a smattering of these comments:

Nigel Pinkerton from Lower Hutt:

With respect, F symonds is also not comparing apples with apples.
Say I took out a $400,000 mortgage and payed an average of 7.5% for the rest of my life, not reducing the loan’s value. Bear in mind that mortgage rates are currently at the top of their cycle.
I would be paying about $575 a week for the rest of my life, and by the time I retire $400,000 would not be a lot of money to pay off (prices and incomes keep increasing).
If I am renting, even at say $400 a week. This rent will keep increasing with the cost of everything else and in ten or twenty years time I may be paying $800-$1000 a week or more with nothing to show for it.
Generally, if you are covering more than 75% of your landlord’s interest payments, you are making them richer on paper (which they can cash in by selling up in the future). This applies even if you are not contributing to paying off the principle (book value) of the loan.

Shaun from Karori:

The quoted figures are misleading in the following ways.

1. Most home owners will be on fixed rates. In the worst case where a mortggage has recently been refixed, these rates will still be over 1% lower than the quoted floating interest rate of 10.4%. Many home owners will still be on fixed rates which are even lower.

2. The quoted mortgage repayments figures include repayment of capital – which means that over the term of the 25 years the 90% mortgage ($310,500) is completely repaid. This savings part of the mortgage needs to be taken out in order to compare like with like.

Taking these two factors into account and using an a current bank 3yr fixed term rate of 8.8%, gives an actual annual interest cost of $27324. This is around $7500 less per year ($150/week) than the quoted figures.

Still cheaper to rent, but lets be accurate in the figures so as to make the comparison valid.

ILNZ of Howick:

There is one major point missing here: rent increase every year, 7-12%? so it will possibly takes only 5- 6 years for your current rent to match your mortgage payment, and the rent still goes up in the years to come, but not your mortgage payment

If you do not own a house when you can afford it, then you will forever miss out.

And when you are old, say after 25 years, paying off your mortgage, you have a house that worth a fortune by then, but not those renters.

KatieR of Point England:

Got reminded this week of the benefits of ownership. Renting in the current climate is great financially but terribly disruptive to your life. Theoretically you pay your rent and don’t have to pay another bill other than power and phone. In real life, I am hassled to pay water bills without notice and worry about lawns. I rent so I don’t have to worry about this crap.

In addition, I now only deal with property agents and will not rent from owners- and recently learned that this needs to be written in the tenancy agreement as some owners know this and have it managed by agents for the first two months then start doing it themselves. Agents are contactable 24 hours and get things done quickly. Owners expect me to put up with things not working for their convenience. I don’t pay rent to put up with a broken toilet and pay rent for my convenience.

I am thinking about buying next year as I am sick of the crap- six week evictions because their son is getting back from overseas, landlords visiting at all other than a six month property inspection (I am paying for privacy) and the terrible state of most rental properties – plumbing, electrics alarm and paint matter to tenants.

The key point here is that with the feedback mechanisms of blogs and the all pervading power of Google – so called experts need to be aware that people will seldom take their version of the truth at face value – people are encouraged and rewarded to dig a little deeper and hear the “wisdom of the crowd” before making up their mind.

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Home owners opt to rent out properties that are struggling to find buyers

Posted on: July 8th, 2008 | Filed in Renting

With the level of property sales already down 44% at just 25,500 properties in the first 5 months of the year – and stock of property on the market at record levels, it comes as no surprise that the level of rental properties on the market is also growing.

In fact over the past 3 months as the levels of new properties coming onto the market has begun to decline and the overall stock of properties has also begun to decline, so the level of stock of rental properties has risen. The graph below shows the statistics of properties listings on realestate.co.nz through the first half of 2008.

Rental listings vs property for sale on realestate.co.nz Jul 08

The blue shaded area represents the stock of rental properties – growing sharply from a steady 4,000 in the first 3 months to then spike up to the current level of over 6,000 this month. At the same time the red columns representing properties for sale as measured on the left hand axis shows the decline from April, down from 61,700 to just under 60,000 this month – not a massive decline, but a decline all the same.

As a note it is important to note that rental properties on this website tend to reflect a high turnover as the timeline of renting is on average so much shorter than selling properties, however looking back over the past 24 months – no other period has seen such a fluctation in stock.

Additionally it is clear that it is difficult to directly correlate the circumstance of properties once marketed for sale being alternatively offered for rental, however the feedback from within the industry and other articles definitely point in this direction.

Ammended content 9th July

At the request of Lance – below is the same data presented for an 18 month period – clearly the stock of rental listings are growing at a rate far ahead of any seasonal influence.

Property for sale and for rent - realestate.co.nz 2007 /2008

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Insulation subsidy to assist rental landlords .. and tenants!

Posted on: June 13th, 2008 | Filed in Green, Property Investing, Renting

With only 2 weeks of the winter behind us we know that there are going to be many cold days and nights ahead – depending upon which part of the country you live. Statistics keep telling us that kiwi houses are amongst the draftiest and least well insulated of any houses in the world and this brings with it significant health issues.

Add to this not only the looming threat of a power crisis (not a word apparently the government wants us to use!) and the spiralling costs of food and fuel and you can see why many people are going to be cold this winter.

Insulating rental property - government subsidies availableThis need not be the case as the government has schemes to encourage the insulation of pre-1978 houses that are being rented. Now there has to be a fair stock of these around the country and we can all image how cold and drafty they may well be.

The scheme run by The Energy Efficiency and Conservation Authority is offering landlords a subsidy of up to 55% on a full house retrofit of insulation and other energy efficiency measures for any of their rental properties occupied by low-income tenants. There are certain conditions and the work must be carried out by one of two organisations (Eco Insulation or EECN) dependent upon which part of the country you are in.

Insulating these houses has to be a must – good for the tenant, good for the environment and good for the property value.

Update June 2009

Government announce grants of up to $1,800 to insulate NZ Homes – Warm up New Zealand .. Heat smart

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Property purchasing options: co-buying and fractional ownership

Posted on: March 9th, 2008 | Filed in Buying / Selling a home, Money Matters, Property Investing, Renting

The emerging wisdom of the crowd is clearly saying we are about to witness a significant correction to the housing market. (As a point of note the phrase wisdom of the crowd comes from the title of James Surowiecki’s excellent book which I coincidentally have recently read and would thoroughly recommend).

If it is any consolation – we are not alone when it comes to the property market hitting the wall in NZ. Most developed countries are to a greater or lesser extent are either about to witness this correction, or are deeply in it!. The only question is when and by how much, this useful chart from The Economist presented on Lance Wiggs blog shows the scale of some of the European property market corrections.

Whilst property is for some people a speculative investment from which to earn incremental income and establish a passive asset for retirement, the majority of home owners buy property for the pleasure of ownership and the very primal need to shelter themselves and their family.

As an option renting a property can and does meet this need. At this time there are clear arguments that renting is cheaper than buying. When you stack up mortgage repayments as well as repairs and maintenance and compare that to rental costs the incremental costs can be over $17,000 per year. However the downsides such as surety of tenure, inability to make the place your own and the thought of paying someone else’s mortgage still drive well over 60% of NZ’ers to own their own place.

Conventional wisdom always sees property purchase tied to the “nesting” mentality driving people to buy when setting up home with a partner. So with relatively low affordability the question for many is how to get on to the property ladder. Looking to trends overseas it shows that there is more people choosing for deep pragmatic reasons to buy property in partnership with friends and business partners as a means to take that first step on the ladder.

Naturally wherever there is a good idea involving the aggregation of interested parties around a shared need the web intercedes with smart functionality – this has proven to be the case with co-buying property. This concept has spawned a thriving business for a couple of UK based entrepreneurs who have taken their learning in facilitating the meeting of prospective co-buyers from their UK base to offer the service here in NZ as well as Australia and Canada. The NZ version of Co-buywithme has been operation for about a year and has over 500 members from all areas of the country and all walks of life; some looking to co-buy a first home, others looking for a shared ownership in a holiday bach; whilst others see the opportunity to explore investment property. As ever the web creates the facility for anonymous interaction – it is then up to individuals to make the buying decision, the parallels with online dating could not be more similar.

Utilising the same model of shared ownership, when people hear of fractional ownership they immediately think “time-share”. That concept may have slipped in the credibility rankings from the 1990s, but the idea of a more permanent holiday escape without the exposure to high property prices has seen this emerging segment of fractional ownership emerge over the past 5 years.

Fractional ownership is perfectly targeted to the “never-grow-old” mentality of baby boomers who fancy having a holiday home for more than a couple of weeks a year. Fractional ownership allows between 2 and 5 owner to collaborate in the purchase of a property with joint ownership rights to the title which can be sold independently and in so doing divide up the access to the property into meaningful time periods. There are a growing number of such properties being marketed in NZ’s vacation centers offering the chance for overseas buyers to grab a slice of NZ summer partnered with a kiwi family enjoying the winter activities, thereby allowing each to enjoy the benefits of a quality property for half the equity and half the mortgage and also half the appreciation in value (in time – potentially!).

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THUNDERBIRDS ARE otaGO

Posted on: November 13th, 2007 | Filed in Architecture & Construction, Regional News, Renting

A real estate agent in Christchurch has bought the rights to be the first kiwi in space via private rocket. To be honest, a trip to the moon is probably high on the wish list for us all. Personally, I would be happy just to travel out far enough to float around in a weightless environment; I’m not that worried about hitting a par 3 on the Ptolemy Crater Course.
Given that this may not come to pass in our lifetimes – what could be the next best thing for astronaut-hopefuls is a spaceship lifestyle on earth in Dunedin.

Experience life like Lady Penelope, Virgil and Scott with the added bonus of being right next to the beach

This futuristic flat features an open plan orbiter with one bedroom, built in furniture, small kitchen and separate bathroom with shower and toilet.

Otago spaceship It has a large pod, which is docked onto the back of it for use as an extra lounge or office – earthlings call this a conservatory. There is also a garage for parking your space cruiser and off-space-highway room for visitors to dock their sandcrawlers. Clever co-ordinates and orbit speed means this ship catches all day sun and views of Blueskin Bay (when you’re not on the dark-side of the moon).For times when you want to get back down to earth – a quick space-walk lands you on Warrington Beach.

Please note: Aliens wanting to take up the tenancy may need a reference.