What to look out for in 2016
2015 has seen ups and downs for investors, so what should they watch out for in 2016?
Wednesday, December 30th 2015, 12:00AM
by Miriam Bell
NZPIF executive officer Andrew King
Over the course of this year, investors were hit by the introduction of a number of government and Reserve Bank measures.
The most significant of these were the Reserve Bank’s new LVR restrictions for investors in Auckland, the RBNZ’s creation of a new asset class for investors, and the government’s new tax measures, including the “bright line” test.
At the same time, residential property saw solid price growth nationwide and unprecedented price growth in Auckland – which was beneficial for many investors.
Price growth in Auckland has now cooled, but many commentators believe the Auckland market is simply stabilising while growth will continue to spread to nearby regions, like Hamilton.
Colliers International research and consultancy director Chris Dibble said the compound annual growth rate of Auckland residential dwellings has been 11.2% p.a. over the past five years.
This is compared to 7.4% over the last 20 years.
“Recent legislative changes and new regulations in China will slow the rate of Auckland dwelling price growth to long-term averages,” Dibble said.
“Investors will look further afield, creating an ‘Auckland investor effect’ in neighbouring regions that will see regional dwelling price growth at rates not seen since 2006.”
Following the highs and lows of 2015, NZ Property Investors’ Federation executive officer Andrew King said there are two key issues investors need to keep an eye on in the new year.
For landlords, the most pressing of these issues are the government’s new minimum standards for rental properties.
While full details of the minimum standards haven't been announced yet, they will focus on insulation and smoke alarms.
King said landlords will need to state on tenancy agreements what parts of the property are insulated and to what level.
This is to make it easier for tenants to compare rental properties they are looking at.
Although it will be stated on the tenancy agreement, it will raise awareness of insulation and many more tenant applicants are likely to ask about the insulation, he said.
“Because of this landlords should find out what insulation their properties do have so they can tell prospective tenants.
“If the level is low then they may want to improve it to keep up with the competition. Landlords should be able to raise rental prices a little for the extra insulation.”
On top of this, landlords should also look at the condition of their properties as MBIE is to have greater power to prosecute landlords who fail to maintain their rental properties, King said.
“Landlords need to be aware that it is to become easier for tenants to claim retaliatory action against landlords if they evict tenants because they make genuine requests for repairs and maintenance.
“Retaliatory action will also cost the landlord up to $2,000 if it is proved. This goes to the tenant which gives them an added incentive to claim.”
The other key issue will be the Reserve Bank’s efforts to control the housing market
King said the RBNZ has shown that it is prepared to target specific areas if they believe house prices are rising too fast.
“They have done this to Auckland and may well do it to other areas know as prices are rising in some provincial areas.”
Also, the RBNZ is looking at introducing loan to income restrictions in an effort to reduce the amount of money people can borrow, he said.
“If provincial property prices start to rise sharply this is likely to be the next weapon that they introduce.”
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