Three whys men Renters for life - More give up on ownership - The Ultimate Property ...
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BUYING, SELLING, BUILDING, RENOVATING, INVESTING
Three
whys
men
Renters for life
More give up on ownership
Earthquake Leading the
strengthening amalgamation
Realistic target calms fears debate
ISSUE 18
MEMBERS OF THE NEW ZEALAND PROPERTY INVESTORS FEDERATION
N T
R E E E
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ourselves and we will treat your residential property He owns and runs RentPro.
investments as we do our own. > NZPIF Northern Rep
Because we work so well together, sharing years of > Awarded NZPIF Certificate of
experience and expertise, we can guarantee your rent* for Appreciation 2013
the life of any tenancy where we get to select the tenants
– at no extra cost. > Former TPIA President for nine
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COMING...
We’re changing the name of
Tauranga & Rotorua Property Investor
to better reflect the full scope of the
The magazine for property investment industry.
everyone who has an
interest in property As UP – the ULTIMATE PROPERTY magazine, we will
help you reach a much wider market of people who are
interested in property – their most valuable asset.
015 To advertise, contact Natalie on 022 106 9329
June 2
Rebecca Smith Tasha Ogilvy
CONTENTS
4 Make Home Shows work for you
6 Earthquake strengthening target
set
8 The name’s Bond - Tenancy Bond
22
Getting to grips with tenancy bonds
10 Auckland a financial stability risk
The hot Auckland market makes the
Bay a cool place to be
12 Significant changes in force for
residential building
15 Bach to the future
IRD changes rules
24 16 Merge like a zip
The debate is becoming louder about
amalgamating the Bay’s councils
22 Making the Western Bay one
24 Covering all the bases
Carpet Court teams up with property
investors
26
26 Mayor outlines Council plans
12 28 Renters are here to stay
PRODUCTION TEAM
Editor at Large: Dan Keller
BIG JUMP IN RENTS
dan@rentpro.co.nz
Weekly rents leapt 9% in January compared
Managing Editor: Paul Dykes to a year ago and the national median rent
Pauld@NewsAplenty.co.nz rose to a record high of $420/wk, according
M: 021 0207 0912 to the TradeMe Property Rental Price Index.
Advertising Sales: Natalie Adams Head of TradeMe Property Nigel Jeffries
Natalie@NewsAplenty.co.nz said the increase is the largest single-month
M: 022 106 9329 rise recorded by TradeMe over the past five
years. Median weekly rents clicked up $20/
Production: Think Marketing wk between December and January. The
info@thinkmarketing.co.nz Bay of Plenty region rose 7.9% in the same
P: 07 544 1193
period. Source: TradeMe
PROPERTY INVESTORS
ASSOCIATIONS READ OUR BACK ISSUES AT
Tauranga Property Investors Association www.NewsAplenty.co.nz/property/archives
PO Box 15033, Tauranga 3144
P: 07 571 8159 Disclaimer: The Tauranga & Rotorua Property Investor is a quarterly publication © Copyright 2015. Articles and illustrations may
www.TPIA.org.nz not be reproduced in any form without the permission of NewsAplenty Ltd. The opinions expressed are not necessarily those
of, nor endorsed by, NewsAplenty Ltd, the Tauranga Property Investors Association (TPIA) or the Rotorua Property Investors
Rotorua Property Investors Association Association (RPIA), unless stated otherwise. Whilst every effort has been made to ensure accuracy at the time of printing,
PO Box 881, Rotorua 3040 under no circumstances will NewsAplenty Ltd, the TPIA or the RPIA be liable whatsoever for any loss, injury or damage
arising directly or indirectly from any omission or error in respect of information contained in this publication (whether the
P: 021 131 6119 result of negligence or otherwise). NewsAplenty Ltd, the TPIA and the RPIA do not accept any responsibility or liability for
www.RPIA.org.nz the views or claims expressed in this publication.
2 TAURANGA & ROTORUA PROPERTY INVESTOR
32 Council HQ under attack MORE PENSIONERS RENTING
The housing market will need to cope with the
34 Census shows property investors’ needs of an ageing population.
contribution
More than 84% of families renting in the Twice as many over-60s are renting than
Bay of Plenty rely on private landlords there were 10 years ago, and the
Salvation Army says that could
37 Call for compulsory smoke alarms become a big problem in the
next three or four years.
38 Bus tour pulls out the stops Any sell-off of state houses, as
TPIA members take an investment tour signalled by the Government,
will exacerbate the problem.
41 Bayfair flyover tops wish list
Source: TV3 News
42 Property investors pack financial
punch
43 Polytech house passes grade
Relocatable finds new home in Rotorua
44 Rental market prices
90%
of all fire fatalities last year occurred
32,000
Bay of Plenty households pay rent to
69%
of TPIA members’ rental properties are
in rental properties private landlords, trusts or businesses insulated
PRESIDENTS’ REPORTS
RENT RISES REFLECT DEMAND ROTORUA ON THE MOVE
With rent increases being reported in the media, I Rotorua is a changing city with many new devel-
wonder if a perfect storm of future rent increases is opments taking place, including a new Countdown
on the horizon. Locally, current demand for qual- supermarket on Fairy Springs Rd and a new Big
ity rental properties is outstripping supply, putting Save site on Lake Rd, to name just a few.
upward pressure on market rents (the median Tourism numbers this year have been extremely
rent percentage change for a 3-bedroom house in high and with the huge Crankworx Festival sched-
Tauranga is up 6% in one year). uled to return for the next two years, and local council and police
The continued call for a mandatory rental warrant of fitness scheme working extremely hard with the community to ensure crime is kept
for rental properties and proposed Reserve Bank “five-property at its lowest, the outlook for Rotorua is brilliant.
control measures” (classifying residential property loans as com- Many contrarian investors have set their eye on the city. They can see
mercial loans), if implemented, would no doubt increase the cost that it is starting to boom and are buying up properties, just as other
to landlords. This would in all likelihood be passed on to tenants as investors - sick of waiting for the boom in Rotorua prices - are sell-
rental increases. ing up (often at a loss) and taking their funds back to the big smoke.
TPIA members who can properly manage rising costs, and potential They have watched prices rising in other regions.
future costs, will see an opportunity to provide more quality, warm, To buy when others are despondently selling and to sell when others
safe and dry properties at fair market rents to meet the market are euphorically buying takes the greatest courage, but provides the
demand. greatest profit.
Our February bus tour was another roaring success, with a local tour
of members’ investment properties and a large-scale development
Debbie Van Den Broek, RPIA President
in Te Puna, providing an excellent opportunity for members to learn
from fellow successful investors in a social and fun way (page 38).
Grant Harris, TPIA President
TAURANGA & ROTORUA PROPERTY INVESTOR 3
Make Home Shows work for you Seize the opportunity to stand out BY PAUL DYKES The success of the Tauranga Spring Home It was clear at the Spring Home Show at shop front at their place of work, being Show at the ASB Arena in October in ASB Arena in October, however, that some tradespeople or manufacturers, so attracting attracting thousands of potential customers exhibitors weren’t doing enough to make the eye and attention of passers-by is an proves that the concept is working. the connection with the passers-by. While unfamiliar art. How else would the exhibitors have man- some booths were flat out fielding questions It is simply not enough these days to aged to place their offering in front of so and selling product, other exhibitors just just set out your stall and expect people many people in such a short space of time? sat back and watched the world go by – and to bother to find out what’s on offer. They just had to stand there, and thousands their wallets with them. Exhibitors have to offer something, a hook, of interested, receptive people strolled by. Many of the exhibitors do not have a to get the walking wallets to pause. They 4 TAURANGA & ROTORUA PROPERTY INVESTOR
need a call to action – a special incentive
that is available to show-goers only.
The same logic applies to advertising.
Some people simply identify their company neither show really delivering totally for the
in an advert, without highlighting a key rea- exhibitors,” he says.
son why the reader or viewer should show Rotorua and regions have roughly half
some interest. What is your selling point? the population of the Tauranga/Western
Can we see that at a glance? Bay market. The two Tauranga Home
Tauranga-based Bay Events Ltd, which Shows now attract about 20,000 people over
runs both the Tauranga Home Show in May the combined six show days, with combined
and the rebranded Spring Home Show held exhibitor numbers totalling 350 in 2014.
in October, is rightly pleased with its efforts. “It’s also important to have a nice venue,”
Bay Events director Graeme Martin says says Graeme. “The ASB Arena is a great
the success of both shows last year was a place to do business, with easy, single-level
first for the region. access (for both visitors and exhibitors) and
“It’s hard doing two good Home Shows heaps of free car parks on site.”
in the one city in the same year,” says The show dates for 2015 are 8-10 May
Graeme. “Tauranga is only just big enough for the Tauranga Home Show and 16-18
to cope with the two events being successful October for the Spring Home Show.
concurrently. Rotorua has two Home Shows Exhibitor enquiries can be sent to Sheryl
run by competing organisations and it’s a Gray via sheryl@bayevents.co.nz or phone
real bun fight in such a small market, with 07 576 0513.
BIG PRIZES AT 2015 HOME SHOW
Every May there comes a time for all home home maker,” says Graeme. “There’s some-
makers, home builders, home renovators and thing for you as well.”
home buyers – the Tauranga Home Show at
The Tauranga Home Show is the biggest
the ASB Arena, Baypark.
lifestyle event of its type in the wider Bay of
Set to open at 10am on Friday 8 May, this Plenty and attracts 10,000 visitors over its
year’s Tauranga Home Show will feature one three show days from 8-10 May 2015.
of the biggest single home show prizes ever
With more than 2,000 free car parks and easy
offered in Tauranga.
access for even the most limited, the show
A beautiful Palazzo kitchen and appliance has attracted a loyal following over the past
package worth $30,000 will be won by one 15 years.
lucky show visitor.
“We get lots of folk who return year after
“There are more show prizes of course, year,” says Graeme. “At only $10 to get in
but this one is the biggie,” says organiser with under-13s no charge, it’s always a great
Graeme Martin from Bay Events. day out.”
The more than 200 exhibits and displays The show has appeal for the whole family,
range from whiteware to beds to kitchens to with the popular 2-for-1 entry prices for the
showers to landscaping to interior living to over 65s on the Friday.
just about everything you’ll ever need for your
For further details, check out the new
perfect Bay of Plenty lifestyle.
taurangahomeshow.co.nz website.
“And even if you rent your home, you’re still a
TAURANGA & ROTORUA PROPERTY INVESTOR 5
Earthquake
strengthening
target set BY DENIS MCMAHON
As the dust begins to settle on the review This raises the whole argument about
process into what is required in the way
of a consolidated approach to a standard
whether building owners need to take into
account what their local market requires in
BUILDING
in respect of seismic strengthening, some
certainty has emerged for owners of com-
the way of a seismic rating, as opposed to
the minimum 34% set by the government.
MINISTER
mercial property.
The Government has made it very clear
SET ON 34%
that the minimum level of 34% of code will Building and Housing Minister Nick
be acceptable from a national perspective. Smith was reported in the Nelson Mail
The government has been under pressure in January saying the Government
from some local authorities and other had settled on the 34% NBS (National
groups to have a higher minimum thresh- Building Standard) level, and that he
old, but has settled on the 34% figure. hoped to finalise the legislation in the
The rationale behind this is that no one next few months.
was killed in the Christchurch earthquakes This will vary from town to town and
He said it was inconsistent to have
in a building with a seismic rating of 34% region to region. For example, in Tauranga
each of New Zealand’s local councils
or above. This is a fairly rational approach we know that we have a pool of national
taking a different approach and the
in setting the level at 34% in my view. tenants requiring a minimum of 67% of
new law would over-rule their individ-
I have spoken with several structural engi- code to occupy a building, but such tenants
ual policies.
neers since the earthquakes and they have may not exist in smaller provincial centres
all said that specifying a higher figure could and therefore the need for higher thresholds The NBS takes into account the
be rendered meaningless as the damage does not exist either. different level of earthquake risk
sustained in any earthquake will depend on If the government had gone along around New Zealand, with Nelson at
factors such as the depth of the earthquake, with the idea of a much higher minimum the mid-level of risk on the “Z scale”
its duration, the type of motion produced requirement, it quite literally could have applied in the standard.
and so forth. spelt the end of the main streets of small-
Smith said this meant that a building
The effects of setting the threshold at town New Zealand, and this would benefit
in Auckland constructed to 34% of
34% are already significant for commer- no one.
NBS would be a third of the standard
cial property owners, with one local CBD As things now stand, we have a threshold
needed for a building in Nelson to
property recently selling for a fraction of its that makes commercial buildings safer in the
achieve that percentage, and a quarter
value of 10 years earlier. event of an earthquake and leaves building
of Wellington’s required strength.
My own company, Property Managers owners with the option to upgrade to a
Ltd, is currently involved in a seismic higher standard if that is what their market “A building in Wellington with a 34%
upgrade of another CBD property at a requires. That has to be a good outcome in standard has to be four times stronger
cost of several million dollars, but there is my book. than in Auckland.”
an upside to that in that, as a direct result * Denis McMahon is a director of Property
of the upgrade, we have secured a national Managers Ltd and Ray White Commercial,
tenant on a decent lease. Tauranga
6 TAURANGA & ROTORUA PROPERTY INVESTOR
Have your home loan
delivered by an ANZ
Mobile Mortgage Manager.
We come to you.
Bernice Burns Tazmeen Khan
Mobile Mortgage Manager Mobile Mortgage Manager
Bay of Plenty Bay of Plenty
1 Grey Street, Tauranga 1 Grey Street, Tauranga
07 557 7148 07 557 7538
021 899 972 021 884 247
bernice.burns@anz.com tazmeen.khan@anz.com
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TAURANGA & ROTORUA PROPERTY INVESTOR 7
The name’s Bond
– Tenancy Bond
Getting to grips with tenancy bonds
BY JULI ANNE TOLLEY*
The purpose of a bond is to cover any tenant damage or unpaid rent exposed to potential losses should the tenant make a silly decision
or associated costs at the end of a tenancy. to stop paying rent. A tenancy has to be 21 days in arrears before an
In a successful landlord/tenant relationship, all the rent and related eviction can be awarded, and then you may have cleaning or damage
tenancy charges are paid in full, and there is no residual damage from to sort out after that.
the tenancy. As a result, the tenant receives their bond back in full. Logically speaking, you want to obtain the maximum protection as
The idea behind the bond is that there is some financial security for a safeguard to preventing such situations. A larger bond can contrib-
both the landlord and tenant should something go wrong. ute to the motivation of a tenant to keep their side of the agreement
How much should you collect? The answer to that question in so that they get their money back and the larger the sum, the more
short is – the maximum allowed. The Residential Tenancies Act 1986 motivation.
(RTA) states that a landlord may request a bond of an amount equiv- It is important to understand that while the bond is held as secu-
alent to a maximum of four weeks’ rent. rity, it is still the tenant’s money. A landlord cannot simply decide to
Bonds are lodged with and paid to the Ministry of Business, keep the bond. Both parties must agree to the claims against a bond,
Innovation and Employment (MBIE), and the RTA clearly states and both the landlord and tenant must sign the completed refund
that the bond must be paid to the MBIE within 23 days of receipt of form.
monies. If a tenancy ends with issues such as unpaid rent, excessive clean-
Collecting anything more than four weeks is a violation of the ing required, or damage that can be clearly attributed to the tenant,
RTA, and doing so could expose you to fines. This includes so-called then you can make a claim for compensation from the bond.
“pet bonds”. An applicant may suggest that they would be willing to The tenant must indicate agreement to the claim by signing the
pay a “pet bond” in addition to their normal bond. refund form. If no tenant signature is included on the form, then
The fact is there is no such thing. You can only collect up to four the MBIE will put the request on hold and contact the tenant for
weeks and nothing further regardless of pets or any other variation approval.
of a tenancy. While it sounds tempting to cover yourself in case their Typically, issues are resolved reasonably and quickly if both parties
beloved Fluffy damages the carpet, it is just not legal. take their responsibilities seriously. However, if you still cannot reach
Why do I suggest the maximum? The reality is that it isn’t a lot of an agreement, you can file with the Tenancy Tribunal to present your
money when compared to the value of your property. If you are only case for claiming against the bond.
collecting the equivalent of two weeks rent, you are leaving yourself
We can assist with all your mortgage and insurance needs, saving
you time and often money.
DOWhy
YOU NEED FINANCE? - WE CAN HELP
not give me a call now for a free, no obligation chat?
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• Refixing or refinancing your existing loan
whenever it suits - at home, at work or even a local cafe.
• Buying or building your dream home
• Investment property purchases
• First home buyers
• Insurance • Refixing or refinancing your existing loan
• Buying or building your dream home
garet Richardson • Investment property purchases
gage Advisor
• Insurance
22 0011
@majesty.co.nz Margaret Richardson Mortgage Advisor www.majesty.co.nz
027 522 0011 marg@majesty.co.nz
8 TAURANGA & ROTORUA PROPERTY INVESTORRECOMMENDED PREVENTATIVE PROCEDURES
The following steps provide an insurance policy of sorts for a
smooth tenancy and easy bond process at the end.
COMMON BOND CLAIMS
1 Clearly document any special arrangements or instructions • Carpet cleaning for stain • Final water rates
about the property as part of the tenancy agreement. treatment or excessive path • Replacement of missing
2
marks chattels.
Provide the tenant with documentation and instructions for
appliances, alarms, and anything installed at the property. • Final rent • Cleaning costs required to
3 Collect the maximum bond at beginning of tenancy.
• Damage to walls, doors, or return property to a reason-
4
windows ably clean and tidy state
Encourage tenants to carry contents insurance. You cannot
legally require it, but you can encourage them to do so.
5 Complete a property condition report at the beginning of
the tenancy. Have the tenant review it with you, make any
agreed adjustments, and then both parties should sign it.
Keep in mind that your claim must be a legitimate tenant charge,
and you will have to provide evidence to support your claim. Claims
6 Take photos of the property at the beginning of the tenancy related to damages must be only for the item or area damaged.
as evidence on how the property was handed over to the For example, if the tenant accidentally puts a hole in the wall, they
tenant, and provide a copy to the tenant. are responsible for patching it and painting the patch with matching
7
paint. You cannot claim to have the entire wall painted.
Complete regular inspections, and address issues that are
Additionally, you will need to be prepared to prove the age of
noted during the inspection immediately with the tenant. The
inspection also enables you to keep tabs on needed mainte-
the item damaged as its value may be depreciated based on the IRD
nance and minimise costs. depreciation table in the settlement. For example, if two-year-old
8
carpet is stained, the adjudicator could first adjust the value down
Complete regular maintenance on the property. A main- to apply to just the affected area and then further depreciate that
tained property demonstrates to the tenant that you care amount based on the Complete
age of the carpet. your
about your investment and encourages them to do the
same.
At the end of thepower
day, goodteam. procedures and documentation are
crucial in managing a property, especially when you are dealing with
9
When investing in rental
Keep communication channels open with your tenant, and another person’s money. The
properties, bond
you need is there to secure the goodwill of
to build
a strong team of professionals
foster a positive business relationship. Encourage them to the tenant, and most of the time, it
around you to support your works
goals. well.
notify you immediately of maintenance issues or concerns. When it doesn’t,Wethe bond
provide will provide the financial coverage of
a focused,
Make it clear how to communicate with you (phone, email, most claims if youprofessional,
obtain the full management
maximum bond at the beginning of a
service so you are free to
text). tenancy. spend your time and energy on
10
investment activities and living
Complete the final inspection promptly and be clear on your life. Let us take away the
anything that needs attendance. worry.
11
Complete yourThey must be truly Cliff and Juli Tolley Your dedicated property manag
Be reasonable in any claims you make. + Juli Anne Tolley is a member of the TPIA and Principal
power
the tenant’s responsibility, and you team. must have evidence at Quinovic Property Management in Tauranga.
When investing in rental Call
P. us 9620
07 579 for an obligation free appraisal!
Juli@quinovic-tauranga.co.nz (0
proving damage aboveproperties,
normal wear
you need and tear.
to build
12
a strong team of professionals
around you to support your goals.
If the tenant disagrees,Wehave a conversation with them to
provide a focused,
go over the concerns andserviceevidence.
so you are free to This is best done in
professional, full management
spend your time and energy on
person, face-to-face. investment activities and living
your life. Let us take away the
worry.
Cliff and Juli Tolley Your dedicated property management team.
Call us for an obligation free appraisal! (07) 579 9620
A C C O U N TA N T S
Talk to us today about our reasonable
service plans we have available from as
little as $55 + gst / month.
your investment property & tax gurus
phone 07 576 2194 | admin@tutburyassociates.co.nz | www.tutburyassociates.co.nz
TAURANGA & ROTORUA PROPERTY INVESTOR 9Auckland a financial
stability risk
The hot Auckland market makes the Bay a cool place to be
BY SHARON ZOLLNER*
The Auckland housing market is proving a tricky beast to tame, with Auckland house prices have risen by more than 40% over the past
strong population growth and low interest rates a potent combina- three years, compared to around 25% in Canterbury and less than
tion. Auckland housing is the single biggest factor standing in the way 10% elsewhere. Auckland median house prices are about eight times
of a cut in interest rates – indirectly holding up the exchange rate. regional median household incomes, as compared to under six for
It is a financial stability risk for the economy – if not an inflation other centres.
risk at present given benign inflation elsewhere – but the blunt tools Of course, there are good reasons for this: Census data shows that
the Reserve Bank (RBNZ) has at its disposal would cause collateral Auckland’s urban population has increased by roughly 50% since
damage. 1991, as opposed to 17% for the rest of the country – and housing
It could be the situation resolves itself relatively quickly, but the supply has not been keeping up. The number of building consents
cure could be worse than the disease. Meanwhile, the Bay of Plenty issued for new dwellings in Auckland has more than doubled since
has experienced a net population gain from Auckland as people its early 2009 trough, but is still only a shade higher than historical
respond rationally to the housing cost differential. averages. Higher house prices are the market’s way of telling Adam
The Auckland housing market is enjoying a second wind. Indeed, Smith’s invisible hand to pick up a hammer.
it has had so many second winds in the past couple of decades that But it adds up to a quandary for the RBNZ. The Auckland housing
it is verging on hyperventilating. But the latest upturn is particularly market represents a financial stability risk for the nation. It would
interesting because it has happened despite RBNZ restrictions on normally also at this point – five years into an economic upturn –
high loan-to-value mortgage lending. represent an inflation risk, but a global disinflation wave is preventing
The latest data from Barfoot and that. However, the fact remains that the Auckland housing market
Thompson for January showed is the single biggest hurdle to the Reserve Bank cutting the Official
three-month average house Cash Rate (OCR) in response to low general inflation.
prices in our largest city It is unfortunately logistically impossible to set different interest
up 12% on a year rates in Auckland versus the rest of the nation, and attempting to
ago, with house introduce a regional aspect to mortgage lending would also lead to
price inflation all kinds of unintended distortions. And thus unpleasant trade-offs
by this measure present themselves.
barely dipping Take on Auckland (and to a lesser extent, Christchurch) with
out of double tougher macro-prudential weapons (for example, tighter lending
digits since restrictions, higher bank risk weightings for property investors to
mid-2012. push up their interest rates) and kick the rest of the nation while it’s
down? Keep the OCR high against a global cutting trend and damage
the export sector with the resulting high exchange rate?
Of course, the most palatable solution is not down to the RBNZ
at all. In a speech in early February its Governor Graeme Wheeler
10 TAURANGA & ROTORUA PROPERTY INVESTORsaid: “Resolving the housing shortages is Federal Reserve follows through on its sales in December were about a third higher
key. In Christchurch, this issue is expected threat to raise the global benchmark interest than a year previous, versus around 25% for
to be resolved, although with longer delays. rate off the floor. Even just the threat of New Zealand as a whole, perhaps reflecting
But in Auckland, much more needs to be it has seen the US dollar soar; the Fed may a degree of catch up.
done, especially in creating opportunities for yet lose their nerve. However, there is no However, house price inflation has under-
residential construction in Auckland.” getting around the fact that much of the performed, up around 2.5% year-on-year
We agree, but there is no quick fix. The increase in global asset prices in recent years versus more than 5% nationally. By ANZ
Government is pulling out all the stops, but has been due to artificially cheap money, not Bank estimates, the Bay of Plenty region
increasing housing supply takes time – and sound fundamentals. Plunging commodity actually has an emerging housing shortage,
historical experience both in New Zealand prices are telling us that the global economy which should support prices going forward.
and overseas suggests a housing supply is slowing dramatically. This will prove an The Auckland housing market cannot
surge typically arrives just in time to exacer- acid test for global housing markets, equity soar onward and upward in defiance of
bate a downturn. markets, commercial property markets, you affordability metrics forever. Gravity will
There are a couple of factors that could name it. eventually come calling in the form of
mitigate the excess demand in the Auckland Of course, house prices are subject to either an outright fall in prices, or a lengthy
housing market without a surge in housing global, national and local factors. Turning period of flat nominal prices with broader
supply, at least temporarily. Exceptionally our focus local, those who do not have to inflation providing the real price adjustment.
strong net migration has benefited Auckland be based in Auckland have a strong incen- The RBNZ faces a tricky dilemma
the most, as it is the preferred destination tive to sell up and buy a relative mansion on whether to wait it out, or take it on.
for new migrants. Statistics NZ data for elsewhere – or fund a large chunk of their Certainly addressing the housing shortage
December showed a 10% fall in seasonally retirement – with the proceeds. 2013 Census needs to be part of the long-term solution.
adjusted monthly permanent and long-term estimates point to a small internal migration In the meantime, the Bay of Plenty has
arrivals. The data is volatile, but it is the first outflow from Auckland to other centres (as been benefiting as Aucklanders vote with
suggestion of a peak that we’ve seen. distinct from international migration, which their feet.
does benefit Auckland disproportionately).
Waikato and the Bay of Plenty have * Sharon Zollner is a Senior Economist at ANZ
been the two big beneficiaries of internal Bank.
migration out of Auckland, proving that
market forces do work; the price differential
between Auckland and the rest of New
Zealand houses can’t stretch indefinitely.
You can see the attraction across the
On the other hand, the Australian econ- Bay of Plenty: reasonable proximity to
omy continues to weaken, and the numbers Auckland, more affordable housing, and
heading long-term across the Tasman are good growth prospects. The region’s
already down about a third on a year ago. growth strategy is critical both in terms of Disclaimer: This material is for information purposes
only. You should seek professional advice relevant to
Net migration will continue to put pressure attracting new businesses and people and your individual circumstances. While ANZ has taken
on housing for some time yet, but it is pos- supporting existing ones. People shift for care to ensure that this information is from reliable
sible the worst is behind us. opportunities; they shift out when they can’t sources, it cannot warrant its accuracy, completeness
or suitability for your intended use. To the extent per-
A less palatable “solution” would be see them. mitted by law, ANZ does not accept any responsibility
a loss of confidence that the Auckland So how has the Bay of Plenty housing or liability arising from your use of this information.
housing market goes only one way. Globally, market shaped up of late versus the New
asset prices are riding for a fall if the US Zealand average? REINZ data shows house
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TAURANGA & ROTORUA PROPERTY INVESTOR 11Significant changes
in force for residential
building BY MICHELLE PADDISON *
New law puts onus on builders
On 1 January 2015 a new law came into force that requires residen- they should receive from builders before and after the building work
tial builders to provide certain information and documentation to and the remedies that are available to them if the building work is
homeowners, and increases their potential liability to homeowners. defective.
Who needs to be aware of the changes? Some of the new laws also apply to people who build houses
Residential builders must comply with the new law’s requirements or themselves, or with the assistance of others, and then on-sell or who
they could be subject to instant and significant fines and disciplinary sell built houses in trade.
action by the Building Practitioner’s Board.
The new laws are intended as consumer protection measures for
homeowners. Homeowners should be aware of what information
12 TAURANGA & ROTORUA PROPERTY INVESTORWhat are the requirements before the building work begins? Once the 12-month defect repair period is up, it is up to the
For a building contract costing $30,000 or more (including GST owner to prove the defect before the building contractor is required
and including any work carried out by subcontractors) or when the to fix it.
homeowner requests, the builder must provide: There are implied warranties for all residential building work for
• A standard disclosure statement that discloses the builder’s back- 10 years and there are new ways for homeowners to take action
ground, information on the building company, the insurance that when the warranties have not been met.
they carry and the guarantees and warranties that apply to their A homeowner can take action for breach of warranties even if
materials and workmanship; they were not a party to the original building contract.
• A standard checklist that advises the homeowner to consider the Who else can be caught by the new laws?
risks they face. An “on-seller” who sells a house has the same warranty obligations
• A written building contract that must include key information as a building contractor. An “on-seller” is someone who:
(for example, an expected start date and an expected completion • Builds a household unit by himself or herself or with the assis-
date, dispute resolution, the process for varying the contract). If tance of others; or
the required clauses are not in the contract, certain clauses will be • In trade arranges for the household unit to be built or acquires the
included by default. household unit from a person who built it or arranged for it to be
The requirements do not apply to subcontractors. built.
What are the requirements after the building is completed?
The building contractor must provide certain information and doc- *Michelle Paddison is an Associate at
Harris Tate Ltd
uments regardless of the price of the work, such as information/
Phone: 07 578 0059
copies of ongoing insurance policies, guarantees, product warranties. michelle@harristate.co.nz
What protection is available to homeowners after the building www.harristate.co.nz
work is completed?
There is a 12-month “defect repair period” from completion of the Disclaimer: This article is general in nature and should not be treated as pro-
fessional advice. It is recommended that you consult your advisor. No liability is
building work where the building contractor has to repair the defects assumed by Harris Tate Ltd for any losses suffered by any person relying directly
unless the building contractor can prove it was not their fault. or indirectly upon the article above.
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14 TAURANGA & ROTORUA PROPERTY INVESTORBach to the future
IRD changes the rules removal of depreciation on building structures means you get hit
twice.
On the face of it, the new mixed-use asset rules (those which apply There is some relief in that if you can specifically identify a cost
to the Kiwi bach amongst other things) appear quite complex. that was incurred when the holiday home was rented out (e.g. a
They’re actually not. tenant breaks a window) or relates solely to the income earning use
Consider a simple yet familiar example of a holiday home rented (e.g. advertising), then a full income tax deduction is available for
for 12 weeks a year, used by the family for 8 weeks a year and unoc- that cost. However, for those generic costs, such as rates, insurance
cupied for 32 weeks a year. and the big one, interest, the new apportionment rules will apply.
In the old days, assuming the holiday home was “available for The adjacent tables show the change. But it’s actually worse than
renting” for the entire year, expenses were deducted based on a sim- this! In the old days the rental loss of $30,030 would be entered
ple 44/52 basis (52 weeks available less 8 used privately). into your tax return to reduce income from other sources (salary,
In other words, rates, insurance, and most significantly, bank interest, dividends, etc) and therefore the tax savings of $9,909 were,
interest, would be 85% deductible. Even with the removal of the essentially, immediate.
depreciation deduction for the house, there was often a tax loss that From the 2014 tax year, this may no longer be the case. The loss
would be offset against your salary and result in a significant tax of $16,380 calculated above cannot be offset against other taxable
refund. Unfortunately, those days are over. income if the rental income received ($7,200) is less than 2% of the
From the 2014 tax year (1 April 2013 for most of you) Inland value of the holiday home.
Revenue no longer counts the full 52 weeks in the year, so deductible So, assuming the holiday home is valued at say $400,000, 2%
expenses are now calculated based on actual usage. This includes would be $8,000. As the rental income is only $7,200, the loss of
private and rented. $16,380 has to be carried forward to a future year and it can be
So, in our example, the total use for the year is 20 weeks (12 + 8). offset only if the holiday home makes a taxable profit, or if the 2%
Even though the holiday home might have been available for the rule allows a deduction.
other 32 weeks, that period is ignored for working out deductions. And if you’re thinking of clever ways to increase the rent or
This means that expenses are deductible only to the extent of days rented, Inland Revenue has that covered and can counter any
rental use divided by total use i.e. 12/20. Available deductions there- contrivances.
fore go from 85% (44/52) down to 60% (12/20). And the previous * Janine Hellyer is a Director at BDO Tauranga Chartered Accountants
THE GOOD OLD DAYS NOW FROM THE 2014 YEAR
RENTAL INCOME (12 weeks at $600 / week) $7,200 RENTAL INCOME (12 weeks at $600 / week) $7,200
EXPENSES EXPENSES
Depreciation $4,500 Depreciation -
Insurance $800 Insurance $800
Interest $30,000 Interest $30,000
Rates $3,500 Rates $3,500
Repairs $5,000 Repairs $5,000
Total Expenses $43,800 Total Expenses $39,300
Less Private Weeks (8/52 x $43,800) $6,570 Less Private Weeks (8/20 x $39,300) $15,720
Claimable Expenses $37,230 Claimable Expenses $23,580
Loss -$30,030 Loss -$16,380
Tax Savings at 33% $9,909 Tax Savings at 33% $5,405
TAURANGA & ROTORUA PROPERTY INVESTOR 15MERGE
like a zip
16 TAURANGA & ROTORUA PROPERTY INVESTORThe debate is becoming louder about the Bay’s councils
“It is interesting that our region is commonly referred to as Western Tauranga Mayor Stuart Crosby (see below) suggests his city’s bound-
Bay of Plenty. It is that for most purposes, except Local Government, aries be pushed out to encompass the main urban growth areas,
which is perverse and an anachronism that needs to be changed.” leaving the Western Bay of Plenty District Council to control a largely
rural populace.
So say Paul Adams, John Gordon and Graeme Horsley – the three
men behind a recent plan to ask the Local Government Commission Generally, there is a yearning for a cohesive, visionary government for
to assist a voluntary merger (see page 22). the whole region on the eastern side of the Kaimai Ranges from Waihi
Beach to Pukehina.
They have held back from making the application while the various
local bodies gather data on the likely outcomes, a SWOT analysis of Various local leaders and commentators have provided the following
the strengths, weaknesses, opportunities and threats inherent in such thoughts, without seeing what their colleagues have written. Several
a move. This should be ready by June. people declined to comment, given their employment status. Others
simply did not reply before deadline.
There is some consensus that the region should come up with its own
solution, rather than have one foisted on it by Wellington. Others argue These thoughts are presented below, as received.
that there is no need to merge the councils – they already co-operate
in many areas.
STUART CROSBY Mayor of
Tauranga TAURANGA CHAMBER OF COMMERCE
Whenever I hear the topic of local govern- The Tauranga Chamber of Commerce Board supports the rationalisation of Tauranga City
ment reform discussed, the word amalga- Council and Western Bay of Plenty District Council activities from an operational and struc-
mation is never far behind. I am supportive tural perspective.
of the Bay of Plenty-wide project “Local
Streamlining processes and making it easier for businesses to operate across the districts
Government Futures” currently underway
of both councils is something the Tauranga Chamber of Commerce Board endorses.
to ensure that discussions around the future
of local government are evidence based. The Chamber recognises that there are different options for achieving this. Amalgamation is
While many are quick to point to the one possibility although fraught with difficulty.
potential advantages of amalgamation, we
Another is to use existing statutory powers to merge activities. There is no legal barrier to
also need to turn our mind to the down-
the two councils having a single District Plan, a single set of bylaws and much more.
sides. Perhaps the most significant being the
perceived or real dilution of local represen- Improved decision-making for the region as a whole would result by rationalising activity
tation and sovereignty. and the Chamber urges the two councils to make this a priority.
In this sub-region alone we have
Whether or not amalgamation happens, at least this would mean there are common sets of
very unique communities of interest.
plans and rules and common decision-making processes for the Western Bay as a whole.
Conversations about the future form of
local government should acknowledge and
respect the rural/urban divide that exists
between us and our neighbours.
My view on amalgamation will be
PETER MCKINLAY Local government analyst and commentator
informed by evidence of both the pros and On a careful reading of the draft proposal The reason lies in the detail of schedule
cons. In the meantime, the immediate chal- for the Wellington region, it’s clear that the three of the Local Government Act 2002,
lenge for our sub-region is managing the Local Government Commission took the especially the matters to which the com-
growth expected over the next 50 years. In view it really had no alternative other than mission must have regard in choosing its
this, we are also unique from other areas in to recommend a single unitary proposal for preferred option, and the criteria for good
the Bay that are facing challenges associated greater Wellington. local government.
with static growth or population decline. It’s more than likely it would take the The objectives that proponents for a
Successfully managing growth requires a same approach in respect of the Bay of merger of Tauranga and Western Bay
collaborative approach across jurisdictional Plenty. What this means, for example, is a appear to have could actually be achieved
boundaries. Over the past decade we have proposal to amalgamate the Tauranga and without the need for an application to the
worked through SmartGrowth, which has Western Bay Councils, leaving the Regional Local Government Commission if the two
seen TCC, WBDC, Regional Council, tan- Council untouched, would actually trigger a councils were prepared to put in place the
gata whenua and NZTA agree to implement process that would result in a final re- structural and other changes needed using
one “settlement pattern” spanning from organisation scheme recommending a single the tools they currently have available to
Waihi Beach to Paengaroa. unitary Council for the whole of the Bay. them.
TAURANGA & ROTORUA PROPERTY INVESTOR 17ROSS PATERSON Mayor of Western Bay of Plenty BILL FAULKNER Former TCC councillor
District Council
The case for amalgamation of Tauranga City and Western Bay
Everybody is entitled to an opinion on whether local bodies should Councils is overwhelming and overdue.
amalgamate and how far that should extend. There’s nothing wrong There was a poor case for Western Bay’s continued existence in
with this – in fact, it’s all part and parcel of democracy. the 1989 Local Government reforms. Its ratepayer base was/is too
What’s important to Western Bay, though, is that we can’t keep small.
basing the discussion on anecdotal, untested assumptions and politi- In the interim, Western Bay has been living under the coat-tails of
cal rhetoric – ratepayers deserve far more than this. Tauranga City’s ratepayers’ infrastructure. I won’t get into mone-
Ratepayers deserve a debate based on sound evidence, not ideol- tary detail, but here are a few examples of how Western Bay gets
ogy that assumes bigger is always better, or that amalgamation is the by with token or no cash contributions: Baycourt, ASB Arena, Bay
only way to improve efficiency. Park Stadium, sports grounds, parks, libraries, wastewater/sewerage
Councils provide a wide range of public services and regulation. (Omokoroa), New Waiari Water Project, and Route K.
Some services may benefit from bigger scale and some may not. Witness traffic jammed to get in and out of the city each day from
Some aspects of regulation may benefit from more centralised deci- Western Bay using Tauranga ratepayer-funded services, then leaving,
sion-making, but for others it may become less effective. making little meaningful financial contributions to those services,
We also need to consider the different identities and interests of creation or maintenance.
our communities, and make sure any changes take account of that. Amalgamation won’t be one way either. Western’s Bay’s not
Besides, amalgamation is not the only way to achieve efficiencies insignificant debt will have to be carried over to a new entity.
of scale. Other options – for example, shared service delivery and Amalgamation of the Mount and Tauranga proved there will be no
joint contracting, should be evaluated and compared to what amalga- “savings”, but there will be financial equity over time and the big
mation might achieve. gains will be in consistent development principles, planning, building
This is why the majority of mayors in the Bay, including me, have regulations, roading and, most of all, a cessation of parish pump
agreed to get this evidence together, rather than assuming what’s politicking from Local Government politicians – many driven by
best for ratepayers in the future. re-election prospects.
From Western Bay’s perspective, if this evidence provides compel- You could also throw the Regional Council in the mix. Port
ling reasons for change – reasons that deliver savings for ratepayers company dividends could help fund the new structure, instead of
and better outcomes for their communities – we’ll talk to our com- subsidising rates.
munities and ask them for their view.
If they tell us they want something different based on this evi-
dence, who are we to stand in their way? After all, it’s about what
communities want, not us telling them what they should have.
ANDREW COLLINS President of the BOP branch of the Property Council New Zealand
Along with my colleagues on the Property of the SmartGrowth partners are to be Plenty and I fear that this option could get
Council (Bay of Plenty), I have spent con- commended. caught up in all sorts of wrangles and be
siderable time thinking about what would be At the Property Council, we’ve consid- difficult to get across the line in the short
the best local government structure for the ered a range of options including the status term.
Tauranga/Western Bay of Plenty area. quo, shared services, boundary adjustments, I’d be happy to be proven wrong, but if
I personally want to see strong and territorial level (city/district) mergers and the wider complexities of a unitary author-
visionary local government for the com- unitary authority models (city/district/ ity model mean delays and leaving us with
bined Tauranga and Western Bay of Plenty region all combined such as in Auckland). the status quo for many more years, then
area to ensure that our highly integrated While there are pros and cons for each I’d rather support a two-step process with
rural and urban community continues to model, I am of the view that the merger the first step being the merger of TCC and
grow and thrive. of Tauranga City Council and Western WBDC as soon as possible.
With Tauranga now straddling artificial Bay of Plenty District Council is desirable, We should at least have one strong terri-
local authority boundaries that were set over important and probably inevitable. I say torial authority to represent and advocate
a quarter of a century ago, I feel that there bring it on! for us at a national level; to strategically
is a degree of unnecessary duplication and I am tempted to go the next step and manage Tauranga/Western Bay’s growth
bureaucracy. support a unitary authority model for the and infrastructure efficiently, to better
We need visionary, effective, efficient, Western Bay of Plenty and I would do so if leverage off the growth and success of the
accessible and accountable local govern- I thought that this could be achieved in the port and to manage the Tauranga harbour
ment. Unfortunately, I don’t think that our short term. environs in a consistent and unified way.
current model (three separate city, district However, the unitary authority model
and regional councils) consistently delivers raises a number of politically vexed issues
this, even though the collaborative efforts that extend well beyond the Western Bay of
18 TAURANGA & ROTORUA PROPERTY INVESTORDOUG LEEDER Chairman, Bay of Plenty Regional SIMON BRIDGES MP for Tauranga, Matua resident
Council
The following is my personal view. The Government does not take
The first and most important point really is that it’s not up to coun- a view on proposed council amalgamations as any decisions need to
cils to make any calls either way on this topic. It is completely up to be community led and are best made by those who will be affected
the people in the community to engage in the debate – if they want by any changes – the locals. My interest and view is as a local Matua
to – and to make that call. resident who has chosen Tauranga as a place to work, live and raise
I believe that one of councils’ responsibilities is to keep trying to a family.
do better for our current and future communities. Like in any busi- I am broadly in favour of an amalgamated Council for two main
ness, continuous improvement should always be one of our aims. reasons. The first is improved efficiencies and reduced costs for
We owe it to our communities to consider all possibilities for that, ratepayers. At this stage, the business case and evidence needs to be
within current structures and across them. laid out and demonstrated in more detail.
There are enough challenges facing our region as it is. We should The second reason is that a single unified Council will lead to
be focusing on supporting our communities to meet those chal- stronger, clearer vision for the Bay of Plenty that is better for
lenges, and grow and prosper over time. everyone. We have already seen the success of collaboration between
In regard to the Western Bay, I don’t really think anyone has TCC and WBOPDC. Priority One covers both councils and is deliv-
enough solid evidence yet on what would be best from a pure ering economic benefits for the entire region. In roading funding, by
logic perspective. Councils can, and should, be helping to sort the agreeing on what they wanted in roading across boundaries, we have
fact from the rhetoric and providing unbiased information to our arguably received more than our fair share.
communities. Formalising this cooperation in a single entity will lead to even
And that’s what we’re trying to gather up at the moment on a better outcomes for the Bay of Plenty and enable us to face the
region-wide level, through the joint Local Government Futures opportunities and challenges that lie ahead with one strong voice.
project – to build an evidence base for consideration. My support comes with one main concern that needs to be at the
But, at the end of the day, once that unbiased information is pro- forefront of this discussion – local representation. I think this can
vided to communities, it is – and should be – completely community be addressed by having a strong local board structure with represen-
preference as to what shape they want their own local government tation on the main Council to ensure the local boards and commu-
to take. Different communities will have different views on this, and nities are heard. I look forward to further discussion on this very
in the end that’s what local government and democracy is all about. important matter and the future direction of our region. →
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TAURANGA & ROTORUA PROPERTY INVESTOR 19You can also read
