Bank, govt aim at demand, what about supply?

May 18, 2015

The Reserve Bank and the government are both trying to take the heat out of the Auckland housing market.

The Bank announced proposed changes to the loan-to-value ratio (LVR) policy to take effect from 1 Octobere:

They will:

  • Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
  • Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
  • Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.

The government is  taking extra steps to bolster the tax rules on property transaction.

FInance Minister Bill English and Revenue Minister Todd McLay say the Government is taking extra steps to bolster the tax rules on property transactions – including those by overseas buyers – and to help Inland Revenue enforce them.

The tax measures are also expected to take some of the heat out of Auckland’s housing market and sit alongside the Reserve Bank’s latest moves to address associated financial stability issues, Mr English says.

“Taken together, they will help Inland Revenue enforce existing tax rules, provide it with extra resources and ensure that property investors pay their fair share of tax – whether they’re from New Zealand or overseas.”

The Budget this week will confirm that, from 1 October this year, the following will be required when any property is bought or sold:

  • All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number as part of the usual land transfer process with Land Information New Zealand.
  • In addition, all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
  • And to ensure that our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.
  • In addition, a new “bright line” test will be introduced for non-residents and New Zealanders buying residential property, to supplement Inland Revenue’s current “intentions” test. Under this new test, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.

“Tax rules are complex and affect people in different ways, so we will consult on these measures before they take effect on 1 October,” Mr English says.

The “bright line” test will then apply to properties bought on or after 1 October.

To further ensure overseas property buyers meet both existing tax requirements and those of the new test, the Government will investigate introducing a withholding tax for non-residents selling residential property.

Officials will consult on these details with a view to this withholding tax being introduced around the middle of 2016.

Mr English reiterated owner-occupiers of residential property will not be affected by the new measures when they sell their main home, or if property is inherited from a deceased estate or transferred as part of a relationship property settlement.

“It’s important to reiterate that these changes will not apply to New Zealanders’ main home, although existing tax rules will still apply in  addition to these new measures,” Mr English says.

“It’s equally important that people buying residential property for gains meet their tax obligations, whether they are from New Zealand or overseas.

“The combination of collecting IRD numbers and introducing this new bright-line test will help ensure that non-residents pay their fair share of tax in New Zealand.” . . .

New Zealand National Party's photo.

These measures should go someway to dampening the demand side of the pressure on Auckland property prices.

More needs to be done to increase the supply of houses.

This could be done by building more houses and by people moving from Auckland to other areas.

Immigration Minister Michael Woodhouse is considering incetivising immigrants to settle in the regions:

The Government is set to give skilled migrants, investors and those planning to bring businesses to New Zealand extra points if they settle outside of Auckland.

Skilled migrants and those applying to live in New Zealand under entrepreneur visas already gain 10 points in the immigration points system if they say they intend to settle outside of Auckland. That could soon get a boost.

“Those entrepreneurs, those innovators who could make a contribution to regional development, it is possible for us to bump up the points settings to incentivise that,” says Mr Woodhouse. . .

 It’s not just immigrants who could make a contribution to regional development.

If some of those bemoaning property prices in their home city opened their eyes to opportunities outside Auckland they could move out of Auckland.

They would get a house for much less than they could hope to pay in the city, find how much easier life is when there are fewer people clogging the roads and in improving their lives would free up houses in Auckland for those who can’t or won’t move.


If you can’t save 20% . . .

July 17, 2013

Suggestions that banks require deposits of at least 20% before lending for houses have been criticised for making purchases more difficult for first home buyers.

That might be so but does that make it wrong?

If people can’t save 20% of a purchase price, how will they go about covering their interest bills and repaying the capital?

Having less than 20% equity in your home doesn’t give you much security. If the market turns the lower your equity the greater the chance  you could end up owing more than you own.

It might also help people aim a little lower on the property ladder rather than trying to start several rungs above their budgets.

Saving a deposit takes discipline and focus.

Both of these are needed to maintain interest payments and reduce debt, is it such a bad thing to require a bit more of them of people before they buy?


And they say farms are expensive

October 31, 2012

We were splitting the partnership in a crib in Wanaka and looking for another one at the same time we were buying a couple of hundred hectares from a neighbouring farm at home.

When given the price of the section and working out the per hectare price compared with the farmland my farmer asked, “how many stock units could I run on it?”

Urban sections aren’t directly comparable with farms but Don Brash points out just how out of kilter city prices are:

For one of the least densely populated countries in the world, it is ridiculous that tiny 500 square metre sections often end up costing well in excess of $250,000 – equivalent to $5 million per hectare. Yes, there are costs of servicing these new sections with infrastructure – but $5 million per hectare?

Five million dollars could buy you about 600 hectares of reasonable farmland in the Manawatu on which you could run about 6,000 stock units.

People complain that farms are expensive. I wouldn’t say they’re cheap but they’re far more reasonably priced than the sections Dr Brash talks about.

That’s a lot of money poured into what is usually a non-productive asset, if not a liability.

A section, and the house built on it, generally cost money and earn nothing until, if the market is favourable, it’s sold when there might be some capital gain.

That contrasts poorly with farms which are – usually – productive assets that provide jobs and earn export income.


Historic home for sale

December 22, 2011

One of the beautiful historic homes in our neighbourhood is for sale.

Burnside Homestead was built in the mid 1980s 1890s by John Forrester Reid. It has been owned by only two other families since then. The Hudsons bought it from the Reids in 1930 and the current owners, Alison and Bruce Albiston bought it from them in 1974.

The Albistons have lovingly renovated the house, updating it with heating and extra bathrooms in sympathy with its Victorian origins and maintained the garden and parkland with the mature trees which surround it.

The house has at least nine bedrooms, four bathrooms and two en suites, separate servants quarters, a private bedroom with en suite upstairs, a billiard room, large commercial kitchen and scullery, dining room and the grand octagonal hall with a sprung floor.

The coach house near-by was recently converted to provide two more bedrooms with a kitchen and living area.

Most of the furniture in the house is original and includes a grand piano.

The Albistons have been running the homestead as a B&B  and hosting small conferences.

Burnside is only 15 minutes from Oamaru and only a few kilometres from the route the Alps to Ocean cycle way will take.

The property is listed on TradeMe for private sale.


Save The Cities

October 27, 2010

A group of concerned farmers has set up a lobby group called Save The Cities.

“If city folk want to Save The Farms, it’s the least we can do to reciprocate and Save The Cities,” group spokesperson Fairly Emotional said.

“Overseas buyers are lining up from all countries to purchase our houses, apartments, office blocks, factories and other residential and business property.

“We believe the Government must take urgent steps to address overseas ownership of our homes and work places. The first step to place a moratorium on the sale of any sensitive residential or business property  to overseas ownership until there has been informed public debate and suitable protections incorporated into a review of the Overseas Investment Act 2005. New Zealand must retain ownership of our the homes, offices and workplaces of Aotearoa New Zealand.

“Overseas investment can bring positive economic benefits to New Zealand and there are a number of examples, equally there are examples where those benefits quickly move off-shore. Much of our prime residential and business property is now in overseas ownership. Can we afford to sit back and let this happen to our large cities and the communities they support?

“The culture of New Zealand is one of partnership with the land and the waters of Aotearoa. As partners we ask for the chance to be heard and the opportunity to best protect our properties for future generations.”

Ms Emotional said she hadn’t been in a city for some time but used to stay with urban relatives when she was a child.

“I have very fond memories of playing in quarter acre sections with my cousins but they tell me with in-fill housing and apartment developments there aren’t many of them left.

“Quarter acre sections are Kiwi icons like pavlova and jandals. We can’t have foreigners buying them and turning city folk into tenants in their own homes, even though many of them already are.”

Ms Emotional said she was aware that banning foreign buyers could precipitate a collapse in property prices.

“But that could be a good thing. It’s too difficult for young people to get a foot on the property ladder these days. If we limit the market the rungs will get lower and make it easier for people to become home owners.”

She said a fall in urban property prices would also help retiring farmers who’d had the price of their farms depressed by moves against foreign ownership but denied that was what was motivating the Save The Cities campaign.

“As New Zealanders we are proud of our place in the world. We have always batted above our weight on the international stage, be it on the sporting fields or in our role as an international citizen and the responsibilities that brings with it.

“We have a beautiful country and wonderful traditions which must never taken for granted. There will always be pressures economically, socially and culturally to make accommodations and that is the reality of a modern country. One of those traditions is property owning and the way that continues to support not only our country but the local communities which rely on the homes and businesses. We cannot let that be lost without questioning, why?”


Farm sales and property values drop

September 18, 2010

The volume of farm sales and prices paid dropped in the three months to August.

From a high of $4,650,000 in August 2008 the three month median price for dairying properties is down by a third to $3,100,000 in the latest REINZ Rural Market Report statistics released today.

Only 17 dairy farms were sold in the three months to August, one less than in the same period last year and significantly below the 67 transactions in the three months to August 2008. Just three dairy farms sold in August at an average price of $2,543,333, and the average price per hectare decreased to $31,598 from $36,435 in July. The average price per kilogram of milk solids has fallen further to $33 from $37 in July, $40 in June and $45 in May.

From a peak of $90,125 in August 2009, the average price per hectare of all types of farms has fallen to $29,739. The 192 farms sold in the three months to the end of August is an increase on the 183 in the same period last year, but less than the 516 transactions in the three months to August 2008.

The national median farm sale price eased up from $1,118,500 for the three months to July to $1,127,754 for the three months to August 2010. Well down on the median of $1,742,500 for the equivalent period in 2008, the latest August figure is fractionally above the median for all farms of $1,000,000 for the same three months in 2009. However with the low number of sales currently occurring, price fluctuations, both upwards and downwards, can be impacted by the range of prices of the mix of properties being sold.

On a regional basis the largest number of farm sales during the three months to August was 31 in Canterbury, 24 of them grazing properties, and 27 in Southland, 11 of them grazing properties.

During the past year median prices for farms have declined in eight out of the 14 districts. In the three months to August 2010 compared with the corresponding period in 2009, farm sale prices were down in Waikato from $1,663,655 to $1,187,500, Bay of Plenty from $1,000,000 to $920,000, Hawkes Bay from $1,800,000 to $945,000, Manawatu/Wanganui from $1,275,000 to $1,200,000, Wellington from $3,005,000 to $1,935,000, Canterbury from $1,300,000 to $1,200,000, Otago from $937,500 to $712,000, and Southland from $1,200,000 to $1,125,000.

There was another decrease in the number of sales of lifestyle properties from 1088 at the end of July to 1066 in the three months to the end of August, and the national median selling price eased from $447,500 at the end of July to $436,750 last month. While the August 2010 median is still up on $430,000 for the same three month period in 2009 it is below the August 2008 median of $450,000.

The decline in sales and prices is due to both the recession and the boom which preceded it.

Farm prices for all properties soared on the back of increasing dairy prices until it was cheaper to buy an existing dairy farm than to purchase sheep or cropping land and convert it.

There used to be a rule of thumb that you should never pay more than three to five times the value of a property’s gross income when buying a farm. That was disregarded for not just dairy properties but sheep and beef ones with much less earning potential.

The value of a property is most important when you’re buying or selling or if it’s highly mortgaged.

Lower prices may make it easier for people to get in to farming or increase their land holding, although credit is still pretty tight. But they will also be causing older farmers to re-think their retirement plans and they will be having a detrimental impact on equity of those with mortgages.

That won’t matter if the people can cover interest payments and ride out the current downturn. But it will put pressure on people who were struggling before prices dropped.

However, banks will be mindful that there’s no point pushing for sales when prices are dropping.

The protracted process of the sale of the Crafar properties won’t be helping farm sales and that’s when it’s possible for overseas investors to own farms.

The volume of sales and property prices would drop even more if farm ownership was restricted to New Zealanders.


The right to go to court

June 15, 2010

The debacle over the foreshore and seabed started over a very simple issue – Maori wanted the right to go to court.

They’ve got that now with the repeal of the Foreshore and Seabed Act.

Private property rights will still apply to private property, public access is still preserved on public land.

That all sounds fair and reasonable to me.


It was a case of vendor beware

March 4, 2010

When we got an offer for a Southland farm we’d had on the market from a Maori trust supposedly backed by money from Dubai the real estate agent warned us not to take it.

We took his advice.

The trust had planned to buy 28 farms and was offering well above the going price. The ODT reported last week that they’d scaled their plan back to 10 farms and today reports that the whole deal appears to have fallen over.

When the province’s two big rural real estate firms, PGG Wrightson and Southern Wide, wouldn’t have anything to do with the deals it was a pretty clear signal to be wary.

It’s a pity the other real estate agents weren’t so careful although the vendors should have known that anything which sounds too good to be true almost always is and they should have been beware too.

Farm sales have been slow but now that these ridiculous offers are out of the way some genuine buyers with real money may come forward with more realistic offers.


It’s a sham

December 18, 2009

Our Riverton farm was on the market earlier this year.

At the time the grapevine was buzzing about a Maori bloke who was signing up farms without setting foot on them.

Shortly after ours was signed up by a man offering a 1% deposit after unspecified due dilligence.

The real estate agent told us he had absolutely no confidence in the offer and we didn’t accept it.

It sounds very like the offer came from the same outfit which the ODT reports has bought 28 farms in Southland.

A Maori trust, with financial backing believed to come from Dubai, has contracted to buy 28 farms in Southland, with plans to buy others throughout the country.

The cost of the farm purchases so far is estimated at more than $150 million.

Inquiries by the Otago Daily Times have revealed concerns in the rural industry about the group’s actions, from delays confirming the sales contracts to deposits not being paid as expected.

Two of Southland’s largest rural real estate companies, PGG Wrightson and Southern Wide, declined to deal with the trust, but the farms have been bought through other real estate agents.

That the two major firms won’t have anything to do with the trust is pertinent.

If it’s the same outfit which made the offer to us, it’s a sham.


Draft walking access and out door codes released

October 2, 2009

The Walking Access Commission is calling for submissions on its the Draft National Strategy on Walking Access and the Draft New Zealand Outdoor Access Code which were launched by Agriculture Minister David Carter this week.

Both accept that private property is private property to which private property rights apply:

The Commission accepts fully that it is the prerogative of landholders to refuse access to their land, even if such access may have been traditional and the request seems to be reasonable, for example, to gain access to a river for fishing or a national park.

Landholders have the right to charge for any facilities or services on their property in association with the provision of access. They also have the right to recover any costs incurred in providing access.

Some people don’t understand the property rights which apply to a small section in town apply to large properties in the country.

The Commission does and is not seeking a right to roam. It’s taking a common sense approach, aiming to negotiate with landowners where appropriate to allow access to walking tracks, waterways or beaches.

 

 


Hope for the high country

August 27, 2009

The government’s  announcement of a fresh approach to pastoral leases gives hope for the high country.

The new direction for Crown pastoral land strikes a balance between economic use and environmental and cultural values, say Agriculture Minister David Carter and Land Information Minister Maurice Williamson.

The government’s three-prong plan aims to have effective stewardship of the land, better economic use and improved relationships with lessees and high country communities. 

Under the previous administration ineffective stewardship developed when too much land was put under DOC which had insufficient resources to look after it properly; economic use was compromised and relationships with lessees and high country communities were in a very poor state.

The new plan confirms the government’s commitment to basing pastoral leases on the capital value of land. It also rescinds the previous government’s policy which prevented the freeholding of any pastoral leasehold land under tenure review if even a small part of the property was within five kilometres of lakes.

This was inflexible and reduced the potential gains from diversification of land-uses enabled by freeholding. What happens to land if the owner wishes a change of use should be dealt with under the resource consent process and district and regional plans, not through tenure review.

“Labour’s policy was driving more and more land into the DOC estate, with the assumption that the Crown could better look after the land than farming families,” says Mr Carter. “This Government’s direction will maximise the best conservation and economic gains from each tenure review.”

Mr Williamson says the plan recognises the value New Zealanders place on lakesides and landscapes, and promotion of public access to the high country remains part of the tenure review programme.

“Safeguards are in place, including oversight of tenure review funding, to ensure these values are protected by tenure review and pastoral lease management,” the Ministers say. 

Tenure review under the previous government had been slowed down by a requirement for Commission of Crown Lands to report to the Minister of LINZ on all tenure review proposals. The plan recommends that preliminary proposals no longer go before the minister which will speed up the process.

The paper Crown Pastoral Lease 2009 and beyond is here.

The Cabinet minute on the paper is here.

Background and archived documents on the issue are here.


Where Fonterra goes farm prices follow

July 14, 2009

Farm prices followed the Fonterra payout up and now they’re following it down.

New Zealand farm prices have fallen by a quarter across the country in the last year
and taken an even heavier hammering in Southland where the dairy conversion boom has ground to a halt.

Rural lifestyle blocks, however, are continuing to sell, with sales volumes increasing over June 2008 figures, and the median price for lifestyle blocks falling a more modest 7.4% year to year.

This will be worrying for people who borrowed a large proportion of the purchase price because the fall in values could mean they lose their equity in their properties.

But it’s a necessary correction to a market in which land values were not necessarily related to its earning capacity and unless you’re needing to sell there’s no need to panic. Prices went up, they’ve come down and they will, eventually, go up again.

Sheep and beef prices went up last season and the outlook for the coming season is reasonably positive; and the fundamentals which drove drove property prices up in the wake of the dairy boom haven’t changed.

The world is short of food and growing middle classes in China and India want more protein.

New Zealand farmers are very good at converting grass to protein and those who do it with low cost systems will not only ride out the recession but prosper from it.


Fish & Game’s failed court bid could be costly

June 12, 2009

The ODT reports that Fish and Game’s failed challenge to pastoral lessees’ property rights could cost it a six-figure sum.

The two respondents to the High Court action instigated by Fish and Game, the High Country Accord, representing pastoral lessees, and their landlord, Land Information New Zealand (Linz), have both said they are seeking reimbursement of their costs.

The High Country Accord has said the case cost it $250,000, while Linz would not reveal its costs or how much it was seeking from the action heard by the High Court in Wellington.

While Fish and Game is not funded by taxpayers, it gets its money from the sale of fishing and hunting licences, it is a public entity, established by statute, which reports to the Minister of Conservation.

Its attempt to gain public access to pastoral lease properties was in effect one public body taking another to court.

It wasted money which should have been spent managing, enhancing and and maintaining sports fish and game in that action and it’s now likely that much more of the licence fees paid by anglers and hunters will go towards reimbursing the costs of the respondents.


Wheels fall off TradeMe tractor sale

May 26, 2009

When the TradeMe auction for the International 574 Tractor and free farm closed on Sunday night, vendors Shelley and Allan Holland thought they had a deal for $250, 000.

Yesterday the man who placed the highest bid, pulled out because his bank wouldn’t finance the deal.

Who would make an agreement to spend a quarter of a million dollars, with the eyes of the world on them, without checking with their bank first?

Perhaps that was in the days when a deal was a deal and could be sealed with a handshake.

The Hollands took a gamble and gained worldwide interest because they took a risk and undertook to respond to everyone who asked a question or comment.

They also undertook to donate $10,000 from the sale to charity and their concern when the deal collapsed wasn’t for themselves but those they’d wanted to help.

It’s not just us. We’ve still got our land, we’re no worse off than where we started … but it’s all the people that we promised money to. We wanted to give $10,000 to some people that we thought really deserved it because people had been so overwhelming with the auction and we had such an incredible response.”

“And now what do we do? We are just absolutely gutted – totally and utterly gutted.”

The couple was disappointed for people they had offered to support out of their earnings, including one boy named Ollie whose plight had come up in the question-and-answer section of the auction. Ollie needs medical treatment in the United States.

 

TradeMe contacted other bidders informing them the sale had falled through and there’s a message on the sale page saying this item was sold to another member.

I hope it was for a sum close to the closing bid.

Hat Tip: Kismet Farm who left a comment on yesterday’s post about this.


Tractor sale with free land gamble pays off

May 25, 2009

When Shelley and Allan Holland put their International 574 tractor on TradeMe with their 8 hectare Catlins farm thrown in for free and just a $1 reserve they were taking a gamble.

But thanks to the publicity generated by the novelty of the auction and their dedication to responding to the thousands of questions and comments, the gamble paid off.

The tractor would be worth about $5,000, the property had been lsited with a real estate agent for $230,000 and the QV for it was $260,000.

The auction closed last night with the winning bid of: $250,000.


Tractor sale chugging along

May 24, 2009

Bidding on the International 574 tractor for sale on TradeMe has passed the QV for the farm which comes with it for free.

The QV is $250,000 and the latest bid as I write (at 11.20) is $250,300.

The auction closes at 10.30 tonight.

It has attracted 298,522 views and TradeMe is donating their fee to charity.


TradeMe tractor auction helping sick child too

May 21, 2009

The latest bid on the old International 574 tractor for sale on TradeMe is $233,032 – nearly $230,000 more than it’s worth but still not quite at the QV for the 8 hectare farm that’s been thrown in with it for free.

The auction has attracted 229054 views – and climbing by the second. It’s also helping a young boy who suffers from a rare medical condition.

His mother tried to auction a section on TradeMe but the auction was pulled. She then left a comment about this on the ask-a-seller for the tractor auction:

Good Luck – Trade Me pulled my listing similar to this – I was trying to fund raise for my son’s medical treatment in America and did an auction with a buy now that would include some land by the beach – its listed on Trade me so i had already paid the real estate listing fee – but they wouldn’t allow it – Hope you get what you need for the land.

She then left a further comment:

Still fundraising – relisted my auction (218925767) without the land bit – was tempted after seeing how successful this one is going – but I live rurally and Trade Me is how I get by when i can’t get into the City to get what I need… so better not annoy them.

Someone then asked for a bank account so they could donate money and it’s turned into a fundraiser to help pay for the enzyme repalcement therapy her son needs.

Jim Mora’s panel interviewed his mother yesterday (a bit more than half way through part 1).


Tractor $232,632 farm still free

May 19, 2009

Bidding on the tractor for sale on TradeMe  has reached 232,632.

That’s a couple of thousand more than the top bid yesterday morning.

The farm which is comes with it for free has a QV of $250,000.

The auction has attracted 162,793 views. It closes this Sunday evening.


Tractor price triggers inflation alert

May 18, 2009

Don’t tell Dr Bollard, the latest bid on the International 574 tractor for sale on TradeMe is $230,200.

A tractor that old – I think it must be 30ish, would normally sell for about $5,000.

The farm which is being thrown in to the deal for free has a QV of $250,000.

The auction has attracted world-wide interest and the vendors have opted to reply to every question and comment. As I write, there have been 132,168 page views, which I think is a TradeMe record.


Tractor for sale, free farm on side update

May 17, 2009

News of the tractor for sale with a free farm on the side  has gone world wide.

Vendors Shelley and Allan Holland listed it on TradeMe with only $1 reserve, but the publicity has attracted bidders and the latest bid is $230,000 – approaching the $250,000 QV with a week still to go before the auction closes.

Shelley has undertaken to reply to questions and there’s already been hundreds of them.  I copied a few here yesterday, and here’s a few more:

Q: Does the Tractor have a beam? Good luck – I love people whom are bonkers!

A: High beam or “Beam me up” beam?

Q: hi if i win would the locals kick up a stink if i put a six lane motorway thru .and housing nz devepment appartment blocks on site

A: I think they may well impale you wiith a very sharp pitch fork dipped in acid and set on fire

Q: Hi there This is a great feel-good story. Interested in being Auckland Super mayor?

A: I don’t handle idiots too well, but thank you for the vote, Shell the mayor, Sounds cool

The vendors featured on TV3 News last night, the story’s here, the video’s here.


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