Quarterly News – Winter 2023
The rental market update
The usual winter slow down has occurred, however properties are still renting relatively quickly after they are listed for rent online.
The choice of tenants is not as ideal as it was a couple of months ago, but that is typical of this time of year – less people want to move houses in the rainy season.
It is important that pre-tenancy checks are done and are done thoroughly – as we all know how hard it can be to get a problem tenant out of your property. Credit checks and background checks are very important, and problem tenants usually seek out private landlords as they think they’ll be less likely to perform these checks, or less likely to find anything adverse on their history. We use multiple databases to perform these checks and protect our landlords.
Reminder to our landlords we have extended the reach of our advertising to get properties rented faster and to the best possible selection of tenants. We now advertise on: www.trademe.co.nz, www.realestate.co.nz, www.homes.co.nz, www.oneroof.co.nz, www.raywhite.co.nz, www.royalheights-nz.rwoffice1.com, www.juwai.com, www.nz.hougarden.com, www.neighbourly.co.nz.
– Natalie Hachache, Director, Spectre Property Management Services Ltd
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Rental legislation update
Most people purchasing new-build properties assume that they will be compliant with the Healthy Home Standards – however that is not always the case. The Building Act and the Healthy Homes Standards are 2 different Acts and require different things.
Many new-build properties have a CCC (Code Compliance Certificate), however they may not be compliant with Healthy Homes Standards – the most common instance we’ve found with this is the Heating Standard in the Healthy Homes legislation. Many new-builds do not have a heat pump installed, as this is not a requirement in the Building Act. Or if they do have one installed, it may not be the correct size to meet the Healthy Homes Heating Standard – the Act sets out specific calculations of size (KW) of the heat pump depending on many factors in the house. There is a heating tool available on tenancy.govt.nz which can be used to calculate what is required.
Often the size that is determined when following the legislation’s requirements seems excessive to most people – especially if the living room is open plan, which is most properties in NZ now. Unfortunately in most cases there are no exceptions to this with a new build property, and very few exceptions for older properties. If the property requires a 10kw heat pump according to the calculations, then that is what needs to be put in. We are aware of instances where a landlord has a 6kw heat pump at the property when a 10 kw heat pump was required and they wanted to install a second 4kw heat pump to make up the difference – the legislation does not provide for this however, and in order to be compliant the 6kw heat pump needs to be replaced with a 10kw one in this scenario.
It may seem crazy, but that is the legislation we have been lumped with and have to adhere to. And with the potential for a $7200 fine at the tenancy tribunal, it is cheaper to comply (and less headaches for the landlord!). We have heard of some landlords “risking it”, however this is indeed very risky – as it is a legal requirement to state in a tenancy agreement the required kw for heating and the current kw for heating – if there is a discrepancy it is pointed out in a very prominent way to tenants. Our advice is don’t risk it.
You can read more information about the healthy homes standards here:
https://www.tenancy.govt.nz/healthy-homes/
And specifically the heating standard here: https://www.tenancy.govt.nz/healthy-homes/heating-standard/
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The Finance update
LVR restrictions set to ease come June 1
Eighteen months after tightening the country’s mortgage market, the Reserve Bank of New Zealand (RBNZ) will allow more owner-occupiers and investors to qualify for loans with high loan-to-value ratios (LVRs), as of 1 June.
The current LVR settings were tightened in November 2021, when the RBNZ wanted to reduce “risky mortgage lending” because it believed risks in the financial system were elevated.
According to the RBNZ, those changes made the financial system more resilient, which has been evident in the past year as property prices have fallen without widespread impacts to financial stability.
Now, the RBNZ believes the LVR settings should be loosened.
“Our assessment is that the risks to financial stability posed by high-LVR lending have reduced to a level where the current restrictions may be unnecessarily reducing efficiency. In particular, impeding the provision of credit to some otherwise creditworthy borrowers, which is not proportionate to the level of risk that we see,” Deputy Governor Christian Hawkesby said
How the LVR restrictions would be changed
As of 1 June, the RBNZ will update the limits for banks’ high-LVR lending:
- For owner-occupiers, no more than 15% of new loans (up from 10%) can have an LVR above 80%
- For investors, no more than 5% of new loans can have an LVR above 65% (up from 60%)
The reason the RBNZ has tighter restrictions for investment loans is because they’re deemed to be riskier than owner-occupied loans.
Why the LVR restrictions exist
Here, in the RBNZ’s own words, is why banks are subjected to LVR restrictions:
“LVR restrictions support the stability of the housing market and help reduce the risk of a sharp correction in house prices. They also provide an additional buffer if a housing downturn were to occur, which would particularly affect highly indebted home owners and investors.
“Housing lending makes up about half of bank lending in New Zealand, and a home is usually the single largest asset that a family owns. Property is also a significant part of many New Zealanders’ investment portfolios.
“A sharp correction in house prices is therefore a significant risk to the financial system, which could negatively impact the functioning of the banking system and cause lasting damage to households and the wider economy.”
Contact me for a home loan pre-approval
The RBNZ’s reforms are encouraging, because they will allow some New Zealanders to enter the market sooner than expected.
Regardless, my role as your mortgage adviser remains unchanged – which is to help you get a great loan that is suitable for your financial circumstances.
Get in touch if you’d like me to help you finance a property, whether it’s your own home or an investment. My strong recommendation is to get a pre-approval before you start your house hunt, so you know how much you can spend.
– Originally Published 26/05/23 – Logan Reardon – Mortgage Adviser, Loan Market
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The sales market update
The news is not ‘doom and gloom’ at the moment as much as the media would like you to believe.
The good news is that the sales market seems to be showing slight signs of hitting the bottom.
This is the time that buyers typically like to jump in and buy. We are starting to see this happen as numbers through open homes and auctions improve.
Our prediction of the lifting of the OCR was correct too.
We predicted a 0.25% rise. That is what happened, contrary to most economists’ view, and certainly contrary to the treasury’s view.
The good news is that most of the major banks had already factored in the latest rise in the OCR, so no real rate rises. We believe this is where things will be at until we start seeing decreases to the OCR in the first or second quarter of next year.
This is great for landlords if they are managing to hold. The long term gains will be worth the short pain felt at present.
This coupled with the rental market looking strong spells some good news.
Let’s all hope that inflation is under control finally and our predictions come true.
The piece of information that is not a prediction, is that the sales market is showing positive signs!
Keep well
Happy Days.
– Ronald Hachache, Licensed Agent REAA (2008) – published 30/05/23