Category: News

Investing in central city apartments

A guest post from Impression Real Estate

It’s a great time to own property in Auckland.

It might not seem that way when prices are flat, but that’s only because we’ve been spoiled over the 2010 to 2016 period – it’s been an incredible run. From our point of view, after five storming years we’re back to normal; yields are reasonable, prices are not far off their peaks and interest rates are rock-bottom.

The Auckland CBD apartment market has been flatter than the wider residential property market, which is not too surprising because apartments are traditionally more volatile when it comes to pricing. Vacancies did rise recently, peaking at 4.5% in April this year. That’s higher than we’ve seen in a while, but once again we’ve been spoilt by five years of vacancy levels below 3%. Looking back to 2005 we’d sometimes see vacancy levels up to 15% in the CBD, so even 4.5% is impressively low. Happily, that vacancy rate has dropped down below 3% again now – this is the new normal.

That high level of demand has helped the central city to soak up all the new apartment buildings that have been completed over the past two or three years. We were concerned that the influx of brand-new residences would reduce rents and prices; it seems to have slightly lowered prices but had negligible impact on rents. Over the past five years, owner occupiers have been influential in taking some of the smarter apartments out of the market (particularly brand-new ones), which has helped to prop up prices. Tony Alexander at BNZ believes Auckland still has a shortage of housing and what we see in the market every day supports that idea.

For apartment investors, the flat market means you have the luxury of being picky. You don’t need to rush; you have ample time to do your due diligence and be certain that you’re not buying a lemon. Most of our buyers are looking for yields in the 6.5% to 7% range – not a massive yield compared to the heady days pre-2010, but a significant improvement on the 2% or 3% you’ll get from a typical term deposit at the bank.

You might get a slightly higher return on Airbnb, although you’ll certainly have to work for it. With the Auckland Council’s bed tax hitting hard; a lot of the wind has been knocked out of the sails for Airbnb hosts. Ironic, really, when the America’s Cup pre-races start next year and there should be serious demand for properties. We’re still running some very successful short-term rental properties, but they can be marginal once the bed tax is paid so you’ll need to do your numbers on any individual property.

Overall, apartments in Auckland are well-priced right now with plenty of choice and solid yields. As an investor, you have your pick of apartments and you should expect to see strong long-term capital gains. There’s more demand for smaller property types than there has ever been, alongside a continuing affordability squeeze. And Auckland itself could not be more appealing as a place to invest your money. The city is growing, its economy is robust, and the lifestyle is world class. The government and local council are putting money into the city to keep improving it and we have the America’s Cup coming here to showcase our gorgeous harbours and tourist-friendly downtown precinct. It’s a great time to invest – and live – in Auckland.

Time for a financial spring clean?

Spring is the time we take advantage of the improving weather, longer daylight hours and often even our better mood to get our homes in order.  It is also a great time to have a financial spring clean. When was the last time you took a look at your

  • Insurance?
  • Mortgage?
  • Credit cards
  • Bank accounts?
  • Shares?
  • or Will?

Check out some suggestions from the Eightfold team on how you can carry out your own financial spring clean.

Insurance
– When was the last time you reviewed your Life Insurance?
– Have your circumstances changed since you started your cover?

You may be over-insured, under-insured or if you’ve got one of the bank policies – paying for very watered-down coverage.

Reviewing Life Cover, Trauma Cover and Income Protection can be very complicated and time consuming to do yourself. The great news is, you don’t have to. Let us do all the hard work for you, with the bonus that we provide this service to all Eightfold clients free of charge!

Mortgages
As Banks continue to lower interest rates, the way in which they calculate customers debt servicing has also been lowered. This means that as a customer you may be able to borrow a bit more. We are seeing evidence of this, resulting in more market activity. It also means that there may be an advantage to breaking existing loans and re-fixing at lower rates – talk to your Adviser to find out if this could be right for you.

Credit cards and accounts
With banks focusing on sales targets we’re often sold banking products we don’t need, or which become redundant over time, such as a savings account or credit card that have sat there doing nothing for years but are costing you money in annual fees. It’s good to occasionally review these and clean up or close what’s no longer required.

On credit cards have a think about card limits. If you no longer need the limit you have, from a security point of view it’s a good practice to lower that back down to what you need now

Shares
Many New Zealand investors are sporadic in their approach to buying and selling shares. In the heat of an IPO with the market talking up the investment opportunity, many of us have purchased shares. But how often do we stop to consider how they’ve performed and if you should keep or sell them? Make it part of your spring clean to review these and consider your options.

Wills
As we go through life, our family dynamic changes. We have children, lose parents and circumstances change. Wills are designed to be living documents and need to be reviewed regularly on our journey through life to ensure they reflect the legacy you want to leave behind.

Making sure all your bases are covered

The start of the year always feels like a struggle to get going. We have a decent summer break through Christmas & New Years and then a sprinkling of public holidays through January and February which keeps us in holiday mode.

Now that we’re all getting our focus back, it’s really a great time to tick off some of the bigger items on your to do list. We often get feedback from clients that they’ve wanted to review their insurances for a few years but just never quite got round to it. That’s usually because it feels like such a big job, your paperwork and documents are all over the place and there are so many different companies and options out there. So where do you start?

Well the good news is that Eightfold can assist with all of those things. Mike Connellan, our insurance specialist, can help provide a clearer picture of what you’re covered for; how your premiums compare with the market and whether the policies you have are still appropriate for your current situation. And the best part is that this service is free to use – the same way as using one of our mortgage advisors for your home loan is.

Many people take out policies like Life Cover, Income Protection and Trauma Cover but never review them when their circumstances change.  Also, people often don’t fully understand what they’re actually covered for. Mike recently assisted a client who had a Trauma policy with one of the banks and he didn’t know that he could claim for the cancer that he’d had 3 years ago. Mike helped him lodge a claim and he subsequently received approximately $70,000.

If you’d like to book in a review with me to go through your existing policies, or even if you don’t actually have any cover in place and want to find out what cover best suits your situation, please give Mike a call on 021 765 223 or drop him a line at mike@eightfold.co.nz.

Changes in the housing market – good for first home buyers

The new Government is in the process of implementing restrictions which may help take some of the heat out of Auckland’s housing market.

Policies such as the introduction of restrictions on offshore buying and a reduction in immigration numbers should help reduce some of the rampant demand for houses. But while these policies will help reduce some of the competition for houses, fundamentally there are not enough houses available in Auckland to meet the demand so we are unlikely to see a significant fall in prices. The pressure coming off the housing market will hopefully give you more time in your housing search to find the right house rather than rush to find any house.

Those who may benefit most from the cooling of the housing market combined with the changes in the LVR restrictions, which came into effect on 1 January, are first home buyers. Conditions are probably more favourable now than they have been in the last 4 years for first home buyers. The changes in the LVR restrictions now mean that banks can look at lending to more people who have less than a 20% deposit. Banks can now lend 15% (previously 10%) of their mortgage funds to those with less than a 20% deposit.

To put that into context; if you consider New Zealand’s largest bank, ANZ, has a residential mortgage book of approximately $73.5 billion, then based on that, the extra 5%, means they now have an extra $3.6 billion to lend to those with less than 20% deposit!

As mortgage advisors we have certainly notice that banks are far more open to this type of lending, so now is a great time to give us a call on 0800 881 886 and find out whether you may be in a position to get into the market sooner than you planned.

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