I hope this magazine finds you still on holiday and enjoying a well earned break. This is a great time of the year to contemplate events of the past year and where you are heading in the coming year.
Quite a few aspects of property have not performed or acted as they previously would have. House prices went up but interest rates went down. Tenants moved in with each other, increasing the number of people living in individual rental properties, but rents still rose. A property investor was elected as US President and our industry wasn't blamed for it.
This last point is most significant as I can't recall a time when our industry was so badly thought of. We seemed to be the reason for every property problem, real or perceived. This point was captured well in a survey released just before Christmas by the BNZ.
When asked "What do you think are the biggest reasons causing New Zealand’s housing crisis?" (using the term crisis is debateable) 35% said "there are too many investors in the market (looking) to make a profit".
The result surprised the Bank as well, who thought more people would realise that supply was the real issue. More specifically, that the supply system was not able to react adequately to changes in demand.
Despite the fact that the number of properties bought as rentals hasn't varied much for many years, the general public believe that we have been out on a spending spree. They believe that we have large tax advantages that mean we can pay whatever it takes to buy a property and Government money will allow us to do it.
Much of blame for this attitude must fall upon poor commentary by a large proportion of the media and vested interests in the financial markets industry, who have never been happy that don't make money from rental property investors.
Rather than look at the more complicated supply side issues in property, they have focused on demand instead. Keep foreigners out and get rid of rental property owners has been a familiar cry, which is highly likely why people view us as the main problem for home affordability.
People thought that extremely high LVR restrictions on property investors would reduce their number, but Core Logic data shows that the proportion of property sales to investors has not changed. Two things are likely to have happened. The first is that investors would move to lower value areas and property types. The second is that more experienced investors, with higher equity levels, will take the opportunity to replace new investors who would have liked to invest in property before it was all made too hard.
Most people are in favour of debt to income restrictions as they see this as being applied against investors. In reality it is first home buyers who will feel the affects more than anyone. When restrictions were applied in the UK, rental property buyers were actually exempted. Presumably they didn't want rental prices to increase and make it even harder for first home buyers to save a deposit.
Despite what they think of us, we provide people with homes and that is a marvellous thing to do. Pay no attention to the detractors, but do pay attention to the property cycle and that many economic conditions are not behaving as they used to.
If you are using the holiday period to plan new rental property acquisitions, make sure you are well informed and have a plan to add both value and rental returns to your buy. Talking to Property Investor Association members is a great source of independent advice and ideas.
I hope you have a fantastic and profitable New Year.