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The future of property investment... is the party over?

Apr 18, 2017 - 7.30pm

  St Mary’s Peace Hall, 36 Vivian St, New Plymouth

Ashley Church: don't worry, be happy
The party's not over yet!
 
by Richard Woodd, TPIA executive committee member
 
Photo: From left Colin Jackson (sponsor), Ashley Church (speaker), Colin Comber (TPIA President)

Ashley Church, chief executive of the NZ Property Institute, painted a positive scenario for residential property investment for the foreseeable future when he spoke to the TPIA monthly public meeting on April 18 on the theme: Is the party over, is a crash coming?
However, he could not predict what measures any government may take to attempt to close the widening gap between static personal income and rising rents and house prices.
Ashley, who with his wife has a $7.5 million portfolio and debt of around $3.5 million, said based on media coverage and political statements, "you could argue that the future looks bleak, dark clouds are gathering, yields are down and prices have soared.
"But property values have risen steadily over the past 45 years -- with a couple of blips -- and they will continue to in the future. It may seem hard to believe but the $1 million Auckland median house price will be $2 million 10 years from now," he said.
Housing and Immigration were major issues of the current general election campaigns, but in terms of imposed constraints, he believes we won't see much more than political posturing.
"New arrivals last year were 127,000 of which a third were returning Kiwis and Australians and 20% were students. The effect of foreign investors on house prices is a subject of much debate. The media says the impact is 30% while property analysts believe it's more like 9%. It's not a simple equation and controls will not change things much. A recent survey of the economic contribution of different ethnic groups put Chinese at the top and Kiwis at the bottom, so that's food for thought. 
"When we reach a population of 10 million, however, it will be a different discussion."
He ran through the crises and challenges of the past that should have spelled doom at times for property investment returns: the Vietnam war and later two Gulf wars; Britain abandoning NZ and joining the European Common Market causing a 10 year recession for us; two severe oil price shocks; major overseas borrowing to fund the Think Big projects; Muldoon's price and wages freeze; Rogernomics, economic form, removal of manufacturing and farming subsidies; the start of GST; inflation 20%, mortgage interest rates over 20%; reform of the welfare state etc.
"And guess what happened to house prices between 1963 and 2011? The national median price doubled every ten years regardless of these major events. A more mature approach to property investment has developed and people did not panic when's events such as the 9.11 attacks and the GFC occurred."
Has the market peaked? He thinks not. It can't be judged by what's happening in Auckland because all regions of NZ represent distinctly different markets with different drivers of price and demand.
"There is a housing under-supply and a steady decline in house occupancy rates, which are down from 3.29 people in 1986 to 2.87 now despite total population increasing. Another driving factor is more active property investors, claimed to be responsible for anything between 25% and 42% of price growth.
"These and other drivers of price are very strong snd if the market cools it will be through intervention not lack of market dynamics."
Will there be a capital gains tax? "We already have one though nobody talks about it. If you sell an investment property within 10 years you'll be taxed on the profit. The only area left is the family home and nobody will ever tax that. Only Gareth Morgan's party is pushing for it."
Loan to value ratio restrictions? "Currently 40% deposit requirement may go to 50%, although the impact of the current level has been minimal. We might see more property syndicates forming to meet tougher LVR rules."
Debt to income restrictions: "We should be more worried about this insidious prospect based on your earnings versus the net value of your property, with a 4.5% cap. It didn't work in the UK but it wasn't compulsory. Set at 4.5 % it would cause a cause a collapse of the property market as it would prevent people borrowing money. Finance Minister Steven Joyce has put it on hold till after the election , but I think it's a dead duck."
Mortgage rationing? "This is being driven by the inability of banks to borrow more from within New Zealand and is driving up interest rates as banks pay more to their depositors to attract new funds."
Other possibilities: "Labour may require investors to buy only new houses and any government may drop the LVR for first home buyers to below 20%."
 
 
Surveyor Colin Jackson on greenfields projects
 
by Richard Woodd, TPIA executive committee member
 
Bland & Jackson Surveyors sponsored the evening. Colin Jackson, one of the 5 directors, decided at the age of 14 he would be a surveyor, encouraged by his father. He ended up in Borneo working on Shell platforms and on returning to Taranaki for the Government's 'Think Big' projects, he was involved in siting, driving and levelling 6000 piles for the synthetic fuels plant at Motunui. He then worked offshore Taranaki and went on to other similar work in Vietnam, Indonesia, Borneo and Russia.
BJSL specialise in large local greenfield subdivision projects and are currently involved in Settlers Bush, Cyrus-Karamea Sts, Fernbrook, Sycamore St, several in Bell Block, Cowling Rd and the big Area Q between Wills and Airport Rds. Collectively these staged projects will see 120 new lots released for sale next summer.
Colin said Area Q has proved challenging in terms of landowner agreements and planning infrastructure, to an extent that development contributions will total $14,500 per lot, and that will include $3000 to the Government transport agency NZTA for the cost of increased traffic movements on and off the highway.
Colin also covered the NP District Plan Review, which is out for consultation currently and council is seeking public feedback. A summary booklet is available to anyone.
"All the current rules will change, some quite significantly. Land use will be less permissive and more prescriptive. In the CBD (roughly between Belt Rd and Te Henui stream and Pukekura Park) medium density housing will be encouraged, possibly even to allowing 100% site coverage and that will create stormwater management issues in my view. Council may have to offer incentives such as waiving development contributions to land owners."
 
 
 
 

 

Past Meeting:

GUEST SPEAKER: ASHLEY CHURCH

Ashley Cameron Church (born 26 February 1964) is the current Chief Executive Officer of the Property Institute, in Wellington. He was born in Hastings, New Zealand, and raised in Napier where he was educated at Tamatea High School. In 1987 he stood, unsuccessfully, as the National Party's parliamentary candidate for Napier. In 1989 he became the youngest person ever elected to the Napier City Council. During his time on the Napier City Council he was a polarising personality, attracting both strong support and strong opposition for his views. He was responsible for the ‘NapierLife’ Marketing program, which was a key driver in reversing population decline and re-energising economic activity in Hawke's Bay during the 1990s. He lost his Council seat in 1998 after serving three terms. His community activity has included roles as National Council Member of New Zealand Jaycees, Executive Councillor of the North Shore Chamber of Commerce, National Board member of Towns & Cities New Zealand, Creator and Organiser of the Hawke's Bay Summer Festival, and Organiser of the 1985 North Shore Telethon Centre. He is also a past Director of the Hawke's Bay Airport, Marineland of New Zealand and the National Aquarium of New Zealand. Church was Chief Executive Officer of the Auckland Property Investors Association between 2005 and 2007. He is also a past National Sales and Marketing Manager of Pulse Energy and Mercury Energy. He was subsequently employed as the CEO of the Newmarket Business Association. He is a regular media commentator on Property, Energy, and Business issues and has appeared on My House My Castle, NZ Open Home, ASB I Want to Buy a Home and TVNZ Breakfast.

Image courtesy of Property Instatute - www.property.org.nz
Article courtesy of Wikipedia - https://en.wikipedia.org/wiki/Ashley_Church

SPONSOR: BLAND & JACKSON SURVEYORS