A technical one but have a look at the new draft standard for testing and decontamination of methamphetamine, which is now out for consultation. Your views, as experienced landlords and property managers, are wanted and are essential to ensuring we get this right. 

This is the work that Tiffany Whyte, President of Waikato PIA, was doing on the committee which helped develop this new standard. Thank you, Tiffany, for all the time and effort you have put into this on behalf of New Zealand’s landlords & PMs. 

The Government’s Planning Bill and Natural Environment Bill were granted royal assent on 30 September and are now law. But does that mean the old RMA is out and a totally new system is in from day one? Not quite. 

The new system will be introduced in stages, starting this year, with the full system expected to be operational by 2030. 

A transitional consenting regime will operate while the new planning system is being implemented, starting one month after enactment (from 30 October). Transitional consenting will help councils and applicants process RMA consents – guidance is available on the new planning website. 

Existing Resource Management Act plans, consents, and processes will continue while the new system is put in place. For some more helpful detail on what the changes mean and key things to look out for, have a look at this helpful explainer from law firm Russell McVeagh.  

I always think it’s important to correct a mistake when I make one, so I’m doing that here about Labour’s CGT numbers and the new Treasury house price growth forecasts. It’s only a little error and doesn’t change much, but accuracy is important. 

I thought the Treasury forecasts were based on the calendar year, but they weren’t. If you look at the source material (here), they’ve got 2.4% annual growth in the year to the end of Jun 2028, followed by 3.7%, 4.1% and 4.8%. 

It doesn’t change the numbers much. Labour still has to borrow to fund the first two years of free doctors visits and still has to tax the inflation component of any house price increase, which is the worst part about this tax. They are also still very vulnerable to the housing market staying flat longer, cost increases in the provision of doctors visits, and most of all behaviour change from people aiming to minimise their tax. 

This week’s interesting read is an opinion piece by Joseph Darby, which looks at the cost of providing rental accommodation compared to what tenants pay. The sums are sobering and reinforce the idea that investing in property isn’t the no brainer it might once have been. But are his sums correct? 

Joseph takes two medians as the basis for his calculation: A median Auckland house at $950,000 in August and Auckland’s median rent, about $650 a week. After interest costs, rates, insurance, maintenance etc, the owner is short about $480 a week. For the national medians of $750,000 house cost & $590 a week rent, the shortfall is about $310 weekly. That’s your subsidy to the tenants. 

Sounds pretty dire. But what about leverage? I wrote to him to ask what the impact of leverage would be on the return – leverage is often talked about as the big differentiator for property because you’re earning money from someone else’s cash. That was covered in this follow-up article in Stuff, also an interesting read. 

Leverage amplifies whatever the property (or any investment) is already doing. The test is whether rent after costs plus capital gain beats the interest rate on the debt. If it does, gearing makes you better off; if it falls short, gearing makes you worse off, and the more you borrow the worse it gets. That’s easiest understood through capital gains. 

If you’ve borrowed 100% on a rental and it’s going up in value by 3% or 4% a year, you’re making a profit on money you otherwise wouldn’t have. However, if, like at the moment in some cities, your property value is going down, you’re losing ground with borrowed money, which isn’t good. Obviously, the other costs and income also come into play here, determining your overall position. 

My question is this: there are a lot of experienced investors reading this. What do you make of this thesis? In the current market, are rental property owners increasingly subsidising their customers, the renters? There is one obvious flaw in the argument, which is that very few of us are buying the median house at the median price and charging the median rent. We’re looking for that bargain with a good cashflow and growth potential. But what else can you see in this argument which doesn’t add up? 

Jim Rogers, a renowned American investor, was well known for his views about demographics. The money, he believed, would follow the demographics, the populations which were growing. Which is why he moved to base himself in Singapore, as he saw Asia with a large young population as a place for growth. 

Asia’s birth rate has since fallen dramatically, but the point about demographics still holds. It’s a major factor shaping our lives, our economy and our business – especially when it comes to the provision of homes for rent. 

Two pieces then that you might like to listen to while you’re relaxing, or doing a bit of painting or on a drive. One is a story about a report challenging the idea that New Zealand’s ageing population should be viewed primarily as a cost burden. I loved this one, as the debate so far has all been about how much my cohort is going to cost and not about our ongoing contribution, which will be significant. A great listen. 

The other is an interview with Simon Kuestenmacher, who many of you will know already thanks to his articles for Australian Property Investor Michael Yardney. In this interview he talks about generational differences in the workplace, but the changes he outlines also have an impact in other areas, including property. Again, an interesting and thought-provoking listen. Enjoy. 

The Huddle: Could Arena Williams lead Labour someday?

Even the maximum tribunal award left a meth-lab landlord $63,000 out of pocket