Welcome to the first edition of the West Auckland monthly Residential Landlords Newsletter.
I am a landlord myself and have been for over 30 years. I currently own rental properties in South Auckland, North Shore and West Auckland. Being a high preforming Real Estate Agent (top 1% in New Zealand) for over 25 years and always working in West Auckland I know the real estate market and the rental market very well.
In this and ongoing newsletters I hope to provide ongoing up to date information relevant to landlords who own rental properties in West Auckland.
Regular features will include:
• Current sale prices
• Current mortgage rates
• Current rents
• A monthly suburb spotlight review
• A relevant feature article each month
I hope you will find it useful. I am available for free advice and opinion on any residential real estate matter.
| Sale Prices | |||
| Suburb | Mediam selling price | No sold | Days to sell |
| Titirangi | $ 624,500.00 | 25 | 23 |
| Hobsonville | $ 725,000.00 | 3 | 53 |
| West Harbour | $ 639,000.00 | 15 | 28 |
| Glendene | $ 691,500.00 | 12 | 29 |
| Henderson | $ 498,250.00 | 64 | 29 |
| Massey | $ 462,000.00 | 33 | 23 |
| Oratia | $ 880,000.00 | 7 | 31 |
| Ranui | $ 522,000.00 | 26 | 32 |
| Sunnyvale | $ 410,000.00 | 7 | 23 |
| Swanson | $ 530,000.00 | 4 | 32 |
| Te Atatu Peninsula | $ 681,250.00 | 18 | 28 |
| Te Atatu South | $ 560,000.00 | 15 | 22 |
| Glen Eden | $ 479,000.00 | 44 | 22 |
| Kelston | $ 590,000.00 | 6 | 37 |
| New Lynn | $ 555,000.00 | 25 | 33 |
| Current Mortgage Rates 13/06/2014 | |||||
| Float | 1 yr fixed | 2 yr fixed | 3 yr fixed | 5 yr fixed | |
| ANZ | 6.49% | 5.95% | 6.49% | 6.55% | 7.40% |
| ASB | 6.50% | 5.85% | 6.19% | 6.85% | 7.40% |
| BNZ | 6.34% | 5.85% | 6.29% | 6.25% | 6.99% |
| Westpac | 5.99% | 5.95% | 6.19% | 6.69% | 7.40% |
| Kiwi Bank | 6.15% | 5.85% | 6.19% | 6.29% | 7.20% |
| Best of other lenders | 5.64% | 5.59% | 5.79% | 5.95% | 6.79% |
| Current Rents | ||
| Nov 13 - April 14 | ||
| Glen Eden | Average Rent | Bonds Paid |
| 2 Brm flat | $ 287.00 | 12 |
| 2 brm house | $ 349.00 | 23 |
| 3 brm house | $ 410.00 | 82 |
| Glenene | ||
| 1 Brm flat | $ 319.00 | 6 |
| 2 Brm flat | $ 329.00 | 20 |
| 2 brm house | $ 368.00 | 23 |
| 3 brm house | $ 401.00 | 70 |
| 4 brm house | $ 502.00 | 16 |
| Henderson | ||
| 1 Brm Appartment | $ 286.00 | 6 |
| 2 Brm Appartment | $ 377.00 | 9 |
| 3 Brm Appartment | $ 410.00 | 6 |
| 1 Brm flat | $ 283.00 | 14 |
| 2 Brm flat | $ 330.00 | 52 |
| 1 brm house | $ 262.00 | 6 |
| 2 brm house | $ 369.00 | 46 |
| 3 brm house | $ 429.00 | 221 |
| 4 brm house | $ 519.00 | 82 |
| 5+ brm house | $ 580.00 | 8 |
| 1 room | $ 296.00 | 8 |
| Kelston | ||
| 1 Brm Appartment | $ 285.00 | 17 |
| 2 Brm Appartment | $ 365.00 | 6 |
| 1 Brm flat | $ 281.00 | 17 |
| 2 Brm flat | $ 319.00 | 14 |
| 2 brm house | $ 359.00 | 22 |
| 3 brm house | $ 418.00 | 58 |
| 4 brm house | $ 453.00 | 16 |
| 5+ brm house | $ 607.00 | 5 |
| 1 room | $ 164.00 | 5 |
| New Lynn | ||
| 1 Brm Appartment | $ 262.00 | 24 |
| 2 Brm Appartment | $ 336.00 | 12 |
| 1 Brm flat | $ 269.00 | 12 |
| 2 Brm flat | $ 331.00 | 64 |
| 3 Brm flat | $ 394.00 | 11 |
| 2 brm house | $ 375.00 | 32 |
| 3 brm house | $ 431.00 | 98 |
| 4 brm house | $ 483.00 | 19 |
| 1 room | $ 211.00 | 5 |
| Ranui | ||
| 2 brm house | $ 354.00 | 12 |
| 3 brm house | $ 394.00 | 68 |
| 4 brm house | $ 483.00 | 8 |
| Royal Heights/Massey | ||
| 2 Brm flat | $ 328.00 | 13 |
| 2 brm house | $ 359.00 | 27 |
| 3 brm house | $ 414.00 | 157 |
| 4 brm house | $ 471.00 | 32 |
| Te Atatu | ||
| 1 Brm flat | $ 275.00 | 11 |
| 2 Brm flat | $ 330.00 | 21 |
| 2 brm house | $ 379.00 | 11 |
| 3 brm house | $ 457.00 | 45 |
| 4 brm house | $ 541.00 | 5 |
| 5+ brm house | $ 566.00 | 5 |
| Te Atatu Peninsula | ||
| 2 Brm Appartment | $ 409.00 | 5 |
| 1 Brm flat | $ 282.00 | 9 |
| 2 brm house | $ 378.00 | 14 |
| 3 brm house | $ 453.00 | 64 |
| 4 brm house | $ 515.00 | 19 |
| Titirangi | ||
| 1 Brm flat | $ 296.00 | 16 |
| 2 Brm flat | $ 351.00 | 12 |
| 1 brm house | $ 277.00 | 6 |
| 2 brm house | $ 376.00 | 20 |
| 3 brm house | $ 467.00 | 79 |
| 4 brm house | $ 567.00 | 25 |
| West Harbour | ||
| 1 Brm flat | $ 295.00 | 6 |
| 2 Brm flat | $ 332.00 | 6 |
| 2 brm house | $ 381.00 | 11 |
| 3 brm house | $ 441.00 | 85 |
| 4 brm house | $ 560.00 | 34 |
| 5+ brm house | $ 686.00 | 12 |
| Western Beaches/Rural | ||
| 1 Brm flat | $ 258.00 | 6 |
| 1 brm house | $ 269.00 | 6 |
| 2 brm house | $ 375.00 | 31 |
| 3 brm house | $ 458.00 | 52 |
| 4 brm house | $ 513.00 | 22 |
| 5+ brm house | $ 575.00 | 5 |
| 1 room | $ 161.00 | 6 |
| |||||
| Henderson | |||||
| Date | Median selling price | 5 year gain % | |||
| April 1994 | $ 125,000.00 | ||||
| April 1994 | $ 173,000.00 | 38.4 | |||
| April 2004 | $ 258,000.00 | 49.1 | |||
| April 2009 | $ 311,000.00 | 20.5 | |||
| April 2014 | $ 498,000.00 | 60.1 | |||
| Over 20 years | 298.40% | ||||
| |||||
| Te Atatu Peninsula | |||||
| Date | Median selling price | 5 year gain % | |||
| April 1994 | $ 108,000.00 | ||||
| April 1994 | $ 186,500.00 | 72.2 | |||
| April 2004 | $ 298,000.00 | 59.8 | |||
| April 2009 | $ 405,000.00 | 35.9 | |||
| April 2014 | $ 681,250.00 | 68.2 | |||
| Over 20 years | 530.80% | ||||
Positive Gearing Vs Negative Gearing
What does it all mean?
The best way to think of it is in terms of cash flow (money in, money out). Positively geared property means that your cash flow is positive – more money (rent) coming in from your investment property than going out.
Negative gearing means the opposite - more money going out than coming in (from rent).
It’s easy to understand why an investor wants a positively geared property, so why on earth even consider negative gearing?
The answer is long term capital gains. Let me explain. Over time property prices have increased considerably because of inflation and other factors. A rough rule of thumb is that property prices have doubled every 8 – 10 years. That means prices on average have increased by around 7.5% per year.
This has pretty much been the case in Auckland for the past 50 years. Suppose you purchase a rental investment for $500,000. On average over 10 years it will have increased in value by 7.5% = $37,500 per year; last year West Auckland property prices increased by 12%.
Negative Gearing
Let’s buy the $500,000 investment by borrowing 100% of its value and at a mortgage rate of 6.25% fixed for 3 years. To do this we would use equity in our existing home.
The figures would look something like this:
Because this is a loss of income we can reduce our earned income of wages or salary by this amount saving tax payments on that amount. If taxed at 33% we will save $15,455 x 33% tax = $5,100
actual shortfall is now $10,355 p.a.
The situation now is if the property goes up by $37,500 per year (7.5% average increase per year on $500,000) it is well worth paying $10,355 per year to get it as you will be $37,500 - $10,355 = $20,145 per year ahead.
Over time the council rates and insurance will increase but so will rents. From my experience as a landlord of over 30 years rent increases more than cover rising council rates and insurance, and in fact after a few years I have found properties I have brought which were negatively geared moved to be positively geared.
But why not just buy a positively geared property in the first place? It is possible to find positively geared properties but in practice they do not usually work out as good as they seem.
To get a property that is positively geared it is necessary to buy a low cost property so that the mortgage repayments are as low as possible. That means buying in poor locations and usually below standard properties. While the rent will be lower they may still give a positive cash flow on PAPER. In practice the situation is often very different.
Because the property is of a lower standard and because it is in a less desirable location only poor quality tenants are usually found. This leads to longer vacancy rates (no rent) and tenants behind or not paying rent. In addition poorer quality tenants are usually harder on the property and maintenance and repair costs are higher.
The main advantage of owning rental property – capital gains are also lower in poorer locations. What is that often heard saying in real estate “LOCATION, LOCATION, LOCATION”. My philosophy has always been good property, good location, good tenants = few hassles even if at first it is negatively geared.
Until next time,
Best wishes,
John Goodrum
Licensee Agent REAA 2008
021945140
09 838 8895
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