The Block and other reality renovation programmes, in which contestants spend a large amount of money and effort to fix up homes, has helped fuel an obsession with renovation. What The Block fails to teach is a crucial factor in playing the real estate game well.
Every potential renovator must understand this: increasing your sale price does not necessarily mean increasing your profit.

Recently, The Block’s Australian production company set realistic reserves on the 4 properties in the first series based on what they paid for the dwellings and the renovation costs. In an extremely awkward TV moment, three of the 4 properties failed to come close to their reserve prices.

Subsequent series set the reserves at lower levels so that reserves were met, and contestants were rewarded for their efforts. However, it is understood that the production company would have failed to break even on the project when the true dwelling and renovation costs were added together.

Here is a very simple rule to follow when considering renovating to add value for profit: look for $1.50 in extra value for every $1 you invest. This principal can often become derailed when, for example, an unwary seller invests $50,000 in renovations that only add $50,000 to the final sale price, or – worse still – much less. Even if a 0% profit is returned, the time and energy expended in planning, managing and undertaking those renovations make the real rate of return a major loser.

Often when if comes time to preparing a property for sale, uninformed homeowners will raise the cost of the house by the amount they spend on the house. The net dollar effect of this $1 for $1 renovations is zero but the pressure it creates on the sellers can be enormous.

You can avoid getting into situations like this by enlisting a trusted real estate professional to advise on the saleability of your home in its present condition. Then you can compare that to the price your agent might expect to achieve if clearly outlined improvements were made.

Interestingly landscaping may cost 1% of the property’s value but may increase your selling proposition more than any other renovation on a dollar-for-dollar basis. But you need to do your homework.

The post Adding value to your home appeared first on Cox Partners Estate Agents.

According to interest.co.nz, this time last year the average one year fixed term mortgage rate was 6.04% across the banks.

This fall has prompted many mortgage holders to want to break their fixed term agreements to shift to a better rate.

Many banks enable customers to make small additional home loan repayments without penalty. However, lenders may charge an early repayment cost (ERC) fee or “break fee” if you repay a fixed interest rate loan or make a significant lump sum payment before the fixed rate term ends.

The reason lenders charge a break fee is because when a fixed rate loan is repaid early the lender may lose money. The fee recovers this loss. The loss occurs for the lender when interest rates at the time of early repayment are LOWER than the interest rate applicable to the loan. This is because the lender cannot re-lend the repaid funds at the same rate that it could when it first loaned the money.

If interest rates have risen or remained stable, there will not be a cost to the lender if the loan is repaid early, so a break fee will not be charged (though a separate administrative fee may be charged).

Calculating a break fee is a complex formula and the formulas vary across the banks. In times of falling interest rates, break fees can rise significantly. Mortgage holders can be surprised at the size of the fee if they repay their loan early.

If you have a problem relating to the break fee charged by your lender, you may contact the office of the Banking Ombudsman at bankomb.org.nz.

Bear in mind, simply charging a break fee is not necessarily an issue in itself. The types of things that could be a concern are:

• if your lender didn’t tell you about the break fee;
• your lender didn’t tell you about how the break fee is calculated;
• there is a mistake in the calculation; or
• your lender gave you incorrect advice about
• the most appropriate type of loan for your circumstances.

For a useful guide to Early Repayment Costs on Fixed Rate Loans click here

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Generally there is no capital gains tax on property sales in New Zealand. However, new rules affect properties purchased from 1st October 2015 and sold within two years of being bought may attract a tax liability from any increase in value.

The “bright line test” will be used to help Inland Revenue distinguish those who buy and sell residential property with the intention of making a profit from property sales.

The IRD has always had the ability to impose a tax when a property was bought with the INTENTION of profiting from the sale. But “intention” is often difficult to determine and enforce, resulting in a loss of tax revenue.
Under the new rules the sale of your main home is exempt, as is a property transferred on the death of a person or under a relationship agreement.

The calculation of the taxable portion is simple: it’s the difference between the purchase price and the selling price. And the tax is calculated at the individual’s marginal tax rate, the same as any other income.

Habitual renovators will also have the “bright line” test applied to them. Anyone who frequently buys a home and does it up while living in it, then sells it for a profit is really running a trading business.

These people should be taxed under existing law, so the new test simply makes this clear. It states that if a home renovator buys and sells their home more than twice in a two year period, they will be deemed a trader and tax will apply on any profit they make.

The bright line test is not aimed at people who buy a property to provide tenants with a home.

While there has always been a risk associated with quick turnover in the sale of investment properties, there has been debate on how the bright-line test could catch people whose personal circumstances change unintentionally, and must sell their investment property within two years, triggering a tax bill.

Two other compliance requirements under the new rules are that non-residents and New Zealanders buying and selling any property other than their main homes must provide a New Zealand IRD number with the transaction, and non-residents must have a New Zealand bank account to get a New Zealand IRD number.

If you are planning to buy and sell property, our recommendation is that you always seek independent legal advice to help ensure your interests are protected.

The post New tax rules for property traders appeared first on Cox Partners Estate Agents.

In its six-monthly financial stability report, the Reserve Bank announced its intention to introduce new loan-to-value ratio (LVR) limits on lending to property investors in the Auckland Council area that would require those borrowers to have at least a 30% deposit.

The Reserve Bank imposed its original limits on mortgage lending with deposits of less than 20 % in October 2013, but house prices in Auckland have continued to rise due to strong inbound net migration and a lack of supply.

This new restriction is an attempt to take the heat out of the Auckland property market, which the Reserve Bank sees as a key risk to New Zealand’s financial system.

The supply and demand factors in Auckland are absent from most regional economies like Hawkes Bay where housing supply is consistent and population grown is benign due to relatively poor employment prospects.

The 2013 LVR measures constrained the volume of sales in Hawkes Bay which have been recently been tracking at around 20% below the 10 year average.

Recognising more subdued housing markets outside Auckland, the Reserve Bank is easing the restrictions on high-LVR lending for all residential lending to 15% per cent from the existing 10%. The 10% speed limit will stay in place for Auckland owner-occupiers.

This means banks in Hawkes Bay will be able to approve more loans to people with less than 20% deposit. These changes will come into effect from October 2015.

In recent months turnover has improved in Hawkes Bay. This is primarily because many first time buyers are taking advantage of the Home Start subsidy and improved KiwiSaver withdrawal incentives from 1st April 2015.
This weeks pre-budget announcement adds to the effort to rein in Auckland’s housing market. Speculators who buy and sell residential property for profit within two years will be taxed on the capital gains. The family home or an inherited estate will be excluded.

Measures will also be introduced targeting overseas buyers who have been able to escape paying any tax on their profits.

It is unclear what effect this combination of measures will have on turnover or prices in Auckland or Regional New Zealand. But over time, what the changes will provide will be better quality information about owners of investment properties.

Our reading of the Napier market is that the short to medium term turnover will remain at between 80 and 90 sales per month, and price levels are unlikely to shift significantly from current level, which plateaued several months ago.

Cox Partners publish a monthly analysis of the Napier Real Estate Market which is distributed to our interested people by email.

If you’d like to receive this interesting and informative commentary, please call us on 835-4321.

The post Housing market announcements appeared first on Cox Partners Estate Agents.

But why have they chosen a poppy, Mummy?
Why not a beautiful rose?
Because my child, men fought and died
In the fields where the poppies grow.

But why are the poppies so red, Mummy?
Why are the poppies so red?
Red is the colour of blood, my child.
The blood that our soldiers shed.

The heart of the poppy is black, Mummy.
Why does it have to be black?
Black, my child, is the symbol of grief.
For the men who never came back.

But why, Mummy are you crying so?
Your tears are giving you pain.
My tears are my fears for you my child.
For the world is forgetting again.

In remembrance of ANZAC Day.

The post ANZAC Day poppies appeared first on Cox Partners Estate Agents.

ANZAC Day commemorates the loss of life and of innocence at war.

Interestingly, recently my sons school librarian directed my 12 year old son away from the fantasy stories he’s enjoyed reading up until now toward a series of war stories for young people.

Did I mind?, she asked me.

After some consideration, I replied, “No.”

While the books generally tell stories of glorious victories, dignified defeats, superhuman courage and sacrifice, they have also introduce my son to some of the disturbing truths of war – pain, death and suffering.
For me, this reality really hit home when I attended a screening of Turkish filmaker Tolga Ornek’s 2005 documentary “Gallipoli – The Front Line Experience”. It was uncomfortable to watch the idiocy and paradoxes of battle expressed in the letters and journals of men (from both sides) who were there.

It is not a story about who won or lost.

Everyone lost in this shocking conflict, when young men not only fought against each other, but against extreme weather conditions, severe hardships like the ravages of disease, flies and lice.

Soldiers fight for all sorts of reasons. Because they are sent to do so. Because they believe in causes. But usually because politicians tell them to go.

With all of its implications of men willingly offering themselves up on the battlefield for their nation, and of the women and children back home suffering stoically in their absence, it’s important not to trivialise the true and devastating social impact of conflict – especially the first world war.

Fortunately, most of us haven’t had to face the question of whether to go to war.

As my son, grows I hope he develops an awareness of the more pervasive, ugly, reality of war – that mostly war just kills people horribly, without dignity, and scars for life many of those who survive it.

What shines through repeatedly is that whatever their reasons for going to war – from Gallipoli and Palestine to Vietnam and Afghanistan – our servicemen ultimately end up fighting mostly for their fellow soldiers – their friends and colleagues.

If there’s an “spirit” it’s probably that. And this not unique to the ANZAC.

On Saturday I’ll be taking Isaac to the Dawn Service at the Napier Cenotaph.

It’ll provide an opportunity to contemplate the deeper resonances of war. I hope to see you there . . .

Lest we forget.

The post The resonances of ANZAC day appeared first on Cox Partners Estate Agents.

Ingredients:

6 Hot Cross Buns

2 cups cream
1.5 cups milk
3 eggs
Zest of 1 orange
1 handful sultanas
Berries & cream to serve
Sugar to spinkle

Method:

1. Pre-heat oven to 160c fan bake
2. Slice Hot Cross Buns in half (through the middle)
3. Butter the baking dish & lay the bun bottoms on the dish
4. Mix the cream, milk, eggs and orange zest in a bowl & pour over bun bottoms
5. Sprinkle over sultanas & place bun tops on top. Sprinkle with sugar
6. Bake at 160c for 30-40 minutes

Serve with cream & berries

The post Hot Cross Bun Pudding appeared first on Cox Partners Estate Agents.

You’re probably looking forward to that extra hour of sleep you get when we turn the clocks back. But a little more shut-eye (and the threat of being an hour early to work on Monday) isn’t the only thing Daylight Saving Time can signal.

You can also use this time to take care of important biannual tasks around your home. Here are few suggestions:

1. Change the batteries in your smoke detectors.You’ve probably heard this one before, but it’s worth repeating. Take the time to make sure your smoke alarms are in working order and have fresh batteries. It’s a fact, smoke alarms save lives.
2. Turn over your mattress.To make sure your mattress wears evenly, manufacturers recommend you turn it every six months. If you’ve got an underlay rotate it.
3. Clean your pillows.Oils and dust from your face accumulate in your pillow over time, so twice a year, it’s recommend they be cleaned. If you’ve owned a pillow for more than two years, experts recommend you replace it.
4. Take stock of your medicine cabinet and pantry.Daylight Saving is a great time to unclutter your pantry and medical supplies. Dispose of anything that is stale or has expired.
5. Clean your fridge’s coils.To keep your refrigerator running efficiently, ease your unit away from the wall and vacuum away the layers of dust from the coils.
6. Vacuum your dryer vent and ducts.Lint lodged in the vent pipes, the space behind the dryer, and ducts outside can cause fire if left to accumulate. Use a vacuum to remove this.
7. Replace or clean filters around your house.Use this time to inspect the filters in your heating and air-conditioning units to make your systems are still running well. Also check your water filter and the filter in your vacuum.
8. Check your emergency kit.If you’ve depleted your supply of batteries, bandage, and other just-in-case items over the past six months, use this time to restock.

The post Your daylight saving checklist appeared first on Cox Partners Estate Agents.

Since then, home owners have no longer been able to rely on the apparent “comfort” and “safety” of total replacement home insurance. Instead most providers only offer “sum insured” cover, where the policy holder nominates a maximum sum which the insurer is obliged to pay to repair or replace the home.

This change from total replacement to sum insured moved the risk of underestimating the costs to rebuild homes from the insurer (and their reinsurers) to the homeowner.

The task of calculating the cost to rebuild your home after a natural disaster is an expert job. And because premiums are based on the amount of cover purchased, the tendency for most home owners is to underestimate the replacement cost.

Financial commentator, Rob Stock, recently quoted from an Australian report that during the ACT bush fires claimants were underinsured by an average of 40% of the replacement cost.

The primary reason was errors made in calculating the rebuild cost. Apparently over half the claimants used online calculators to estimate replacement costs, and these proved to be “a bit hit and miss”.

The sum insured will need to cover the total rebuild cost of your home in the event of a total loss.

This will usually include:

• The rebuild cost of your home as well as other structures such as decks, driveways, fencing, pools, carports and garages
• The cost of materials and finishing to get your house back to the same quality
• An allowance for compliance costs and professional fees such as architect or council fees
• Demolition costs
• GST on the sum insured.

Another common error homeowners make is failing to increase the sum insured after renovations and improvements.

Insurers claim that the change to sum insured policies provides greater certainty for policyholders. Claims are likely to be settled more quickly because the expectations are clearer. Under the sum insured policy, both the insurer and the insured know the maximum that is payable for a total loss.

Insurance providers also say that the move to sum insured introduces new freedoms to homeowners. For example, if your home is destroyed, you may decide to build something different, or better (by topping up the cash settlement).

Homeowners must now take greater care when insuring their home. An accurate and personalised sum insured based on a cost estimate from a suitably qualified professional is the best way to establish the sum insured.

When you’re buying home, consider getting an insurance valuation at the same time as you get a market valuation for your mortgage provider – doing this usually attracts a discount.

We’d be happy to connect you with the right people who can help. Call Cox Partners on (06) 835-4321.

The post The home insurance shake up appeared first on Cox Partners Estate Agents.

These changes are designed to help lower and middle income first home buyers attain their dream of owning a home.

There are three main changes:

• Replacing the KiwiSaver First Home Deposit Subsidy with a KiwiSaver HomeStart Grant, doubling the support for buying a new home and increasing the house price limits;
• Enabling larger KiwiSaver First Home Withdrawals by including employer contributions and the member’s tax credit (meaning first home buyers will now be able to withdraw all of their KiwiSaver savings except the $1000 kick-start);
• Expanding eligibility for Welcome Home Loans by aligning the house price caps with the new KiwiSaver HomeStart Grant.

The following table summarises the changes.

So what do the numbers look like for a first home buyer?

Let’s use the example of a couple in Napier, both of whom earn $35,000.

After five years of contributing to their KiwiSaver account at the minimum of 3% they will be able to withdrawn $24,377 (this calculation excludes investment returns).

This is made up of Employee contributions of $5,250 each; Employer contributions of $4,331 each (after ESC Tax); and Member tax credits of $2,607 each. That’s $12,188 each.

Add to this the new Kiwisaver HomeStart Grant of $5,000 each for an existing home, or $10,000 each for a new home.

This means the combined amounts available for this couple to purchase an existing home is $34,377, or $44,377 for a new home.

The Welcome Home Loan scheme provides for a minimum 10% deposit, so this couple will be able to buy an existing home in Hawkes Bay up to $343,770. With median prices sitting at around $300,000, this couple could afford a “better than average” home. The may also buy a new home for $443,770

For more information, please call (06) 835-4321 and we’ll direct you to someone qualified to help.

The post KiwiSaver boost for buyers appeared first on Cox Partners Estate Agents.