Auckland Homelessness Rises Among International Students, NZ Treasury to Propose 32% GST & Pension Age 72

Topic #1:  NZ Herald 25th of September- First-home buyers’ 10-year, $260,000 rent bill to save deposit

Topic #2: Oneroof.co.nz 24th of September - Tony Alexander: Why rents are falling and what it means for landlords and tenants

Topic #3: RNZ 25th of September - International students join growing number of rough sleepers in Auckland, advocate says

Topic #4: 1News 25th of September - Is it worth fixing your home loan for longer?

Topic #5: NZ Adviser 25th of September -GST at 32 percent, pension age of 72 among Treasury solutions to financial crunch

#AucklandHomelessness #InternationalStudents #NZFinance #GSTIncrease #PensionAge #RoughSleeping #FinancialNews #RNZUpdate #NewZealandPodcast #EconomicSolutions

Transcript

 Hi everyone. I'm Debbie Roberts, owner and financial adviser at Property Apprentice. Join us today for the week in review where I talk about current events for the everyday investor and home buyer. Our topics for this week. First up from the  📍 New Zealand Herald on the 25th of September. First time buyers, 10 year, $260,000 rent bill to save deposit.

Topic number two from  📍 oneroof.co.nz on the 24th of September. Tony Alexander, why rents are failing and what it means for landlords and tenants. Topic number three from  📍 RNZ on the 25th of September, international students join growing number of rough sleepers in Auckland., Advocate says .Fourth topic from  📍 1News on the 25th of September.

Is it worth fixing your home loan for longer? And topic number five, from RNZ  📍 on the 25th of September, GST at 32% pension age of 72 among Treasury solutions to the financial crunch.

 So first up for this week in review from the New Zealand Herald on the 25th of September. First time buyers, 10 year, $260,000 rent bill to save deposit.

The first home buyer who paid a median rent while saving for a 20% deposit over the past 10 years, would've spent nearly $260,000, a significant increase from the $140,000 spent a decade ago. This is according to data from Corelogic, which assumes it takes an average of 10 years to save the deposit.

Corelogic, chief Property economist Kelvin Davidson, noted that while the data's not adjusted for inflation, it accurately shows that renters are currently paying a record high portion of their income towards rent. Even with the challenges of renting, Davidson said first home buyers remain active in the market, motivated by the incentive to buy now and potentially save money on a mortgage compared to their current rent.

He noted that the years to save measure is based on a 20% deposit, even though many people buy with a smaller deposit. Davidson also stated that due to the benefit of leverage, it makes sense to get into the housing market as soon as possible. David Cunningham and Chief Executive of Squirrel agrees with this perspective.

He stated that it makes sense to get into the property market now rather than saving for a larger deposit, especially when prices aren't falling. Cunningham said that over time house prices tend to rise supported by long-term inflation. He also noted that a mortgage instills a savings discipline similar to KiwiSaver as payments are a priority in a household budget.

Cunningham highlighted that the difference between a 10% and a 20% deposit could mean several years of saving versus owning a home now. He explained that a borrower's loan-to-value ratio or LVR can improve over time as they pay down their loan and house prices potentially increase, eventually allowing them to access standard interest rates.

He said the most important factor in the decision is affordability and that if a buyer can afford the payments, they should consider getting on the home ownership journey sooner rather than later. And I completely agree with this. I think it should be part of everyone's toolkit to help fund retirement, to be in a mortgage free home, or at least as close to mortgage free as possible.

Because if you're still renting in retirement and all you've got is a little bit in KiwiSaver and the government superannuation, you're not gonna have much. In retirement. So the sooner you start planning the better. And, um, you know, the, even if it takes you 30 years to pay down the mortgage, it's better than not starting at all.

So I think it's important to remember that it is worth the effort and much better than the alternative of renting for the rest of your life.

 Topic number two from Oneroof.co.nz on the 24th of September. Tony Alexander. Why rents are falling and what it means for landlords and tenants. The rental market in New Zealand is currently weak, A trend that's not surprising given a couple of key factors.

First national house prices have been falling, creating an oversupply of some types of properties as new builds from the post pandemic surge remain unsold Second population growth is slowing with annual net migration dropping significantly from a peak in 135 in October, 135,000, sorry, in October, 2023 to just 13,000 in July.

The long-term average for net migration is about 50,000. Surveys of residential property investors conducted with Crocker's Property management show that it's becoming increasingly difficult for landlords to find good tenants. In July and August, a record negative 41% of landlords reported that finding a tenant was difficult.

And that's a sentiment that has since slightly improved to negative 36%, suggesting that the market's no longer worsening, but not yet recovering significantly. The article notes that it's taken over a year for this turn in 10 availability to manifest in falling rental prices. While average rents are still rising slightly,

the pace of these increases has slowed considerably. With some regions now experiencing price drops. The weakening rental market is only having a slight impact on existing investors' desire to buy more property. I think potentially one of the main reasons for that is because house prices have dropped significantly and rents are only recently softening.

If you're looking at purchasing an investment property in the current market, the yields are the highest. They've been in a long time, so the rental returns are really good for someone that's buying. The challenges for people who've owned rental properties for a while and are now having to soften their rents, you know, soften their rental expectations moving forward.

'cause there's so much choice amongst tenants, you know, if they can move into a brand new one, a brand new rental property and pay less for the privilege, then you know that is pretty tempting. A proportion of existing investors wanting to buy again has dropped slightly from 21% down to 19%, and additionally, a recent survey of real estate agents found that investors haven't deserted the market as a net positive number of agents reported

seeing more investors. We are certainly seeing the same thing as well. However, there has been a notable increase in the number of investors looking to sell with a net 24% of agents reporting this trend up from 11% in late 2023. There could be a number of reasons for that. Um, separation, entering retirement years and wanting to downsize your portfolio or potentially

people looking at the fact that the property market has started to get a bit more interest from other buyers. So people who've been holding onto lemons have decided to suddenly, you know, try and sell them now. And it's one of the factors contributing to the positive market for first time buyers as they've got far more options to choose from.

And same with property investors that are looking to pick up a good deal in the current market. The article concludes that the market outlook is slowly improving due to the effects of lower interest rates and a potential bottoming out of net migration. 

Topic number three, and this is quite topical.

International students join a growing number of rough sleepers In Auckland, an advocate says. An advocate for Auckland's homeless Kildare Peterson says he is seeing an increase in the number of people sleeping on the city streets. Peterson, who was formally homeless himself, drops off supplies like food, clothing, and tents to those in need.

He says he is seeing a growing desperation among the homeless, noting that many can't afford to rent with some prioritizing food for their children, over paying for housing and electricity. A homeless man named Ben shared that he intentionally gets arrested to have a roof over his head and a break from drugs and alcohol.

He explained that he prefers sleeping in the city center to be closer to support services like the city Mission. Peterson's also noted a wider range of people experiencing homelessness, including international students who find themselves unable to keep up with the cost of rent. The rising number of people sleeping rough has prompted calls for the government to implement duty to assist legislation.

Aaron Henry. Hendry sorry, Co-founder of Kickback, an organization that helps homeless youth, stated that this type of legislation would require the government to provide resources to ensure everyone has access to safe housing. He noted that currently many people fall through the cracks because they don't meet the criteria for support.

The legislation would help to identify gaps in the housing market and inform where investment is needed. However, Hendry cautioned that it wouldn't solve the problem overnight as homelessness is a fundamental housing issue.

 According to Auckland Council data, the number of people identified as homeless in the city has increased from 426 in September 24 to over 800 in May, with the actual numbers likely higher due to uncounted individuals.

Now this, because we've seen that rents are softening, uh, especially in parts of Auckland as well as other areas across the country. I suspect that one of the main reasons for this is the number of people who've been made redundant from their jobs or who've, who've found difficulty finding work after they've, after they've arrived in New Zealand.

So, you know, certainly I think it is worth considering for someone who has gotten income to look at negotiating. You know, if you're looking at finding a rental property, negotiate with the landlords because this is a time in the market where the tenants are in the position of power in that negotiation because there are a lot of rental properties on the market looking to find tenants.

So, you know, if you don't ask, you don't get. Negotiate on the rent, and you just might get a bit of a bargain for a while.   📍  📍 If you'd like to learn more about investing in property, join me at one of our free events called How to Succeed With Property Investing. I'll discuss strategies for successful investing from my perspective as an experienced investor and a financial adviser, and all of our free events are available live and online.

Check out www. propertyapprentice.co.nz for upcoming dates and register today.  

Topic number four, from 1News on the 25th of September, is it worth fixing your home loan for longer? According to a recent property report from ANZ, Borrowers may have more time to decide on a long-term fixed rate. The report notes that while floating rates and shorter term fixed rates are largely unchanged, average four and five year rates have slightly declined.

However, the one year term remains the most popular among borrowers at the moment. This preference is driven by expectations of deeper official cash rate cuts or OCR reductions following weak economic data and the reserve bank's previous hints at more aggressive easing. ANZ's, economists still expect the OCR to be cut down to 2.5% in November with a risk it could go even lower.

They say this provides borrowers with more time to consider a longer fix. Though they caution that the easing cycle won't last forever. The report suggests that while short term rates may fall further, borrowers should still consider spreading their risk over several terms. The bank's analysis of breakeven points, the rate at which a shorter fix becomes a better option shows that rates would have to fall significantly to make a short term fix more beneficial than a one or two year term.

Unless of course, interest rates increase over the next two years and then you might have been better off to wait for six months and then fix for three years, for example. Okay, so talk to your mortgage adviser. Don't take this as being individual financial advice 'cause it's not. But the article says, for example, to make a six month fix a better choice than a one year one, the six months rate would need to fall to below 4.46% by March, which is a significant drop.

Although there are a lot of economists that are predicting significant drops up until, you know, potentially the February announcement, which would fall in line with re-fixing in March. Certainly wouldn't wanna bank the house on doing your entire mortgage on that strategy though, which is why I think a split mortgage is a really good option to discuss with your mortgage adviser.

The economists also note that by the time a one year fix ends, the financial markets might be anticipating OCR hikes, which is what I was alluding to before. Ultimately, ANZ believes there's merit in extending the mortgage now and spreading your risk. As the end of the cutting cycle is approaching and trying to pick the bottom of the interest rate cycle is next to impossible.

Topic number five, from RNZ on the 25th of September, GST at 32% pension age of 72 is among Treasury solutions to the financial crunch. According to a recent long-term fiscal statement from the Treasury, new Zealand's aging population will put an unsustainable strain on the country's finances, primarily through the costs of New Zealand Super and healthcare.

The report indicates that without changes, government spending per person could double by 2065. The Treasury's report suggests several solutions to stabilize debt, all of which would require difficult decisions, which are unlikely to be popular with the voting public. For example, stabilizing debt would require the average tax rate on labor or GST to rise to 32% by 2065.

An alternative solution to manage New Zealand's super costs would be to either tie it only to consumer price inflation, or to raise the eligibility age to 72. Infometric's Chief Executive Brad Olsen noted that the inconsistency of New Zealand super being the only benefit tied to wage inflation.

Westpac Senior Economist Darren Gibbs stated that due to the magnitude of the problem, a combination of tax increases in spending cuts would likely be needed and that everyone will have to contribute. He said it'll become a political issue and hopes that a mix of policies will be implemented, but that this requires political consensus, which seems to be a bit difficult at the moment, doesn't it?

There seem to be coming from opposite ends of the spectrum sometimes. The Treasury and economists agree that while there's no need to panic, the time for action is drawing nearer. Gibbs pointed out that a significant acceleration of population aging and associated costs will begin around 2030, which is gonna be here before you know it. Olsen emphasized that doing absolutely nothing becomes just eye wateringly unsustainable.

He said that while the issue can't be solved immediately, the government must start making changes. The Treasury also advised that acting sooner rather than later would reduce the overall cost of change and allow for a fairer distribution of costs across the generations. My thoughts on this are, uh, look, I think it's more important now than ever to take control of your own financial future.

So, you know, investing in property does give you the benefit of leverage when it comes to wealth creation. It's the fastest way to grow wealth over the long term because of that ability. So, you know, this is a really good time to learn a little bit more about it. The market is complex. Property's a long-term gain.

It requires a smart strategy to begin with. There's no such thing as one size fits all when it comes to property investing. It's not about the property that you buy, it's about what your portfolio is gonna be doing to you. That's going. That's gonna be doing for you, sorry. That's gonna help you retire in much more comfort than you might currently be on track for.

  📍  📍 And this is literally why we run our free events. We wanna help you learn a little bit more about it and give you the confidence that you need in order to be successful on your journey. It's why we've called our event How to Succeed with Property Investing. All of our events like this are available online, so, and they get updated every week.

Tailored to today's market conditions regardless of where you live, whether you're an experienced investor or just getting started, come along to this free session and I'll help equip you with key tools and insights to help you to make confident, informed decisions. Don't miss out. Register today and take the next step towards achieving your financial success.

I'll also tell you a little bit more about how we could help you as a client if you wanted to become a client of ours to achieve your investing goals. So if you are interested in finding out more about how we could help you visit www.propertyapprentice.co.nz today and register now.   📍  📍 If you've already been to one of our free events and you enjoyed it and you think someone else might benefit from that.

Send them in our direction, just send them along to the website, property apprentice.co nz. Tell them to register for a free event and that's all you need to do. Okay? And if you wanna find out more about how we could help you get, get in touch with my husband, Paul Roberts through our website. So book a no obligation, free phone call or meeting with him.

Go to property apprentice.co nz and we are here ready to help. Thanks for listening. 

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