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House prices may get a shot in the arm from current low interest rates and the government’s decision to scrap any chance of a capital gains tax.

Westpac’s chief economist Dominick Stephens says house price inflation could reach 7% over the coming year from 1.3%.

Stephens said the dramatic decline in interest rates would be a game changer for the economy, which had been slowing in line with the global economy over the past year.

Earlier this month the RBNZ cut the OCR to a record 1.5% after being on holdings for more than two months, a move it said was aimed at getting “ahead of the curve” and helping to give support to the domestic economy. The central bank was ambivalent about whether any further cuts might be needed.

Westpac was forecasting the economy to grow just above 2% this year before rising.

He said low inflation had been a feature of the economy for several years and was not going away.

However, he said the current economic environment was making it difficult for businesses to pass on cost increases.

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REINZ welcomes Privacy Commission’s guidelines but warns they may cause confusion

When news of the ‘KFC test’ broke last year, the Real Estate Institute of New Zealand (REINZ) immediately called for some consistent standards to be put in place, therefore, broadly speaking, the Institute welcome the announcement from the Office of the Privacy Commissioner (OPC) that it has released some guidelines for landlords and property managers.

However, there are concerns around some of the discrepancies between what landlords may ask for under the Residential Tenancies Act (RTA) and what the Privacy Commission’s guidelines state. For example, Section 13A of the RTA requires a tenancy agreement to state whether a tenant is under the age of 18 – if landlords can’t ask a tenant’s age (almost never justified) or are unable to ask for a driver’s licence (almost never justified), then how will landlords ensure a tenant is over the age of 18?

REINZ is disappointed that the industry was not consulted on these guidelines as the Institute would have been able to provide some valuable feedback to the Commissioner as to how some of these recommendations would work in practice.

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Two Christchurch schools have new principals, both starting their roles in July.

Christine O’Neill has been named head of Christchurch Girls’ High School, while Joe Eccleton will take the helm at Cashmere High School.

O’Neill spent 10 years as head of St Thomas of Canterbury College before becoming an independent consultant for the Ministry of Education in 2017. She said she was not looking for a new job until she saw the vacancy at Christchurch Girls’.

Eccleton is a father of two, and lives in Cashmere. He was assistant principal at Cashmere High School until 2016.  What attracted him to the new position was the chance to contribute to both the school and the wider community.

The school’s alumni includes several notable people in politics, sports and the arts. Eccleton said the successes were in part due to the school’s ethos.

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Westpac’s economists have reconfirmed their forecast there will be no more Official Cash Rate (OCR) cuts by the Reserve Bank for the remainder of the year, but expect house price inflation to hit 7% next year.

An update by Westpac’s chief economist Dominick Stephens said they believed the Reserve Bank would keep the OCR at 1.5% for the rest of the year, but admitted it was a finely balanced call.

The update also said the bank’s economists had previously thought there would be another OCR next year, if a Capital Gains Tax was introduced.

But the Government’s announcement that it was dumping CGT, combined with low mortgage interest rates, meant they don’t see any further changes to the OCR until mid-2022.

They also believe those factors would see house prices rising.

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The Government’s Healthy Homes standards have officially been signed off and will become law on July 1.

The standards have now been drafted into regulations and approved by Cabinet.

Private landlords have just over two years to ensure rental properties meet the standards, which some say could mean tenants will wind up paying more rent.

On Monday, Deputy Prime Minister Winston Peters announced the exact standards had now been signed off and that standards would lift conditions for more than 600,000 New Zealanders, who live in rented homes.

From July 1, 2020, landlords will need to include detailed information in their new or renewed tenancy agreements about how their property meets the standards, so tenants and landlords will be aware of the standards before compliance is required from July 1, 2021.

Additional guidance information including an online tool for calculating the required heating for a living room, will be available on July 1, 2019.

All rental homes will be required to:

Have a heater that can heat the main living area to 18 degrees Celsius.

Have ceiling and underfloor insulation that either meets the 2008 Building Code insulation standard, or (for existing ceiling insulation) has a minimum thickness of 120 millimetres.

Kitchens and bathrooms will be required to have extraction fans or rangehoods.

Install a ground moisture barrier to stop moisture rising into the home where there is an enclosed subfloor space.

Have adequate drainage and guttering to prevent water entering the home.

Block draughts that make a home harder to heat.

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Interest rate cuts have left borrowers “sitting pretty” and that is likely to mean a boost for the housing market, economists say.

ANZ and Kiwibank both moved quickly to introduce reductions on their home loan rates by up to 15 basis points.  Westpac cut its floating and one-year rate by 16 basis points.

ANZ’s and Westpac now have a one-year rate of  3.89 per cent. Westpac’s two-year rate dropped four basis points to 3.95 per cent.

Rates so low make higher prices easier to service and there are predictions it could give national property prices a second wind.

The bank expects annual house price growth of 3.9% this year, from 3.8% last year, and 5.5% next year for the country as a whole.

But while it’s good news for borrowers, it’s not so good for savers.

Kiwibank’s variable rate deposit products, Notice Saver and Online Call,  decreased by 15 basis points.

ANZ is also cutting what it pays on term deposits by between 15 basis points for the 90-day rate and 15 basis points for the 60- and 120-day terms.

Westpac reduced its 90-day and four-month rates by 15 basis points. Its five-month term will drop by 20 basis points and term deposits between six and nine months drop by 10 basis points.

Its savings accounts were also affected.

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Property investors get a bad rap and yet nearly half of New Zealanders believe property is the best way to generate wealth for retirement, according to KiwiWealth’s first State of the Investor Nation survey. The survey looks at New Zealander’s perceptions of wealth and wealth creation.

79% of the 2,101 survey respondents have some form of investment savings, with the median investment portfolio worth $27,000.

The most popular asset classes to invest in were Kiwisaver (69%), savings accounts (62%) and term deposits (34%).

Yet the asset class that New Zealanders think will generate the most wealth for retirement is residential property, with 46% of respondents putting it first.

New Zealanders have the most wealth tied up in residential property with the median investment value of $500,000.

Among investors, 60% are confident in the property market.

Despite the signs of a cooling housing market, 80% of respondents expect house prices to continue rising in the next 12 months.

Wellington: 91% believing that house prices will keep going up in their region.

Auckland:  72% saying that prices would continue on an upward trend.

Christchurch: 77% confidence, followed by regional New Zealand at 83%.

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Who’d be a property investor in 2019?

A capital gains tax might be off the table but there are still several changes happening that make it less appealing. Properties will soon have to be brought up to higher standards of insulation, ventilation and heating. Losses on rental properties are now ring-fenced, so they cannot be used to offset other income. The bright-line test, applying income tax to capital gains, has been extended to properties bought and sold within five years.

With the prospect of capital gains slimmer for the time being in many major centres, it might make you ask whether it’s a sector worth dabbling in, at all.

But many New Zealanders still cling to property investment as the best way to “get ahead” and prepare for retirement.

Last year, 313,596 taxpayers – excluding companies – filed returns that declared rental income for residential, industrial and commercial property investments.

Property investment is more tangible than shares. The fact you can borrow from the bank to get started also amplified potential gains (although it would also magnify losses).

Rental returns are getting better: Corelogic data shows since the start of 2018, rents have risen at almost double the rate of house prices across the country.

If you’ve been thinking you’d like to get stuck in to property investment, click on the ‘Read the full sourced article’ link below to see how you might do it:

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New Zealand annual house price growth accelerated to 2.7% in April from 2.5% in March,  still however down from the 7.6%  in April 2018, according to Quotable Value figures.

A number of regions are registering double-digit annual growth in property values.

Kawerau posted the biggest annual increase of 23.3 percent, albeit at a lower base where the average current value was $250,975. Tararua values were up 20.1% at $230,915.

The national average value was $686,975, compared to Auckland’s $1,033,583. Wellington values came in at $706,123, while Hamilton was at $585,579, up 5.1% from a year earlier, and Tauranga values were at $740,222, also up an annual 5.1%.

Wellington region was up 8.2%, Christchurch values increased an annual 1.3% to $498,105 and Dunedin values were up 13% at $457,530. Queenstown Lakes values increased an annual 3.3% $1,194,045.

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A retiring couple need a nest egg of $785,000 to live a “choices” lifestyle in a city, but if they are in regional New Zealand they only need $492,000.

Massey University’s annual Retirement Expenditure Guidelines, which are now embedded in many KiwiSaver calculators, shows the estimated nest eggs retirees need to fund the spending gap between what NZ Super pays for, and “choices” and “no frills” retirement lifestyles.

Because NZ Super is not enough for most people to live on, even a no frills retirement requires savings for a two-person couple of $263,000 for city retirees, and $13,000 for regional retirees.

“Of those aged 50 to 64, 52 per cent report still having a mortgage, while 79 per cent of the respondents who had reached retirement age were mortgage-free,” report author Claire Matthews from the university’s Massey Fin-Ed Centre says.

“If greater proportions of retirees have mortgage debt in future, it will become of more concern.”

Just 40 per cent of pre-retirees believed they were well-prepared for retirement, she said, and 57 per cent considered retirement to be a concern.

The findings confirmed New Zealand Superannuation was not sufficient to fund the retirement most people want, Matthews said, but most retirees said they were satisfied with their level of retirement income.

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