Market Updates

SUBDIVISION
If your section is big enough, you may be able to cut it up into smaller portions. Subdivision cost more than $70,000
in Auckland. You could then sell the bare land: Real estate agents would then add another 3 per cent or 4 per
cent in commission, plus marketing costs, and the seller would have to cover legal fees.

Another option is to add a property. You could move a cheap relocatable house on to the section or build new.
Bruce said property investment was a “time in the game” business. “You can sort of guess we’ve been at the top of
the cycle. If you have a property worth $800,000 you’re not going to take a bet with me that it will go up another
$50,000 this year. But you’ll definitely take a bet over ten years that it will go up $400,000.”

“This arrangement generates gross weekly income of $220 to $250 per student. From this, costs such as feeding the
student, along with their portion of power and water usage can be removed to calculate a net income figure.”
Internal reconfiguration of an existing residential property to create a separate flat. This was an option for bigger
houses that were configured so that a portion could be separated off for people to live independently. “This option
works well where a dwelling has several stand-alone bathrooms, multiple sinks or basins plumbed in which are
suitable for use as a kitchen/kitchenette, and multiple door access points to the building.

But be warned. This is so easy to be caught out. “In Auckland there tends to be more lemons than good properties
from an investment perspective. A lemon is a property that you can’t afford to hold in all parts of the property
cycle.”

OWNER/OCCUPIER LANDLORDING
This is one of the cheaper ways to start making money from property. Bayley said it was usually an option for
younger homeowners who had bought a property with multiple bedrooms and rent some of them out, getting
help to pay off the mortgage and some of the household bills.

“With a marked rise in the number of international students now studying at New Zealand high schools and tertiary
education centres, more and more Kiwi families have taken to hosting foreign students in the homes.

“This arrangement generates gross weekly income of $220 to $250 per student. From this, costs such as feeding the
student, along with their portion of power and water usage can be removed to calculate a net income figure.”
Internal reconfiguration of an existing residential property to create a separate flat. This was an option for bigger
houses that were configured so that a portion could be separated off for people to live independently. “This option
works well where a dwelling has several stand-alone bathrooms, multiple sinks or basins plumbed in which are
suitable for use as a kitchen/kitchenette, and multiple door access points to the building.

“Granny flats are usually the resulting studio, one, or two-bedroom units with their own entrance, bathroom/toilet
and kitchenette amenities. They can have their own power/gas connection, allowing the tenant to pay for just
what services they use. Water can be serviced as a separate utility connection for each tenancy, although the
cost of creating of this off the mains can be several thousand dollars.”

In general, the cost of creating a flat could vary from $10,000 to $60,000 depending on the scale of fitout required.
This work will need a building consent and might also need resource consent. Be very aware that when buying a
property advertised as “home and income” should check the LIM report to make sure the “income” portion had
been consented.

BUYING FOR YIELD

Yield-seeking investors are looking for the income they can make from rent. At the moment, it’s hard to get a high
rate of yield in the bigger centres. Across Auckland, yields of between 3 per cent and 4 per cent are normal, and
from that you have to cover all your expenses. Cheaper areas usually offer better yield, because rents are higher
compared to property sale prices.

Auckland Property Investors Association president Andrew Bruce said everyone talked about capital gains but it
was investors with strong yields, who focused on what they were earning from their properties, who did well over
the long term. “It’s not sexy to say I made $20 passive income a week this month. It’s not going to get a stirring
conversation going.”

PROPERTY INVESTORS

New Zealand’s property breakdown of average house price over average rent weekly rent and gross yield for a
standard 3 bedroom properties across Auckland 2018

Property Investors price over the past decades according to Barfoot and Thompson over the 10 years shows has
experience strong capital growth, however, it looks to have turned, but would-be property investors are being told
that does not mean they’ve missed their chance.

https://www.barfoot.co.nz/market-reports/2018/april/suburb-report

All property investors could make money in all parts of the property price cycle. Regardless whether the cycle is “It
doesn’t have to just to going up or going down” you can buy at a discount and make your money upfront, not
over time. You pocket it straight away. There are numbers of ways to get started. This is where you buy a property,
expecting the price to rise. This strategy was most successful during the “up” phase of a property cycle. “Most
recently 2012-2016, where, in Auckland at least, values have risen year after year by approximately 10 per cent
annually.”

It can also pay off when investors buy a property in an area that is becoming more popular – either due to
population growth or the development of new infrastructure in the area. But Auckland Property Investors
Association president Andrew Bruce said buying for capital gain was one of the more expensive ways to start.”