AMS Blog

The AMS Property Gazette - September

Tue, 14 Sep 2010 00:36:00 GMT

In this month's edition of the AMS Gazette I would like to begin by saying thank you to all the support and well wishes I have received since the earthquake on 4th September. It was a shock to we woken up at 4.30 in the morning to what sounded like a Boeing 747 landing in my driveway while being shaken so hard I thought my fillings would fall out. Thankfully my wife Barbora who is employed by Air New Zealand was working out of Rotorua and missed the original earthquake. Maddison however, our four year old Fox Terrier has not stopped shaking and is ready pack her bags and move to another city.
As the earthquake has mainly affected the Canterbury region I am going to cover some of the things Cantabrians should consider doing in regards to their mortgages and home loans.

So what to do next if you live in Canterbury.

Many of you will have already done the right thing and contacted the EQC to lodge a claim. Don't worry if you have not already done this as the EQC have come out and said you have 3 months from the 4th September to contact them. Just remember that once you have made your claim you cannot add further damage at a later date. So make sure you have a good look around your properties, so when the assessor arrives to look around your properties you can show him/her all the earthquake damage.

Mortgage Holidays - If you feel you need a mortgage holiday contact me and I will help with organising it. I have heard directly from all the major lenders and am fully briefed on how to make an application.

NB - You do not have to have lost your job or have extensive damage to your family home to get a Mortgage Repayment Holiday, if you want one you can have one. Each lender has slight differences in the processes of applying for a repayment holiday. There are also slight differences in the available structures you can use depending on which lender you have your mortgage with. Some for example will allow your mortgages maturity date to be moved out so when you return to paying your mortgage there is no change to amount you pay, other lenders unfortunately do not have this option. Please contact Advanced Mortgage Solutions here to get assistance with your application. Alternatively feel free to call me on 980 4541.

Please be aware these facilities are only available for people who live or have property in Canterbury - outside of this region it is (as far as the banks concerned) business as usual.

News Outside of Canterbury

Interest Rates - This Thursday's Official Cash Rate announcement is expected to see interest rates remain unchanged. With recent world events, namely the speed, or the lack of speed in which the world is recovering from the recession, it is believed interest rates will not go up again this year. There is in fact a good chance of medium to long term interest rates to fall slightly - Watch this space.

House Prices - House prices around New Zealand appear to have come down a little over the last month or so. The number of houses for sale are lower than anticipated for this time of year, with commentators arguing that many people are now holding off to take advantage of the 2011 Rugby World Cup. This is a hard one to call - personally I think if we have a long warm summer we could see house prices recover and feed nicely into the World Cup frenzy. Like with interest rates above time will tell.

As I sign off I would like to wish all of those affected by last week’s earthquake the best of health and wellbeing - if I can be of any assistance please feel free to contact me.

Kind regards

Scott Miller

P.s Find a number of short video's to help with better understanding bank policies, what interest rates are doing and a brief look into some of the different strategies available when looking to invest. Please click on the link below to have a look.

* Please note that at this time this service is only available from landlines.

This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication.

The AMS Property Gazette - August

Mon, 13 Sep 2010 13:30:00 GMT

Get The Best Home Loan - Interest Rates Advice - Mortgage Broker

Recently there has been a large increase in new and existing clients asking for assistance with their home loans and mortgages. With this in mind and to help further assist to our clients outside of Christchurch, Advanced Mortgage Solutions is pleased to announce the introduction of a toll free number.

0508 HOME LOAN or 0508 4663 5626*

If a toll call is required to talk to us please feel free to use this new number at anytime. We are currently updating our logo's and email footers to incorporate the new number so please look out for them.

Interest Rate Outlook

Current Interest Rates
Rates offered are the best of standard, carded interest rates available and do not reflect any discounts your Advisor may be able to obtain for your client. Rates correct as at 01/8/10.
Variable	5.85%
6 Month Fixed	6.00%
1 Year Fixed	6.35%
2 Year Fixed	6.89%
3 Year Fixed	7.15%
5 Year Fixed	7.65%

New Zealand is actually making the slow and steady recovery we needed The problem is that media tends to focus on and highlight the negatives that continue to come out, whether it be the small interests rate increases we have expected (published as 'hikes' - far more dramatic!) Or the sluggish real estate market when in fact these factors are normal in a slow, bumpy recovery which looks and feels more like small waves in a bathtub than the negative sentiment the media promotes.

Yes we did get a 0.25% increase in the Official Cash Rate late in July but that was well and truly expected, guess what we will get another two to three similar moves before the end of the year, but remember the world economy was in such 'free fall' eighteen months ago that drastic measures were required and taken to protect us all from a depression like environment whereby rates were slashed to historic lows.

As such the next two or three increases do little other than restore us to a more 'normal' interest rate environment which is required to ensure that we don't return to a debt fueled recovery. Amazingly, we have yet to see the bank's react with an increase to their variable rates by passing on the 0.25% increase but as sure as the sun follows the moon you can expect that to land within the week.

This economic recovery is not about the housing market jumping back out of it's skin, it is being driven by slow, sustainable manufacturing growth, increased productivity and a reduction in household debt.

We continue to be restricted by a lack of available credit with banks remaining extremely conservative, in a bizarre sort of way this actually drives our business as more consumers who historically thought their bank was their friend have found out they are not so friendly and won't lend them the money they want to buy their new house, as such they find themselves at our door with far more options and our clients are constantly amazed that we can turn a bank 'no' into another bank 'yes'.

So, we get you the money, then the question becomes should I fix my interest rate or float? This is certainly a tough question in the current environment but with the difference between the floating rate and the 2 year fixed rate now looking at around 1% we do see more value n the mid- term rates of 2 year and suggest that this is a pretty safe place form many of our clients which may look pretty attractive in one year's time.

If you have a home loan coming up for renewal or just want some help with a loan please contact me by email here or get my contact details from here.

Kind regards

Scott Miller

P.s Find a number of short video's to help with better understanding bank policies, what interest rates are doing and a brief look into some of the different strategies available when looking to invest. Please click on the link below to have a look.

* Please note that at this time this service is only available from landlines.

This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication.

The AMS Property Gazette - July

Sun, 25 Jul 2010 19:44:00 GMT

The Budget

The budget has come and gone with little to no affect on existing investing strategies, and for those looking to purchase a family home for themselves nothing has changed at all. The biggest change came with the dismantling of the ability to claim depreciation from the building. Experts in this field have placed a weekly cost to the vendor of investment property to be around $30 - $40 pw for new houses and $20 - $30 for existing or secondhand houses. Of course depreciation is still available on chattels and it is expected the chattel valuers are going to become very popular and extremely busy over the coming years to help compensate the losses mentioned above.

LAQC's

Like above very little has changed here. As long as the property held within an LAQC (Loss Attributing Qualifying Company) is running at a loss ( When the mortgage, rates, insurance, and maintenance costs are higher than the rent received) and you are personally guaranteeing the loan against the property(s), nothing has changed in distributing those losses against your personal income.

Interest Rate Outlook

Current Interest Rates
Rates offered are the best of standard, carded interest rates available and do not reflect any discounts your Advisor may be able to obtain for your client. Rates correct as at 10/7/10.
Variable	6.00%
6 Month Fixed	6.10%
1 Year Fixed	6.45%
2 Year Fixed	7.00%
3 Year Fixed	7.30%
5 Year Fixed	7.75%

The easy decisions are over! After an almost continuous easing of interest rates over the past 2 years the worm has finally turned and we are now on the upward spiral.

Up until now it has been relatively easy to read the interest rate market and the majority of consumers have slowly unwound their fixed rates to enjoy the historic interest rate lows of the past year.

Now however, we are faced with the difficult decision of whether to lock interest rates in or stay floating.

Further confusing the matter, recent economic data does suggest that while interest rates will certainly continue to rise it may not be as fast as many first thought.

Consumers continue to look to get their household balance sheet in order, despite a recent spike in spending largely due to people looking to make any 'big ticket' item purchases pre the increase in GST in October.

Our appetite for borrowing remains subdued as where possible consumers look to pay down debt as opposed to increase it.

While this augers well for the future it does contribute to the sluggish recovery the economy is making.

This is further evidenced by the continual slow progress of the housing market which remains soft as the value of residential sections continue to drop, now down by 17% from their peak two years ago. Additionally, migration continues to slow from last years healthy increase of over 20,000.00, currently 2010 sees us on target to only increase by around 8,000 people which could yet be an optimistic figure as the buoyant Australian labour market continues to hold appeal for some Kiwis.

Interestingly, we have seen a substantial easing in long term rates from the major banks over the past week with decreases of as much as 0.65% off five year fixed rates and up to 0.45% off three year rates & two year rates down by around 0.30%. This move certainly sees the interest rate curve flatten substantially and provides far more appeal to the two & three year rate options which are now less than 1% - 1.25% higher than the low variable rate.

Currently a split on variable and two or three year money looks pretty appealing although if you are concerned about rate rises now may be a good time to lock in.

As always please do not hesitate to contact me if I can assist you in finding ways to streamline your mortgage costs. This ranges from purchasing property right through to loan roll overs and top-ups.

Kind regards

Scott Miller

P.s I have started making a few short video's to help with better understanding bank policies, what interest rates are doing and a brief look into some of the different strategies available when looking to invest. Please click on the link below to have a look.

NOW - No Opportunity Wasted

Thu, 22 Jul 2010 05:16:00 GMT

Events and Seminars

This is serious... every property owner or investor should watch this video.

www.righthererightnow.co.nz

Make no mistake if you’re a property investor then after the recent budget you have 3 clear cut choices to make.

You can give up
You can give in
Or you can give it your all!

Sadly most will choose the first 2... What about you though?

Will you quit like the rest? Or will you do whatever it takes to educate yourself on the opportunities the recent budget has given property investor just like you?

If you’re not a quitter then this video message is for you. Go to this website and watch this short video today...

www.righthererightnow.co.nz

On this video you’ll discover how some property investing experts are using the financial changes made by National to their advantage already. In fact you’ll discover a strategy that can put $20K in your bank account up front plus pay you $200 per week in positive cash flow?

That’s right $20,000 up front and $200 per week in positive cash flow... sounds interesting doesn’t it?

And the best part is on this video you’ll discover an opportunity to learn how you can do the same from investing in the NZ property market right now. So what are you waiting for? Watch this short video today

www.righthererightnow.co.nz

Make no mistake there always has been and always will be financial change. It’s not the financial change that this budget will bring that matters, it’s what you do about it that counts.

This two day event only costs $47.00 Book Now!!

It’s how you react that counts and remember you have 3 choices!

You can give up
You can give in
Or you can give it your all!

If you’re not a quitter then seriously this video is for you

www.righthererightnow.co.nz

Happy property investing and whatever you do don’t quit!

Cheers

Scott Miller

P.S. Remember it’s not what the “Government Fat Cats” having taken away from you that counts. What counts is how you deal with it and the opportunities you create from these same financial changes that counts!

Watch this video this video and get even with the “Government Fat Cats”

www.righthererightnow.co.nz

ALL this for only $47.00!!!

Budget 2010

Sun, 23 May 2010 04:30:00 GMT

There is a good chance you will be thinking - How does the 2010 budget affect me?

In this newsletter I will cover off some of the affects Thursday's budget will have in relation to owning property, both for owner occupiers and for investment property portfolio owners.

The Budget and what does it mean for property owners?

Owner Occupiers:

Basically not a lot has changed if you own your own home. Because home owners are exempt from claiming things like depreciation on their homes, losses against personal income, and don't usually derive an income from their home, most of the changes will not influence your day to day expenses (excluding things like the increase in GST etc).

The IRD still have their task force looking into owners who have placed their ‘principle place of residence’ (their own home) in an LAQC and are claiming loses as an expenses. This is illegal and the IRD/Government is taking this form of tax evasion very seriously. If you find yourself in this position I recommend you seek advice from an accountant immediately - putting one's head in the sand will not make it go away.

Investment Property:

In contrast there have been a number of changes (as expected) for those of us who own an investment property portfolio. However these changes are less dramatic than most of the pre-budget hype, speculation, and downright irresponsible dribble that was being circulated. So let’s cover of the main facts.

1)Depreciation on buildings has been removed unless the building’s life expectancy from new is less than 50 years. A list of such buildings is being made available and an application process for people who believe they fall under this criteria is being established. Personally when talking about residential property I cannot think of a reason where I would want to construct a property that would only last for 50 years. Its resale value for one would not be particularly high. There may be areas where sleep outs or minor dwellings are popular allowing for this kind of building and subsequent depreciation may take place?

2) One of the more annoying ‘the world is coming to an end’ forecasts around the changes to take place in the 2010 budget included ring fencing of losses within an LAQC. This would have meant that any losses incurred through owning a negatively geared property portfolio held in a LAQC could no longer be offset against your personal income tax. Although there has been some suggested changes (this is not law yet and is subject to change) to LAQC’s for the majority of us it will have no effect. This is due to the lenders of New Zealand making it compulsory for the directors of an LAQC to give personal guarantees for the loan the LAQC is being structured over.

The following is from Matthew Gilligan of Gilligan Rowe and Associates - one of New Zealand’s leading property accounting firms.

Paragraph 5.11 states a member's interest (in the proposed new LAQC regime) would extend to include in the definition of equity the share of any debt guaranteed by the shareholder.

This means that if you are a guarantor, you get to claim losses up to the extent of your equity invested PLUS your guarantee. As shareholders will guarantee (most of the time) all of the debt, the structure will get full flow through of losses up to

100% of the value of the amount of debt they have guaranteed, or cash injected - the higher of the two.

Therefore effectively existing LAQC users will get the benefit of losses flowing through, provided they are guarantors to the debt.

Remember this is all subject to submission and not law yet.

The other major change regarding LAQC’s is around the tax paid when an LAQC starts making a profit. At present if you make a profit in an LAQC the maximum tax rate you will incur is 30% (company tax rate). However proposed changes will see this rate change to match your personal tax rate. So if you (under the new tax rate affective in October) earn $70,000.00+ you will be taxed at 33% and so will your profits from your LAQC. This is seen as making the tax system more fare and will limit tax avoidance through LAQC structures.

Please feel free to contact me if you have any questions or thoughts on what I have written above.

May's Newsletter

Sun, 23 May 2010 04:31:00 GMT

I would like to take this opportunity to welcome all those clients who have joined the AMS team from what was Paul Kerr Mortgages. Paul has decided to leave the mortgage industry and we wish him all the best of luck with his future business ventures.

The last two months have seen many interesting developments in regards to property and of course this years budget is just around the corner.

The Budget

The first quarter of 2010 has seen the growth of late 2009 slow quite markedly. The issue is understanding why and how long this slowdown will last.

House prices have flattened this year adding weight to the concept that the growth of late 2009 was driven predominantly by lack of stock on the market not an economic rebound. While this continues to be the case the 'fear' that John Key has generated in the residential investment market due to his proposed tax changes to residential investment property has had a ‘lead weight' effect on property investment.

Our belief is that until budget 2010 is released in May and it is clearly understood what changes are being made to the tax laws around residential investment property most investors are sitting on their hands (and their cash) which will continue to hold the momentum the market had in late 2009 back. As such the average days to sell a property has lengthened to its highest level since June 2009 and is quite indicative of the true state of the housing market.

One highlight was today's unemployment figures announcement. There was an unprecedented 1%+ drop in the unemployment levels in New Zealand for the month of April. This has increased the possibility of an interest rate rise in June 2010 instead of the more widely predicted July increase. However Dr Bollard has indicated that he believes interest rates will rise at a much slower rate in similar situations in the past. I personally don't see this so much as a negative influence as much as I see this as a necessary part of the property sectors recovery.

Kiwis continue to deleverage their asset position (repay debt while interest rates are low) and this puts us in a good position for growth in the not too distant future (as in 2011) as pent up desire to invest and grow will at some stage be unleashed stimulating the economy. We cannot help but believe that the 2011 Ruby World Cup will be a strong catalyst for our 'real' rebound.

Our recommended borrowing strategy has not changed greatly in the past 6 months and at the risk of repeating ourselves we cannot recommend anything else other than floating rates or six - twelve month fixed as a preferred option. Variable rates remain at record lows, while most fixed rates have fallen in the past month they remain very high in relation to floating rates and this is more a sign of the market ‘overpricing' long term rates in the back half of 2009 which was driven by the price war the banks created for term deposits and not improvement in market conditions. Stick with the shorter term funding but keep your payments above the minimum required to repay, perhaps assuming rates of 1% higher than today.

Please find this useful link below and make your vote - it is best your voice is heard.

Do you support tax changes to investment property?

YES / NO

Interest Rates

So with the new unemployment figures and the direction in which they are heading together with the contents of the Budget (which is due to released on 20th May), will impact the Reserve Bank’s review of the Official Cash Rate early next month. The consensus is now that the Reserve Bank will start increasing rates as early as June. Increases are expected to be in small increments of around quarter of a percent. How many we have will depend on how strong our economic recovery is.

As mentioned above a drop in unemployment is a strong indication that the economy is improving. The other significant event that is severely affecting the international financial markets, is the debt crisis in Greece and Portugal and whether it will extend to other larger European countries such as Spain, UK and Italy. This crisis has been the cause of the rapid appreciation of our currency particularly against the Euro which is now up over 10% over the past month to 0.56. This has had a major effect on world equity markets which are wobbling - some are down over 3% this week. Two years ago, as the global financial crisis was unfolding, individual governments were sorting out the banking system. Now the world bankers will have to focus their attention on sorting out some individual countries.

Tip of the month:

{tag_recipientfirstname} if your home loans are on floating I believe it is time to look at your fixing options. Interest rates are going to go up and although Dr Bollards intention is to increase them slowly you never know what might happen. Feel free to contact me or email me to go over the best interest rate solutions for your needs.

~March’s Property Newsletter

Thu, 25 Mar 2010 06:28:00 GMT

Blog

Welcome to my newsletter for March 2010.

The response to Advanced Mortgage Solution’s new referral programme released last month has been over whelming. We have been able to help 4 couples into their first homes and helped half a dozen investors purchase further investment properties. The good news doesn’t stop there – because of these referrals $1,820.00 has been paid in commission to the referrers, our way of saying thank you for supporting AMS.

There seems to be a vacuum of property related news around New Zealand as many analysts and investors take a collective breath on hearing John Keys pre-budget announcements last month. It appears many people are waiting to hear confirmation of what exactly is going to become law on May 20th Budget.

Please click on the links below for this month’s points of interest:

- OCR remains unchanged
- Opposition to tax announcements finds voice
- House prices continue to increase but at a slower rate
- Aussies – coming then going
- Phoenix - two to go

1 – OCR remains unchanged

Yesterday the Governor of the Reserve Bank left the official cash rate (OCR) unchanged at 2.5%. The reasons for this are that the economy remains subdued, unemployment is at a 17 year high, building consents are down and credit card growth is sluggish.

Business confidence appears to be improving but for all intents and purposes we are still in a recession. What is unusual is that we are a full 1.5% below Australia’s overnight cash rate of 4.0%. This is why our exchange rate has been depreciating against their currency. This is positive for those exporting to Australia as still remains our largest market. The earliest the commentators are suggesting that rates will start to rise is around the middle of the year. We believe, due to the state of the market, that it may be later than this - around September.

This is positive for those with mortgages, as each month more and more people are coming off expensive fix rate mortgages and getting the benefits of lower rates.

2 – Opposition to tax announcements finds voice

Finally there is some real noise being made from property groups, property educators, solicitors, and accountants about the dangers of proposed tax changes outlined by John Key last month. As I indicated in last month’s newsletter I believe there are some real downsides to the proposed changes.

Click here to read more……….

3 - House prices continue to increase but at a slower rate

QV figures out on Wednesday show that although house prices have continued to raise they are doing so at a slower rate. They go onto say…….

“Property values are above the same time last year according to the QV residential property indices for February released today. While the year on year change has increased further to 5.5 percent, values in the last few months have flattened in many areas. Nationally, values are now 3.9 percent below the peak of the market in late 2007.

The National average sales price also increased to $416,074 in February, up from $409,807 in January. While roughly indicative of value, the average sales price is a less reliable measure of change than the QV index as averages can be biased depending on which part of the market is active.

Glenda Whitehead of QV Valuations said “the annual change in values across New Zealand has continued to increase from last month, but this is masking what has happened in the most recent months. In the main urban areas, values have grown since mid 2009, but that rate of growth has recently begun to slow. In the provincial areas, this growth has slowed even more, and across the rural residential areas house values decreased slightly over the last month”.

Whitehead said “after a relatively quiet January, things seem to be returning to normal. Sales activity picked up over February and is back to similar levels to that observed throughout 2009. There has also been a significant increase in new listings, and we would expect this to convert to higher sales numbers in the coming months. The increase in sales and listings are both to be expected as February and March are typically the busiest months of the year”.

“The market remains patchy and buyers cautious. Well presented, good quality properties are continuing to sell quickly and at healthy values, whereas those with less desirable attributes are proving hard to shift. There is activity at the lower end of the market, driven mostly by first home buyers. Fewer investors are actively buying, and some are selling their investment properties now rather than waiting for the changes in property tax to be announced in the May budget” said Whitehead.

“The banks continue to take a cautious approach to lending, with property valuations required where the borrower has a relatively low deposit” said Whitehead.

Whitehead said “there is an increase in the number of new houses being built, but many of these are for clients under contract. Builders are still struggling to secure finance if they do not have these underlying sale agreements. Demand for new houses is steady but still nowhere near the boom levels of a few years ago when they couldn’t be built quickly enough”.

“We expect values to stabilise over the coming months reflecting the ongoing uncertainty around economic factors such as employment, pending interest rate rises and continued tight lending criteria. We may see more certainty in the market after the May budget announcement when personal tax cuts are known, changes to property taxation are specified, and interest rate changes are clearer” said Whitehead.

Values in the Auckland Region have continued to increase in recent months and are now 8.7 percent up on the same time last year. The Wellington Area is 6.7 percent up, and Christchurch 6.9 percent up. Values in the other main centres have been stable in recent months, but still remain above last year by 4.3 percent in Hamilton, 1.0 percent in Tauranga, and 6.2 percent in Dunedin.

Unlike the main centres, values in the provincial centres have been more variable over recent months, although values are still above the same time last year in almost all areas. Rotorua is 2.5 percent up, Gisborne 2.6, Napier 5.9, New Plymouth 7.9, Wanganui 1.1, Palmerston North 6.1, Nelson 5.5, Queenstown Lakes 0.8, and Invercargill 4.3 percent. Whangarei is the only centre still below last year at 1.8 percent although this has improved since last month.”

4) Aussies – coming then going

Here’s a boo hoo story about poor Aussie who feel they are being overcharged for accommodation when coming to New Zealand to watch the Rugby World Cup.

Source: ONE News

An Australian travel agent is accusing Auckland hoteliers of being greedy in their pricing for the Rugby World Cup.

Australian Sports Tours says hotel rates during next year’s World Cup will be about three times what they’re during the Bledisloe Cup.

General manager Sam Harrison says a night at the Hilton Hotel could set people back by $1700 and he says this is pushing people to consider alternatives like travelling early or flying in and out on the same day. He says even some two and three star hotels are tripling their prices, believing demand will outstrip supply.

Harrison says hotels in cities not hosting the cup could offer competitive prices, but they are jacking their prices up too. He says there’s a danger of alienating markets like the United Kingdom, which has been hit hard by the global recession. Harrison says staying on a cruise ship looks like a good value option compared to the Auckland hotels.

5) Phoenix - two to go

Being more of a traditional rugby union fan I have not really followed the progress of how the Phoenix has got on during the season. But since they made the play off I’ve been hooked. Just this weekend’s game against Sydney and we are in the final.

Go the gold and black!!

~February’s Property Newsletter

Thu, 25 Mar 2010 06:29:00 GMT

Blog

Well hasn’t a lot happened in the space of one month, we have had a power packed month of news and announcements. I have listed a few I think are worth looking at in a little more detail.
1) AMS releases it’s highly anticipated referral scheme
2) John Key outlining tax reform
3) Please read a little light humour on how the new tax system will work.
4) New housing data from QV
Let’s have a look at these points of interest.

AMS releases it’s highly anticipated referral scheme!!!

We have had a number of referral schemes ideas over the years, and though all of them were good, somehow they lacked in clarity and ease of understanding.

But now we are pleased to announce that Advanced Mortgage Solutions Ltd is offering a referral scheme that is second to none and is open to all those who refer business to us.

Starting this month if you refer family, friends, or work colleagues to Advanced Mortgage Solutions and they settle a loan no matter how big or small you receive 10% of our commission. All you have to do is introduce us to people who you think can benefit from our wealth of experience and we will do the rest.

One of our referrers has already referred 2 clients to us this month and although she doesn’t know it yet is up for a commission cheque of $581.00!!!!!!

This is a great opportunity to enjoy a little extra bonus every now and then, whilst knowing the person you referred is in the best possible hands.

We look forward to hearing from you and helping with you referees needs.

If you would like to know more or have someone who needs our help please click HERE.

John Key outlining tax reform

This week John Key outlined guidelines on what he thinks the National party are likely to announce at this year’s budget on May 20th. I have summarised how this will affect home owners and property investors below.

Proposed Tax Changes for Homeowners

Those with their own homes (and those planning to buy), can breathe a sigh of relief that the proposed tax changes will not affect owner occupied properties. A land tax has been ruled out. This would have been levied in much the same way as rates - a blunt form of tax, hitting hard all those that own their homes as opposed to those who rent. A land tax would have had a negative impact on those on lower incomes, our farming sectors and property owning charities. A capital gains tax has similarly been rejected. A rise in GST is negative for homeowners as any alterations and improvements will cost more. There will be relief from lower marginal tax rates.

Likely Tax Changes for Investment Properties

The big news in the Government’s opening parliamentary speech is the comments about trying to extract extra revenue from the residential property sector, which they believe, unfairly is not paying its way. After ruling out capital gains, land taxes and the notional return, the two areas the Government is likely to target is depreciation and how much in the way of losses can be claimed. There are two types of depreciation, one on buildings or improvements and the other for chattels The change, we understand, will only apply to buildings or improvements. The second change, hinted at, may be ring fencing losses to a certain level or restricting their offset to property income. The Government must be careful in changing of the rules regarding property investment as many people have their only form of superannuation tied up in this sector. Secondly the Government should be encouraging the landlords to continue improving their properties and so improving our housing stock. These changes will not do this. If this sector is made unattractive to invest in, there will be fewer investors - this may well lead to a rental accommodation shortage and hence higher rents, not to mention the real chance of properties devaluing.

Is it a Good Time to Buy?

The property market was quieter in January and agents have put this down to two factors- the number of people on holiday and the uncertainty regarding new property taxes. For potential owner occupiers, this has been removed and they can now consider whether it is a good time to buy. This is always a difficult decision but there are a number of positives out there. We are still in a recession with higher than anticipated unemployment figures being released last month. It can be assumed that interest rates will remain lower for longer. If GST goes up this will cause an increase in the costs of new houses may cause existing stock to rise in price as well. Properties still tend to be priced below their 2007 peaks - it is cheaper to buy today than three years ago. Due to tax anticipated tax changes with residential investments we may see a few more rental properties coming onto the market, which in the short term will increase available supply which is always good for potential home buyers.

Please read a little light humour on how the new tax system will work.

The tax system explained in layman’s terms; explained in beer.

Suppose that every day, ten men go out for beer and the bill for all ten comes to$100.

If they paid their bill the way we pay our taxes, it would go something like this…

* The first four men (the poorest) would pay nothing.
* The fifth would pay $1.
* The sixth would pay $3.
* The seventh would pay $7.
* The eighth would pay $12.
* The ninth would pay $18.
* The tenth man (the richest) would pay$59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just$80.

The group still wanted to pay their bill the way we pay our taxes.

So the first four men were unaffected.

They would still drink for free.

But what about the other six men? The paying customers?

How could they divide the$20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man, like the first four, now paid nothing (100% savings)

* The sixth now paid $2 instead of $3 (33% savings).
* The seventh now pay $5 instead of $7 (28% savings).
* The eighth now paid $9 instead of $12 (25% savings).
* The ninth now paid $14 instead of $18 (22% savings).
* The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

“I only got a dollar out of the $20,”declared the sixth man.

He pointed to the tenth man,” but he got $10!”

“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he got ten times more than I!”

“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.

Professor of Economics.

New housing data from QV

Property values have increased further according to the QV residential property indices for January released today. Nationally, values are 4.4 percent above the same time last year, and 4.3 percent below the peak of the market in late 2007.


NZ MAIN AREAS	SIGN UP TO YOUR AREA

Auckland Region

7.3%

$549,028

Hamilton

3.5%

$350,722

New Plymouth

7.1%

$337,719

Palmerston Nth

5.6%

$290,709

Christchurch

6.3%

$380,268

Queenstown

0.5%

$607,245

Invercargill

4.6%

$208,128

Whangarei

-3.9%

$330,076

Tauranga

0.6%

$422,226

Rotorua

3.3%

$268,690

Napier

5.1%

$321,551

Hastings

2.6%

$327,341

Wellington Rgn

5.7%

$460,638

Nelson

3.6%

$340,782

Dunedin

5.0%

$279,101

New Zealand

4.4%

$409,807

Annual Property Value Change
Average Sales Price

View FAQs on the Property ValueMap

The average sales price across New Zealand also increased to $409,807 in January, up from the $404,671 in December. However, the average sales price is a less reliable measure of value change than the QV index as the average can be skewed depending on which part of the market is active.

Glenda Whitehead of QV Valuations said “market activity in January appears to have been patchy. Overall, activity was lower than expected, although our valuers are seeing an increase in activity in some sectors of the market and a decrease in others. While it is normal for sales activity to be at its lowest over the Christmas period, there is usually an increase in listings activity in January leading into the busiest time of the year in February and March. This January the expected increase appears to be absent”.

Whitehead said “this lower level of market activity in January could be due to more people being forced to take additional leave this Christmas, and only recently returned from holidays. There are also signs of increasing indecision in the market, fuelled by uncertainty over interest rates, employment, which direction property prices are likely to move, and the recently announced tax working group recommendations”.

“The majority of the market activity, particularly in the main centres, is being driven more by existing homeowners and first home buyers rather than investors. Those currently entering the market appear to be taking a cautious approach to their decisions, and are doing their research thoroughly. Some of the frantic market activity of 2009, when there were multiple buyers competing for a property, appears to have eased, at least for the time being” said Whitehead.

“It is still too early in the year to conclude the likely pace of the market in the coming months. There is increasing debate around the likely impact of the options put forward by the tax working group, but movements in property market are driven by a combination of factors, and while any tax changes implemented will impact, that change will be alongside other market factors such as interest rates, employment security, and bank lending policies prevalent at the time any of those tax changes come into effect” said Whitehead.

Values in most of the main centres have continued to increase in recent months and are now all above the same time last year. Values in the Auckland Region are now 7.3 percent up, the Wellington Area is 5.7 percent up, and Christchurch 6.3 percent up. Values in the other main centres have fluctuated in recent months, but still remain above last year by 3.5 percent in Hamilton, 0.6 percent in Tauranga, and 5.0 percent in Dunedin.

In the provincial centres values have been more variable over recent months. However, values in nearly all areas are now above the same time last year. Rotorua is 3.3 percent up, Napier 5.1, New Plymouth 7.1, Wanganui 0.1, Palmerston North 5.6, Nelson 3.6, and Invercargill 4.6 percent. Whangarei is the only centre still below last year at 3.9 percent. Queenstown Lakes is 0.5 percent above last year and this is the first time it has shown year on year growth since May 2008. This is due to an increase in values in the last few months after a relatively flat 2009.

We trust you have found this information to be helpful and at times humours. As always we love to hear your feed back and look forward to hearing your thoughts and observations.

~January’s Property Newsletter

Thu, 25 Mar 2010 06:30:00 GMT

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All the crew at Advanced Mortgage Solutions you like to wish you a Happy New Year.

I can optimistically say I look forward to an improving local and world economy, and with any luck transform into happier times for 2010.

I often receive enquiries from clients regarding points of interest, or law changes that relate to property in New Zealand. I would like to start this newsletter with a question sent to me by my client, Matt. Matt works in Australia and has a small but growing property portfolio in New Zealand.

Matt’s question:

I look forward to hearing from you in Feb, I will also look forward to your next property commentary. Will you be commenting on the recent taxation proposals and their implications for investors? Recent chatter on the propertytalk website has caused quite a stir!

For those who are interested Matt is referring to this thread on Propertytalk.

The outlined changes to the current tax laws within the threads centres around a proposal being put forward where people with negatively geared rental portfolios placed in LAQC (Loss Attributing Qualifying Company) would lose the ability to claim their associated loses within their portfolio against other forms of income – for most of us this relates to our wage or salary.

The ‘Tax Working Group’ has stated the IRD are missing out on hundreds of millions of dollars from wealthy New Zealanders who legally use current tax benefits enjoyed by offsetting their negatively geared property portfolio’s loses by using an LAQC. It appears the TWG’s beef centres around so called ‘rich people’ finding a way to minimise their tax loses.

So where does it currently stand? – At this stage the committee set up to look at the impact of New Zealand’s love affair with property and the implication this love affair has on our economy is in deliberation. Some in the industry think changes are not only required but are imminent, others believe this is merely the present government allowing it to be seen as ‘taking action’ but has no real plans to implement any major changes. The latter has some weight behind it when one looks at the demographic of voters who put the National party into power in the first place.

My thoughts? – I think that once again property is taking an unfair hit for the economic problems we have recently injured. LAQC’s and their benefits help many New Zealand’s find a way forward in life, often this comes in the form of helping set up a nest egg for retirement, particularly important as our ageing ‘cradle to grave’ system is being eroded by government every year. To abolish the benefits of an LAQC will not only see rents rapidly rise to cover the costs a vendor now has to foot alone, but it could trigger a large reduction in the value of house prices in New Zealand.

In my opinion this would have a catastrophic effect on home owners as in many cases lenders would hold larger mortgages against a property than the property is worth, forcing them to ‘call up’ these mortgages in order to balance their books. As always time will tell, but be prepared to wait through a long drawn out process.

Tip of the month:

On a lighter note – please remember to contact me with any loan roll overs you have coming up. It is more important now than at any time to have the right structure and fixed terms in place, particularly as the next 2-3 years are likely to be bumpy in regards to interest rates.

We have an OCR (Official Cash Rate) announcement on January 28th and another on March 11th. The expectation is ‘no change’ in the OCR on these announcements; however this is by no means set in concrete.

Adele, now is a good time to buy houses, it doesn’t matter if it’s for yourself or to add to your portfolio. Interest rates and house prices are low, this coupled with the fact that we are at the start of another capital growth cycle means we are in exciting times. As always please feel free to contact me with your questions as I would love to help you with your property plans.

~December’s Newsletter

Thu, 25 Mar 2010 06:31:00 GMT

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Welcome to my festive season’s newsletter.

I wish you and your family a very Merry Christmas and a Happy New Year.

Colin, I thought I would take this opportunity to recap on events that have taken place over the last year, if you are anything like me I just cannot work out how the year went by so quickly.

2009 - A random review
The big events of 2009 are usually well covered in the Christmas newspapers. I have picked a few which may not make the papers.

The All Whites secured their place at the World Cup in South Africa in 2010. Brilliant!
It turns out that most investors lost money without the help of financial advisers.
The housing market held firm in the face of some dire predictions.
The Silver Ferns won the inaugural World Netball Series in Manchester, beating Jamaica in the final.
The Spring Boks took the Tri Nations but we held on to the Bledisloe Cup.
Michael Jackson passed away.
The associated persons ruling came into effect.
Dr Bollard held his nerve and the OCR remains at record low levels and, for the first time in many years, New Zealand has a normal interest rates yield curve.
BNZ got rid of it’s mobile mortgage managers, encouraging its customers to return to its branches.
Water was found on the moon.
I became an uncle for the first time.

There is no doubt that 2009 was a hard year, and most of hardship was a result of the world’s financial meltdown. This placed huge pressure on employers, lenders, government, and the family unit. Although some pain remains, there are signs that the worst is behind us and nowhere can this be seen more graphically than in the housing market. In New Zealand purchasing houses remains the single biggest ticket item. On average most of us only do this 2-4 times in our lives.

Recently house prices have made a remarkable recovery in their value. The last peak in house prices was in November 2007 and has been used as the benchmark to measure house prices ever since. Part of the reason for these increases in house prices have of course been the low mortgage interest rates we have enjoyed in 2009. Although the longer term rates (3, 4, 5 year) have ballooned above their 10 year averages, short term rates remain low. Today’s announcement from Dr Bollard came as no surprise when he left the OCR unchanged.

Bank	Term	%
ANZ	6 Mths	5.99
ASB	6 Mths	6.00
BNZ	6 Mths	5.75
Kiwibank	6 Mths	5.75
National	6 Mths	5.70
Westpac	6 Mths	5.49

What will 2010 bring?

· The OCR is expected to remain unchanged until the middle of 2010.
· House prices will continue to improve but perhaps at a slower rate.
· Interest rates will continue to increase.
· Mortgagee sales will remain at higher than normal levels.
· New Zealand’s economy will continue to recover.
· Worldwide economic improvement.

Tip of the Month

AMS is open over the festive season so please feel free to contact me over the break with any of your finance needs or questions.

Look out for my January newsletter as it will have a major announcement. AMS is going through a number of existing changes that I cannot wait to share with you.

~November’s Property Newsletter

Thu, 25 Mar 2010 06:32:00 GMT

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Welcome to November’s newsletter.

This month has seen it fair share of property related news.

· NZ’s Official Cash Rate remains unchanged
· Australia’s Official Cash Rate increases for the second time running
· Associated person’s ruling comes into effect
· Debate of capital gains tax continues
· House prices continue to improve
· Mortgage interest rates continue to increase

New Zealand Official Cash Rate (OCR) has remained unchanged for the 4th six week period in a row, and Dr Bollard has repeated his intentions of leaving it unchanged until late 2010. Some economists were predicting that New Zealand would follow Australia’s lead and increase the OCR to offset any inflationary pressures due to the improved outlook of New Zealand’s economy. The reality is that Australia came through the recession in much better shape than New Zealand and it will take some time for the improvements in our economy to show through in any real terms of growth.

This unchanged status in the OCR however has not stopped mortgage interest rates from increasing. One factor (and there are many) attributing to these interest rate increases is lenders in New Zealand have been under increased pressure from the Reserve Bank to limit the amount of offshore borrowing secured for mortgage purposes, and to increase their local deposit funds to cover any shortfalls. This has lead to lenders around New Zealand offering better rates on term deposits thus pushing up mortgage rates to cover costs of the accumulating interest on these term deposits.

In fact the 3, 4, and 5 year rates are now above their ten year averages, making these rates undesirable to fix in unless under particular circumstances. I.e. parking an estate or your property portfolio’s cashflow allows.

Please contact me here if you have a fixed term roll over coming up for renewal as it is very important to have the best interest rate structure in place bearing in mind how volatile interest rates are at the moment.

Associated Peron’s Ruling

The associated persons ruling came into effect on 6th October 2009. This will have far reaching repercussions for those people who have both buy and hold and trading portfolios. The ruling (in basic terms) states that if you are trading property, it is deemed that you are a ‘trader’ and that this is how you go about making a living. So even if your intention when purchasing a property is to buy and hold, if you sell this property within 10 years of purchasing it, the property is tainted under this new ruling and you will have to pay income tax on any profits.

More importantly though, because you are considered a trader you will have to have claimed GST after purchasing the property and as such will have to pay GST back to the IRD when selling the property. This is very important to remember as it will make a big difference in your calculations when purchasing a potential property.

The old structures of setting up a buy and hold company or trust for buy and holds, and a separate company or trust for trades will no longer protect you from becoming tainted.

There are however a couple of things to keep in mind.

1) The ruling only takes effect on property purchased at the time of acquisition. So all property purchased before the 6th October is not tainted by this ruling even if you sell the property before owning it for 10 years.

2) If you do not trade property or sell a property within ten years of purchasing it (after 6 Oct 2009) you will not be considered a trader and as such will remain untainted.

House Prices

House prices continue to rise across the nation. The strongest growth continues to be in the major city centres however this is filtering down to smaller areas of population. With fears that strong house prices will ultimately cause another recession down the line there has been a lot of talk of introducing a capital gains tax to dissuade people from investing in property.

You might think I am bias but I think this is very short sighted and the long term effects of such a tax has not been thought completely through. Property investment has always been a large part of New Zealand’s economic landscape and to attribute the cause of the recent recession solely on property is ridiculous. To introduce a capital gains tax in order to reduce the pace of increasing house prices and making it more affordable for the average consumer makes little sense to me.

If the government increases the tax payable on petrol or cigarettes (or any other items) then it’s not the shop owner that bears the brunt of this increase in total cost of purchasing this item to sell. The extra expense incurred by increasing the tax levy is pasted onto the consumer, therefore allowing the shop owner to retain his margin. This type of on-flow effect will also take place if a capital gains tax is introduced on property. The net result in my opinion will be higher property prices (hindering the average first time buyer), resulting in less people owning their own home and more people settling for the rental option. Which in turn fuels the price of houses and further tilts the balance of home ownership in favour of the property investor, which I believe to be the exact opposite of what the intentions of bringing in a capital gains tax is suppose to achieve. Watch this space!

Summary

Gareth, a lot has happened in property over the last month. I have summaries the most important factors that may affect you. I do however strongly urge you to contact me directly if you are thinking about completeing any property transactions. My services and advice are largely free and I would hate to see any part of your property portfolio compromised.

~October’s property newsletter

Thu, 25 Mar 2010 06:33:00 GMT

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Interest rates

The Reserve Bank cash rate has remained at 2.5% for some time now. The next OCR announcement is set for 29th October 2009 and the expectation from the mainstream bank’s chief economist is there will be no change. However there is underlying pressures for the OCR to go up, and it is widely picked that the original comments from Dr Bollard that the OCR will remain unchanged until late 2010 is being overly optimistic. Just last week Nick Tuffley from ASB predicted that we will see a .5% increase in the OCR in March next year.

What would I do if I was looking to fix a loan?

I still believe there is merit in leaving your loan on the floating rate as we are some way off seeing the OCR rise. I also believe that long term interest rates (3 – 5 years) are no longer attractive as they are now higher than their 10 year averages. If you did want to fix your home loan I would suggest a maximum of 2 years and would consider the option of splitting your loan to reduce your exposure at the end of your next refix period. I offer free advice on fixing home loans and are happy to help you with your decision making. Please contact me here if you would like me to access your options.

Housing Market update

House prices continue to improve with September being the fourth straight month of property price increases. It is believed this is largely due to there being a high demand for property coupled with reasonable low levels of supply. A unseasonably warm end to winter also saw long periods of warm weather enhancing the warm fuzzy feeling around property procurement. This however has been tempered slightly by less than average weather for spring.

As is typical with property lead recoveries it is the major metropolitan centres that are experiencing the best capital growth.

This was evident in the resent QV report out on October 10th.

Lastly I would like to comment on population growth within New Zealand.

Population fluctuations are a well known contributor to the direction of house prices. We have seen a dramatic increase in the numbers of New Zealander’s returning to our shores and it will slowly filter through to the numbers of people either looking to rent or purchase a house. To give you an idea of immigration numbers 17,043 people have registered as permanent or long term returners to New Zealander to September 2009. This is a huge number and there is no sign of it slowing down.

Tip of the month

Be sure of the consequences of your decisions before re-fixing your home loan as it will play a large part in how things will unfold at your next loan roll over. Try and avoid getting advice from someone that works at the bank. Generally these people hold multi-roles that demand they do more than one job and are not specialists in mortgage lending.

As always please feel free to contact me for free independent advice on all things property.

~Property comments from the BNZ

Thu, 25 Mar 2010 06:33:00 GMT

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I am pleased to report that the housing market continues to improve. Not only are the traditional well informed property investors in the market but the long awaited return of first home buyers is making a real difference to the numbers of properties being purchased, if anything the problem facing the market at the moment is not having enough stock to go around. This in turn is one of the reasons why we are seeing house prices increase.

The mainstream banks are slowly beginning to relax their lending policies, and although these policies are not reaching the relaxed levels we witnessed in 2007, they are certainly better an 6 months ago.

A number of mainstream lenders will now consider lending above 80% LVR for the right kind of property and applicant. This however is still bettered by the 95% LVR products that is available to Advanced Mortgage Solutions clients that fit criteria.

As always if you would like to know more please click here to enquire further.

TIP OF THE MONTH:

This month’s tips come courtesy of recent comment released by Tony Alexander from BNZ. Please read on to hear his thoughts on interest rates and where he sees the housing market going.

INTEREST RATES

Given the way the data have fallen over the past week it remains reasonable to continue to expect
wholesale interest rates to slowly drift higher in coming months.

Early this week we learnt two important things. First, as discussed in depth in our Housing section, house prices are now officially rising again in New Zealand. They gained 1% in July and 2.2% in the three months to July. The time taken to sell a dwelling is now the best compared with average since late-2007, and anecdotes continue to bespeak of listings shortages. This means prices are likely to continue to creep up.

This development is important because we Kiwis pay close attention to house price movements and the gains in prices fairly much wipe out concerns some will have been having about rising unemployment being the key determinant of house price changes and everything else in the economy. As we have pointed out, the labour market lags the economy, it does not lead it. That means if you forecast the economy on the basis of what the labour market is doing you are actually looking backward rather than forward.

The other large piece of news was retail spending growing in seasonally adjusted volume terms by 0.4% during the June quarter This is still a weak result by historical standards but better than the 0.2% decline expected in the markets and the strongest result since the March quarter of 2007 (when sales ballistically soared 3.7%!).

The data come in a week when we have also learnt that the EU economy shrank only 0.1% during the June quarter with France and Germany each growing by 0.3%. Japan also grew 0.9% during the June quarter. The results add up to further support for the global recovery story therefore further upward pressure on share prices, growth and risky currencies like the NZD and AUD, and of course interest rates. But rate rises will not be linear. There will be substantial reversals at times as doubts occasionally appear about the strength of the economic recovery. In particular one must be wary of the impact which the unwinding of unsustainably stimulatory fiscal and monetary policies will have next year and through 2011. In fact those concerns have dominated this week with the result that after initially jumping skyward wholesale interest rates have finished today down very slightly from where they were a week ago.

Key Forecasts

• No more monetary policy easing this cycle.

• Medium to long term housing rates have seen their multi-year lows – stop-start rises now lie ahead. Speed unclear.

If I Were a Borrower What Would I Do?

First one needs to recognise that in these still very uncertain times one cannot take a reasonable stab at where fixed rates will be in one, two, and three years time. That means it would be risky to base one’s decision upon what to do at the moment on someone’s forecast of where things will go in the future. Just because we called it right with regard to catching the low-point for fixed rates in March does not mean we can reasonably say where those rates will be while the global crisis continues to unfold.

The upshot of recognising such uncertainty is that one should be prepared to pay a premium for certainty in the form of a higher rate for fixing long term than short term. The question is however whether the current premium for fixing three years and beyond, when mixed with an assumption of higher rates in the future, justifies fixing medium to long term.

First, would I take the five year fixed housing rate at 8.3%? No I would not. It is 0.2% above the average for that rate over the past five years and although we think fixed rates will average higher over the next five years than the past five, the rate looks expensive.

Would I fix three years at 7.45%? Three weeks ago when this rate was 6.99% my answer was yes I would. But at 7.45% one is paying quite a premium above floating at 5.89% under the Total Money package, fixing 18 months at 6.09%, or fixing one year at 5.99%. For an above average risk averse person fixing at 7.45% for three years looks good in the current environment. But I would not.

~Property news for July

Thu, 25 Mar 2010 06:35:00 GMT

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Welcome to my newsletter for July 2009.

Internationally:

There has been a lot of positive news out in the market at the moment. World stock exchanges have had 10%+ rallies over the last two weeks, noticeably the Dow Jones sneaking past the imaginary 9000 point barrier and the NZX 50 passing the 3000 point mark. This is good news and long may it continue. I suggested in my May commentary that if the northern hemisphere had a good long summer with positive financial news that it would filter down to the New Zealand economy, and it certainly has been positive so far.

Locally:

The OCR announcement this Thursday is expected to bring up no surprises with most economist’s predicting a hold on the cash rate at 2.5%. What does this mean? Well for the short term rates (6 months and 1 year), I expect there will be very little change if the rates stay the same. If rates do fall I would imagine only a small flow-on from the lenders would take place. The promised bank war on rates has not eventuated, although don’t count this out from happening in the near future as competition for customer retention is heating up. There is continued pressure for longer term rates (18 months, 2, 3, 4, and 5 year rates) to increase, albeit slowly. If your home loan(s) is coming up for renewal within the next 60 days please contact me here and I will approach your lender to ascertain any potential discounts available for you.

On another local matter there is good news for first home buyers with little or no deposit.

The following is an update on the current Welcome Home Loan product.

“Welcome Home” loan lending limits look set to increase

Lending limits for “Welcome Home” loans for first home buyers look set to increase next month, opening the scheme up to low-income home-buyers in parts of New Zealand for the first time in several years. Housing Minister Phil Heatley has told Parliament’s social services select committee that the current $280,000 loan limit for the scheme could be raised by the Cabinet on August 3 to between $320,000 and $350,000.A spokesman for Housing Minister Phil Heatley has said there were no plans to change the income limit of $85,000 for a household of one or two people, but it was clear that the loan limit had fallen behind property values, especially in Auckland.

NZ Housing Foundation director Brian Donnelly said the new loan limit could make the scheme useful in Auckland if it was extended to cover shared equity arrangements where first home buyers buy only 75 or 80 per cent of the value of a home, with the rest owned by a joint owner such as the Housing Foundation.

Welcome Home loans:

Loans up to $280,000 for first home buyers.

Household income must be under $85,000 for one or two borrowers, or $120,000 for three or more borrowers.
15 per cent deposit required for loans above $200,000.
Proposed loan limit increase to $320,000 or $350,000 would finance homes worth up to $376,470 or $411,765 if borrowers can find the required deposits.

This product is available through Advanced Mortgage Solutions and if you would like more information please click Here.

Tip of the month:

House prices seem to have found their low point.

If you are in a position to hold onto your current property portfolio without it causing an undue financial strain then do so. Don’t misunderstand me; if you have a particular property that is not behaving itself by all means sell it. However with net migration breaking all sorts of records, the economy being as bad as it has for so long, and continued historically low interest rates house prices are going to make a comeback. The time where capital growth was the reason for owning property although still a while off, is returning, and from the bottom it can only go up.

Please click here to return to AMS’s home page

~95% product available

Thu, 25 Mar 2010 06:34:00 GMT

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I am happy to announce that Advanced Mortgage Solutions has secured a new funding line that allows clients to refinance at 95%.

This product allows you to refinance existing lending on owner occupied or rental properties. Like other recently released 95% products there are some guidelines. These include having a property portfolio with less than 5 properties, having a clean credit history, low consumer debt, and good account conduct. If you think this is you and you would like to know more please feel free to contact me.

Further to comments I made last month I believe best time to buy property is now! This does not mean that you have to break your neck to purchase one this week, instead I believe prices will remain low over the winter period and leading up to Christmas. I would suggest that house prices will make a recovery in early 2010 and continue to increase throughout the year. This is important as rental yields generally do not make us rich, it’s capital gain that drives property portfolio’s.

To return to AMS’s home page click here

~Interest rates

Thu, 25 Mar 2010 06:35:00 GMT

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Interest Rate Outlook

Current Interest Rates
Rates offered are the best of standard, carded interest rates available and do not reflect any discounts your Advisor may be able to obtain for your client. Rates correct as at 03/07/09.
Variable	6.30%
6 Month Fixed	5.39%
1 Year Fixed	5.49%
2 Year Fixed	6.20%
3 Year Fixed	6.89%
5 Year Fixed	7.90%

The economy is stabilising, and this should see an end to the easing of interest rates much further, provided we do not see any more turmoil in overseas markets.

We are seeing a continuing strengthening of net migration into NZ with another month of in excess of 2,000 more people into our beautiful country, on an annual basis our population has increased by more than 9,000 which is more than double a year ago, this is predominantly being driven by a sharp decline in the number of Kiwi’s jumping the ‘ditch’ which is now down to record lows not seen since 2006. The strong net migration together with strong housing data supports the theory that the easing of interest rates has almost finished.

Much improved household affordability is being driven by the lower interest rates we now enjoy and the average number of days to sell a house is now down to 41 which is just a touch over the historical average of 39 days and seasonally adjusted sales last month were over 5,700 more than 50% above the trough in November 2008. There is clearly a stock shortage in Real Estate with a lot of people preferring to sit tight in the current climate due to concerns around employment prospects and the continuing conservative approach to lending from banks who all have liquidity concerns and are in a massive arm wrestle for term deposits.

The Reserve Bank has reiterated that it expects to keep the Official Cash Rate low right through to late 2010 and while business confidence has been restored the economy is still hampered by the strengthening of the kiwi dollar due to a continuing depressed global environment, which is undermining the rural and export sectors.

Mortgage rates continue to be influenced by contrasting forces, at one end of the scale you have continued upward pressure on long term rates (3-5 year) due to upward pressure on term deposit rates as banks scramble for term deposits. At the other end of the scale we see the message being reinforced that short term rates will be held low for at least the next 18 months. These forces are seeing a lot of tension in the mortgage market with consumers confused or contrasting in their opinions. Our current strategy still remains unchanged though, be patient and take advantage of the low 6 month or 1 year fixed rates with over 2% difference to 5 year rates, the other option is to consider a hybrid of the two.

What’s Hot
We have been able to extend our very popular 95% LVR product out to refinance clients now. Previously restricted solely for purchasers, we can report many happy clients last month were able to consolidate their debts into one loan, saving them thousands of dollars in interest and reducing their monthly commitments-Help your clients, refer them to us!

My property commentary

Tue, 09 Mar 2010 01:58:00 GMT

Well summer has definitely gone and winter has arrived, but despite the weathers best efforts there is plenty happening in the property market.

First I would like to go over some of the thought I have on where the property market is going.

I believe that the seasonal changes we are experiencing could not have come at a better time. In the last three months of summer we saw a rebound in the property market. Sales numbers were up, days taken to sell were down, and in April we even saw a small increase in the median houses price throughout New Zealand.

Traditionally winter always brings a lull to the market. Daylight viewing hours are less, the cold inhospitable weather lessens people enthusiasm for house hunting, and properties don’t look so good with leafless tress and muddy grounds.

BUT THAT’S IN NEW ZEALAND!

It pays to remember that in the big scheme of things New Zealand really is only a cork floating on the sea of international change, and we as a country don’t have that much financial clout. As New Zealand moves deeper into winter the northern hemisphere arrives into their summer and all the nice things about life returns to those who live north of the equator. As far as the weather is concerned the good times are back. (I was speaking with a client in London yesterday and it was 25 degrees, his kids were outside playing in the garden, happy days)

So the good feelings are back - but what about the global recession, how’s that coming along?

Well financially, stock and monetary markets have been making a slow but steady recovery, making up some of the lost ground they have experienced over the last year or so. Wall Street has seen a 19% increase in its markets since its lows in Dec/Jan, as have many of the European stock and monetary exchanges.

The implementation of recession busting government policies is also starting to have effect. TARP and similar schemes have gone a long way to oiling the wheels of finance, allowing companies, and individuals to lend money again. This combined with a reduction in interest rates for almost all countries has made accessible fund more affordable.

Now I am not saying that the world (or New Zealand) is out of the woods yet, but what I am leading to is that given the direction the markets and monetary policy is heading, we should be well placed to see some real change as we come into our spring. The feel good factor in the northern hemisphere coupled with rejuvenated business confidence will surely flow and bob the cork that is New Zealand. Expect to see unemployment reduce, net migration continue to increase, and house prices slowly rise as our summer takes hold.

As I mentioned at the start, personally the timing of the seasons

could not be better.

Tip of the Month:

Please be aware the new 95% product is going well with over 2/3being approved. If you find yourself looking to make that next purchase or simply want to know how you are placed to move forward please don’t hesitate to contact me.

Below I have added the latest commentary from the NBNZ.

Please read on as it makes great reading.

The month in review

Lower mortgage rates have given the property market a shot in the arm, although it has the feel of a statistical rebound from very low levels. The number of new homes being built remains weak. The Reserve Bank has committed to keeping rates low until the latter part of 2010, which will provide borrowers with a greater degree of certainty.

» Building Consents – March. Residential building consents remain very weak. Following an 11.7 percent increase in February, consent issuance fell 4.6 percent in March (-30 percent annually). Stripping out volatile apartment issuance, consents fell 1.3 percent following a 0.2 percent increase last month. The level remains near historical lows.

» Net Migration – March. NZ gained a net 1,720 people in the month of March, taking the annual gain to 7,482 (compared to 4,678 a year ago). In the March quarter, net migration was running at an annualised rate of 16,520 people, equivalent to 0.4 percent of the population.

» Mortgage Lending – March. Household credit growth rose by only 0.1 percent - despite all that frenzied mortgage fixing and increased housing market activity.

» REINZ housing data – April. Nationwide house sales recorded an impressive 19.6 percent seasonally adjusted increase in April, and are now up 39 percent on a year ago. The median length of time to sell a house improved to 44 days in seasonally adjusted terms in the month. This is down from 48 days in March and a peak of 57 days in July last year, although it remains slightly above the historical average of 39 days. House prices also continue to surprise, although composition issues with the REINZ data means that some caution should be taken. Nevertheless, the median house price rose $5000 in the month to $340,000 and is only down 1.4 percent on a year ago.

» RBNZ April OCR Review. The RBNZ delivered a clear message in its latest assessment of the economic situation by cutting the Official Cash rate (OCR) by 50 basis points and committing to keeping rates low until late 2010. In so far as central bank communication is concerned, the message was clear cut: if you are a borrower, don’t panic and rush to fix

for a long-term.

» Household Labour Force – March. In seasonally adjusted terms, employment fell by 1.1 percent in the March quarter – the biggest quarterly contraction since the March 1989 quarter. However, volatility in the employment growth measure of late almost makes the quarter-on-quarter movements redundant. We instead prefer to focus on the more stable unemployment rate, and while it rose 0.3 percentage points to 5.0 percent, judging by leading indicators it is set to rise further.

Assessment

The month saw further signs of encouragement in so far as housing related indicators are concerned. However, the level of activity still remains well down on the peak. Recovering house sales look to be leading the way and should start to flow into building consent figures in H2 2009 (which having hit 1960’s lows is simply unsustainable relative to natural population and

migration growth). But going forward we need to differentiate between the change and the base. The change is welcome but recovery means climbing out of a very deep hole. The big uncertainties are impetus from migration versus fewer jobs.