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Mortgage Advice Blog

Get the latest news and tips about mortgage finance and the property market. Scott Miller, mortgage broker from Advanced Mortgage Solutions comments on housing and lending.

October's Property Gazette

Published by Scott Miller on Monday, October 20, 2014 in

Are you a “Kiwi” Saver?

Last week was Money Week - An opportunity for all New Zealanders to stop and take stock of their financial goals.

As a country, our appetite for trying to understand all things financial is a bit lacking and we could all do with being a little more interested and informed and therefore help ourselves to take control of our financial futures. This includes understanding how to structure our lending to make it work for us and reduce it faster, and how we save.

As specialist Registered Financial Advisers we are consistently looking to extend our products and services to our new and existing clients without compromising the specialist advice and service we provide.. Along with the recent addition of a Registered Financial Advisor, Bennen Lewis, who specialises in providing risk products, we have all recently undertaken training on providing our clients with class advice in regard to Kiwisaver.  We outsource our products we provide which allows us to have variety, options and specialist companies to use that meet our client’s needs best.

It was interesting to learn that a larger proportion of Kiwisaver contributors are “parked” in a default scheme, initially set up through their employer. Being enrolled in a scheme, certainly has its benefits but many don’t know that the default providers are limited to seven and that there are other options that once you are enrolled and contributing would be beneficial to consider.

Some of the questions you may like to consider are;

Who is your current provider and are they Kiwisaver specialists or a “Jack of All Trades” providing a huge number of products and services to clients by making it easy to have everything in a “one stop shop”?

  • Is my provider proactively or passively managing my investment?
  • What are my provider’s service, fees and returns?
  • What fund am I in and does it suit the type of Investor I am?
  • Is my fund provider New Zealand owned and operated or offshore?
  • Does my provider offer a life stages option where my investment fund is changed based on my age?
  • Do I understand that my Kiwisaver funds are held by Public Trust, as Supervisor of your investment no matter my scheme?

How many of us have opted in and simply forgotten about it?

Taken the following statistics it is something we shouldn't have!



Assumptions

Both investors start saving at age 20 on salaries of $30,000.00 pa each and remain employed until retirement age of 65. No withdrawals are made.

Their salaries grow by 3% pa and they earn 4% or 6% pa return after tax, fees and expenses. Inflation is assumed to average 2% pa

The investors and their employers each contribute 3% if the investor’s before tax pay into the investors Kiwisaver account

The employer’s contributions are net of employer’s superannuation contribution tax at current rates.      

Post Election Market

The election result is now known and the status quo remains with pre-election nervousness disappearing.  This should inject some confidence back into the housing market as things such as a capital gains tax are not likely to come to fruition for the time being, and those that were waiting to see what happened can now move forward.

There was a pre-election lull in relation to new home consents and market commentators are expecting activity to pick up before the end of the year.  Strong demand for homes in Auckland and Canterbury are expected to drive demand for the building sector in the next couple of years.  It is interesting to note a rise in consents for new apartments.  These consents have risen form 4% in 2010 to now make up 12% of total consents.  This figure is buoyed by growth in the retirement village sector.

The Reserve Bank made no change to the Official Cash Rate in September, with the next review due 31 October.  This provides ongoing stability to the market, and we have seen the continuation of some good fixed interest mortgage interest rates especially for one and two years.

There is some relaxation from the banks in relation to lending criteria creating more interest from first home buyers and increased confidence generally.

A softening of the New Zealand dollar may also provide stimulation to the market as residential property becomes more affordable to those returning home from overseas or migrating to New Zealand.

All in all, with the election behind us and some positive signals from the lenders, and hopefully some good weather as well, we see the market picking up over the spring and summer.

The Main Centres

The Auckland region as a whole saw residential property values increase by 1.8% over the past three months and 10.3% year on year. Whilst values are still rising, the rate of growth has decreased significantly, probably due the effect of the winter and the build up to the election.  Spring traditionally provides buoyancy back to the market with increased listings and buyer interest.

Residential property values in Hamilton City decreased by 0.9% over the past three months, however they have increased 2.7% year on year. In Tauranga City home values have remained stable with a 0.0% change over the past three months but they have increased 4.5% year on year.  The Tauranga market benefits from migration from Auckland and Christchurch.

Home values in the Wellington Region are still showing a slight downward trend, decreasing 0.9% over the past three months and values across the region as a whole are up only 0.3% since September last year.

In Christchurch City home values have increased 0.3% over the past three months and they are 5.1% higher than in August last year. Home values in Dunedin City have increased by 0.3% over the past three months and 1.7% year on year.
 
The Regions

Values in the provincial centres are variable while many are decreasing or flat and there are a few areas where residential property values have increased. Fonterra’s lower dairy pay out may have an impact on the housing market in the provincial areas.


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