Rob Report for Remuera and Parnell (December 2009) – Local Property Report

A local property Report from Robert Ashton : Rob Report

Dear Valued Rob Report Subscriber

 Please find attached your complimentary copy of The Rob Report for Remuera and Parnell (December 2009).

CLICK ON LINK 0912The Rob Report December 2009 Remuera & Parnell

 Have a great month.

 Regards

Robert Ashton AREINZ BE (Structural)

Residential Sales Specialist

Bayleys Remuera, 55a Remuera Road Newmarket, Auckland, New Zealand

Bayleys Real Estate Ltd, Licensed under the REA Act 2008

Tax cuts: High earners set to benefit most

Source: nzherald.co.nz

 By Audrey Young  

 4:00 AM Wednesday Feb 10, 2010

 Big personal tax cuts for middle and high-income earners are likely to be announced in the May Budget and take effect from October this year.

The tax cuts of up to $4 billion will be funded mainly by increasing GST from 12.5 per cent to 15 per cent, and cutting depreciation tax breaks on buildings.

Prime Minister John Key pledged to give across-the-board tax cuts in his statement to Parliament yesterday on his plans for the year.

There would be upfront increases in social welfare benefits, superannuation and working for family payments to compensate for the GST rise.

He acknowledged that higher income families would benefit more from the tax cuts, because they pay more in tax. Lower income earners would be no worse off – unless they owned rental property – and he expected them to be better off.

He said the Government would not increase GST “unless it saw the vast bulk of New Zealanders better off”. “GST is a very difficult tax to avoid, no matter how people structure their financial affairs. As David Lange once observed, even drug dealers pay GST.

His plan also set new priorities in science and innovation, and in exploiting the financial gains in gas and oil exploration and mining minerals – on conservation land.

“We are not magicians,” he told reporters. “We are not a Government that has spare cash, so we are having to move things around to make sure we can invest in areas we think are most critical for our growth.”

Referring to comments by Reserve Bank Governor Alan Bollard on Sunday about New Zealand’s gap with Australia, he said: “Alan Bollard might be satisfied with the crumbs off Australia’s table – I want the entree, the main course and the dessert.”

It is thought that the Government’s present aim with the October tax cuts will be to align the top personal tax rate of 38c and trust rate of 33c with the corporate tax rate of 30c.

But there is still more work and modelling for officials to do before that looks like a certainty. At the very least there is an expectation that the top personal tax rate will drop to 33c.

The Government may want to keep something in reserve in case it has to match a cut in the Australian business tax rate from 30c.

The measures will have the effect of reinstating, in a broad sense, the tax cuts that National cancelled because of the recession, and funding them from elsewhere.

Yesterday’s statement was the Government’s response to the tax working group which urged reform for a “broken” tax system by lowering personal taxes, and steering investment away from residential property to more productive sectors.

Relief in property circles as most tax options ruled out

Source: nzherald.co.nz

By Anne Gibson

4:00 AM Wednesday Feb 10, 2010

The vice-president of the Property Investors Federation is relieved that most housing tax options were ruled out in Prime Minister John Key’s speech yesterday, but he is wary of what is to come. Andrew King said Key had erred on the side of caution and been politically astute. “It’s what we expected but it’s nice to hear it,” King said in reaction to Key’s speech to the House shunning most of the Tax Working Group’s advice to hammer landlords. Key ruled out a 0.5 per cent land tax which would net $2.3 billion annually and a capital gains tax and said there would be no introduction of a recommended scheme to tax rental income at the equivalent of a risk-free rate of return, pulling $500 million-$900 million a year. King said most landlords hoped Key would not implement the Tax Working Group’s recommendations which floated these ideas. As for the May Budget, King said he was not too concerned and predicted only one change to the system. “I think he’s going along the lines of disallowing building depreciation. I can’t see him banning Loss Attributing Qualifying Companies because the biggest users of those are forestry businesses. All banning those would do would mean residential investors would own properties in their own names and they would still get the same tax deductions,” King said. Axing building depreciation would bring in about $1.3 billion annually, the working group predicted. King remains disappointed and angry about the group’s report, saying it undermined the $200 billion residential property sector, created widespread misconceptions and skewed information which stirred up anti-landlord sentiment. He cited a sub-report to the group from Inland Revenue and Treasury which said that in the last 28 years, landlords had paid tax every year except 2007 and 2008 when interest rates were so high that they claimed deductions on mortgage costs. “The working group’s report is misguided. It is not as thorough as it should be,” King said. But John Shewan – group member, landlord and Pricewaterhousecoopers chairman – said some multimillionaire landlords qualified as state beneficiaries because they appeared poor on paper. He said the $200 billion tied up in residential rental property was four times the capitalisation of the NZX yet resulted in negative tax. Lee Whiley, an Auckland landlord, is worried about disallowing depreciation and predicted this could halve his annual income from six properties. Key released little about the Government’s tax plans but said landlords would be made to pay their share. “The Government does believe there is a gap in the current tax system around property investments where income is being derived but, in aggregate, no tax is being paid – in fact the Government is actually losing revenue in this sector,” Key said. “We will therefore be making changes [in the Budget] to the way property is taxed which will result in … more fairness for taxpayers.”

BUYING OR SELLING A PROPERTY

As printed in The South African” Issue 13 – January 2010

IAN MELLETT OF QUAY LAW Ian Mellett and his wife Cathy emigrated to New Zealand in June 1997. Ian has a BComm LLB H Dip Tax and was engaged by a Johannesburg law firm and subsequently Deloitte and Touche. He joined Deloittes in Wellington for a couple of years and has thereafter practiced law in New Zealand for the past 11 years. Ian played provincial cricket for Northern Transvaal B and Griqualand West. He has retained his interest in the game and has been the principal sponsor of the Parnell Cricket Club for the last 3 years. His wife Cathy has a project management background and nowadays assists him in the Quay Law practice. Their young children Michael and Matthew are both born and bred Kiwis and enjoy giving dad a hard time when the All Blacks beat the Boks! In this issue we present one of Ian’s exposé’s on conveyancing.

This is a MUST READ for everyone, as buying or selling a property is probably one of the most important transactions that you will undertake.

BUYING OR SELLING A PROPERTY 

Our aim is to ensure that this often stressful process proceeds in a smooth and efficient manner As you embark upon purchasing a new home or selling your existing property, it is prudent to take professional legal advice at an early stage in the process. We recommend that you engage your lawyer to review any agreement for sale and purchase prior to executing same, as this will afford you the opportunity to make any suggested amendments. It is extremely important to remember that once you have signed the agreement, a legally binding contract comes into force with the ensuing legal obligations. A recent court case in Northland clearly demonstrates the strict approach that a court will adopt in determining a contracting party’s legal obligations. Mr and Mrs A entered into a contract to purchase a new home with the contract being conditional, amongst others, upon them selling their existing home. Their circumstances changed with the result that they did not vigorously pursue a sale of their existing home. They consequently cancelled the contract on the basis that this condition had not been satisfied. The vendor eventually sold the property but at a far lower price than that provided for in the original contract with Mr and Mrs A. The vendor successfully sued Mr and Mrs A for his loss (in excess of $100,000), the court holding that Mr and Mrs A had a legal obligation to use all their efforts to fulfill the condition of selling their existing home and that they had not discharged their responsibility in this instance. In addition to receiving the requisite and timely legal advice, it is essential that you are kept abreast of all developments pertaining to your transaction. In order to facilitate this, Quay Law has embraced a unique piece of conveyancing software which enables all interested parties in a conveyancing transaction to be kept in the loop at all times. KeyTrack ( allows not only you as the vendor or purchaser of a property, but also all related service providers such as your real estate agent, mortgage broker, banker etc to follow your conveyancing transaction online. Using the KeyTrack system has the following benefits: 1) You are able to view the status of your property transaction online 24 hours a day 7 days a week. 2) You will receive email and/or text alerts when conditions in your agreement have been satisfied and when your agreement is declared unconditional. 3) You will receive email and/or text alerts upon your deal settling including notification that the keys can be released/collected. 4) If you have multiple transactions on the go, you are able to view all of these transactions with your single login, saving you time in phoning or emailing the lawyers associated with each deal. 5) The electronic file is stored indefinitely for you to access (free of charge) at any time in the future. 6) You will have global access to your transactions and will receive text message updates globally. 7) Your estate agent /estate agency branch administrator also has access to your transaction thereby saving you the hassle of having to communicate with your agent as well as your lawyer. Your estate agent is able to keep you updated with online developments relating to the marketing of your property eg the outcome of your open homes. The team at Quay Law are excited about the additional efficiency and service levels which the KeyTrack system will deliver to our clients. Please feel free to contact Ian Mellett at Quay Law for more information, or if you have any questions regarding your conveyancing or other legal needs visit our website www.quaylaw.co.nz for more information.

THANK YOU, IAN! WE LOOK FORWARD TO MORE LEGAL UPDATES IN FUTURE ISSUES……..” READERS, WATCH THIS PAGE!”

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Revealed: the risks of DIY home sale

Source: Leigh van der Stoep – Sunday Star Times

THE DANGERS of selling your house privately have been exposed, after a woman who tried to back out of such a sale was ordered by the courts to honour the deal.

Auckland woman Catherine Burton, aged in her 80s, sold her house privately for less than two-thirds of its market value and later, regretting the move, refused to settle.

The new owner took Burton to court and won, and now Burton must also pay high court costs of the dispute, which could total tens of thousands of dollars.

Experts say the case shows those trying to save money by selling their house without a solicitor or an agent take a big risk.

The buyer, Edward Sayers, a lawn-mowing contractor in his late 60s, offered to buy the unit in Ellerslie, Auckland, from Burton in 2006 after she inherited it from her brother.

He became interested in the unit – one of three – while mowing the lawn of one of the neighbouring properties, and thought he would be able to buy it at a good price because of its dilapidated condition. Burton’s brother had been a hoarder, and the poor state of the property had prompted Auckland City Council to give notice that it could be a health and safety hazard.

Sayers sent Burton a letter offering $125,000 for the property, which both parties thought was probably worth around $155,000, based on the previous year’s council rating valuation. In a reply letter Burton also said she doubted the property would be worth more than $125,000 due to its condition, but indicated that there was other interest in the property. Neither party ordered an independent valuation.

Six weeks later Burton accepted Sayers’ offer of $125,000 and five days later they signed a sale and purchase agreement. Burton, the court found, did not consult a lawyer on the agreement, because she wanted to save money. Sayers had suggested she get legal advice.

When the other interested buyer came back to Burton more than a month later, he was upset to learn it had been sold. The man phoned Sayers accusing him of taking advantage of Burton, and told her to seek legal advice.

Based on this, Burton then refused to settle the agreement, claiming it was an unfair bargain. Sayers – and a nephew who had helped him with the deposit – took court action.

Justice Geoffrey Venning ruled that although the actual value of the property was closer to $190,000, and the purchase was “a bargain”, Burton had not been deliberately taken advantage of.

Sayers himself did not know the true value of the property and had advised Burton that she should take legal advice, Venning said.

“This is not a case of experienced or successful business people taking advantage of an elderly lady,” he said.

When contacted by the Sunday Star-Times, Burton said she was unhappy with the outcome but did not wish to comment further.

Her lawyer Kevin McDonald said an appeal was possible.

Sayers, who is now 70, was pleased with the judge’s decision but was unhappy the issue had dragged out over three-and-a-half years. He still does not have access to the property, and is anxious to start cleaning it up and making it liveable. He believed his offer was fair and reflected what he thought the property was worth. Legal fees to fight the case had been “horrendous”.

“The vendor will get very little money from this venture, which is a shame and completely avoidable,” he said.

Auckland University associate law professor David Grinlinton said for a contract to be overturned there had to be strong evidence of “unconscionable behaviour”, where one stronger party knowingly took advantage of a weaker party’s disabilities.

He urged buyers and sellers to get legal advice because property sales were complicated, and the transaction often involved large amounts of money.

“When people enter into contracts, they are entering into legally binding agreements that can be enforced by the other party. Where a lot of money is involved, you are really foolish to enter into those contracts without taking proper legal advice. The law won’t intervene to help people out if they make bad decisions.”

Another property law expert said although using a real estate agent was optional, not using a lawyer was “just stupid”. A solicitor would have told Burton to get an independent valuation, a cost of just several hundred dollars, but instead “this has cost her thousands”.

Peter McDonald, president of the Real Estate Institute of New Zealand, said the case was a prime example of why people were better off using an agent to sell their property. He said the new Real Estate Agents Act, which came into effect last year, gave buyers and sellers “huge consumer and legal protection”.

Agents were required to provide sellers with evidence of how they have reached a suitable price at which to market the property, and were also compelled to advise both parties to engage a lawyer when signing.

“People think they can save money, but they’re not,” said McDonald.

“I do feel sorry for the woman. I wouldn’t want my mother in that position.”

Executing a Sale and Purchase Agreement

The legal team at Quay Law recommends that you engage your lawyer to review any agreement for sale and purchase prior to executing same, as this will afford you the opportunity to make any suggested amendments.  It is extremely important to remember that once you have signed the agreement, a legally binding contract comes into force with the ensuing legal obligations.

How tax system changes could cut house values

Source: 3new.co.nz

Wed, 16 Dec 2009 3:44p.m. Westpac economists taking a stab at the impact of possible tax changes on house values reckon the decline could be as high as 34 percent. In a note today, Westpac chief economist Brendan O’Donovan and research economist Dominick Stephens focused roughly on tax changes being discussed by the Government’s tax working group. The economists acknowledged their estimates were sensitive to the assumptions they made, but said the framework was useful for illustrating that prices would be affected by taxes, and for giving a rough guide to their size. According to the exercise, the biggest impact would come from the introduction of a deemed rate of return of 6 percent. The result would be a fall of between 26 percent and 34 percent in house prices, while rents would rise between 13 percent and 17 percent. For property investors, rental income would not be taxed, and expenses including interest would not be tax deductible. Instead, income tax would be applied to a “deemed rate of return” on the net equity on the property. Owner-occupiers would be unaffected. Under the deemed rate approach, fully leveraged landlords would not pay any tax on their zero equity, but would lose the right to deduct cash losses on the property against their taxable income. The Westpac economists reckoned that the introduction of a 10 percent capital gains tax would lower house prices 15.7 percent and cause rents to rise 7.8 percent. But they regarded a capital gains tax on investment property as unlikely, saying it would be costly to administer and much of the burden would fall on tenants who tended to have low incomes. A reduction in the top rate of tax to 30 percent would see house prices fall 13.6 percent and rents rise 6.8 percent, the Westpac economists estimated. Landlords received a tax rebate for losses on their rental properties at their marginal rate of income tax. If the marginal rate of income tax changed, so would the size of the rebate. A land tax of 0.5 percent was estimated to cause house prices to fall 4.4 percent and rents to rise 2.2 percent. The fall in house prices was based on the median house, for which land made up 40 percent of the value. Land values were estimated to fall 11 percent. Under a land tax of 0.5 percent combined with income tax of 30 percent house prices would fall 16.9 percent and rents rise 8.4 percent. The Westpac economists said such a combined approach was “politically plausible”. They were unable to work out how far prices would fall under a ringfencing scenario under which rental losses could only be offset against future rental profits, not current personal income. There would be no ability to shelter from income tax using loss-making rental properties, but property would still be a tax-efficient investment for cashflow positive landlords. Owning property came with tax advantages, Mr O’Donovan and Mr Stephens said. An investment in one’s own home incurred zero tax on the flow of benefits — avoiding rent and capital gain. By contrast, all other investments incurred tax on the interest/dividends/profits. From a rental property perspective, the losses from paying more in expenses and mortgage interest than receiving in rent were tax deductible against other income, while capital gains were tax free, the economists said. “High-income landlords can swap their taxable labour income for tax-free capital gain income. Unsurprisingly, many do.” NZPA

What are the advantages to you of using a property law firm that uses KeyTrack®

Level 1, 427 Remuera Road, Remuera, Auckland

What are the advantages to you of using a property law firm that uses KeyTrack®

KeyTrack® allows not only you as the vendor or purchaser of a property, but also all related services providers such as your real estate agent, mortgage broker and banker, to follow your conveyancing transaction online. 

Remuera law firm, Quay Law is currently the only law firm in the Remuera, Meadowbank, Parnell, Epsom, Orakei and Mt Eden to embrace this software. 

1. You do not need to phone your lawyer to see your status of your property deal as this is contained in your Transaction Status Report (TSR)
2. You have access to your deal 24 hours a day 7 days a week.
3. You will receive text and email alerts upon your agreement being declared unconditional. This gives you knowledge of this fact at the earliest possible opportunity hence you’ll have more time to organise the necessary matters required to be completed prior to settlement of your property transaction ( signing of loan agreements, organising insurance and removal vans)
4. You will receive text and emails on your deal settling including notification that keys can be collected if you are buying or handed over if are selling a property again saving you valuable time.
5. If you have multiple transactions on the go you are able to view all of those transactions with your single log in saving you time phoning or emailing lawyers associated with each deal.
6. The electronic file is stored indefinitely for you to access (free of charge) at any time in the future.
7. You will access to your TSR & Marketing Status Reports (MSR’s) globally and will receive text message updates globally.
8. Your agent also has access to your TSR saving you hassles in having to communicate with your agents as well as your lawyer
9. Your agents are able to create a MSR in KeyTrack® keeping you updated with online developments relating to the marketing of your property for sale e.g. the outcome of your open homes and not just weekly activity by post but real time activity online.

Please contact Ian Mellett at Quay Law for more information, or if you have any further questions regarding your conveyancing needs or visit our website www.lawyerinauckland.co.nz for more information.

Ph: 523-2408        Email: quaylaw@quaylaw.co.nz

Bollard hints at earlier rate hikes; kiwi jumps

Thursday, 10 December 2009, 11:00 am
Article: Businesswire

Bollard hints at earlier rate hikes; kiwi jumps Thursday, 10 December 2009, 11:00 am

Article: Businesswire Bollard brings forward timing of OCR hikes, driving up kiwi dollar, short bond rates By Paul McBeth Dec. 10 (BusinessWire)

Reserve Bank Governor Alan Bollard brought forward the likely timing of increases in the official cash rate after lifting his forecast for the pace of economic growth, driving up the kiwi dollar and short bond rates. Bollard kept the OCR unchanged at a record low 2.5%, as expected, and said provided the economy continues to grow, “conditions may support beginning to remove the monetary stimulus around the middle of 2010.” He has previously said rates would not rise until the second half of next year. Search New Zealand Business Related Stories on Scoop NZ dollar jumps on Bollard hint of early rate hike 10/12/2009 Bollard to hold rates steady; may point to rebound 07/12/2009 RBA hikes rates for third straight month 01/12/2009 Bollard talks down impact of rate hikes on kiwi 21/10/2009 NZ inflation accelerates; kiwi dollar jumps 15/10/2009 Results powered by search.scoop.co.nz More Related Stories >>> “The economy continues to recover, reflecting improved world growth, higher export commodity prices, increased government spending and housing strength,” Bollard said in a statement released in Wellington today. The New Zealand dollar jumped to 71.87 U.S. cents after the Monetary Policy Statement was released in Wellington, from 71.22 cents immediately before. The yield on two-year government bonds soared 20 basis points to 4.55%. “I’m a little surprised they are happy for business and mortgage rates to go up,” said Grant Hassell, who oversees about $4 billion as head of fixed income at AMP Capital Investors. The central bank may have been “spooked” by the strength of the housing market. Helping underpin the kiwi, Bollard indicated a “sense of comfort” with the current level of the New Zealand dollar, which “stops it falling any further in my view,” Hassell said. There is a “very real possibility” the RBNZ hikes rates in March, as the market has priced in, especially given the Reserve Bank of Australia probably won’t slow its tightening process. Still, Bollard would prefer to wait until June, he said. Domestic property values climbed 1% in the 12 months through November, the second month of gains from the same time a year earlier, according to QV Valuations data. The central bank will have to walk a fine line over stoking economic activity without over-egging it as inflation begins to speed up ahead of Bollard’s expectations and the housing market continues to show signs of emerging from the lethargy of the past 18 months. The Reserve Bank’s Expectations Survey found respondents see inflation accelerating to a 2.6% annual pace from 2.3% over the next two years. Prices unexpectedly rose in the third quarter, with the Consumer Price Index increasing to an annual 1.7%, according to government data, ahead of the 1.2% pace forecast by the RBNZ. The central bank has a benign outlook for inflation, and Bollard said he expects the annual consumer price index will remain below 2% until early 2011 and “track within the target range over the medium term.” The Reserve Bank expects the 90-day bank bill to begin rising in the June quarter next year, when rates climb 0.1 percentage points to 2.9%, and increase to 3.3% in the September quarter. The bank previously forecast this to occur in the December quarter of 2010 and March quarter of 2011, respectively. Before today’s statement, traders had been betting the central bank would hike the OCR by 1.63 percentage points in the next 12 months, based on the Overnight Index Swap curve. The scale of expected tightening has declined in the past month as Bollard reiterated the divergence of monetary policy between New Zealand and Australia, where rates have been rising for the past three months. Bollard said he tried to combat the market’s tendency to “price some degree of interest rate normalisation” once investors guessed the OCR had hit its bottom by adopting his outlook on how long interest rates would remain depressed. “We believe this communication has helped reduce the extent to which markets priced near-term OCR increases,” he said in his report. The trade-weighted index for the New Zealand dollar, the central bank’s preferred method of tracking the currency, has climbed more than 24% from its low in March, and has damped Bollard’s preferred export-led recovery. “The high level of the New Zealand dollar has limited the scope for exports to contribute to the recovery,” he said and the central bank predicts the 90% gain in dairy prices on Fonterra Cooperative Group’s online auction website over the past four months have largely been offset by resurgent currency. New Zealand climbed out of its first recession in a decade in the second quarter this year as returning expatriates and an inflow of new migrants helped underpin the housing market, and boost business and consumer confidence, and the bank boosted its forecast for economic growth, projecting 1.1% quarterly gains in gross domestic product in the December quarter next year and March quarter of 2011. The central bank said unemployment had been tempered by businesses cutting worker hours rather than laying off staff, and was near its trough. The Reserve Bank cut its projections for the unemployment rate, which is expected to peak at 6.7% next year, down from the 7% forecast in the September statement. Bollard highlighted the links between monetary and fiscal policy, and said “fiscal consolidation would help reduce the work that monetary policy might otherwise need to do” as the economy returns to growth. The central bank’s main policy tool came under scrutiny after Parliamentarians criticised the big our Australian-owned banks earlier this year for failing to pass on all of the OCR cuts to their customers. Faster consolidation and tweaks to the tax system could help increase the national savings rate, and lead to lower interest rates on average, he said in his report. A big uncertainty for the economy is whether consumer spending will follow on from the resurgent property market, with households taking a “very cautious” approach to their spending decisions, Bollard said. Consumer spending has shown a small spark ahead of the Christmas shopping season, with core retail spending on electronic cards, which excludes auto-related sales, up 0.3% according to Statistics New Zealand. (BusinessWire)

Source: Scoop.co.nz