Merry Christmas from Harcourts

At Harcourts, we’d like to take a moment to thank you for your continued trust and partnership this year. Your support has been
invaluable, and we are committed to delivering the best possible service as we move into the new year.

As the festive season approaches, we send our warmest wishes to you and your loved ones. May this time be filled with peace, good health, and joy; and may the year ahead bring you exciting opportunities and lasting success.

Residential Tenancies Amendment Bill 2024 – Update

In previous editions of the PM Focus newsletter, we have included updates on the progress of the Residential Tenancies Amendment Bill 2024. We can now report that the Residential Tenancies Amendment Bill (RTA Bill) has passed its Second Reading stage with all recommendations by Select Committee voted in favour and adopted.

Key examples of the committee’s recommended changes which have now been adopted in the Bill include:

• Clarifying rules for consenting to and refusing requests to keep a pet, by expanding and clarifying grounds for refusing a request, and adding
  a non-exhaustive list of reasonable conditions that a landlord may attach to their consent;
• Simplifying the smoking provisions, by allowing the prohibition of smoking inside while allowing for a case-by- case assessment elsewhere on a property; and
• Strengthening protections for tenants by extending existing rules for retaliatory terminations, which prohibit a landlord from terminating a tenancy in response to legal actions taken against them.

The next stage for the Bill is the Committee of the Whole House. You can find out more about the Bill and track its progress on the Parliament website. We will update you again when this Bill is passed into law.

Harcourts property managers are being kept well informed of the proposed changes, and once the Bill has been passed into law, we will be providing comprehensive training to all Harcourts property managers throughout New Zealand to ensure full compliance with the Residential Tenancies Act and Amendments on behalf of our landlords.

Modernising the tenancy bond service

Tenancy Services are upgrading and modernising the tenancy bond service and changing how they deliver their services.

This modern, digital-first system will make bond transactions quicker and easier for landlords, tenants and property managers. Changes will be made in stages, with the first stage of the project taking effect from late November 2024.

This first stage will enable new bonds to be lodged digitally. For property management companies, this will
be administered via our property management software that has been developed for a new business to business connection. For private landlords, other options will be available.

Harcourts offices use the most up-to-date property management software available, and we anticipate a seamless transition to the new and improved system.

Locking up over the holidays

If you are lucky enough to be going away over the summer holidays, you’ll want to make sure your home is as secure as possible while you’re away, to avoid any nasty surprises when you return.

Here are some tips for securing your home.

• Secure all tools, ladders, axes, hammers, and saws – anything that will help thieves break into your house.
• Lock all doors and windows, set alarms, and use deadbolts. Don’t forget the garage.
• Leave your curtains open and your blinds up, but if you have anyone popping over, get them to adjust them now and again.
• Use lights with timers – a dark home over many nights is a sure sign you’re away. Timed lighting gives the appearance of activity, and the more you mix up the lighting timing and locations, the better.
• Unplug appliances and devices to minimise the risk of electrical fires.
• Clean out your fridge to minimise the amount of food you keep in the fridge and freezer while you’re on holiday. That way less will be lost if there’s a power cut while you’re away.
• Turn down the ring tone on your phone if you still have a landline. Long, loud, unanswered rings are just another way of shouting out, “No one’s here.”
• Be careful who you tell, don’t advertise your absence on your phone answering machine, sites like Facebook, or anywhere else that isn’t secure.
• Leave an emergency contact number with friends or neighbours.
• Cancel your newspapers and other deliveries, so they don’t pile up on your doorstep and advertise that you’re away.
• Keep the garden tidy if you are lucky enough to be away for an extended period, arrange for someone to come and mow your lawns and tend to the garden.
• Ask a friend to help if you’re going to be away for an extended period, you may want to ask a friend to pop over once a week.
• Keep a car in the driveway or ask a neighbour to park in your driveway occasionally.
• Ask your neighbours to help if you know them well enough and ask them to check on your house for litter, and branches that have blown down or pot plants that have fallen over. These are tell-tale signs you have gone away.
• Tell neighbours you’re going away and arrange for them to collect your mail. Nothing says, “No one’s home!” like an overflowing mailbox.
• Hide any valuables including jewellery so that thieves cannot locate them easily.

Now kick back and enjoy your holiday with additional peace of mind.

Renting with Harcourts – Christmas edition

As part of our continued commitment to our tenants we publish a newsletter twice per annum to coincide with Winter and the Summer/Christmas season. Whilst some of the articles may be repetitive, with an average tenancy lasting from 1 ½ – 2 years,
we want to educate our tenants how to look after their rental, and what their responsibilities are. At Harcourts we believe, Happy Tenant, Happy Landlord.

In the latest edition of Renting with Harcourts we included the following articles:

1. Happy holidays from Harcourts (with a reminder to check your property for maintenance before the Christmas period)
2. Low Deposit Home Loans: Options for First Home Buyers in New Zealand
3. Safe removal of 3M adhesive strips
4. What do you really have to do for a rental inspection?
5. Make a splash around your home this summer
6. Maintaining a healthy home
7. Locking up for holidays
8. Renters insurance
9. Tenancy Services – The Tenancy bond service is changing
10. Update on Gumboot Friday
11. Christmas recipes

You can access a copy of the Renting with Harcourts newsletter here

When the RTA Amendment Bill has been passed into law, we will update our tenants on the changes that directly affect them.

We thought the article on the safe removal of 3M strips and the tip to use a hairdryer to remove them was useful enough to share with our landlords – see over page

Safe removal of 3M adhesive strips (for our landlords AND tenants)

Whilst 3M adhesive tape, or any similar product, is heralded as a product that doesn’t cause damage and is an alternative to putting nails and holes into walls; this isn’t always the case when it comes to its removal.

The removal of the adhesive tape can damage the wall if not removed carefully, and often removes the paint from the wall with the strip, leaving an unsightly patch on the wall.

Heat is essential for many chemical processes, and the molecules in the 3M adhesive will loosen up when exposed to enough of it.

If this doesn’t work, you can get a removal product from your local hardware store, or try solutions such as petroleum jelly, hand sanitiser or nail polish remover.

To avoid damaging the wall try using a hair dryer, heat gun, or heating pads when removing the adhesive pad. The heat can make it easier to remove stubborn residue.

We are delighted to announce that…

Harcourts Foundation NZ proudly supported Gumboot Friday for the third year, in 2024. With the successful fundraising efforts in 2022 and 2023
combined, the Harcourts network raised over $323,000 which made 2254 free counselling sessions available to Kiwi kids in need.
The impact of Gumboot Friday on the country has been astounding, and so has our network’s focus on raising funds and awareness for Kiwi kids struggling with their mental health. These children come from diverse backgrounds, families, and communities all over
New Zealand.

Time is running out – Healthy Homes Standards

As the 1 July 2025 deadline for compliance with the Healthy Homes Standards approaches, it’s crucial that all private rentals meet these requirements.
As a landlord, meeting these standards is not just a legal obligation, but a way to enhance the quality of your rental home.

By improving your property, you provide your tenants with warmer, drier, and healthier living environments, leading to better health outcomes and increased satisfaction with their rental experience.

If you haven’t already, now is the time to take action to comply with these standards.

Visit tenancy.govt.nz/healthy-homes/ for all the information you need.

 

We are pleased to bring you the latest updates on the recent property tax changes that have been passed into law.

The main tax changes are;

• Interest deductibility for residential property
• Returning the bright-line test to two years
• Removal of depreciation for commercial buildings.

Interest deductibility of residential investment properties is to be phased in

Mortgage interest incurred for residential investment properties will be phased in over the next two years.

• 80% of interest will be deductible for the 2024-2025 income year• 100% of interest will be deductible for the 2025-2026 income year
• If the property is a new build, 100% of interest remains deductible.

The status quo will remain for the 2023-2024 income year (100% interest deductible for a new build, 50% for residential rental properties acquired before 27 March 2021 and for (non-new) properties acquired on or after 27 March 2021, no interest is deductible).

Bright-line reduced to two years

The bright-line test, designed to capture tax on gains from sale of certain residential rental properties, has been reduced to two years.

The two year bright-line will apply for properties sold on or after 1 July 2024. In most cases, if a binding contract for sale was entered into on or after 1 July 2024, the two year bright-line will need to be considered.

If the binding contract was entered into before 1 July 2024, the 10 or 5-year bright-line needs to be considered.

There are specific rules that apply to “off plan” purchases, so it is important to seek expert advice on any property transactions.

Main home exclusion

The main home exclusion from the bright-line is being changed from the current calculations based on the time that the property is used as the main home and the land area of such use.

From 1 July 2024 the exclusion will apply in full if more than 50% of the time and more than 50% of the land area of the property has been used as the main home.

Be aware that if the property does not meet the main home exclusion, the gain on the sale may be taxable.

Example:

John entered into a sale and purchase agreement to acquire residential land in late 2021 with the transfer being registered on the title on 5 January 2022. He used the land as a rental property. He enters into a sale and purchase agreement to sell the land on 20 June 2024. The current 10-year bright line test will apply to tax the disposal of the land. The land was acquired after 21 March 2021, and the bright-line end date for the land (being the date the sale and purchase agreement was entered into), was prior to 1 July 2024.

Mike purchased a residential rental property with a bright-line start date of 5 January 2022. He enters into a contract to sell the property on 27 July 2024. Because the bright-line end date for the land is after 1 July 2024, and the property has been held for more than two years, the disposal will not be taxable under the new 2-year bright line test.

Removal of depreciation on commercial building

Depreciation for commercial buildings with an estimated life of 50 years or more, will be set at 0% from 1 April 2024 onwards (application for the 2025 income year)

Commercial fit out that is not part of the building structure can continue to be depreciated separately, so it is important to review this when negotiating agreements

Residential buildings cannot be depreciated for tax purposes.

It will be important to review the impact of the removal of depreciation on future provisional tax payments.

Residential property tax losses

The loss ring-fencing rules still apply for residential property losses.

Residential rental expense deductions can be claimed up to the amount of residential rental income earned in a year, including bright-line income from the sale of a property. However, any excess deductions cannot be offset against other income such as salary or wages. Excess losses are carried forward to be used against residential rental income in the future.

Rollover relief

Rollover relief is a concession that treats the person acquiring the property at the transferor’s cost price and the original acquisition date. Therefore, if the concession applies, bright-line tax may not be triggered nor the brightline acquisition date reset.

Further rollover relief is now available for the transfer of property from 1 July 2024.

In addition to existing rollover relief, bright-line property can be transferred without triggering tax where:

• The transfer is to an associated person (as defined in the Income Tax Act) and this association has been in place for two years
• If the transfer is to a trust, all beneficiaries of the trust have been associated with the transferor for two years.

Example

Sarah owns residential land with a bright-line start date of 4 June 2024. The land has a cost of $750,000. In December 2024, Sarah gets advice from her lawyer that it would be beneficial to transfer the land to her family trust. She has been a settlor, trustee and beneficiary of the family trust since it was established in 2020.

As a settlor and beneficiary of the family trust, Sarah is associated with the family trust. Sarah has been associated with the trust for more than two years. Therefore, a transfer of the residential land to the family trust will qualify for rollover relief. Sarah will be treated as having transferred the land to the family trust for its cost ($750,000), such that no tax consequences will arise for her under the bright-line test. The trust will be treated as having acquired the land on 4 June 2024 for $750,000.

On-line Market Operators – GST changes

New listing intermediary GST rules have been implemented for the supply of short-term or visitor accommodation through online marketplace (such as Airbnb) which may affect property managers and landlords that offer short term accommodation. These rules mean GST is charged whether the accommodation host is GST registered or not and changes who accounts for the GST to the Inland Revenue.

These rules are complex, and we suggest if you are affected by these changes (including accommodation hosts considering GST registration) you consult with your accountant or a tax specialist.

In summary, while these property tax changes bring welcome relief, they also introduce complexity that requires careful consideration. We strongly recommend consulting with your accountant or tax specialist to navigate these changes effectively and ensure compliance with tax obligations.

Disclaimer

This information is for general education purposes only. It does not cover all situations and circumstances and should not be taken as direct tax advice. If you are looking for specific help, please contact BVO (Stephen Rutherford or Julia Owens) to provide specific advice.

Harcourts value collaborations with trusted businesses like BVO, to contribute valuable content to Property Management Focus. It’s through these relationships that we can ensure our audience receives the most relevant and impactful insights. Thank you again to BVO for their valuable contribution.

Please visit www.bvo.co.nz for more information.

Click here to see the full article from OneRoof here.

‘Broke $9m’: Christchurch house price record smashed for second time in a matter of weeks

Christchurch’s house price record has tumbled for the second time in less than a month, after a large property on the hillside suburb of Scarborough sold off-market for more than $9 million.

Harcourts Holmwood agent Grant Chappell, who brokered the deal, told OneRoof he was unable to disclose much about the sale but he was confident it was a new high for the city’s housing market.

Last week, OneRoof reported industry rumours that prominent Christchurch developer Philip Carter had sold his luxury home on Whitewash Head Road, dubbed The Rocks and also in Scarborough, for more than $8m.

The sale price, which remains private, supposedly pipped the previous $8m record, jointly held by two properties – one of which sold at the start of March.

Chappell was unable to reveal the exact sale price of his Scarborough Hills property before settlement, but confirmed it “broke $9m”.

He said both the buyer and seller were private people who wished to remain anonymous.

However, he was able to reveal some details of deal. He said he had approached the owners of the property after receiving an expression of interest from a buyer.

They told him they would sell if he found them a smaller property in the suburb. “They just wanted to downsize a wee bit to get rid of all their land. They’ve bought a beautiful property close by which is of similar size, but they don’t have the big section to maintain anymore.”

Chappell said the vendors’ house had been rebuilt since the Christchurch earthquakes and was located in the “most magical setting”.

“You don’t look at another house, you don’t see any other roofs, you just look out and you just see the ocean and the beach. It’s a very, very magical site and approximately 2000sqm in size so it’s a big site and it’s got a magnificent garden.”

He said the house had “plenty of bedrooms and bathrooms, high specification features” and a swimming pool.

Chappell wasn’t surprised that Scarborough was home to two of the city’s most expensive homes because the cost of land per metre in the suburb was more expensive than other wealthy suburbs like Fendalton.

“That’s what people don’t realise. It’s so unique up there. It’s a unique part of the town,” he told OneRoof.

“To me, Scarborough is a hidden secret. If all the private schools were in Sumner, a lot more people would live in Scarborough and you’d get even more for the houses because there’s so few of them. It’s the most special part of the world – you go up there and Sumner Beach is in front of you, you can hear the ocean crashing on the beach. It is magnificent.”

Chappell told OneRoof he had also just completed another off-market deal in the $7ms for a 300sqm full-floor apartment with an upmarket fit-out in Upper House on Park Terrace.

He had been working with a couple looking for an apartment in the city so approached the owners, who had told him they were ready to move back to the suburbs and own a lawnmower again.

The above properties were among the five sales in Christchurch that surpassed the $7m mark in March. OneRoof understands the fifth sale to surpass this high threshold was a builder’s own home on Clifford Avenue, in Fendalton.

Chappell said the latest record was a big jump from when he sold two large houses on Fendalton Road, in Fendalton, for just over $2.7m in 2001, which made headlines at the time for being the city’s new record. He did not think it would be too long until Christchurch saw its first $10m sale, adding it would easily happen within the next two years if not before.

“There’s money out there. I look at all the people who have done all these deals and you look at them and we’ve got an ageing population, we’ve got people reaching retirement age and they’ve sold their businesses, they’ve worked hard and all of a sudden there’s a bit of money floating around.” All the buyers he had worked with on these deals were over the age of 60 and from Christchurch.

While Christchurch prices still lag behind Auckland and Queenstown, when it comes to the upper end (the top price in Auckland is just under $40m and the top price in Queenstown is over $40m), they pointed to confidence in the market.

End of Financial Year Tips for NZ Landlords

Published on: 20 Feb, 2024

 

As the end of a financial year approaches, landlords have an opportunity to assess their property investments and make strategic changes to optimise returns. Proactively reviewing finances, scrutinising deductible expenses, reviewing and adjusting rent, and assessing insurance cover, can help landlords to maximise return and get the most out of their property investment.

1. Conduct a comprehensive financial review

Before diving into the new financial year, landlords need to conduct a thorough review of their property’s financial performance. Analysing financial metrics, including rental income, expenses, maintenance costs, and any outstanding debts, can help landlords identify areas for improvement and set realistic goals for the coming year.

• Scrutinise income and expenditure statements, ensuring all rental income and expenses are accurately documented.
• Create a budget and financial plan to provide clarity and guidance for the year ahead.
• Consult with a Mortgage Express financial adviser or accountant to identify potential tax deductions and improve financial position
• Use this opportunity to set realistic financial goals for the upcoming year

2.  Claim depreciation and rental property expenses

Owning an investment property offers landlords an opportunity to claim certain expenses at tax return time. Deductible expenses relating to the cost of generating rental income, not including costs for private use, can be offset to significantly reduce taxable income and boost overall return on investment.

• Since 1 April 2011, landlords can no longer claim depreciation on buildings with an estimated life of 50 years or more, essentially all residential properties.
• Landlords can claim depreciation on any item that is separate to the building and considered a chattel.
• Depreciation is an allowance for the reduction in the value of an asset over its lifetime. Each chattel has its own economic life and can be depreciated separately.
• The IRD provides depreciation rates to use for each chattel type.
• Check what rental property expenses can be deducted, and ensure receipts, and documents relating to any items bought for the rental property are in order.

3. Review and adjust rent

Market conditions and economic factors influence rental demand and property values, so it’s important for landlords to periodically review and adjust rental rates to reflect current market trends. Conducting a comparative market analysis provides insights into rental rates in the local area and allows landlords to check that their rents remain competitive.

• Annual rent reviews help landlords keep up with market rents and optimise cash flow to assist with maintenance costs.
• Adjusting rent appropriately not only maximises rental income but also helps attract and retain quality tenants, ultimately improving the property’s long-term profitability.
• Evaluate the current rental market in the area and compare against similar properties. Work with a Harcourts property manager who can help determine a realistic rent
• If justified, consider adjusting the rent to align with current market rates.
• Be mindful of the Residential Tenancies Act, which governs rent increases and sets out the rules for providing notice to tenants.

4. Check insurance cover

Insurance is a critical part of property management, ensuring landlords are adequately protected against tenant-related losses. Conducting an annual insurance review helps landlords check that their insurance policies cover essential risks such as property damage, liability, and loss of rental income. Factors such as changes in property value, renovations, or additions could also require adjustments to insurance coverage levels.

• Review the property insurance policy to ensure it aligns with current needs.
• Check that the policy adequately covers potential risks, including natural disasters, vandalism, and liability issues.
• Consult with an insurance adviser to assess coverage and explore any available discounts or improvements.

Getting the most out of property investment is about planning ahead, making well-informed decisions, and working with experts – such as Harcourts property managers and Mortgage Express financial advisers – who can help pave the way for ongoing success in New Zealand’s property market.

Source: mortgage-express.co.nz