to Valu in Review for February 2005. This is a summary of news articles in the press over the last month. We hope you had a great break and that you now….

Read, learn, enjoy ……..

…….. and happy investing!
 

Dr Cullen (Minister of Finance) continues to move the focus away from the property industry to other sectors for investment. In a recent speech the Minister recommended that NZ’ers save for their futures by moving away from property and investing more in savings and shares. Many commentators have seen it as a political manoeuvring prior to the election later his year.

The Minister has also started to talk down the Government assistance to first time owners that will be announced in the Budget saying the assistance “Will not be huge in this years budget”.

The national Budget date this year is 19 May 2005.

The NZ$ was floated in March 1985 and in February 2005 reached a record price of 72.8 USc. It is believed to have reached this level due to the high interest rates NZ has, low unemployment, Government surplus and economic growth and a “weak” US$.

Unemployment remains at record lows at 3.6% of the labour force or 76,000 people. This is a result of an increase in the number of jobs, a slowing in the number of immigrants and growth in the population slowing.

The government continues to run at a surplus. For the 6 month ended December it is showing an operating surplus of $936m ahead on forecasts. Cash flow was $38 m ahead of forecasts (actual was $91m for the 6 months).

The ASB Bank survey of housing confidence shows that more people believe it is a good time to buy (26%) than those that think it is a bad time (21%). This is the first time the survey has had this result since the middle of 2003. Factors contributing to this result were the price war on mortgage rates at the end of last year, and the Reserve Bank indicating at the end of the year it had probably finished increasing the Official Cash Rate.

Immigration. The net (difference between immigrants & emigrants) dropped in 2004 to +15,100. This is down from 2003 where the figure was + 34,900. The previous 10 years had seen an average of +13,700. At its height the net inflow peaked at 42,500 (mid 2003).

The Official Cash Rate which impacts on mortgage rates is due for review on 10 March by the Reserve Bank. The economists are picking an “improved chance” or just over a 50% probability of a rate increase to 6.75%.
 

A group of owners of 26 apartments in Auckland have settled their dispute with Auckland City Council prior to going to court. The settlement is confidential but is believed to be in the vicinity of $2m. This is close to the amount the owners were seeking to repair the apartments. The total claim had been for in excess of $4m.

2714 claims have been lodged with the Watertight Homes Resolution Service. 244 have been processed so far (161 by mediation, 13 by adjudication and 70 by “other” means). At this pace it could take until 2025 to see all claims settled.
 

The BNZ has commenced battle again with it s four major competitors. Like the battle prior to Christmas it will beat the interest rates of it’s main competitors on a 2-year fixed mortgage.
 

The Taxation Review Authority has recently made a ruling concerning a dentistry practice that was transferred to and then carried on by the trading trust as a way of avoiding tax. As a consequence of the ruling the IRD has advised people who use this structure to reduce their taxable income, to “consider taking advice” as the structures maybe subject to review. The IRD’s main concern seems to centre on where the trust is controlled by them or family members or associated entities. The professional is then “employed” at a very low level, as opposed to what they could earn when self-employed, to enable a higher amount to be distributed to the beneficiaries (possibly family members) to save tax.
 

Figures recently released by the Property Council stated that returns were 14.89% (year ended 30 September 2004). This is up just over 4% from 2003 (10.73%).

Income returns varied from 8.51% (shopping centres) to 10.7% (Wellington CBD)
Capital returns varied from 3.1% (office buildings outside of Auckland’s CBD) to 9.64% for shopping centres.

Overall the market is believed to be strong with no downturn predicted in the short term.

The building boom in the commercial sector has pushed prices up 10%.

If Auckland continues to grow as expected it is predicted that all empty land currently zoned for business will be used by 2020. The Regional Council is currently looking at alternatives to ensure sufficient land and infrastructure for continued growth.
 

The Government is looking to re-structure the benefit system by consolidating 7 benefits into one. It will then create 2 broad categories - those that can work now and those that need some development, have health issues or have children. The objective is to create additional time for case managers to dedicate getting more people off of their benefits. Legislation will be introduced in 2006 with the changes taking effect in 2007 – 2008. Beneficiaries will not face a reduction in the benefit that they receive.
 

The fastest growing localities in New Zealand are those close to New Zealand cities. These regions also have populations with the highest incomes. This is a result of urban sprawl with high paid workers from the city wanting a quieter home life. However it can result in clashes between the 2 different lifestyles (not appreciating each other positions – the need to spray early morning) and increased infrastructure costs for the councils (increased sewerage schemes, town water supplies). This is in areas such as Franklin, Kapiti Coast and Wairarapa.
 

One of the Councils sub committees has voted to look at providing housing to the community. The Council will look at partnership and development options and incentives to get organisations and developers to participate and assist with affordable housing.
 

TransPower, who provides power to the supply companies in Auckland, is starting the consultation process to effected landowners. The company has to increase the amount of power supplied to Auckland and it needs to install new lines through the Waikato to Otahuhu in Auckland using bigger pylons than it currently uses. Residents that will be under the proposed new lines are protesting due to the possible effects on property values, health effects, and ability to use their land.
 

The number of empty flats in Mid-February has seen landlords reducing the rent and waiving the requirement for letting fees to ensure the accommodation is let. The number of empty flats registered with the University of Otago accommodation service is higher than previous years.

Is the past three years students have had more options (such as studio rooms) and were now demanding value for money.