This is a summary of news articles in the press over the last month.

Shortly we will release an update on the discussion document issued by the IRD and Treasury on proposed changes to depreciation.

We hope you

Read, learn, enjoy …

… and happy investing!
 

The national median was up by $6,000 to $249,000 from June to July (up from $211,250 in July 2003). The number of days to sell was down 1 from June to 30. The volume of sales in July was 7,802 (8,367 in June 2004 and 10,138 in July 2003). The category with the biggest drop in volume of sales was in houses under $400,000 in value.

Quotable Value has also released their quarterly house price index. The increase for the June quarter was 1.9%, compared to March that indicated a 5% change. The peak was in the September quarter last year, which showed an increase of 7.3%. On an annualised basis to June of this year the index has increased 22% (up from 15.5% in June last year).
 

The Official Cash Rate is currently 6% with many believing that this will increase to 6.25% at the next opportunity to review the rate by the RBNZ (9 September). Economists are predicting at least one more increase after September in the OCR by the end of the year.

Unemployment is at 4% - the lowest in 17 years. This also means that there is a shortage in skilled workers putting pressure on wage increases. Combined with increases in the price of oil there is a lot of inflationary pressure in the economy making it difficult for the Reserve Bank to keep inflation within the set parameters.

The ASB Bank survey of investor confidence indicates near record highs for the quarter ended in June. 21% (net) of respondents believe that it is a good time to invest. This is up 2% on the March quarter. The belief is that investors believe some of the volatility has been factored into the market and that the economy is in good shape. The gap in confidence between property and other investments has closed, as residential investment property has remained stable.

In the National Bank survey of economic activity only Otago and Hawkes Bay had a decrease in their activity over the June quarter (out of the 14 regions). The trend of the survey is that it is showing a slow down in urban areas while the rural areas are growing strongly.

House affordability, as measured by the AMP Home Affordability Report continues to decline with a drop of 7.9% for the June quarter (8.5% on an annual basis). Northland was the only region that did not experience a decline in affordability (2.9% improvement).
 

Two neighbours entered into a verbal agreement to build a fence. Neighbour A refused to pay. When neighbour B took him to the small claim court the matter was thrown out, as neighbour B did not have a legal leg to stand on.

Had a Fencing notice been obtained before the work commenced then both neighbours would have been legally liable for the costs.
 

It is a believed that rents are falling in some areas (especially on poor condition properties) and this could become a nationwide trend due to the amount of new housing stock being completed. However as interest rates increase the affordability for people to move from renting to first homebuyers becomes harder keeping these people in the rental market.
 

The Inland Revenue Department, in a discussion document, has advised that it is looking to clamp down on those industries where tax evasion is high. Incentives will be issued to encourage people to declare their income during an amnesty. Anyone caught outside of the amnesty period will face full penalties as the IRD undertakes more audits in industries rife with tax avoidance. Closing date for submission to the government is by 30 September. If IRD proposes to move ahead with the idea it could be before Parliament at the beginning of next year.

While no specific industries are mentioned it does mention “contractors” and that the practice is not just confined to household services.
 

The Ministry of Consumer Affairs has recently issued a caution against rent-to-buy/ wrap mortgages/ lease option or vendor finance schemes due to an increase in enquires from those on low incomes.

These types of schemes are not illegal but there is the belief that they can be un-ethical.
 

Figures released by the Property Council for June show an average return of 14.04% (June 2003 10.8%) for the council’s investment performance index survey. This is the highest figure for 10 years.
 

The Insurance Council of New Zealand believes that when purchasing a dwelling the offer should be conditional upon being able to obtain the relevant insurance on the property.

While insurance companies had not removed flood cover for areas that are prone to flooding, the Insurance Council believe the possibility of the cover not being available in the future is real.
 

The system has been modified this year. Consequently many South Auckland properties (primarily in Papakura and Pukekohe) are paying less and some in rural classified areas (Papakura, Franklin and Waiuku) are paying more (due to increased land values).
 

At a recent auction for a 2 bedroom 1970’s Mediterranean style beachfront property on land of 809 sqm reached a record price - $6m (capital value $2.4).
 

An influx of professionals moving into Hawkes Bay combined with increasing property values is resulting in increased demand for rentals and a corresponding increase in rents.

This increased demand excludes the seasonal influx of workers, which starts in October.
 

In the AMP Home affordability survey for the quarter ending in June, Marlborough recorded the second biggest drop in affordability (9.9%) behind Auckland (11.2%). The national average saw the ability of people to buy homes drop by 7.9%.

The decreased ability for people to buy homes is due to increased house prices, low wages in the district and increasing interest rates.