Diana Clement 's Opinion

Your Money and careers writer for the NZ Herald

Diana Clement: Reliable data vital for property investment

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Head must rule, not the heart, when you’re researching to purchase

Some banks' property reports pinpoint specific data such as the percentage of agents seeing more people through open homes, and auction clearance rates. Photo / Getty Images
Some banks' property reports pinpoint specific data such as the percentage of agents seeing more people through open homes, and auction clearance rates. Photo / Getty Images

Buying investment property is about numbers and money, not just lifestyle and human emotion. That is so for both owner-occupiers and investors.

Should I buy or shouldn't I? What suburb with what type of property will give me the best return?

Getting your hands on reliable data can help answer these and other questions - providing you know where to find it, that is.

The Real Estate Institute, banks, QV and related companies (Zoodle, Property Guru and Property IQ) and the Ministry of Business, Innovation and Employment (MBIE) and others all collect data relevant to property investment.

The Real Estate Institute (Reinz) gathers information from its members and publishes sales figures including median prices, days to sell and volumes on its website.

Reinz chief executive Helen O'Sullivan says buyers and sellers can also ask local real estate agents for detailed data such as capital growth over the past 10 years.

QV's various companies sell reports and give others away. An E-Valuer report from QV gives an estimate of current market value based on data such as sales from the local area. Zoodle's title details report at $8 can be useful if you want to buy a property that isn't on the market - if the tenant won't tell you at the door.

A list of recent sales can help paint a picture of what your dream property or do-up opportunity might be worth in the real world. It can also be a useful bargaining tool.

And a certificate of title with a diagram report for $16 might alert you to potential problems related to leases, easements and land usage restrictions on a property.

Heavy users of Zoodle or QV reports can get a monthly subscription to PropertyGuru.co.nz, which allows them to download as many of these reports as wanted for one fee.

Investors have additional things to worry about when buying a property over and above the concerns of owner-occupiers. They need to know how much rent they can charge and what the yield, or annual return on investment, is. They also need details such as how many days on average it takes to let properties in the location they're considering.

And will rent cover the mortgage, insurance, maintenance and other outgoings? If an estate agent's figure turns out to be unrealistic you could be in trouble financially unless you have cash to top up the mortgage. Rent figures come from MBIE, which holds bonds deposited by tenants.

Beware. New landlords can get a bit tripped up by this. They think the average house in a suburb should get the median rent, so they ask too little for their property. The reality is the average rental property is different to the average house because landlords typically buy cheaper properties.

Conversely, if they charge significantly too much rent, the Tenancy Tribunal can order it to be reduced.

MBIE's website at dbh.govt.nz/market-rent has average, median and quartile rents broken down into suburbs and property types.

For those who prefer to read this information on paper, it can be found at the back of NZ Property Investor magazine with sales snapshots.

If affordability concerns you, or is part of the total home buying equation, then Interest.co.nz publishes the Roost Home Loan Affordability Report. It gives a monthly assessment of home loan affordability for a typical buyer.

Want to know if it's a buyer's market, a seller's market or balanced? The answer is on Helm's Properazzi website's Property Dashboard, which is a series of visual indicators for various markets in New Zealand. The speedo indicates to buyers whether you can be relaxed about buying in a buyer's market or need to make haste in a seller's market.

Buyers who are concerned about the effect of economic conditions on their property purchase have various places to go to find out more in language written for Joe Public. If you're at all in doubt over whether to buy or wait then reading these reports is very worthwhile.

The website SRA.co.nz has several free reports. It considers issues ranging from birth rates to the numbers of for-sale ads posted and building consents issued. Realestate.co.nz monthly property report offers interpretations of its statistics such as listing numbers and asking prices.

Both the ANZ and BNZ publish regular property reports. The statistics included in these reports can be useful in the decision-making process. They drill down, for example, to specific data such as the net percentage of agents seeing more people through open homes, the percentage of foreign purchases of New Zealand property and auction clearance rates.

Rental yields have declined significantly since the 1990s. That means rental properties aren't the money-spinners they once were. This is a problem for investors who might find more profitable places to park their money that don't involve calls in the middle of the night complaining that there's a rat in the roof cavity.

The Westpac Property Investor report allows investors to download a spreadsheet with the gross yields for suburbs, which is helpful, especially as the figures can be sliced and diced.

If you want to buy in Auckland, but don't care where, you can order the data by the gross yield figure. In the report I downloaded at the time of writing, a two-bedroom apartment/flat in Manurewa was offering the best yield in Auckland at 7.2 per cent and apartments and flats in Pinehill offered the worst yields at 1.7 per cent.

The only downside is that the data is January to December of the previous year and it isn't updated monthly.

Data that drills down to the suburb is useful. If, for example, you want to buy a rental property in Glenfield, but yields are better in neighbouring Beach Haven, you might be persuaded to look there.

Yield isn't the only factor. Tenants in Beach Haven may not look after properties as well as the average Glenfield tenant. Or Glenfield could have potential improvements that will boost rents and/or property prices at a faster rate than Beach Haven.

Another useful source of statistics for investors is Trade Me. The auction website produces quarterly reports in which it publishes the data and analyses the numbers from rental property listings. Those reports show the trends in the number of listings and changes to the level of inquiry from tenants. Alistair Helm, who runs Properazzi.co.nz, rues that these reports aren't more frequent and more in-depth.

As with any data, understanding the figures can be difficult. Be careful of it telling you what you want to hear.

Just because three-bedroom houses in Ponsonby experienced 14 per cent growth in rental yield in the year to March 2014 doesn't mean they offer good potential for capital gain in the near future. A sure-fire winner in property has the habit of tanking.

Unfortunately property data can be contradictory, says Helm, and he questions the accuracy of some of the reports produced from the data.

For instance, in March and April median prices appeared to be rising rapidly in Auckland while supply dried up.

The reality was that the lack of lower-priced sales on the market thanks to LVR restrictions skewed the figures, artificially pushing up the median. "It is entirely inaccuracy of interpretation because it is a mathematical model," he says.

Helm cites Grey Lynn as another example where the data isn't broken down sufficiently to become meaningful. He says the median price for the suburb quoted by the Real Estate Institute includes apartments and doesn't reflect the true picture.

QV figures can remove apartments from the equation giving a truer representation of what's happening in the standalone house market.

"We need more intelligent data reporting," says Helm.

• Real estate investment websites such as Realestateinvestar.co.nz also offer repackaged data from the sources above for a monthly fee.

- NZ Herald

Diana Clement

Your Money and careers writer for the NZ Herald

Diana Clement is a freelance journalist who writes about personal finance and careers. She has worked as a journalist for more than 25 years in both New Zealand and the UK. Diana has contributed to a large number of local and international publications. Her pet topic is the secrets of saving money.

Read more by Diana Clement

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