Oil prices rising – What will this do to Rents in Auckland we wonder?

Motorists likely to face further rises after the 8c-a-litre jumps last week

Motorists face more increases in the price of petrol, which is likely to reach a new high, the Automobile Association is warning. Motorists are being urged to redouble fuel conservation efforts as no early end seems in sight to the price rises. Even after two increases last week — in which petrol rose 8c a litre and diesel by between 6c and 10c— the AA says the oil companies have still not passed on the full brunt of a global cost spiral.

‘‘So we shouldn’t be surprised if there’s pressure to raise prices in the coming week,’’ senior AA analyst Mark Stockdale said last night.

All the big four suppliers have lifted the price of 91-octane petrol at city pumps to $2.11 after confusion in the market late in the week.
That was caused by BP, which found itself out on a limb after being the first to impose the latest increase, and then backed down. But after watching its rivals leapfrog its prices on Friday and Saturday, BP followed them back up, citing unsustainable import costs.

Even though that is only 8c below the record price of $2.19 for a litre of 91-octane petrol after Hurricane Katrina crippled American oil production in 2008, Mr Stockdale said the companies had faced a 13c increase in import costs in the past fortnight. Only Gull is undercutting the big players, selling its 91-octane bioethanol-petrol blend for $2.06 and diesel for $1.48, which is 1c below the Caltex price and 8c lower than BP.

Mr Stockdale warned continuing instability in the Middle East could push the price past the $2.19 record.
British International Development Minister Alan Duncan, a former oil trader, is warning that a barrel of crude oil could almost double to US$200 — well above a record high of US$147 — if unrest in Libya and elsewhere in the Arab world gets worse. ‘‘All I’m predicting is danger,’’ he told the Times newspaper.
‘‘If crude oil doubles you’re going to have a very serious spike— trying living without it for a week.’’
The British Government is coming under increasing pressure over prices at the pumps, which exceed $3 a litre in some districts, as 63 per cent of the revenue goes into its coffers, compared with a tax share of 43 per cent in New Zealand.
Although Mr Stockdale was not so pessimistic, he warned prices were unlikely to ease much once the latest Middle Eastern crisis abated or Saudi Arabia tried to stabilise the market by increasing its own oil production. ‘‘We have to get used to the idea that as global demand increases and supply doesn’t, we are going to be facing these kinds of price fluctuations, and whenever any little crisis comes along it’s going to lead to price spikes,’’ he said.
‘‘The only way we can manage that is by reducing our consumption.’’

Although Libya is not among the largest oil producers, Mr Stockdale said the relatively small cut in production amid political upheaval in that country showed an international buffer of supply over demand was dwindling.

‘‘This is a global issue— worldwide we need to look at supplementing consumption with renewable fuels or alternative transport.’’

Green Party transport spokesman Gareth Hughes said that although the AA was concentrating on giving drivers energy-saving tips, there was an urgent need for the Government to prepare the country for an oil squeeze by promoting public transport and alternative fuels.

‘‘In 2008, when oil prices rose, we found people flocking to public transport but the system simply wasn’t ready so in Wellington they had to get rail units out of the museum and Auckland had people packing the trains.’’

Mr Hughes said none of the Government’s seven ‘‘roads of national significance’’, including the $1.7 billion Waterview Connection motorway project under consideration by a board of inquiry sitting in Auckland, had oil price risks factored into their business cases.

• Article
• 7 Mar 2011
• The New Zealand Herald

Expectations that the Reserve Bank will cut interest rates have hardened as the scale sof the Christchurch disaster becomes clearer.

The money market is now fully pricing in at least a 25-basis-point cut to the official cash rate when the bank releases its monetary policy statement on March 10. It was a 50/50 proposition on Wednesday.

And according to Credit Suisse’s swapsbased indicator, the pre-quake 50 basis points of tightening the market expected to happen within the next year have been scrapped.

ASB economists, who on Wednesday put a 35 per cent probability on an OCR cut, saying the case for cutting was more ‘‘why not?’’ than anything else, said yesterday they expected a 50-basis-point cut and that it would be very helpful to the recovery.

Driving these rapidly evolving views is the realisation that the physical damage from Tuesday’s earthquake will substantially exceed the $5 billion to $6 billion caused by last September’s quake, and that the loss of life will also mean a much heavier psychological toll.

‘‘The cost to the Government is likely to be much larger, at a time when the economic backdrop is posing challenges to the Government in meeting its Budget,’’ said ASB economist Jane Turner.
‘‘Fiscal policy is likely to find itself in a position where it may be tighter than ideal for the broader economy, and monetary policy can provide some offset.’’

Reserve Bank Governor Alan Bollard, in a speech a month ago, raised the possibility that he might ‘‘have to reconsider some further monetary policy stimulus’’ in a scenario where consumers remained cautious, saving more and spending less, and there was a pall of gloom over the housing market.

A raft of underwhelming data indicated the economy had stalled over the second half of last year, Turner said.

‘‘The latest Canterbury earthquake adds to this uncertainty, and suggests lower interest rates would be helpful to the recovery of the economy.’’ — Brian Fallow

• Article
• 25 Feb 2011
• The New Zealand Herald

As rents in most of Auckland continue to rise, two North Shore suburbs have bucked the trend with a 4 per cent fall.

Inner-city suburbs such as Grey Lynn and Epsom have risen more than 20 per cent, according to figures released last night by Crockers, but the median rent for a three-bedroom house in Takapuna and Devonport dropped 4 per cent last month compared with January last year.

The two North Shore suburbs are close to beaches, with vibrant cafe and night life and high-decile primary and secondary schools and are still within 16km of the city centre.

Geri Martin, of Bayleys in Takapuna, said some local landlords were ‘‘particularly fussy’’.

‘‘Some say to me that they’d rather their property stay empty than to have someone they don’t want living there.’’

In Takapuna/Milford the median weekly rent for a three-bedroom house fell by $20 in January to $480 compared with the same time last year, while Devonport prices dropped to $550.

Harcourts Devonport property manager Graham Ward said business was still very busy. In the six months to January 31, he had rented out 68 properties in the Devonport area.

The North Shore is not the only place where tenants can get more for their money.

In Manukau’s Maraetai, a 30-minute ferry ride from the city, a seven-bedroom, three-lounge, threebathroom house with a swimming pool and 930sqmbackyard is about to go on the rental market for $800 to $850.

The Tuscan-style home is only six years old, has sea views and is a twominute walk from Maraetai Beach.

In comparison, a split-level threebedroom villa in Ponsonby with limited yard space is advertised at $875.

Landlord Michelle Harrison says Maraetai is perfect for busy professionals and young families wanting a beach lifestyle while still being close to the city centre. She says the ferry ride home is the perfect way to unwind.

‘‘You definitely get more bang for your buck out here. It’s great to just go there and relax and all you can hear is the birds.’’

Mrs Harrison said rents in soughtafter inner-city areas, such as Ponsonby and Remuera, were over-priced considering what was available in more outlying suburbs that were still reasonably close to the city centre.

• Article
• 21 Feb 2011
• The New Zealand Herald

Rental website makes letting a room for the World Cup a popular choice

Billboards showing homeowners exactly how they can make big bucks during the Rugby World Cup are attracting some of Auckland’s hottest properties.

One house — a multimillion-dollar home in a resort-like setting— will set renters back between $1500 and $2000 a day.

The billboards, advertising for GoRugbyHomes.co.nz, show an illustration of a rugby ball plus a house equalling big money. On the website, it says: ‘‘The law of supply and demand: more tourists than you can shake a stick at — and they need beds. ‘‘Rugby-mad tourists need beds. Rent a property, caravan, single room even . . . it’s not rocket science.’’ There are already dozens of properties listed, from single bedrooms, family homes and inner-city apartments to villas opposite Eden Park.

South Auckland’s Sir Edmund Hillary Collegiate also has its school marae up for rent. Prices start from around $150 a night to up to $2000 a night.

That home, in Northcote, is fittingly titled ‘‘Auckland’s Best Kept Secret’’ on its profile. It boasts of a resort-style pool complex, built-in gas fires and barbecue, a heated pool, spa and tranquil ‘‘mesmerising views that sweep across bush, beach, harbour and the city’’. It also features a penthouse suite with in-room double spa bath, double showers, a private deck and a games room. With two big rooms up for rent, up to four people can stay and hosts Graham and Nyree promise a ‘‘full, sumptuous breakfast daily’’ as well as champagne and nibbles to welcome guests the day they arrive.

Homeowner Graham Dorward said he was offering his home up — bed and breakfast-style — to cater to the rich. The package would include a full Kiwi experience, complete with golf and fishing trips, depending on who stayed. Guests would also be picked up from the airport in a Mercedes. Mr Dorward said he was an avid rugby fan who wanted to participate in a unique way during the World Cup. ‘‘I’m offering quality . . . I’m just targeting the top end. ‘‘That market needs to be catered for — and obviously drinking champagne.’’

There are also gorgeous properties for rent in other parts of the country, such as the ‘‘ Waterfront Stunner’’ in Christchurch, on the water’s edge with large balconies overlooking the sea, a master bedroom and ensuite.

GoRugbyHomes marketing director Mike Gray said people were starting to comprehend exactly how much money they could make by putting their properties up for rent during the tournament. Last month, 25 properties popped up on the site. ‘‘It really is an opportunity for people to make money. But if you think about it, there is just going to be so much demand,’’ Mr Gray said.

‘‘So even if you rent out one or two rooms, you’re providing a much needed service.’’

Mr Gray said many properties had already been successfully rented out to mainly overseas tourists. He said one homeowner in Canterbury had managed to rent out a property for the entire duration of the World Cup. As a result they would be pocketing around $41,000. ‘‘Even if you have a couple stay for three nights at $200 a night, that’s $600.

‘‘It’s up to you to take up the opportunity.’’

• Article
• 18 Feb 2011
• The New Zealand Herald

Lowering the credit ratings of major banks could raise New Zealand interest rates

Ratings agency Moody’s warning that it may downgrade the credit ratings of Australia’s four major banks could potentially increase longer term interest rates in this country, a banking expert says.

Moody’s gave Commonwealth Bank, National Australia Bank, ANZ and Westpac a warning that it may lower their AA1 longterm, senior unsecured debt ratings because they rely on 43 per cent of their funding from markets that are considered volatile.

National Australia Bank owns New Zealand’s BNZ and Commonwealth Bank owns ASB.

‘‘The potential impact is that we’ll face an increase in longer term interest rates because the banks won’t be able to raise their funding in wholesale markets as cheaply as they currently do,’’ said David Tripe, of Massey University’s Centre for Banking Studies.

An ASB spokeswoman said New Zealand’s banks were less reliant on overseas wholesale markets than Australian ones. ‘‘ ASB remains a strong and well capitalised bank, with current credit ratings of AA2 from Standard and Poor’s and AA from Moody’s,’’ she said. ‘‘As a result of the proposed review and any possible subsequent adjustment of the bank’s rating, we do not expect any change in our ability to access wholesale markets for funding, or any deterioration in the price we pay for wholesale funding.’’

BNZ said it ‘‘remained focused on ensuring that we are well placed to continue supporting customers and investing in our community’’.

ANZ Group Treasurer Rick Moscati said he understood the rationale for the review and the bank had been working hard to reduce its reliance on wholesale funding, which accounted for around one-third of its funding mix.

‘‘We have also increased the average tenor of our wholesale funding and shortdated offshore wholesale debt now accounts for less than 2 per cent of our Australian funding requirements,’’ said Moscati.

A Westpac New Zealand spokesman said Moody’s had indicated that the bank would remain AA rated.

Commonwealth Bank of Australia chief financial officer David Craig described Moody’s review as a ‘‘storm in a teacup’’.

Royal Bank of Scotland credit analyst John Manning said Moody’s concerns appeared to be about a year late as Australian banks had recently lowered their reliance on wholesale funding markets through increased deposits.

Patrick Winsbury, a senior vicepresident at Moody’s in Sydney, said the ratings agency took a ‘‘multi-year’’ view of the banks, which have benefited from government guarantees and liquidity support from the central bank.

‘‘We’ve been banging the drum about it for eight years,’’ Winsbury said.

‘‘We’ve had a period of extraordinary support from bank supervisors and the government, and you’re seeing a global trend in crisis-hit markets to ensure that regulators never do that again.’’

• Article
• 18 Feb 2011
• The New Zealand Herald

A warrant has been issued for the arrest of Blue Chip’s Mark Bryers for non-payment of a fine.

Bryers, who was bankrupted in October 2009 owing personal creditors $230 million, is now living in Australia.

Last May, he was convicted on 34 book-keeping and record-keeping charges as well as failing to attend a creditors’ meeting.

He was sentenced to 75 hours’ community work and fined $37,500.

He has completed his work term but the Weekend Herald reported on Saturday that he had not paid the fine or made any arrangement to do so.

A Justice Ministry spokesman said

• Article
• 17 Feb 2011
• The New Zealand Herald

Desperate flat hunter offers six months’ rent upfront

Auckland’s rental crisis is worsening, with prices rising 7 per cent in a year and desperate tenants going to extreme measures including offering to pay six months’ rent in advance.

New figures show rents in the most desirable suburbs have jumped an extraordinary 24 per cent.

A lack of new construction and increasing demand from a booming population unable to get on to the property ladder are among factors getting the blame.

Last week, the Herald reported how 200 would-be tenants looked through one Kingsland rental property in just 30 minutes.

Real Estate Institute chief Helen O’Sullivan yesterday blamed the rental shortage on ‘‘ pure demand and supply’’.

She said very little building had been done in the past 18 months as developers struggled to find finance for developments that were traditionally sought after by first-home buyers or people looking for investment units.

‘‘You look around Auckland and you’re not seeing major housing developments in rental pockets under way anywhere. The supply hasn’t increased and demand has indeed grown,’’ Mrs O’Sullivan said.

Nationally, rental prices have risen 3 per cent, according to Crockers Property figures released yesterday.

But in Auckland, the rise is more than double that.

It has been driven by rental prices in the desirable city-fringe areas such as Grey Lynn and Westmere where median rents for a three-bedroom house reached $675 a week in January — an increase of 22 per cent on the same time last year.

The median price for a threebedroom house in Epsom, Newmarket and Royal Oak increased 24 per cent to $585 a week.

However, the soaring rents are doing little to deter would-be tenants who are increasingly desperate to find a place to live.

Harcourts Ponsonby property manager Sharon Ryan said it was not unusual for applicants to offer more than the advertised rental price for homes in Ponsonby, Herne Bay, Freemans Bay and Parnell.

She said some tenants were even signing tenancy agreements without viewing the property first— and in one case someone offered to pay a sixmonth block of rent up-front.

‘‘You always get a bit worried when they haven’t seen it. I always say it is better to look first, but I had a girl who had missed out on quite a few properties before and she already knew the complex,’’ said Mrs Ryan.

Other tenants were willing to pay double rent — shelling out for a new property while still paying rent on their current place — to ensure they did not miss out while they gave the required three weeks’ notice.

‘‘Sometimes it is really hard to decide, because you will get six applicants and they are all good. Sometimes what it comes down to is first in/ first served,’’ said Mrs Ryan.

Yesterday, an open home for a three-bedroom townhouse in Grey Lynn advertised at $680 a week — $5 above the average price — attracted 12 people in half an hour over a mid-week lunch time.

Barfoot & Thompson property manager Maureen Kan said the shortage meant landlords had started to ask for more rent.

But she warned that even in a tough market, a property could sit vacant for the sake of $20 or $30 more a week.

‘‘Basically the market is the market. Tenants know what is out there and they have seen enough properties to know when something is overpriced,’’ said Mrs Kan.

In some areas of Auckland, however, there has been a slight drop in the median rental price.

In Devonport and Takapuna, rents were down 4 per cent last month when compared to the previous January.

Geri Martin, of Bayleys in Takapuna, said it seemed landlords in the area were trying to cater to ‘‘fussy tenants’’.

‘‘Tenants are really fussy — if they don’t like something in the house they won’t pay as much, or won’t rent.’’

• Article
• 17 Feb 2011
• The New Zealand Herald

Soaring world copper prices a challenge for NewZealand property Investors.

Scrap metal dealers and exporters say soaring commodity prices are bringing challenges to an industry that’s worth $2 billion a year to the economy.

HOT METAL: Clark Proctor says the rising copper price has led to increased theft of the metal from schools and houses.

Copper futures in New York hit a record US$4.63 a pound on Monday.

Clark Proctor, managing director of Metalman, a Manukau scrap metal buyer and exporter, said prices for steel, lead, nickel and aluminium had also seen rallies on the London Metal Exchange (LME).

But he said rising metal prices put pressure on cash flow in his business.

Metalman was forced to pay more for materials, while its margins remained almost unchanged.

‘‘Most people in our industry — if they’re honest with themselves — would prefer the copper price to be at lower levels,’’ said Proctor.

Scrap metal is a big foreign exchange earner for this country, with its annual turnover worth almost twice as much as New Zealand’s wine exports last year, which fetched just over $1 billion.

Proctor, whose company exports materials mostly to Asia, said rising global prices also led to an increase in the theft of copper from schools and houses, which criminals then tried to sell on to buyers.

The scrap metal industry had been cleaned up over the past five years, he said, but there was still a number of unscrupulous traders.

Last month the Herald on Sunday reported a string of copper thefts, including power lines stolen from between the poles and earthing wires being taken from an electricity substation. Proctor said some scrap metal businesses had also been targeted by thieves trying to get their

• Article
• 9 Feb 2011
• The New Zealand Herald

PAYING THE PRICE

Rental prices have risen in many areas of Auckland over the past year— some by up to a quarter — with a real estate agency expecting another surge because of a shortage of property.

The median prices for a three bedroom house in Takapuna and Remuera have shot up by 25 and 26 per cent since December 2009, while rents in the city centre have risen 16 per cent, according to figures from Crockers.

Michelle Jones, general manager of Crockers, said such figures always naturally lagged behind what was happening in the market.

Even though it was always busy as students returned to university, Ms Jones said demand for rentals was still remarkably high. Crockers recently had 70 people turn up to an open home for a rental property in Ponsonby, and had up to 50 at other viewings. ‘‘That’s not the usual.’’ Landlords in central Auckland suburbs have reported an increase in demand in recent months, with one property in Kingsland attracting more than 200 would-be renters during a half-hour open home.

However, the median rent for a three-bedroom property in Mt Eden (including Kingsland and Balmoral) rose a modest 2 per cent in the year to December. Crockers said it expected the median to rise this year.

Epsom, Howick and Manukau/ Manurewa were some of the worst performing suburbs, with all recording no rise in rents over the one-year period. In some areas, median rents dropped, with Birkenhead (-5 per cent), Waterview (-3 per cent) and Mt Roskill (-3 per cent) among the biggest losers.

Crockers’ figures were sourced from the Department of Building and Housing, which compiles them through its bond registration service.

• Article
• 9 Feb 2011
• The New Zealand Herald

Desperate renters spend months looking for a place to live

Demand for rental property in Auckland is at crisis point, with some houses now attracting as many as 200 would-be tenants.

OH, THE JOY: Renee Bushby says she, her partner and two friends are the lucky ones getting the tenancy on this home in Balmoral Rd.

Desperate tenants are often having to spend months searching for a place to live, and some even engage in bidding wars. Landlords are sitting pretty.

Rental agents say they are receiving hundreds of inquiries for listings, especially for stand-alone houses close to Auckland’s central business district.

An agent who listed a four-bedroom property in Balmoral said he received 200 inquiries on the property before letting it out last weekend.

A property in Ethel St, Kingsland, attracted more than 200 would-be renters during a half-hour open-home.

‘‘It’s going to be very easy to rent it. Narrowing down the list of tenants is going to be the hard part, to be honest,’’ landlord Dave Smith told TV3.

Rental agent Darryl Goode said in the current market, it was not uncommon for hundreds of people to register their interest in a property.

‘‘Give me another 10 or 20 threebedroom houses and I could let them all out in a couple of days.’’

Mr Goode said there was a ‘‘severe shortage’’ of stand-alone houses to let in the city-fringe areas, and the market was the tightest he had seen in his 12 years in the industry.

Real estate agency Crockers recently reported that the average weekly rent for a three-bedroom home in central Auckland was $ 580 in December, up 16 per cent in a year. For Takapuna/Milford it was $670 (up 26 per cent) and Remuera $690 (up 25).

The Herald on Sunday has reported that Auckland rental property listings on Trade Me in January were down 24 per cent on the same month last year.

Demand was also outstripping supply in Northland, Bay of Plenty and Canterbury, although nowhere near as badly as in Auckland.

Agents say the economic slowdown is the main contributor to the rental market being at crisis point.

More rental properties are being sold by investor landlords who want to cash up, and hard times are forcing homeowners to also sell and become renters themselves.

Landlord Lourdes Sudianto said he had to sell his two central Auckland rental properties after his trading business was hit by the global recession.

The slowdown has also forced many landlords to return from overseas to reoccupy their properties.

Harcourts rental manager Lesley Whiting said her Browns Bay office recently lost to returning landlords about 10 of the 300 properties it was managing, and was currently listing only two rental dwellings.

‘‘ It’s got nothing to do with landlords wanting to capitalise from the World Cup, but the economic crisis which is forcing more people to come home and stay home,’’ Ms Whiting said. ‘‘Who knows how long this is going to last, but it’s really reaching crisis point for people looking to rent today.’’

Last year, net migration of 16,500 was the highest since 2003, driven mainly by fewer Kiwis heading to Australia to work.

‘‘The economic recession has had a significant impact on the number of New Zealanders leaving for Australia, with a 27 per cent decrease in transTasman departures over the last 12 months,’’ Immigration New Zealand said in its latest migration trends and outlook report.

Changes to tax laws last year, which restrict investors on what they can claim in depreciation, have deterred

• Article
• 7 Feb 2011
• The New Zealand Herald