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Some need to know, with a bit of WealthDesign nice to know thrown in.

Home truths – what ‘housing crisis?’

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The media has invented the phrase ‘housing crisis’ and repeated it so many times that many now believe we have one. Yes, people are buying houses off each other in some parts of the country for ridiculous prices; even an uninhabitable villa can go for $1,000,000 in Auckland. But that doesn’t mean we have a crisis.

Auckland has a supply issue, particularly with land – which makes up 60% of the cost of a new house in that city. In Christchurch, where over $3,000,000 a day is pouring in from insurance funded repairs and new builds, there is a mega-boom going on. That also doesn’t mean we have a crisis.

Veda have said that people aged under 28 are borrowing more often for personal loans and credit cards and less for mortgages. With four consecutive Official Cash Rate (OCR) hikes this year, the well-publicised 20% deposit requirements and constant reporting of this so called ‘crisis,’ who could blame them?

Since the previous boom peaked in 2007 house prices in 16 areas across New Zealand have increased, but have fallen in 37 and remained stable in 19 – including Palmerston North. Around Manawatu there are plenty of houses under $200,000 that would be suitable for first home buyers, and if you look just outside Palmerston North, there are several small towns that offer houses for even less.

With KiwiSaver’s first home withdrawal, Housing NZ’s first home grant and the Welcome Home Loan Scheme, many people are still buying houses. There are many more who may not even be aware of just how close they already are – banks are still able to lend to 90% (just not all the time), and the LVR restrictions do not apply to new builds (so a 5% deposit may do it).

Some in the media have been saying that first home buyers need to reduce their expectations around how much they can spend on a home, where that home should be and the size and type of property they can buy first up. There is merit to that, but there is far too much misinformation out there too.

Rather than giving up, people just need good advice. They need to speak to someone who knows what is really going on, and who has a sensible and realistic approach. Give us a call – we help make the complicated simple.

Regan Thomas

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Who said New Zealanders don’t save?

The total KiwiSaver balance for all investors is now $ 19.94 billion of savings. Who said New Zealanders don’t save?

With rising investment balances, investors need to consider the fees they are paying and which asset allocation they are invested into. In some cases they are paying top fees for the lowest return.

Category

Max TER %

Min TER %

Median TER %

Av 5 yr return %

Aggressive

1.89

0.93

1.27

10.66

Growth

1.99

0.66

1.07

10.30

Balanced

1.29

0.97

1.03

  9.21

Moderate

1.17

0.56

0.94

  7.89

Conservative

1.05

0.38

0.69

  6.45

 

We have access to independent research that can compare fund with fund and manager with manager. Fees and performance really matter, and you need to be an informed investor. This is especially important as most of the marketing around KiwiSaver focuses on things like access to your KiwiSaver balance; not the real issues of fees and performance.

Our door is always open and we are happy to help you become an empowered investor.

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The IRD have come out with a warning about insurance payments in the event of a claim.  If you receive any insurance payments, tax could be payable on it.

If you’re a business or rental property owner, you may need to declare some insurance payments in your income tax and GST returns. These could affect the amount of tax you should legally pay.  For example, the following insurance payments are taxable:

•loss of profits

•loss of rent

•reimbursement of business expenses

•destroyed or depreciated assets.

Some common mistakes include not declaring insurance payments as income, not accounting for GST or not returning depreciation recovered when the payment is for a depreciable asset. Another area that one should consider is the payment of loss of revenue cover.

To avoid errors, you should keep all records relating to insurance payments for your business or rental property or ask your accountant or tax agent for help with this issue.

The Christchurch disaster has made the IRD aware of this and they now have insurance payments in their sights as a source of tax avoidance.

Any questions you have regarding your unique situation, please give us a call.  We make the complicated simple!

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Plan A or Plan B?

It is a sad fact that we often see the impact of people opting for Plan A, which is no insurance,  rather than Plan B, which is a prudent, well structured insurance portfolio. We hear the stories of families put into financial difficulty due to a death or disability within a family.

Unfortunately disasters do happen and a decision not to have insurance is a decision to take Plan A. The unintended consequence of this decision is far reaching. Yes, simple in the short term, but often devastating in the long term.  The last thing a widower wants is financial pressure after the loss of their loved one; but it happens far too often. In the first two months of this year, I have come across two such cases.

Our clients have had the benefit of the hard conversations. We have had a look at the “what if” questions and put in strategies to cover these potential disasters. This gives our clients peace of mind, and the ability to get on with life, knowing if the worst should happen, at least financial woes won’t be part of the equation.

Talk to your family (immediate and extended) and ask the question – have they had the discussion around risk?  If not, please let us know.  We are happy to sit down and have a conversation around this thorny issue.  We have answers; ones that won’t break the bank and will bring you peace of mind – Plan B, in other words.

John Barber

 

 

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Goals –are your goal posts in sight?

a Soccer ball on a soccer field

 

There is an old saying if you don’t know where you are going, how you will ever know when you get there? In investments this is very true. Last week we had our annual external audit for WealthDesign and one thing that was drummed into me was the need to always have clearly defined goals (defined in a clear and measurable way) on file, for our clients. These goals should always be the benchmark that every investment decision is weighed against. In truth this is easier said than done, and takes discipline and thought to achieve.  Which got me thinking … this applies in all of our lives, not just our businesses.

For example, say you are a trustee of a family trust or you hold a power of attorney for your aging mother.  Having the basics right from the start, is vital.  You have to know what you are trying to achieve.  So work backwards.  What does the family member or beneficiary require to live comfortably and without stress?  This involves numbers!  You can’t just be airy fairy and say I want my mum to be happy and comfortable.  What will that look like? Discuss this with family.  Communication is vital.   You need to be able to formulate how much money your investment needs to provide to have the outcome desired. 

This is where we help you.  It’s often new territory you’re treading, so having the support at hand, with an expert on your team, is invaluable.  We care!  Call us!

John Barber

 

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