TelferYoung (Auckland) Limited

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Auckland Newsletter - December 2007

6 December 2007

Welcome to the TelferYoung (Auckland) Ltd December 2007 Newsletter

Staff Changes - Introducing.....

Bob Hawkes is one of a small team who joined early this year to help establish a North Shore office.  He comes with a wide valuation, property management, Public Works property acquisition and alternative dispute resolution background, specialising in all manner of commercial and industrial valuations, residential where portfolios are involved, arbitrations and Construction Contracts Act adjudications.

Weston Kerr - Happily married with 3 adult children who currently are resident in Europe, having spent 34 years striving to find a balance of commitment between family, clients, charity work, fitness & recreation. Weston is a specialist in rural, lifestyle, subdivision land and high value residential property on Auckland's North Shore. 

Patrick Beasley joined Telfer Young in August 2007.  Patrick comes with extensive experience of the South Auckland property market including residential, commercial and industrial.  Married with a two year old boy and nine week old girl sometimes makes balancing family and work commitments interesting.  His road bike is rapidly gathering dust and cobwebs.

Nick Thompson having graduated with a BCom VPM from Lincoln University in April 2005, went on his ‘Big OE' through Europe and North America before joining the TelferYoung team in May 2007.  Nick is working with Ian Delbridge on commercial and industrial valuations.   

Matthew Straka joined Telfer Young in July 2007 after completing a Bachelor of Business Studies at Massey University, where he majored in financial economics and valuation and property management. Matt who works with Trevor Walker is involved in commercial and industrial valuation work in the Auckland area. 

Mark Maginness is studying towards a Bprop at Auckland University and is working part time for TelferYoung. He is assisting Phil White on consultancy work for Telecom Mobile.

Silipa Wong joined our support staff in February this year as WP Operator and an expert on finding answers to WP problems.  Silipa comes from a health background and is finding the switch to property valuation a refreshing change.

Karen Pearson joined our office in November as Receptionist and Office Assistant.  Karen comes from a legal secretarial background but is enjoying the variety on reception and also working in the central city again.  Out of hours she is involved in trying to organize her two teenagers!

High Court Order to Partition Land

Where there is a long running dispute between cross-lease title owners there is a mechanism that may be helpful to obtain a resolution. It would involve making an application to the High Court for a partition order as occurred in relation to a property at 37 Clifton Road, Takapuna. [Joong Seok Ko and Youn Ja Kim v. Peter James Hugh Goldsmith and ors. High Court of New Zealand CIV 2006-404-3279]

The background is that unauthorised additions were made to four of five contiguous cross-lease title flats built in the 1980s. They share a common area drive with small exclusive use areas, the common area extending to the cliff edge above Takapuna beach.  A lap pool and outdoor living area were constructed adjacent to Flat 5, that intruded upon common land at the edge of the cliff top.  The owner of Flat 5 was being frustrated in his endeavours to sell by a defective title and sought to have the land partitioned in accordance with a plan of proposed subdivision.

What is partition?  The Partition Act 1539 applies to co-owners of freehold land and the Partition Act 1540 applies to co-owners of leasehold interests.  The purpose of the Acts is to provide relief where co-owners cannot agree when dealing in land of which each has an interest.  These Acts apply in New Zealand, under S3(1) Imperial Laws Application Act 1988.  Until this decision, there had been no summary judgement granting partition on cross-lease titles that is directly relevant where alterations have been carried out without approval. 

Abbott J. decided that the plaintiffs had a right to partition which was not constrained by the cross-lease titles and ordered partition subject to the form of the partition being determined.  The Partition Order is subject to a resource consent being granted permitting subdivision of the land.  None of the parties sought the alternative of sale that the Court could order under The Acts.

The decision would appear to have implications for high price cross-lease title property where one party may be seen as significantly advantaged or disadvantaged. In some circumstances there may well be no alternative but to seek an order from the court.

The owners of cross-lease titles can also run into difficulties on re-development, or where one or other of the flat owners intends to undertake substantial alterations that affect the site or an adjoining flat owner.   Conversion to independent titles, subject to obtaining a satisfactory resource consent and subdivision may be a good solution.  A value adjustment is required under the Acts.  Trevor Walker of TelferYoung gave evidence on this aspect to the Court.

It will be interesting to see whether or not this judgement gives rise to other partition applications. 

A Cautionary Word on The Housing Market

Over the past five years the housing market has experienced one of its longest periods of sustained growth in property values compared to any other recent time in New Zealand's history.  We have had booms before, generally brought to an end by external events, such as the oil shocks of the 1970's, and the share market crash of the late 1980s.   But this is different.  There are no clear signs yet that the New Zealand economy is faltering.  To the contrary, and despite higher petrol prices and lower levels of net migration, unemployment is at an all time low for many years, wages have been increasing and are anticipated to increase further, and our dairy industry sector is anticipating further growth for 2008. In essence, the property boom has run its course for a while to come because housing affordability is at an all time low and the rapid increases in property values have reached a point where many income earners cannot service loans based on current prices and current interest rates.

The latest media attention has focussed on the increased volume of properties listed for sale and the length of time to sell a property suggesting that desperate owners are offering to sell at prices below a "registered valuation" a colloquial term for a valuation prepared by a registered valuer. There are increasing predictions of a market downturn and this can panic existing property owners into selling. Such a proposition requires careful thought and sound advice before a decision is made.

The main reason that has been identified that may cause residential property owners to sell is higher interest costs with loans coming up for review in the next 12 - 24 months. Before taking the drastic decision to sell, a home owner or investor should look at the financial implications of an increase in interest rates, balanced against the costs of selling out of a market then buying in at a later date when the housing market shows signs of a recover.

The likely increase in the interest rate on a home loan over say 2-5 years is between 1.25% - 1.5% as at October 2007. 

For the purpose of example only, a $300,000 loan, is unlikely to be carrying an historic interest rate below 7.5% and will probably move to 9% for a 2 - 5 year refinancing term. The actual after-tax cost to the homeowner of the interest rate hike is likely to be  around $4,000 per annum. This is a hefty burden. However, wages have increased by around 10% - 12% over the past few years so the income earner on a salary of say $60,000 p.a. in 2005 is likely to be earning around $67,500 in 2007-2008, and after tax, is keeping $4500.  Although inflation has not been factored into the calculations, belt-tightening required to service a loan at the increased mortgage interest gap is a far better option than the alternative of selling the home at a reduced price in an oversupplied market and paying, say $15,000, for real estate agents commission based on a price of $400,000.  This of course will not save those who have become overexposed and were counting on an increase in the property market to finance a lifestyle they could not afford.  We suggest you talk to our property professionals before making a decision.

Evan Gamby

Christmas Message

Thank you for your support during 2007.  We wish you an enjoyable Christmas break and a prosperous New Year.

Back issues of the newsletter can be obtained from TelferYoung (Auckland) Ltd
Phone: 379 8956
Fax: 309 5443
PO Box 5533
Auckland
www.telferyoung.com
email: auckland@telferyoung.com

+ Evan Gamby + Lewis Esplin + Trevor Walker + Ian Delbridge + Dave Regal + Phil White + Bruce Somerville + Bob Hawke + Weston Kerr + Arthur Appleton + Sonia Dryden + Yoon Jin Cha + Matthew Straka + Mark Maginness + Aimee Martin