Q&As
- What you should check out before you buy a house. And who should do the inspection.
- Some possible progress on the proposed changes to international investments tax.
- Who’s right and wrong in the maths on the new coins.
- Financial adviser explains how “Jane”, with her $1 million in term deposits, could save on fees.
QSettle for a humble first house you say? We did just that with our 1940s stucco duplex last year, and while it is fundamentally a sound house in a good street with good school zones we have since found out that as well as being very tired and shabby to look at it is also somewhat of a money pit/death trap.
It turns out that some houses built around this era have this “TRS” wiring that makes insurance companies nervous. We are trying to save the $8000 to re-wire, but various other maintenance issues have popped up in the meantime.
The plumbing is also due for replacement, and then we will look at some of the joinery. At the time the French doors seemed like a nice feature, but a house full of “non-safety” glass is not ideal for the kids (1 and 3 years old).
We have also learnt that some older homes are like an icebox, and although the art deco fireplace looks cool it is only really effective if you stand on the roof and warm your hands around the chimney.
Needless to say we are doing our part to save the trees and have installed a heat-pump (hopefully the fusebox will handle it).
I wanted to point out there are a number of false economies in buying lovely older homes. But given the alternatives we would do it all over again (I would rather be humble in a nice part of town).
Thankfully I can see the light at the end of the tunnel, and in about 5 years time will be lining up for an iPod (you have to have a 5-year plan, right?)
AFair enough. Obviously, there can be problems with any house, whatever its age, as the whole leaky building saga proves.
So what should the home buyer look out for before buying? I asked Steve Alexander of Alexander & Co, building surveyors. The firm does not generally do pre-purchase surveys, but Alexander has plenty of expertise in the area.
He came up with 11 things to think about when getting a house inspection:
- Don’t buy any house, new or old, without getting a survey by a qualified building surveyor. The New Zealand housing stock is not in great shape.
- If buying an apartment or terraced house, don’t just rely on a solicitor’s search of the title and LIM. Have your solicitor ask the body corporate secretary about your obligations, and if there have been any problems in the development. Seek disclosure of reports about leaks or other problems. The Council may not know of all problems.
- Be aware of alterations that may not have a building permit or consent. A search of the Council file may be needed to identify parts of the house that are unauthorised.
- Older houses have different problems from new houses. You may need to get an electrical survey. Check for problems with storm water disposal, sub-floor dampness, dilapidated roofs or handyman work that is of poor quality.
- A skilled surveyor will be able to warn you about problems that may develop even if everything looks good today. Watch out for houses that have been “dressed up” for sale.
- Seek advice about the maintenance that will be needed to keep the house in good shape.
- Ask yourself how easy it will be to maintain the house. Some house designs make routine maintenance very difficult and expensive. (Ever noticed grass growing out of the gutters on a three-storey house because the owner cannot safely get onto the roof?)
- Houses with absorbent claddings fixed directly to timber wall framing may need recladding in the near future, even if there is no significant water entry today.
- Leaky houses today are not about cracks in walls! Sealant and paint do not fix fundamental problems with design and building. You need a specialist to help you to identify the real issues.
- Choose a pre-purchase inspector carefully. Skill levels in New Zealand are low. A member of the building surveyors institute is a safer bet. The NZIBS website, www.buildingsurveyors.co.nz, lists surveyors who do pre-purchase inspections. Choose an inspector with professional indemnity insurance.
- Get a written report, not a “tick the box” report. Allow ten days to get an inspection done, and then time to think about what the report says.
On cost, Alexander says, “Anything less than $300 is a waste of money. Anyone competent will be charging around $500 or more. Generally here you get what you pay for.”
And given what you pay for a house, it’s surely well worth spending the money.
QAt the Shareholder’s Association meeting on the 11th August Dr Cullen spoke.
A questioner asked why the proposed capital gains tax was to be based on unrealised rather than realised gains. Dr Cullen’s reply implied that the unrealised gains method could be changed during the review process.
A change to realised gains would be a huge improvement. This is how the British capital gains tax works. I lived in England until 2000.
Dr Cullen explained the theory behind the tax. He said that British investment trusts paid low dividends and delivered an income via capital gain and that this should be taxed in the interest of fairness. Further that their investments did not include the developing economies.
This is not really true. There are hundreds of trusts. Some of the big international generalist trusts have a low yield but their capital gain since 2001 is neglible and negative in some years.
Trusts cater for dozens of approaches and all the countries on earth. But you must know.
I don’t think his advisers clued up on this.
“Buggered”, see letter 1 last week, is not a nice word to see in print.
AI thought the Toyota ads liberated that word. But sorry to offend you.
On the tax theory, you’re right that investment trusts vary widely. Even more important, I think, is the fact that investors in New Zealand shares benefit from dividend imputation, so they rarely pay tax on dividends, whereas overseas dividends are taxable.
But here we go, setting off on that whole debate again. I don’t want to run more correspondence on it at this stage.
But I do want to encourage the government if it’s showing signs of modifying the changes. Well done, Michael Cullen. More please!
QI’ve always read your column with interest and admiration for your obvious common sense approach to things. However, I was disappointed in your response to “Mathematics alert…” two weeks ago.
Retailers will soon realise that they cannot make change for ANY item whose price ends in 5c, whether it be 5c, 15c… 85c or 95c.
The great thinker obviously never thought it through.
AI’m afraid you are the one who needs to do a little more pondering, or perhaps a little closer reading.
The correspondent was writing about the choice between 10c, 20c and 50c coins versus 10c, 25c and 50c coins.
“Clearly, replacing the 20c with a 25c coin allows purchases at 35c and 45c, which would not otherwise be possible,” he wrote.
“But consider a purchase for either of these amounts if the purchaser only has a 50c coin available. How would the retailer then give the required change of 5c or 15c?”
Nobody is talking about purchases that cost 5c or 15c. Under the new coinage, that can’t happen.
But with a 25c coin instead of a 20c coin, retailers could give change for purchases of 25c, 55c (the retailer gets $1 and gives back 25c and 2x10c), 65c (the retailer gives back 25c and 10c), and 75c.
It’s true that when we get to 85c and 95c we’ve got problems again. I’m sure the writer would have happily acknowledged that, but he didn’t need to.
He had already made his point, that it wouldn’t work to have a 25c coin unless we also have a 5c coin.
QI think you misunderstood my published letter last week when I said that, “Jane should be able to arrange top quality advice for little charge”.
Given that her $1 million in savings would generate $2500 in brokerage, if she went to a “fee only” adviser, most likely the fee would be less than her brokerage rebate.
Say it took 5 hours at $200 an hour, that comes to $1000. So Jane would get a rebate of $1500 per year.
Equally if Jane gave someone like me $1 million to manage in a managed portfolio that was pure fixed interest, the net charge would usually be not be much more than the custodian’s charge.
I was NOT implying that $100 to $350 an hour is “little charge”!
I seem to remember that various surveys have shown that most people think financial planners’ rates should be less than plumbers, and most plumbers are still less than $100 I think.
AThanks for clarifying that.
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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.