Article: Property Investment

Benefiting From Insulation with Frank NewmanBenefiting From Insulation with Frank Newman

In the 30 May issue of Property Plus I updated the position regarding insulation. I noted that Budget 2018 included $142 million over the next four years to help 52,000 lower-income owner-occupied households insulate their homes. The new grant will cover up to two-thirds of the insulation cost (ceiling and underfloor), and will be extended next year to include the cost of installing a heating device. The new scheme does not apply to rental properties.

It was also mentioned that the ‘Warm Up New Zealand’ scheme that had applied to landlords ends on 30 June 2018. That scheme paid up to 50% of the cost and had a target of subsidising 20,000 houses, but the number of homes insulated under the scheme had fallen well short of the target.

According to Andrew King, speaking on behalf of the NZ Property Investors Federation, the problem with the scheme has been that when landlords obtained quotes to do the insulation work from the government’s 14 accredited installers, the cost was “twice as much” as the price they obtained from other installers and significantly more than the DIY cost.

Since then I have been provided with two quotes from insulation companies to insulate the roof of a small dwelling in Whangarei. One was from an accredited installer and qualified for the 50% subsidy. They quoted for a product with an R rating of 2.9, which is the minimum standard in zone 1 (Auckland north). Their price was $24.70 per square metre (incl. GST), discounted to $12.35 with the subsidy.

The other quote was from a non-accredited installer. Their product had an R rating of 3.2, which is higher than the minium requirement and the other provider’s product. Their price was $13.16 (incl. GST).

As a matter of interest, a quick Google search showed the R3.2 product could be purchased by a DIY landlord for just under $11 per square metre.

So comparing the pricing for 150m2 of ceiling insulation the relative costs would be:
·      Accredited installer, $3,705 (reduced to $1,852.50 after the government subsidy).
·      Other installer, $1,974
·      DIY installation, $1,650.

Although this is hardly a scientific comparison, it does bear out the comments made by Andrew King. On the face of it, the main beneficiaries of the government subsidy are the accredited installers. There may be some saving to be made by the DIY landlord, but in my view for the sake of a few hundred dollars it’s not worth the time and effort and the risk of not doing a proper job.

In light of this concern, there are sufficient grounds for our politicians in Wellington to undertake a thorough review of the subsidised scheme and whether having exclusive arrangements with a limited number of accredited installers is the right way to go. That review should be done before the new $142m scheme comes into play because there is a likelihood that the bulk of that money may go straight into the pockets of a limited number of installers, and not into insulating homes.

Now, from the “That’s interesting” file:  A couple of weeks back the NZ Herald ran a story about a “secret millionaire” who has, over the last 20-years, become New Zealand’s largest “aggregator” of land for development. His name is Garry Robertson. The thing about him is he does not fit the stereotypical image of a developer.

He is reported to have said, “…the more I look at it, the more I firmly believe that these people – both Labour and National – don’t actually want to solve the problem. They don’t want to hear what’s going to fix it and have gone so far down the wrong road it’s ridiculous. We will still be ploughing the same field for the next 20 years if they don’t stop chasing their tails and actually adopt a plan that works.”

“Buying a home in today’s climate puts a massive strain on people’s lives – their marriages, businesses, health. Everything is at breaking point; there’s no head room left as the prices spiral out of control. It’s just wrong. I just don’t get why we can’t do it. It is perfectly logical and if one of the governments of the day just stops for a breath, resets its destination, gets back on the bus and gets the job done, it won’t even take long once they fully understand where they need to go and how to get there.”

In private, most successful developers will share their horror stories about dealing with red tape and local councils, but it is very rare indeed that they voice those concerns in public. Rather than risk being black-listed by those they rely on to grant consents, they take the pragmatic approach of handing the problems onto others to deal with on their behalf and passing the cost on in the form of higher land prices.

There is certainly a lot central and local government could learn from developers, but I doubt that any politician and rule maker is prepared to go out on a limb and be seen to be listening - especially those who make a living out of demonising developers.

Frank Newman is the principal of Newman Property Consultancy. He is the author of numerous books on investment matters. For questions or comment about this article contact .(JavaScript must be enabled to view this email address)

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