Anne Gibson

In a move which flies in the face of the economic downturn, Australian home improvement chain Bunnings says it plans to open six new stores in New Zealand, investing $90 million and creating 500 jobs.

The big-format retailer has announced expansion plans which show its retail outlets could grow from the current 16 to 22 stores - and then to 26 in the near future. Brad Cranston, general manager of Bunnings in New Zealand, said the business would open at Westgate in Auckland, increasing its footprint in Auckland to five big stores. West Auckland was a significant growth area, and the new store would have a hire shop, free DIY clinics, a children's playground, a cafe and two levels of carparking, he said.

Cranston was not concerned about the economic slowdown. Sales turnover was down on last year and same-store sales had dropped within the last two months, but Bunnings views New Zealand as an area of high growth, he said. The sales downturn was "something of a blip" and did not affect the firm's expansion drive.

Bunnings had invested more than $250 million in New Zealand this decade, Cranston said. The business started here in 2001 following the purchase of the Benchmark Building Supplies stores and now makes annual sales of more than $500 million, Cranston said.

Bunnings owned a new Nelson store and would own the new Westgate store, he said. The Westgate deal comes after a new large-format Bunnings store was developed in Nelson, where the retailer opened yesterday. Previously, the chain announced plans to develop stores in Gisborne, Wellington's Lyall Bay and Upper Hutt, and Dunedin. Some of its new stores cover more than a hectare.

Cranston said the business was also examining establishing a further four stores after that. Outlets in Hawkes Bay, Taranaki, South Auckland and the North Shore were quite on the cards, he said. However, plans for those areas were not yet finalised.

Cranston said Bunnings was showing confidence in the market with the new projects. Retail sales have been falling, in line with the shrinking economy, but he is confident about the retail niche Bunnings has carved out since coming here seven years ago.

"The creation of these 500 new jobs will have a positive impact on the community," he said. "As well as offering new employment, Bunnings Warehouse team members are encouraged to play an active part in their local communities by supporting local community groups.

Last year, Bunnings completed the sale and leaseback of 11 retail warehouse properties in Australia and New Zealand, netting A$203 million ($229.5 million). Auckland-headquartered Dominion Funds Management bought five New Zealand properties, while Australian fund Charter Hall bought the remaining six properties in Australia.

Bunnings is owned by Australian conglomerate Wesfarmers, and its main competitor in New Zealand is Mitre 10 Mega, which is also still expanding and aiming for 20 large-format stores.

Mitre 10 has been in New Zealand since 1974 when it was introduced by 15 hardware retailers who had watched the success of the retail formula in Australia. They felt it was time New Zealanders, too, were offered the cost savings achieved when retailers could pool their orders, buy in bulk and promote nationally, Mitre 10 says. More than 120 stores are operating under the Mitre 10 banner including more than 15 Mega stores.

BUNNINGS
* Opened in New Zealand in 2001.
* Has 16 large-format stores.
* Plans to have 22 stores soon.
* Melbourne-headquartered business.
* Became a public company in 1952.
* Founded by migrants from London.

The world's largest shopping centre owner, Westfield, wants to expand here by developing more shops and adding to its $3 billion asset base. 

So says Stephen Lowy, 44, joint managing director of Westfield Group, here from Sydney yesterday for the opening of the $210 million Albany centre after a partial opening two months ago.  That new mall has 5.2ha of indoor floor space and although Prime Minister Helen Clark opened it yesterday, the 1800-seat cinemas will not open until next year.

Lowy said that in the last seven years, Westfield had spent an annual average $175 million and it planned to continue.  "We've got 12 centres here with a value in excess of $3 billion so on that alone, we'd be in the top 10 New Zealand companies if we were listed [here]."

Lowy is one of Australia's richest men, with his family's fortune estimated to be at least A$5 billion ($6 billion), second only to Australian publisher James Packer with A$7 billion.  Lowy, a son of Westfield founder and holocaust survivor Frank Lowy, is also a member of Prime Minister John Howard's Business-Government Advisory Group which consults on anti-terrorism strategies and national security issues.

The former US investment banker is president of Art Gallery of New South Wales, a director of the Victor Chang Cardiac Research Institute and a director of the Lowy Institute for International Policy. Westfield's annual report showed he earned A$8.4 million last year, up from A$4.9 million in 2005.

Lowy yesterday emphasised his company's expansion plans here, particularly at Albany where surplus land will allow far more shops to be built soon.  "It's endless. What limits us is only demand of the population," Lowy said.

Westfield is expanding its Newmarket centre, adding a multiplex cinema and further shops, he said. At Riccarton in Christchurch, it is developing a second level and the expansion of Manukau is being completed. 

But the growth here is being far outstripped by a global drive, with Westfield opening five new malls in the last month.  Four weeks ago, it opened the £340 million ($917 million) centre in Britain's Derby, followed by two new centres in Australia at Newcastle and Brisbane. Yesterday was New Zealand's turn with Albany and tomorrow Westfield will open a new centre in Annapolis, Maryland in the US.  "So that's about A$1.5 billion of shopping centres opened in four weeks."

To cater for that rapid expansion, Westfield was drawing many executives from New Zealand, Lowy said.  For example, John Widdup, director of Westfield New Zealand since 2001, has just been appointed to run Westfield America, in charge of 9000 shops in 59 centres worth US$18.7 billion ($24.2 billion). Widdup left Parnell for Sydney about two years ago but has now shifted to the US.  And Justin Lynch, an Australian at Westfield in Auckland for the last seven years, has stepped into Widdup's role. Lynch was this week appointed director of Westfield New Zealand.  Lowy said Jason James, a former leasing manager at Glenfield, had shifted to Britain to run the new Derby centre.

But Lowy baulked at the suggestion that Westfield developed formula-style malls which were much the same throughout New Zealand.  "I would strongly disagree with that. I don't think Albany's the same as any other centre. Every product we do, we challenge ourselves to make it better than the last one," he said.

Mall giant

• Westfield is the world's largest listed retail property group.
• Manages assets worth $73.1 billion.
• Malls in Europe, United States and Australasia.
• Owns 12 malls in NZ worth $3 billion.

An Indian businessman has paid a record price for an apartment, parting with $11 million for a new Auckland penthouse.  But high taxes mean he may spend little time there.

Mike Panjwani - who has business interestsin New Zealand, India, Singapore, Europe and Dubai - has bought levels 29 and 30 of the Sentinel apartment block in Takapuna.  Mr Panjwani has bought the apartment unconditionally, but will not be moving in until early next year because the property is a shell.

Speaking from Singapore yesterday, Mr Panjwani said he might only spend a few weeks a year in the penthouse.  "We don't know how much time we're spending there. My family can't afford to spend months in New Zealand. The taxes are very high."  Some Sentinel units have sold more than once, and units that fetched around $900,000 originally had resold for more than $1 million. 

The 117-unit tower will open in December.  The two penthouse levels are connected via an internal staircase. The unit was sold with a dedicated lift, four basement carparks, lap pool, spa and large glass-walled decks.

Barfoot & Thompson agent Wayne Muir, who acted for Mr Panjwani, said the businessman was impressed with the seaside suburb.  "He sees Takapuna as a premiere urban seaside location and was impressed by the quality and location of the Sentinel."

The penthouse is yet to be fitted out, but will have a combination of bespoke hand-crafted carpet and natural stone flooring.  Apartment walls will be able to be moved, and the apartment will include a home theatre, motorised windows, gas fireplaces, underfloor heating and large deck areas.  Mr Panjwani has owned a house in St Marys Bay, central Auckland, for a number of years. Two years ago, he sold a collection of large Auckland investment buildings worth more than $25 million through his company Empress Leisure to apartment specialist Blue Chip.

Caption: Street level of the 30-floor Sentinel apartment building in Takapuna, Auckland.

The sale means property developer David Henderson's Princes Wharf apartment is now the most expensive penthouse on the market.  That apartment, which went on the market earlier this year and was tipped to fetch $10 million, remains unsold. The apartment occupies the entire top level of the Princes Wharf block above the Hilton Hotel.

Businessman Colin Giltrap is understood to have set the previous apartment price record for a penthouse in Lighter Quay's North, on Auckland's waterfront.  Mr Giltrap previously lived for about 20 years in a Herne Bay waterfront home that he sold four years ago for $7.2 million.

MILLION-DOLLAR DREAMS

• Most expensive apartment for sale: $10 million Princes Wharf penthouse owned by property developer David Henderson.
• Most expensive house (not for sale): Graeme and Robyn Hart's sprawling $20 million Glendowie mansion.
• Most expensive property for sale: Pakatoa Island, Hauraki Gulf, $35 million, owned by businessman John Ramsey of Crusader Meats.
• Next most expensive: Cowes Bay estate on Waiheke Island, $30 million, 36ha with 1200sq m plantation-style mansion

The market is expecting positive news from Fletcher Building's annual result tomorrow, with predictions of a big surplus that could take net after-tax profit to between $462 million and $493 million.

Fletcher is also picked to give a better-than-expected forecast for next year, because rising interest rates are having little effect on its fortunes. 

Rob Mercer, analyst at Forsyth Barr Research, released a report predicting Fletcher's profits would jump 22 per cent, from last year's $379 million to $462 million this June year.  In March, Fletcher said it was happy with the consensus of analysts' forecasts of $388 million net profit after tax for the full year.  Mercer said he expected the company would issue a highly positive forecast for next year.  "We expect Fletcher Building to confirm a positive outlook, despite the rising interest rate environment. We expect that there should be evidence of a pickup in residential building activity, which is supported by the strong improvement in residential building consents, being up 14.3 per cent for the six months to June 30.  "Fletcher's core earnings have been flattish over the past couple of years on the back of subdued building activity in New Zealand and Australia. We expect the second half-year performance to confirm a rebound in New Zealand residential building activity and a more positive outlook for non-residential building activity.  "Fletcher has expanded its global earnings through the acquisition of Formica, which became effective from July 1. While the interest rate environment is attempting to impact on residential house prices, we remain confident that volume-based building activity will positively surprise."  Mercer valued Fletcher's shares at $14.45 and recommended investors to buy because the shares were trading at around $12.50.

The building products division would reflect a resilient residential market and would show strong earnings in the second half, he said. The PlaceMakers result would be more modest. The laminates and panels division would hold on to earnings, despite difficult conditions in Australia.  Pacific Steel and Pacific Wire had a difficult second half-year period. Fletcher's insulation operations performed poorly in the first half and Mercer was not sure if there had been an improvement in the second half.

First NZ Capital is expecting Fletcher's Formica acquisition to have a big benefit, but said there would be two unusual items on the accounts which would give a massive one-off gain.  "Comments regarding the Formica acquisition will be important. The successful execution of this transaction should be a key growth driver over the next 12 months," First NZ said.

It forecast net after-profit tax would hit $493 million but said that would contain $94 million from the insurance payout after the Taupo fire and a one-off tax gain. Stripping that $94 million out would reduce the figure to $399 million.  "We assume historically high levels of non-residential building activity combined with a sizeable forward order book of infrastructure projects help to offset weaker residential activity on both sides of the Tasman.  "Although New Zealand residential activity has declined, it has held up relatively well, in spite of rising interest rates and increased building costs."

Jonathan Ling, Fletcher's chief executive, will release the result in Auckland tomorrow morning.

FIVE STARS

Fletcher Building has five divisions:
* Infrastructure
* Building products
* Steel
* Distribution
* Laminates/panels

Decades of acrid burning odours coming out of Fletcher Building's Penrose wood plant are about to come to an end to the relief of residents in the area.  Fletcher chief executive Jonathan Ling said on Friday the hardboard and softboard plant on O'Rorke Rd would be shut after an investigation found an upgrade to control the smell would cost between $2 million and $4 million.

The closure brings to an end many years of complaints from residents in the area running from Penrose to One Tree Hill.  Auckland Regional Council's air pollution team discussed taking legal action after advice that there were sufficient grounds for prosecution.  ARC experts said the plant had major ongoing issues.

A One Tree Hill resident has disliked the smell for the 30 years she has lived in the area.  "It used to be so bad, you couldn't have your windows open," she said, although it had been less offensive lately.  Other residents said the smell was so bad it had forced them to to sell houses and move.

In 2001, Fletcher said it would control the odour by installing a bio-filter but the ARC had doubts about the efficiency of the equipment.  Mr Ling said smell was not the only issue. The Laminex plant had been losing money for the past three to four years so any upgrade was out of the question. He cited discussions with the ARC about emission controls and said investigations of how to fix problems and reduce the smell had been central to the plant's future.

The high exchange rate and the plant's non-profitability were other reasons for the decision to close the production facility.  "The odour comes when they heat up the processed wood fibre. It's a burning smell," Mr Ling said.  The plant operated five days a week on 24-hour shifts and staff had tried to control the smells by making only hard boards on day shifts.

"You get an odour when you're making hardboard because of the higher temperatures, so we've tried not to make that board on the night shift. We've tried to manage the odour situation but have had no complaints from residents.  We've been in discussions with the ARC on the odour for some time. We had agreed a plan of approach as to how we'd tackle the issues and that has led us to understand how much it would cost us to fix it."

The plant, known by long-time locals as the NZ Forest Products plant, had been operating for many decades and had employed 65 people.  Ling said the company would try to place as many people as possible within Fletcher's other business units but he expected some people would consider redundancy.

About 60 per cent of the plant's product was exported to Australia, North America and Asia where it was used in furniture and building. The softboard had been used for display noticeboards. The hardboard was used among other furniture in cabinets.  But Mr Ling said demand for the materials had dropped considerably and the hardboard had been largely replaced by other products.

BIG STINK

• Air pollution problems at a Penrose plant partly forced closure.
• 50 complaints since 1999 prompted Auckland Regional Council action.
• ARC has issued seven infringement notices in the past eight years.
• Three abatement notices were issued during that time too.
• ARC demanded Fletcher improve emission controls at the plant.
• Prosecution was an option if offensive odours did not stop.

MEMORIES OF 'ASHY' SMELL GO BACK DECADES

Ana Ofa knows all too well the smells from Fletcher Building's Penrose factory - she's lived a couple of streets away all her life.  "It smells like an incinerator, ashy," says the 27-year-old, whose memories of the odour go back to when she was aged 3.  It hasn't been as strong during the past few years and her most recent memory of a truly pungent reek was the night Princess Diana died a decade ago.

Neighbours say the aroma is hard to describe, their accounts ranging from "dry and woody" to a chemical stench.  "It used to annoy me," says Rosemary Lyon. "It was irritating on my nostrils."

For Bill Berwan, news that the factory is shutting is welcome relief.  "I'm happy," says the Rockfield Rd resident of 25 years. Mr Berwan's four children cried out about the "gas" smell when they were younger but the family would not move house.

While others try not to open windows or dry washing on the line when the smell is at its worst, Ms Ofa "got over it" years ago. She said the factory had an upside for the suburb, providing jobs for many residents.  Her grandfather worked there, as did several other family members.  But the last, her cousin Casa Hala, was made redundant this year after more than a decade with the company.

The run of bad luck at a new Pak'nSave supermarket in Auckland has
worsened as a fire station abandons plans to shift to the site and
contamination issues are discovered. The New Zealand Fire Service
has scrapped plans to shift its Takapuna base to an area of the site
alongside the new supermarket, which has stood empty for two years
because planning consents were found to be invalid. The Fire Service wanted to develop a new two-unit station beside the controversial and still-unopened store on Wairau Rd.

The service had struck a deal to buy part of the site based on an
arrangement that supermarket giant Foodstuffs would secure valid
planning consents. The service regarded the site as the best location
for its regional North Shore base. But two years of delays have now forced the service to drop its plans and look elsewhere.

In another blow, a small area of subsurface ground contamination from
drycleaning fluids and printing inks has been discovered on the site. During construction, Foodstuffs found the noxious substances,
thought to have come from run-off of neighbouring businesses which have
now departed.

The latest developments add to Foodstuffs' problems
with its Wairau supermarket, dogged by an 18-year battle to begin
building, then hit by a fire caused during construction, and subject to
a legal dispute with rival Progressive, owned by Woolworths Australia.

Kevin Stacey, the Fire Service's national manager of strategic assets, said a
search was now on for other sites in the Takapuna area. "I guess we're disappointed in terms of the time it has taken." Murray
Jordan, general manager of property development at Foodstuffs, said
delays had deterred the Fire Service, which had now scrapped its plans
to shift to the site at Wairau and Porana Rds. "Due to the continued delays, the Fire Service has decided not to
proceed with its plans to relocate the Takapuna Fire Station to the
site, but will pursue other options for relocation," Jordan said.

Foodstuffs has battled for 20 years to open the new store, which has been built by Fletcher Construction.

Foodstuffs subsidiary the National Trading Company got resource consent for the
store and a two-appliance Takapuna station and North Shore Fire
District headquarters on the corner site But Progressive took
the case to the High Court, asserting North Shore City was wrong to
grant Foodstuffs a non-notified consent. The High Court ruled the
consent was invalid. Foodstuffs was about to take the case to the Court of Appeal last year but then abandoned that plan.

In December, the council decided to process a new resource consent
application on a limited notification basis which meant only the
immediate neighbours would have a chance to object, and Progressive
would be locked out of the process.

Foodstuffs has applied to the North Shore and Auckland Regional Councils for new consents.

Supermarket sorrows

Pak'nSave at Wairau Rd has been dogged by a series of misfortunes:

• An 18-year battle to begin building on the site.
• Fire engulfing the building as it was being finished.
• A legal wrangle which has kept the store shut.
• Abandonment by the Fire Service, which jettisoned its plans.
• Contamination of the site, discovered during construction.

Rising interest rates and the spectre of a capital gains tax on property investments make Auckland landlord Karen Farrell shudder.  "It's all rather horrendous," says the residential investor, who provides housing accommodation for more than 20 tenants. "It's actually quite frightening."  This story starts about 10 years ago, when she and her husband, former All Black Colin Farrell, realised their children could never afford a house.  "So we began investing to give our kids a head-start. That was the first three houses. Then I realised I'd need one for our retirement."  So it went on.

The couple bought properties around the Te Atatu South area where they live, but have since branched out: a Henderson site drew them for its river appeal, so they had the house removed and plan to build two rental houses there.  They have also bought land further north at Mangawhai. They hope to carve up the existing four-section lot into eight lots and develop houses.  Already, they have a substantial investment portfolio: seven houses and the sections.

But like many landlords, Karen Farrell is beginning to feel the heat. Reserve Bank Governor Alan Bollard's official cash-rate rises are biting hard into her wallet.  Her biggest worry is a $500,000 mortgage she took out at an interest rate of 6.25 per cent in 2003.  She fixed it for five years and has enjoyed the benefits of repayments below the floating market rates since.  Soon, all that could change. The loan used to buy houses could well cost her double in interest payments when she has to renew next year.  "I've heard forecasts interest rates will be 12 per cent next year," she said.

That means a debt costing about $30,000 to service could cost her nearer $60,000 by this time next year.  Add to that the spectre of a capital gains tax and the loss of tax deductions and Karen Farrell and her ilk are being hit in the pocket.

This is precisely where the Reserve Bank, the Treasury and Finance Minister Michael Cullen are aiming.  Investors are their target in the war to dampen the superheated housing market. Landlords are being widely blamed for ramping up the sector and driving first-home buyers out.  The banks have acknowledged the influence of landlords.

ASB said this year that lending to existing homeowners had risen by a third in the past three years. Baby boomers aged 40 to 60 already have a family house and are buying "renters" as a means of saving for retirement.  They load that second property up with 100 per cent finance to claim the maximum tax deductions against their wages or salaries, clawing back large chunks of money.

Even with a mortgage at 10 per cent interest, the payback is huge: they reap the rental income plus the unrealised capital gain and can sell in a couple of years with a good profit - just as long as the market keeps rising.  But people are beginning to question this, saying a landlord bail-out from the sector could swamp the market with properties and force prices down.

Karen Farrell is planning to avoid that scenario. She wants to pass interest-rate rises on to her tenants, just as she has passed rates rises on. And she reckons she has prepared for this scenario already.  "I keep my rents just below par because I like long-term tenants." She hopes the deliberate strategy of under-renting will give her flexibility to push up rents if her costs rise fast.  But if push comes to shove, she admits, she might have to cash up. "That's the last resort. I hate selling. We're always acquiring more. We only sell as long as it allows us to do more, like subdivide."

Long-term property investors like Olly Newland - author of Climbing the Property Ladder and The Day the Bubble Bursts which predicts the demise of real estate's good fortunes - says he and others have accumulated vulture funds for landlords and others forced to sell. They are planning to pick up cheap houses in a crash that they feel certain is just around the corner.  Mike Pero, founder and a director of Mike Pero Mortgages, predicted this month that rising interest rates could force home owners - not just landlords - to sell because they would be unable to afford the price of borrowing.

Landlords are a somewhat unloved bunch.  A study by consultants DTZ for the Centre for Housing Research two years ago reached dim conclusions: a fifth were in the business a year or less; they expected significant capital gains but made little use of business structures to own or manage properties; they rarely used systematic property management systems and discriminated against some people in favour of others.

Andrew King, Property Investor Federation vice-president, was in Wellington this week to meet politicians and put the landlords' case.  He fears a capital gains tax (recommended in a Reserve Bank paper prepared for the parliamentary commerce committee's inquiry into housing affordability) and axing landlord tax breaks - which was suggested by Cullen on Tuesday - could damage his sector and push up rents by 40 per cent over two years.  "This would make a huge difference," King says. "People would sell. Definitely. It's already hard to make property work because the yields are so low."  Landlords would quit medium- to high-priced houses rather than cheaper places, he predicts.  Cheaper properties often have a higher return, allowing landlords to almost cover debt and costs.

But houses in the $300,000 to $500,000 band would be more likely to go on the market, King says. Landlords borrow so much to buy these places that any changes are more likely to force sales.  Tax breaks have helped landlords to cover their expenses, King says. He cites the example of a wage-earner getting $70,000 a year and entering the 39 per cent tax bracket. Buying a rental property and incurring a $10,000 annual loss (the difference between mortgage payments and rental income) could reduce that person's taxable income to $60,000, giving a $3900 tax break.  "But they're still making a loss of $6100, and it's costing them."  King says landlords are making little money because rents are so low.

Economists do not believe harder times with rising interest rates will cause any major fallout. Most landlords won't sell up and instead will push rents up first. Rents have been historically low and far beneath house prices rises, economists say.  Darren Gibbs, Deutsche Bank's chief economist, doubts a swag of landlords would stage any "wholesale bailout". Instead, they would be far more likely to hike rents, in turn fuelling inflation, having precisely the reverse effect to that intended.  Cameron Bagrie, ANZ economist, is picking rents to rise and thinks this will put pressure on households already hit by high petrol, electricity, rates and food bills.  "A lot of this economic cycle is built on debt and is unsustainable so there will be some pain," he said.

As for Karen Farrell, she's counting on the general population appreciating landlords a little more and wants the political blow-torch taken away from the sector's head.  Her final point: "Where would people be without us?"

Fletcher Building's market value soared by more than $600 million yesterday and its share price hit a record on the back of the company's Formica purchase.  The stock hit a high of $13.42, up 77c from $12.65 before Wednesday's trading halt. Shares closed at $13.27.

Trading resumed yesterday after a book build to raise money for the $1 billion purchase of Formica, the United States decorative services firm, announced on Wednesday.  Fletcher placed 26 million shares at $12.60, raising $327 million at a discount to the market price of just 5c.  The book build, combined with the share price spike, boosted the company's market capitalisation by $639 million to $6.63 billion.

Analysts were bullish about the value of Fletcher's latest acquisition. Blair Cooper of Citigroup said the Formica deal was "difficult to fault".  He pushed up his earnings forecast by 4.7 per cent for the 2008 year and up 7.5 per cent for the 2009 year.  But he said he had yet to factor in revenue synergies expected once the Formica business was integrated into the Fletcher conglomerate.

Cooper predicts Fletcher will report core net profit of $388.1 million this year, $457.8 million next year, rising to $502.4 million by 2009.  The company was capable of delivering double-digit growth in the next two years at least, he said, revising the 12-month target share price from $11.65 to $12.30.  The structure of the Formica deal was "great" due to the five-month due-diligence period and a close relationship with the private-equity US vendors developed over three years.

Dennis Lee of ABN-Amro Securities was also bullish, predicting a net profit of $387.3 million this year, followed by $448.5 million in 2008 and $494.1 million by 2009.  He also revised the target share price from $12.52 to $12.87 and was confident Fletcher would delivery synergies from the Formica buy.  "In our view, this is a good acquisition and is timely from a currency perspective," he said. "The transaction appears to represent good value for Fletcher shareholders."

Lee said Formica's performance had been disappointing until private-equity investors bought it under Chapter 11 in 2004, shed unprofitable operations and built a new plant in China.

Property speculators who are reaping millions of dollars from the super-heated housing market are about to feel the heat from a tough new tax crackdown.

Finance Minister Michael Cullen said Inland Revenue would get an extra $14.6 million over the next three years to strengthen property transaction audits. Speculative activity was driving up house prices and household debt levels, he said. So giving IRD more money would help it enforce the law.

Property auditing gathered $100 million between 2004 and 2006, he said and it was important for IRD to have the resources it needed.  Of the country's 1.4 million houses, around 400,000 are owned by investors. If a landlord buys with the intention of selling, tax must be paid on any financial windfalls.

Sharon Cuzens from Inland Revenue in Wellington yesterday welcomed the boost.  "It will enable us to pursue further, in-depth investigations and education on a risk area we have been actively targeting for some years," she said.

IRD would improve information so people were more aware of their liability, monitor major developments to ensure accurate return of sales or profits, boost research and analysis of risk areas and increase audit activity in areas of identified risk, she said.

One housing investment expert also welcomed the Budget package. Andrew King, Property Investors' Federation vice-president, said speculators who evaded tax were taking high risks. He encouraged those people who were eligible to come clean, declare their profits and pay tax.  "It's like playing Russian roulette if you don't," Mr King said. But he also criticised existing tax law, saying it had too many grey areas.

Matthew Gilligan, an Auckland chartered accountant and specialist tax and legal structures consultant, also welcomed the package, saying IRD was too poor to do its job properly and the money would help.  "They're grossly under-resourced," he said, citing long waiting lists for taxpayers seeking rulings and waiting for investigations to be concluded.

Mr Gilligan, whose firm has 4500 property clients investing in residential housing, called for clearer rules on housing investment tax liability. Many IRD staff were excellent but it was not uncommon for staff to change so fast that some taxpayers were dealing with three IRD staff members over one issue, he said.  "That's not uncommon on an audit." Nor was it unusual for a taxpayer to be given conflicting advice by various IRD staff members, Mr Gilligan said.

Greg Haddon, a Deloitte tax partner, said the $14.6 million was not nearly enough to tackle the issue.  "This extra money won't make a big impact," he said, and failed to address the reasons for so many people investing in housing, because they regarded it as a surer bet than other forms of investment.

IRD has already announced the success of previous crackdowns.  Two years ago, it netted just under $11 million from a campaign in the Queenstown/Otago region. Its concentrated audit blitz on developers and speculators started in March 2004 and by November 2005, it had 120 cases either under investigation or heading for prosecution.

Auckland was also a target two years ago, when IRD said it was increasing resources to hunt down speculators and developers who had kept their profits a secret.  Senior Auckland department official Richard Philp said in January 2005 that an extra $106.6 million was gathered nationally within two years on property transactions, including $52.9 million from Auckland.

The rules

• If you invest for the long term, there is no tax on money when you sell the rental property.
• But if you buy with the main aim of selling for a profit, any money you make is taxable.

First-home buyers wait for Government handout.

Prospective first-home buyers hoping for help through a Government-run shared-equity scheme will have to wait a little longer.  Housing Minister Chris Carter said $1.4 million had been allocated in the Budget for work on the potential design of a such a scheme, but a pilot would not be funded until at least next year.

Mr Carter has said the most likely location for a pilot scheme is Auckland and it could involve the Government paying for a 25 per cent or 30 per cent stake in a house, effectively reducing the purchase price of a $400,000 property to about $300,000.

If the house was sold, the Government would take back its percentage share. The scheme is expected to be aimed at the lowest quartile of the housing market.

Mr Carter said the Government was keen to explore how much demand there was for a shared-equity scheme.  If the scheme "flew", it would be introduced as part of a suite of new measures including a possible Housing Affordability Bill. "Shared equity will also be introduced at the same time as the Government seeks to increase the number of houses in the price bracket affordable to first-home buyers."

Mr Carter yesterday also announced $43.6 million over four years for other housing initiatives.  That included $23.8 million to increase the life of the Healthy Housing programme and extend it into the Wellington region for the first time.

The programme targets overcrowded households and assists them into more appropriate housing.  The Housing Innovation Fund, which provides government assistance to local authorities and community groups to develop affordable housing, would also receive a boost of $19.8 million.- NZPA

Westfield is selling two large Auckland malls for more than $300 million as it concentrates on newer development opportunities nearby.

Justin Lynch, Westfield's deputy director, said the Pakuranga and Glenfield shopping centres were for sale.  "It's our normal business practice to review our properties for opportunities to generate higher returns for shareholders," Lynch said.

But Westfield has rarely sold in New Zealand. After taking over St Lukes Group last decade, it embarked on a plan to spend $1 billion in 10 years, vastly increasing its power and presence here.

Westfield has spent about $200 million expanding the two malls in the past decade.  Competitors said yesterday Westfield was selling to quit small malls with no further development potential.

The new Albany mall it was building would threaten Glenfield's primary and secondary retail catchments, one said.

Westfield also said this week it would spend $70 million expanding Manukau, adding a new SkyCity cinema complex, 35 new shops and more parking and the competitor said it was now even more obvious why Pakuranga was on the block.

"Westfield would be shooting themselves in the foot if they kept Pakuranga, because Manukau will eat into its catchment."

Westfield is the world's largest mall owner, with 121 centres worth $67.8 billion in Britain, the United States, Australia and New Zealand.

Lynch said yesterday that the firm had already spent $700 million here and would spend a further $600 million in the next five years.

Westfield had conducted a secretive marketing campaign for the two malls, forcing prospective bidders to sign gagging agreements.  One prospective bidder said he was able to look closely at the malls only after signing a confidentiality agreement drawn up by Westfield's lawyers Russell McVeagh.

Colliers International's top agent John Goddard is handling the deals and large Australian and European institutional or superannuation investors may bid. Wholesale AMP funds, Australia's Centro Properties or German investment funds are also said to be interested.