NZ Property Investor May 2021

Turning back the clocks to mid-2020, we saw Covid-19 and lockdown, rental freezes and experts predicting property price plummets. A year on the market is soaring, with median prices up nationwide by nearly 25% year-on-year (according to REINZ data for April). Landlords have been racing against the clock to get their homes up to standard for the Healthy Homes deadline of July 1. And the Residential Tenancies Amendment Act came into full force on February 11, including the controversial axing of the no-cause tenancy termination provision and roll over of fixed-term tenancies to periodic at the end of the term. Then, on March 23, the announcement of the extension to the bright-line test from five to 10 years, and the removal of interest deductibility on residential investments from October 1. It’s been…

1 Scrapping tax deductibility not the way to go Limiting tax deductibility for property investors’ mortgage interest would be a better game changer than scrapping it altogether, says Westpac acting chief economist Michael Gordon. 2 Govt whacks property investors The Government has announced a range of new measures to tackle the housing crisis, including an extension of the bright-line test to 10 years and the removal of interest deductibility, as the clampdown on investors continues. 3 The good, the bad and the ugly The Government’s housing policy is full of good, bad and plain ugly. NZ Property Investor magazine publisher Philip Macalister explains. 4 Years before changes make any difference The Government’s crackdown on residential property investors through an extension of the bright-line test and removal of interest deductibility will have little effect…

PROPERTY INVESTMENT & EDUCATION WEBINAR , available on demand or via Zoom webinar. Hosted by Gilligan Rowe & Associates. Free to attend. For more information and to register, please visit https://www.gra.co.nz/events/property-investment-seminars or phone +64 9 522 7955. PROPERTY SCHOOL 7-MODULE ONLINE COURSE, available on demand or via Zoom webinar. Hosted by Gilligan Rowe & Associates. Includes over 12 hours of videos, articles and quizzes. Cost is just $595. For more information and to register: https://www.gra.co.nz/events/gra-property-school or phone +64 9 522 7955. For more information about listing your event, please contact Stephanie Bryant at stephanie@propertyinvestor. co.nz Last date for listings in June issue is May 6.…

Colliers International national research director Chris Dibble says the changes to the residential investment landscape will see alternative strategies explored by an increasing number of investors. He believes commercial property and syndication are likely to be beneficiaries because of the following factors. • Commercial property sales are not subject to the bright-line test while depreciation can be claimed on the buildings themselves. • The “buy-in” cost may not be too dissimilar to what some residential investors are already committing. Approximately 65% of all commercial and industrial assets nationally sell for $1 million or under. • The industrial sector generally accounts for about 50% of all commercial sales by volume on an annual basis. This is a sector viewed as a safe haven for investors given the strong tenant fundamentals and stability in long-term…

Reserve Bank data shows the combined value of residential properties rose from $1.19 trillion in December last year. Housing stock includes all private sector residential dwellings – detached houses, flats and apartments – lifestyle blocks (with a dwelling), detached houses converted to flats and home and income properties. By comparison, the country’s annual gross domestic product (GDP) is $322 billion. The growth in the value of the country’s housing stock shows no signs of slowing down. Data from the CoreLogic House Price Index (HPI) shows the upwards trajectory of house prices continued through March, rising 2.2%, taking annual growth to 16.1% – the highest rate since January 2006. This prolonged period of rising prices provides a backdrop to the Government’s decision to extend the bright-line test to 10 years and to remove the ability for…

Investor demand has been a major booster of house prices, he says. The proportion of bank mortgage lending to investors has remained essentially unchanged over the past four years. “In the existing low interest rate environment, investors’ search for yield and capital gains on rental properties has underpinned rapid increases in house prices, but the Government’s plans to scrap mortgage interest deductibility against rental income is going to significantly reduce the prices investors are willing to pay for houses,” says Ranchhod. Westpac’s economists have frequently highlighted financial considerations, such as rental yields, mortgage rates and tax, play a bigger role in determining what prospective buyers will pay for housing than physical factors such as supply. Up until now, says Ranchhod, the tax treatment of mortgage interest costs has given leveraged property investors “somewhat of…