NZ Property Investor July 2021

In order to help those investors who are committed to the “long-haul”, we have been chatting to industry experts on ways in which to ride out this challenging time and move ahead successfully as an investor. We discuss the pros (and cons) of new builds, making use of smart cash strategies, buying off the plan, paying down debt, and other means by which to tighten up your investment portfolio. As an adjunct to our lead story, we are taking a close look at the Treasury’s predictions (presented in this year’s Budget) of a massive drop in price growth. Given that REINZ data from May this year revealed house price growth of 32.3% year-on-year, the prediction of a drop to 0.9% house price growth by mid-2022 seems bold (to say the least). As you’d…

A lower DTI cap of six would be expected to have more impact on moderating house prices and dampening investor demand, but would also have higher efficiency costs and could prevent a small number of first-home buyers from entering the market. However, the addition of the debt-to-income (DTI) tool to the Reserve Bank’s macro-prudential toolkit appears unlikely this year. For DTI limits, the bank estimates a lead time of six months or more will be needed to consult on design and calibration and for industry to implement the necessary systems. It considers a DTI limit will be a complementary tool to the mortgage loan-to-value ratio (LVR) restrictions to further dampen investor demand for residential housing. “The impact of DTI restrictions is likely to be sustained over time to a greater degree than LVR…

Independent economist Tony Alexander says it’s a 50:50 call on how high interest rates will need to go to resecure low inflation because the economy is running hot. ANZ economists believe the official cash rate (OCR) will begin to rise in February. It had previously predicted the OCR to start rising from August next year. Predictions interest rate hikes will be sooner than expected have come after the economy burned off recession fears. There are now a new set of challenges as parts of the economy boom. GDP data for the first quarter of the year shows growth of 1.6% – double the figure most economists predicted. For Alexander that is why as soon as the 2.99% five-year fixed mortgage rate appeared, and through the entire time it was offered, he suggested investors…

1 Top tips for riding out the tax change storm Property accountancy company GRA has come up with a number of suggestions for landlords affected by the Government’s new tax rules. 2 Details emerge of property investor tax exemptions Consultation opens today on how new builds will be exempted from investment property tax changes, in rules to be in place by October 2021. 3 Govt reckons it's tamed house price growth The government claims that it has tamed raging house price growth through the changes it is making, primarily against property investors. 4 Concerns about new tax ‘dismissed out of hand’ The Property Investors Federation’s pleas for the Government to stop plans removing investors’ ability to claim mortgage interest payments as a tax deduction or modify how the policy is introduced have fallen on deaf ears. 5 Caveat…

Chartered Accountants Australia and New Zealand (CAANZ) says homeowners may end up facing a large tax bill under the extension of the bright-line rule. If a house is sold within that period the net gains will be added to the person’s income and taxed at the top rate. It is a trap for homeowners, who CAANZ says should not assume the main home exclusion will automatically apply to them for the full 10 years – particularly if they are outside the safe harbour provision allowing them to be away for 12 months continuously. People who could be caught out are those who are seconded by an employer to work away from home for more than a year, or those who take more than a year to build a new home and then sell…

The Real Estate Institute New Zealand (REINZ) announced in May that property listings had dropped by 28.9% to just 14,883. This is only the second time since the 1960s that the country has had fewer than 15,000 on the market in a given month. There are 6,057 fewer properties on the market compared to 12 months ago. And for the second month in a row, only one region saw an annual uplift in inventory levels – Gisborne with a 15.0% increase in inventory levels from the same time last year (from 80 to 92 properties – 12 additional houses). Regions with the largest percentage decrease in total inventory levels were Bay of Plenty at -46.9% (from 1,417 to 753 – 664 fewer houses), Nelson -45.8% (from 395 to 214 – 181 fewer properties),…