Latest stats by RBNZ, shows the investor lending continuing to dip. As shown in the graph below; investor lending is now at the same size as first home buyers.
Multiple factors for this trend includes, ring fencing of losses, Healthy Homes Bill and Review of the Tenancy Act. Of course the major initial kick start to this was the 40% deposit rule which has since been relaxed to 30%.
Ring Fencing of losses
Basically if your rental property had costs, such as interest costs of $100 and rent of $60, the loses of $40 would transferable to your personal income. This would subsidize investors who had rental properties which would not cover the costs. The government has changed the rules on this front so this transfer is no longer possible. On many rental properties in Auckland this could mean an investor who faces a loss of $15k in a year can now no longer claim $5k in a tax refund. Suddenly instead of losing $10k per year this investor would lose $15k per year.
Ofcourse this change will force many investors to rethink the situation and either find another $5k to $10k per annum from their personal income or back out of the investment. Re investment would be warranted if either more cash flow is available from other income or increases in rent. And or the value of the investment drops by an appropriate amount.
Healthy Homes Bill
The government has made more requirements that a landlord must meet so that tenants have a warmer drier home. The final verdict on this had been a little lighter on investors than expected. Most houses will require a fixed heater in the living room and maybe a top up in insulation. Old villas and Bungalows may have more costs in terms of stopping cold air. Deadline for getting a property up to standard is 2021.
Review of Tenancy Act
We will know about this later on in the year but in the end tenants maybe allowed more secure tenancies. This could be in the way of a 90 notice to vacate in most circumstances including when a house is sold. Also there could be a minimum of one year tenancies in place and or restriction to only one rent increase per year. Pets and possible allowance for lite renovations has also been discussed.
Deposit rule
This has actually been getting easier, the requirement dropped from 40% to 35% and now it is 30%.
Capital gains tax
This is probably one of the bigger things that people are thinking about. Un rightfully so, as it has very little impact on some of the main factors on why property investment helps most NZer’s. The only impact here will be if there are certain exclusions. Exclusions could mean that it is better to invest in a particular kind of property. Farms, batches and large family homes could be some examples.
