RESIDENTIAL
Yearbook 2021 house price increased by 24.3% to $1,100,000. Yet for first-home buyers in Auckland to qualify for Home Start they needed to buy an existing property for $600,000 or less, or $650,000 for a new build. Last year REINZ revealed that only 12% of Auckland properties sold were below the Home Start price cap threshold. That number would’ve only reduced since. “In many ways the market has run away from firsthome buyers. While these adjustments to Home Start won’t be enough for some people, it’s definitely a step in the right direction and will undoubtedly enable
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more young Kiwis on the property ladder,” says Mayne. It is worth noting that price caps in Queenstown-Lakes, Waimakariri District, Selwyn District, Christchurch City and ‘the rest of New Zealand’ will all remain unchanged. Currently, only 12% of properties sold in the Queenstown-Lakes District fall below the $650,000 threshold and only 11% fall below the $550,000 threshold in Selwyn District, according to REINZ. What will change for investors CoreLogic Senior Research Analyst Kelvin
Davidson sees the most significant measure being the removal of interest deductibility. The new policy stops investors from offsetting mortgage interest against tax. This applies to new investors immediately, and will be phased over the next four years for existing landlords. New-builds will be exempt from this tax change, however. The Government says this change will “remove the advantage investors have over first home buyers.” Their aim is to reduce investor demand for debt-driven residential property investment over “more fully taxed and more productive
investments.” Davidson says there is no doubt this will deter some would-be new investors and could cause some existing investors to sell. “It certainly helps to improve financial stability, by ensuring that investors put in more equity in order to keep interest costs low – that may benefit experienced investors at the expense of newer landlords, and could see the ownership of rental properties slowly become more concentrated.” Despite the crackdown on investors, Davidson says there weren’t any obvious ‘carrots’ for investors to divert money towards other asset classes – e.g. such as tax breaks for extra deposits into KiwiSaver funds. There was also no mention of any possible restrictions on interest-only lending (and maybe caps on debt to income ratios) for investors, but are in the pipeline from the Reserve Bank in May. These changes to took REINZ by surprise. Acting Chief Executive Wendy Alexander says this will completely change the financial dynamics of investing in residential property. “Currently you can use the interest deductions as a legitimate property cost, however, this will no longer be allowed from 1 October this year. “In our view, people are likely to already be wary about investing in rental property given the changes to the RTA and the prior removal of ring fencing, however, this is likely to exacerbate concerns around investing in rental property and may see investors considering whether they can get better returns elsewhere. “Many landlords are likely to increase their rent in the
