Property News

Fix-Ups, FOMO & Fresh Tax RulesSally Lindsay looks at what’s new in property news.

Extension to Healthy Homes sought

A 90-day extension on the timeframe for Healthy Homes compliance has been called for by REINZ.

From July 1 private landlords have had to ensure their rental properties comply with the Healthy Homes Standards within 90 days of any new or renewed tenancy.

REINZ says while many of the properties its members manage are compliant, others have been unable to complete their Healthy Homes compliance checks or work orders because of the extended alert level 3 and 4 lockdown period in Auckland and alert levels 2 and 3 in other regions.

“This is particularly impacting those who had planned upgrades, as well as those who have renewed or entered new tenancies,” says Joanne Rae REINZ, property management head. REINZ has requested the 90-days Healthy Homes compliance timeframe be extended by three months to December 29 to enable landlords and property managers to complete the necessary works.

“This means properties that were required to be compliant with Healthy Homes on or before December 28, would now receive additional time to ensure compliance. This request does not have the intention of bringing forward a Healthy Homes compliance due date, rather to keep landlords on the right side of the law,” Rae says. “We have actively encouraged members to work with their clients/ landlords to ensure that all Healthy Homes Standards are met in advance of the final timeline.

“However, we have received significant feedback from property managers that Covid and the various lockdown levels have impacted implementation.”

She says there is widespread concern that, despite their best efforts, many landlords and property managers are simply unable to comply because of physical restrictions to personal movement, supply chain issues and the need to postpone or reschedule booked work orders with qualified tradespeople.

“Considering these restrictions, we have requested the extension to allow for the delays and enable landlords and property managers to undertake the necessary works and ensure their rental properties meet the correct standards.”

FOMO haunts property buyers

Fear of missing out (FOMO) is rising in the residential property market.

The latest Tony Alexander and REINZ survey of real estate agents show FOMO remaining at the higher level registered just after the nationwide lockdown started on 18 August.

The gross proportion of agents who replied to the survey say they see buyers’ FOMO increasing. It has risen from 66% in July to 71% in August and 72% at the end of September.

Alexander says the FOMO gauge shows conditions in the market nationwide were weakest over the April — May period immediately following the shock Government announcement on tax changes.

“Since then FOMO has recovered, but has yet to regain the levels seen before March 23.”

Meanwhile, Investors continue to back away from making fresh purchases of existing properties, while the level of enquiry from offshore remains weak.

Measures of investor buyers in the market were easing ahead of 23 March, deteriorated further after the tax announcement, and have only marginally improved from the lows of April through May.

This month a net 33% of real estate agents nationwide have reported seeing fewer investors looking to make a purchase.

“Given the government’s explicitly stated goal of discouraging investors from purchasing existing properties and given that most listings are for existing properties rather than new ones, the government can claim success,” says Alexander.

“Where they cannot however claim much success is in suppressing the pace of growth in average house prices by much.”

New tax rules touch every area of property investment

Although the Government has outlined details on how the new legislation on the phasing out of property investors’ interest deductions will work, the bill also has other effects for property investors.

The Government is limiting the ability to deduct interest to make residential properties a less attractive investment option.

The Property Council says the changes confirm the Government’s lack of ambition in dealing with the housing and rental crisis. Chief executive Leonie Freeman says while the exemption for new builds is welcomed, it will not incentivise one extra home to be built for a deserving Kiwi family.

The Property Council has been advocating for build-to-rent in New Zealand as a solution to some of the housing woes, and Freeman says it is disappointing the Government hasn’t looked to incentivise a “truly gamechanging asset class” which would see more options for Kiwi renters.

“Build-to-rent is flourishing in other comparable countries like Australia and the United Kingdom but the tax legislation does nothing to seize this opportunity for better rental accommodation in New Zealand. Ultimately, this means less supply for Kiwi families.”

The Property Council asked the Government requested build-to-rent developments be specifically exempt from the interest deductibility proposal to encourage this new asset class. “These changes will do nothing to unleash build-to-rent’s potential, sidelining what could have been a potential gamechanger for the local rental market,” says Freeman.

“Finance Minister Grant Robertson is right when he says ‘tax is neither the cause nor the solution to the housing problem’.

“Our question is, why is it the only lever the Government seems willing to pull?

“You cannot tax your way out of the problem. For us to be innovative about solutions the Government has to work with the men and women across the industry who are fighting to increase the options for Kiwis in dire need of better housing,” says Freeman. ✚