National View -
A National-led government was widely tipped to be the property market’s saving grace. But after the coalition deal was signed, sealed and delivered, what are the benefits of the three-pronged government’s new policies, and who are the big winners?
Property investors were jubilant on election night, with both National and Act backing more investor-friendly policies than the Labour government. While the addition of New Zealand First has shaken things up, the odds have remained in investors’ favour.
Bayleys head of insights, data & consulting Chris Farhi, agrees investors are the big winners under our new government, and says its policies are likely to reignite what had been a dormant group of buyers.
“Interest deductibility is the one policy change that will shift the dial.”
As part of National’s coalition deal with Act, it will accelerate the change to begin in the current tax year. The tax relief on landlords’ rental properties will start with a 60 percent deduction in 2023/24, followed by 80 percent in 2024/25 and 100 percent in 2025/2026.
The new government is yet to confirm if landlords will be able to backdate the 60 percent tax deductibility to the beginning of the current tax year. Regardless, it means more money for investors, and more incentive to buy a residential investment property.
Residential investment property specialist Angela Webb says Bayleys Christchurch is seeing the flow-on effect first hand.
“It’s a great result for residential property investors. We’re already seeing more enquiries coming in from investors.”
“Vendors are also happier to list, as they can see the market quickly improving.”
What’s good for investors is also good for supply, with the move likely to help ease the rental property shortage and reduce the pressure on tenants.
“The pressure point is the lack of rental stock. More purchases by investors will be good for rents” says Webb.
The other policies impacting investors
Alongside interest deductibility, there are also changes in the line-up for investors, including changes to landlord termination rights, changes to other termination notice periods and the introduction of pet bonds.
Under the new government, landlords will be able to issue 90-day termination notices to tenants without providing a reason or having to apply to the tenancy tribunal.
Bayleys Auckland property management specialist Will Alexander says although reinstating the 90-day notice period creates a mechanism to end a tenancy, there are still mechanisms in place to ensure it is not abused by landlords, such as providing retaliatory notice.
“Ninety-nine percent of tenancies are great. The termination rights will help sort out the other one percent.”
“No-cause terminations will avoid getting bogged down in court when dealing with problem tenants.”
Greater control over tenancies may also lead some investors to pivot to longer-term rentals rather than Airbnb, providing another welcome boost to rental supply.
“More rental accommodation is desperately needed,” says Alexander.
While it looks to have limited impact on the market overall, Alexander also says pet bonds will make it easier for landlords to consider requests for pets.
Foreign buyer U-turn
While we’ve seen follow-through on a number of housing policies, the big one that’s now dead in the water is the plan to overturn the foreign buyer ban on luxury homes.
The original proposed change would have seen foreign buyers able to purchase ‘luxury’ homes over $2 million with a 15-percent tax.
Luxury housing specialist Gary Wallace from Bayleys Remuera says the U-turn won’t have a huge impact, but believes the coalition missed an opportunity to implement the foreign buyer tax at a much higher minimum price point.
“It’s neither here nor there; there’s just not that many foreign buyers,” he says.
What it could mean, however, is vendors who had delayed selling on the assumption the foreign buyer tax might increase demand for their property, may now decide to list.
Housing intensification policy good for luxury homeowners
Wallace says there’ll be relief from many luxury homeowners over the government’s plan to address housing intensification.
The coalition will legislate to make the medium density residential standards (MDRS) optional for councils, with the need for councils to ratify any use of MDRS, including existing zones.
Earlier this year National pulled out of a bipartisan agreement, which allowed for the construction of buildings up to three storeys high on most sites without the need for resource consent.
The new policy allows councils to opt-out, provided they zone enough land for 30 years worth of housing demand.
National previously said that zoning would likely include converting more farmland on city fringes into suburbs, and building densely on train and bus routes.
However, it’s hard to pick what the market impact of optional MDRS will be, because it relies on the decisions of individual councils.
Wallace says what it will do is help address concerns from luxury home buyers about the risk of intensive housing being built on neighbouring sites.
“More control on housing intensification is a good thing.”
More new builds on the way
We could see more new builds on the horizon, with three policies that may increase supply in the long term.
Firstly, the new build incentive will introduce financial incentives for councils to enable more housing, including considering sharing a portion of GST collected on new residential builds with councils.
Building consent opt-out could allow home builders to opt out of needing a building consent, provided they have long-term insurance for the building work.
Lastly, amendments to the Resource Management Act 1991 will make it easier to consent new infrastructure including renewable energy, allow farmers to farm, get more houses built, and enable aquaculture and other primary industries.
Bayleys head of insights, data & consulting Chris Farhi, says while these policies are a step in the right direction, they are not the immediate cure-all some Kiwis are after.
“Long-term we might see the proposed regulatory changes enable more housing supply, but it won’t be overnight.”