By the time you read this we will have an election outcome, but at time of writing we are still in a limbo of election promises. Never before has a Government hit private rental ownership so hard with higher taxes, while being well aware of increasing interest rates and the likely impact on the rental market for tenants. This has been a major disruptor of the rental marketplace because for most mortgaged investors it has thrown their investing strategy into unforeseen jeopardy. The outcome has hammered tenants because inevitably the costs must be passed on. It has also stalled anything but necessary repairs and maintenance with upgrades to homes being put on the backburner while the Government coffers are filled.
Furthermore rental homes have not been purchased by new or existing investors, due not only to the returns being poor, but also because banks have made lending very difficult. These structural constraints are playing havoc with the rental market by limiting supply and increasing rents. With immigration increasing our population the housing crisis is unlikely to change anytime soon.
We look to an incoming Government for solutions, but the short term tax take is appealing to National who are planning to phase back in deductibility. This is of limited help as many investors are already selling down properties to ensure they can afford this increased tax. The numbers show that a sell down of properties, or even fewer rental homes being purchased, at a time when the population is increasing will continue to decrease supply. The structural change to turn this around takes time, time which tenants and owners don’t have.
For most investors, our greatest need is to have mortgage tax deductibility restored by April 2024 and only the Act party has the courage to make this their coalition policy. National’s plan to phase-in mortgage deductibility over x years continues to disrupt housing supply and therefore brings no rent rise relief in the ever-increasing cost of living for tenants.
Our first nationwide webinar in October featured property commentators, Andrew Nicol and Matthew Gilligan discussing their hopes for the election with NZPIF Vice President Peter Lewis and myself. Beyond the election NZPIF expects to be part of the Government’s conversations regarding encouraging private investment to house our increasing rental population. There are many solutions such as long term tenancies, higher density housing utilising existing infrastructure, more land zone changes, and Build to Rent options. Providing houses for the nation is what our members and do well so being part of the conversation about increasing public-private partnerships that works well is the wise way forward.
Being solution focussed and part of working groups with Government to help solve housing may bring about the changes needed by both investors and tenants. More young people are renting as they toss-up between shares, kiwisaver and buying a first home. Dealing with banks, mortgage brokers, advisors and finance is a major hurdle for buyers, beyond which competing with other buyers and making the numbers work is a real passion killer.
Having like-minded friends in your corner by connecting through your local Property Investor Association is the well informed way to invest in your future. You are also supporting our much needed advocacy with decision makers.