New Government – so What’s Change?

Picture of PropertySage

PropertySage

TRUSTED PROPERTY MANAGEMENT

The new government coalition in New Zealand has made some changes that could potentially affect the property market. The foreign buyer tax has been dropped, the timeline for mortgage interest deductibility has been accelerated, and there may be a shorter brightline test for capital gains tax. However, the overall impact on the property market is expected to be relatively limited, and factors such as low rental yields and high mortgage rates will continue to play a significant role.

Share Post:

The article discusses the impact of the new government coalition deal on the property market in New Zealand. Here is a summary of the key points:

Foreign buyer tax: The proposed tax on foreign property buyers above $2 million has been scrapped. While this may have had some perceived impact on the market, it is now irrelevant. The focus now shifts to how the government will fund its tax cuts.

Mortgage interest deductibility: The timeline for the full reinstatement of mortgage interest deductibility has been accelerated. Instead of the original plan by the National party, investors will now be able to claim 60% this tax year, 80% in 2024/25, and 100% in 2025/26. While this may have some impact, it is not expected to be a game-changer due to low rental yields, high mortgage rates, and the need for large top-ups on rental properties.

Shorter brightline test: The coalition deal did not mention any changes to the brightline test, which is the period within which investment properties can be sold without incurring a capital gains tax. However, the silence suggests that a reduction from 10 years to two years is likely. This may lead to some investor purchases being brought forward but could also result in selling if investors are no longer liable for capital gains tax sooner than expected.

Inflation focus for the Reserve Bank: The new government wants the Reserve Bank of New Zealand (RBNZ) to solely focus on bringing inflation back to its target rate, removing the mandate of supporting maximum sustainable employment. This change may not have a significant impact on monetary policy, as there is a belief that the RBNZ has already been prioritizing inflation over employment.

Overall, while these policies may have some influence on market sentiment, their actual impact on the property market is expected to be relatively small.

Source from oneroof.co.nz: https://www.oneroof.co.nz/news/new-government-new-rules-what-the-changes-mean-for-the-housing-market-44714?lid=ltm524ima9at&utm_source=braze_campaign&utm_medium=email&utm_campaign=20231130_OR_Newsletter_Generic_Listings_MIN&utm_content=&uuid=22c8b01c-6820-4210-bd4c-003f640666d9

The opinions and research contained in this article are provided for information purposes only, are intended to be general in nature, and do not take into account your financial situation or goals.

Stay Connected

More News & Blog

Understanding the “Paradox of Wealth”: Why Your Tenants and Landlords Feel Crunched (And How to Navigate It)

If you have tuned into the news lately, you have likely heard a lot of talk about a struggling economy. Yet, official data tells a completely different story. According to independent economist Tony Alexander, New Zealand’s Gross Domestic Product (GDP) recently rose by 1.8%, and job numbers grew by 1.1%.
So why does it feel like everyone—from property investors to renters—is feeling the pinch?
As property managers, we sit right at the intersection of landlords and tenants. Understanding this disconnect is essential to managing properties successfully in today’s unique climate. Here are the core factors driving this “wealth paradox” and what they mean for the rental market.

The Rental Market Surge: What Landlords Need to Know About the Latest Data

The latest national tenancy data reveals a 10-year high in newly tenanted properties, yet increased supply has caused the national median rent to drop to $590 a week. This shift is driven by a soft resale market and newly completed builds, which together give tenants plenty of choices and pull pricing leverage away from landlords. To protect your returns in this environment, property managers should focus on minimizing vacancy days through realistic market pricing rather than chasing peak rental rates.

Tony Alexander: What the latest OCR hike means for mortgage rates and house prices

The Reserve Bank of New Zealand has raised the Official Cash Rate by 25 basis points to 2.75%, immediate passing cost increases onto floating mortgages while fixed rates remain temporarily stable as the hike was already priced in. Landlords face squeezed profit margins due to rising operational expenses like insurance and council rates hikes, making careful rental pricing and tenant retention critical strategy adjustments. Property buyers and investors are displaying a strong “Fear of Overpaying” (FOOP) amidst high interest rates, keeping the broader housing market flat with steady or slightly easing property prices.