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The Government has taken a gutsy approach to tackling the housing crisis - the days of highly leveraged property investment are likely over, Greg Ninness says

The Government has taken a gutsy approach to tackling the housing crisis - the days of highly leveraged property investment are likely over, Greg Ninness says

By Greg Ninness

The tax reforms the government is proposing for residential investment properties should go to the heart of the housing crisis and tip the balance of power in the market away from speculators and more towards first home buyers and long term investors.

This will be achieved by extending the term of the Bright Line Test for taxing capital gains on housing and by removing the tax deductibility of mortgage interest payments on residential investment properties.

Extending the Bright Line Test is not a surprise, but few thought the Government would have the guts to remove mortgage interest deductibility because this won't just affect property investors, it will have a flow on affect on the sacred cows in the banking industry who have grown fat on the back of the billions of dollars of debt that has helped fuel the housing crisis.

The fact that the Government has been prepared to stick its neck on the line over this issue, which will undoubtedly rouse the ire of a multitude of self interest groups, shows how seriously it is now taking the housing crisis and its flow-on social impacts.

One of the key things the Bright Line Test has going for it is that it is relatively straight forward.

At the moment, anyone who sells a residential property apart from their family home or an inherited property that they have owned for less than five years, is liable to be taxed on the capital gain.

The government intends to extend that period to 10 years, although the test for new builds will remain at five years.

So if an investor purchases a brand new property, they will only be taxed on any capital gain if they resell within five years. If they purchase an existing property, they will be taxed on the capital gain if they resell within 10 years.

It should be noted that investors can still make and keep a capital gain on property if they sell before those time limits, the tax just takes the cream off the top.

But along with newly reintroduced measures such as loan-to-value ratio restrictions on new mortgage lending, which require investors to have more equity in their properties, the change should take much of the speculative heat out of the market.

However the removal of mortgage interest as a tax deductible expense could potentially have an even bigger impact.

At the moment investors are able to offset the interest portion of their mortgage payments, along with other expenses such as rates and insurance, against a property's rental income when calculating the taxable income it produces. This considerably reduces the investor's tax bill.

However first home buyers and other owner-occupiers receive no such tax advantage.

That gives investors a significant advantage when deciding how much they would be prepared to pay for a property, potentially making it easier for them to outbid first home buyers in particular and adding to upward price pressures in the process.

Removing that tax advantage for investors should help level the playing field between investors and owner-occupiers. It could also have more far reaching implications for the housing market.

In the past, investor-led groups have let out a familiar cry whenever changes in regulations that they didn't like have come into effect, such as recent changes to the Residential Tenancies Act. "It will force investors out of the market," they say. But of course that hasn't happened - investor interest in residential property is as high as it has ever been.

But this time, things may genuinely be different.

Removing the tax deductibility of mortgage interest could have a serious effect on some investors' cash flows, particularly those who have borrowed to the eyeballs, and that may indeed force some of them to either reduce the size of their portfolios to pay down some debt, or cash up and exit the market altogether.

This would tilt the market further in favour of first home buyers and other owner-occupiers.

But some of the details on how the change will be introduced are still to be worked out, with announcement on the change saying it would apply from October 1 this year but would be progressively phased in over four years and that new builds may potentially be exempted.

But the timing of making such a change is perfect.

Mortgage interest rates are at record lows, which means the effect of making the change now will be minimised, compared to making it later when interest rates may be much higher.

Making the change now should help ensure that those investors who remain in the market are better capitalised and more able to withstand the effects of higher interest rates and other market shocks when they start to kick in.

However one change is certain.

The days of highly leveraged property investment are numbered and we are likely to see a substantial cooling in the market as a result.

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224 Comments

28
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Anything that can be done to reduce exposure of highly leveraged investors should definitely be applauded. I feel that Interest only loans should have been the first thing tackled. In a low interest environment the difference between IO and P&I is massive (monthly payments double). This type of lending on scale should never have been allowed.

Will be interesting to see whether the interest deductibility has any short term impact - given the stated timelines for implementation. Long term initiatives are much needed (particularly on the supply side) but we urgently need to shortcircuit the unsustainable price rises. Every month it goes on it creates more people in precarious financial situations that could be wiped out if/when prices do fall.

Interest only loans are higher cost, particularly as the payments will never reduce until principal is paid off. This will disproportionately affect those on the interest only chain.

32
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both rents and house price will increase encouraged by these policies.

thanks.

19
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Couldn't agree more.

In the medium term this may affect house prices and I doubt you will see increases like we have seen these past few months. But long term it's up up and away for housing.

Rental costs will go through the roof.

22
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Every time there is any change in any legislation to do with rentals this old chestnut gets pulled out... rents will go through the roof.... pray tell who will pay these Everest sized rents ? People only earn so much. If you need to double the rent, well just maybe you are over leaveraged, have never considered working capital requirements, and barely understand you are running a government sponsored business.

Rents are already everest sized, and people can't afford them, hence the $1 million a day the government are spending on emergency accomodation. Not being able to deduct interest from tax liability does not equate to that large a rent increase, just more of the standard increases we have seen over the last few year... Guess the next thing the government are going to have to extend eligability for the accomodation supplement to cover most of the renting lower middle class who will be worse affected by this.

Rents are already everest sized, and people can't afford them, hence the $1 million a day the government are spending on emergency accomodation. Not being able to deduct interest from tax liability does not equate to that large a rent increase, just more of the standard increases we have seen over the last few year... Guess the next thing the government are going to have to extend eligability for the accomodation supplement to cover most of the renting lower middle class who will be worse affected by this.

lastrealist...They just have to freeze rents as part of this. There is absolutely no choice unless they want the changes to make things worse (for the poor).

Rentals will reach what the market will bear. House prices will drop and stabilise allowing new owners to come into the market. Good, maybe our lost young generation in Auckland can be found again, with time. Good for NZ society.

12
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Isn't rent included in CPI/inflation measurements - so if you put rents up, you'll push the OCR up, which in turn will push mortgage rates up, which in turn makes property investing less attractive and falling house prices?

The RBNZ will look straight through supply side inflation, they really only care about demand side and wage inflation. Besides, more money going on rent means less going on disposable items.

So are you saying CPI is meaningless?

We both know it's meaningless. I am saying the RBNZ will not tighten monetary policy if it is due to rents rising rather than the economy being at full capacity. CPI has largely been below target for a decade anyway, they will ignore it trust me.

Ok - was just clarifying that we've been using a meaningless measurement to determine where the OCR should be and as a result we've had very low lending rates, which have stimulated asset bubbles. Money supply has been exploding...like 5-10% p.a. Perhaps we should use that as the measurement of inflation?

There's inflation.... and then there's "inflation".

Lionel Hutz

I would not say CPI is meaningless ( not completely anyway ) .
I do think RBNZ will ignore it.

Meaningless as a measure of real world inflation.

Agreed. Inflation figures are spun for political outcomes. We have to have low interest rates else the pack of cards falls... so we have created a measure of inflation that fits with our interest rate requirement.

meaningful to the sheeple

CPI is totally meaningless. Unavoidable household costs such as insurance (just received a 17.5% increase on my annual premium for car yet zero claims history), rates, petrol, basic food items (milk, meat, fish, etc.) have all gone up by much more than the Reserve Bank's 'magic' number. It's the way they calculate inflation that is at fault.

If you're spending more on rent, you'll have less to spend on other consumer goods which make up the CPI so it may not necessarily go up.

Right and what might that do to the economy? (where we create jobs and wages to pay rent..)

I keep wondering how long it will be, before all of these massively huge new mortgages start destroying all the small businesses for the same reason as high rents. New Zealanders have low incomes as it is, compared to the rest of the western world. At some tipping point, the less disposable income we have left over, after paying taxes, mortgage payments and or rent, there is only a small slice of pie that has to be shared amongst everyone. This isn't exactly a great recipe for a thriving economy.

It's already having an effect. Look at business loans taken up as a % of this recent credit spurge.

Look at our societies reproduction rates and the reasons we no longer want kids.

Not sure mate, probably a question for Adrian and Grant. Inflation may be lower, which may result in Adrian cutting OCR again which may drive houses higher again?

13
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Rents - yes but why would house prices increase?

New housing supply will be constrained by this tax change - more expensive to build to rent

12
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Why? Developers are not effected in the slightest. These changes will at best see more owner occupiers and less "investor & renter" properties. Property investors can put there capital into the real economy for a change. If anything some investors may sell so we will see more development sites hit the market. A positive change all in all

Developers are 'affected' the most. Without doing a thing, their present stock now has more demand and is worth more.

New builds don’t stay new forever. At what point does the interest expense in a new build stop being deductible? (If any such point exists then the value of the asset over its life is decreased reducing the incentive to build). If interest on new builds is deductible forever then new builds will be moved to interest only and never paid off, but the incentive to build is still reduced because the value of the new build in the secondary market is decreased.

What does "Property investors can put there capital into the real economy for a change" actually mean? What is this magical "Real economy" and how do I get a piece of it? Maybe invest in share market bubble land instead? Term deposits, where you lose money every day? Maybe start a business and compete with the big sharks, working 12 hours a day, 7 days a week and still fail?

New build could be affected by less demonstrable income due to reduced interest deductibility combined with 40pc lvr. Yeah nah... methinks prices and rents will continue to move up especially rents.

10
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You wish. LOL

11
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I know your view on rents Kate, but he's right that rents will go up. There will be less investors supplying rentals, yes some of these houses will be bought by FHB's but by far not all, there is going to be an even more acute shortage of rentals, which is not good

Unless you believe rental properties will changed into something other than long term housing (rental or owner occupier), the number of properties available to live in will not change. There may be fewer investors providing rental properties, but there will also befewer renters (as they are now home owners).

Rental properties tend to have higher occupancy rates than owner-occupiers.

Consider university students flatting together, or working young professionals flatting together. Incidentally these groups inflate the 'average household income' statistic quite a bit.

One impetus for people buying their own homes is to have children, because by and large people don't want to flat with others who have children and generally it's just awkward over all.

This nonsense again? You can't look at aggregate occupants per dwelling without considering socioeconomic factors as well. University students and young people sharing flats aren't going to be the people moving from the rental market to home ownership.

How many young people do you know? The ones sharing houses with multiple flatmates are not the ones in the financial position to purchase in this market. A lot of young homeowners are renting out bedrooms these days.

How is it nonsense? Do you deny that rentals are typically occupied at higher density than owner-occupied properties?

University students and young people sharing flats aren't going to be the people moving from the rental market to home ownership.

Correct, with today's house prices they won't. But if houses were more affordable, then some people would be moving into their owner occupied properties. It all flows through: right now 28 year olds might be forced to rent, whereas in the past they could have bought their own houses. This means 28 year olds are flatting together, taking up a flat that 26 year olds could have rented, who are in turn taking up a flat 24 year olds could have rented, etc.

The government already is the nation's largest single landlord - and the demand on their rent controlled (income-related) rental housing is growing by the day. Renters just want affordable rent - they don't care whether it is publicly or privately provided.

And it's in Labour DNA to become a bigger Landlord. They are making this a self-fulfilling prophecy.

'Renters just want affordable rent - they don't care whether it is publicly or privately provided.' Very true, this is the level we have sunk to. It's the same when people starve, -they don't care whether its stale bread or fresh bread - any bread is better than no bread.

Of course renters want affordable rent, that doesn't mean they will get it. It's like saying I want a higher pay, it doesn't mean I'll get it.

Hi Kate to some extent many people, particularly those with kids, prefer the state or local got to be their landlord as their tenure tends to be more secure

Oh no rents going up, good lucking finding tenants if you get too carried away. Don't forget the more you put the rent up some of that is going to the TAXMAN Should five per cent appear too small
Be thankful I don't take it all

It doesn't matter, Yvil, if rents go up, people move places or move to another city. Eventually, the interest rate will go up too. In this world, nothing is free. You can only take advantages for certain amount of time. If it's imbalanced, it will correct itself eventually. You should know market better than me.

I don’t see a shortage of rentals in Auckland. There’s heaps on the market here - over 5500 listed on Trademe and over 3500 of these are identified as ‘ available now’. I’m sure thats higher than past years. I suspect all this investor frenzy ( ie buying houses to turn into rentals) may have produced somewhat of an oversupply of rentals which will come hard up against lacklustre demand from already unaffordable rents, lack of overseas students, and low net immigration and put downward pressure on rents.

Hi xingmowang,

You're onto it.

Renters, like me, are going to be screwed by landlords - especially in the current tight market.

Bugger!

TTP

My landlord came and saw us last week and told me the rent isnt going up... What is wrong with him ? Is there some sort of support group or counselor I should get him to go to.

I did same thing and put rent down for tenants after property managers wanted to put it up.

Just increase the rent in your myriad of commercial properties?

Apologies if your comment was reported accidentally. Badly timed auto page refresh and click position.

Ps as such I imagine his property business manages to tax deducts his rent, so he'll just make the government forfeit his increase.

Peak Rent

@TTP my man, haven't seen many posts from you lately.

The increasing numbers of people in emergency housing makes a great argument for NZ having reached Peak Rent. Unless the government increases rent subsidies, it's unlikely rent increase would be successful. Landlords may give notice of rent increases, only to find their tenants start defaulting.

I think today's announcements will result in increased listings. Many landlords brought years ago and could easily REDUCE their rents and still be making a profit - despite losing the tax write off. You never know which strew will break the camel's back.

Perhaps house prices will double? I think not though:

- Increasing rates
- Increasing Insurance
- Increasing repair costs
- Less tax write offs
- etc

Many people that brought over the past few years may HAVE to sell. Land is still very expensive so would likely provide some floor. A bubble is only a bubble if it POPS - until then it's a sphere.. ?? lol. Saying that, Google imaging "Cycle of Bubble" is interesting.

I think Kiwi's have done well to keep their landlords furnished in rents during these Covid-19 times. Many of the landlords whom are claiming they'll 'put-the-rent-up' are probably over their heads and will be the FIRST to add to new listing numbers.

Exactly.

How? Landlords are probably already near the frontier of what the market will bear.

Yeah I think the Real Estate Agents out there have forgotten that there's a little thing that's been going on called a Pandemic, that's kind of left a huge amount of holiday lets and rental properties available. So any short term fear mongering about rental price increase is unlikely to happen. Not until full international tourism is back and that's not going to be for a long while.

Bring rent freeze for at least the remaining two years of Lab in power, cannot be done? - lastly with additional millions of operational funding.. unleash the IRD, AuditNZ & commerce commission to reign in those that cream the 'magical wealth creation back dated to the past 20 yrs'

Won’t removing interest deductibility just incentivise a mass shift to air-bnb or book a batch so that commercial rates apply and interest becomes deductible again?

With my multi units blocks even converting them to motels looks like it might be viable. I can just imagine body corporates in appartments deciding that they are going to identify as commercial hotels!

14
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The IRD has much bigger teeth than you are used to.

Not sure how opening a motel would score the ire of the IRD.

You're missing the point that a commercial conversion will mean you also have to start charging GST on your rental income.

& pay notably higher interest rates.

So.... what you're saying is that accommodation supplement will go up 15%. Got it.

15% more in accommodation supplement that IRD will fully claw back as GST.
Sounds like the only increase in public expense from this money moving in full circles will be for Treasury, MSD and IRD hiring more accountants to manage the increased workload.

No, currently for a house you rent on Airbnb you get residential interest rates and you can deduct the interest from the tax bill, this will now change

"The legislation will also ensure that residential properties used to provide short-stay accommodation, where the owner
does not live in the property, are subject to the bright-line test, and cannot be excluded as business premises. "

https://www.interest.co.nz/sites/default/files/embedded_images/IR%20FACT...

I get the feeling that this government will just continue to counter-strike any action taken by investors. Their point and purpose of all this new legislation is to make investing in houses so unattractive. I no longer see housing investment as a good option, considering all the other costs and risks associated with owning a property and I still have no idea as to what the government is actually trying to achieve?

Personal experience, I still see housing as a far better investment than anything else currently on offer.

Good luck with converting to short term rentals/ tourist accommodation until international tourism gets back on track. Also beware of hidden costs such as repairs, high expectations of quality accommodation, bed tax and the like

Really?

39
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The end of interest tax deductibility is a BIG thing because unlike the bright line test, it affect the investor immediately, well at the end of the tax year, every year. As an investor, I can tell you, it will be a deterrent!

42
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The more landlords that get out of the business the better. This will provide more houses for genuine owner occupiers. The houses will not disappear.

10
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Even if we take a less optimistic approach than that, this policy change has the potential to scare away further investment in housing. This could ensure more new builds in the current building boom fall into the hands of owner-occupiers in the short term, meaning less demand for rental in the longer run further pushing out investors.

It’ll reduce the number of houses being built, because new builds don’t stay “new” forever and at some point these rules will start to eat into the profitability meaning that your ROI still goes out to something like 40 years.

itsme; "The more landlords that get out of the business the better"

I'm really not sure about that, less investors buying houses is good for FHB, yes indeed but many landlords selling is not good, sure some of these houses will be bought by FHB but by far not all, if too many investors exit the market there will be an even acuter shortage of rentals

So if not bought by owner occupiers or other investors. Who would buy them?

The tooth fairy, obviously :-)

The government, temporarily, with the introduction of a rent to buy scheme to gradually take them off the governments hands.

Exactly. The rent paid at the moment by many exceeds the cost of ownership/the mortgage. It's the deposit that holds many prospective FHBs back. And you can't save that deposit if you are paying an exorbitant rent. A well crafted government rent-to-buy scheme would solve that.

Not entirely sure that will be true. Maybe we will start seeing a lot more knock down rebuilds with old housing stock getting more than just a cheap and crappy facelift?

So you think suddenly everyone who’s renting can buy? They all have the deposit do they.

There are many people that can not buy and never will be able to buy so this means less private rentals available at a higher rent and those at the bottom of society go onto a government housing waitlist.

11
up

Agreed - it's a significant change to the maths from day 1, which should reduce the amount an investor is willing to pay for a property. A good start.

Well not quite "from day 1" typically this government is slow to act, it will start on 1st October and take 4 years to be in full effect, I believe

I think its a four year phase in on existing properties but straight away on newly bought ones - so it will affect new purchase decisions straight away.

Correct in 9-10 days (1st Apr?) - but some that already deep into the tulip scheme, will elaborate.. the long range measurement.

I tend to agree it is a potential deterrent, particularly if it cannot be avoided with different ownership structures. In reality however, a $1m mortgage on a $1.25m property is $25k interest per annum, so an additional $10k tax bill. That is only requires .8% appreciation to break-even and that's not allowing for an increase in rents.

10
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Plenty of investors live off their housing investment income and 10k each over several properties is going to be a huge hit.

This would force be some investors to sell existing homes or buy fewer-to-none in the future, so more stock being available for FHBs at 'less unreasonable' prices.

If they are living off income they won't be affected. All the older property investors will have no to little debt and totally unimpacted by this or the bright line test.

TK...yes I totally agree. yet again the rich people with rentals and no mortgage are not negatively affected one little bit. Only difference for me is that if I do buy a rental at some stage there is no incentive to get a mortgage and I will just pay cash. And without rent controls being part of this I will be better off through inevitable rent rises. So just more regulations that benefit the rich and hurt our most vulnerable AGAIN.
This is the type of systemic racism that we need to focus on rather than judging the quality of the restaurant by the aesthetic garnishing and decor.

No one is concerned about long time property investors who hold low debt and are not aggressively expanding their portfolios. Not sure why you mention them. Sure, they have made a fortune, but they aren't driving up prices by expanding their porfolios.

The big concern is highly leveraged speculators who are in the market primarily for capital gains, aggressively bidding up prices, who have created a large amount of financial stability issues (i.e. a bubble). If prices crash it won't be long time property investors with low debt that cause a problem, it will be those leveraged to the hilt.

Yes this will severely impact the highly leveraged as well as be off putting to those that only have a slightly positive rental. They could now become negative or only have a positive return that is barely worth it.

Miguel...What makes you think long time investors are not expanding their portfolios? I knew lots who are doing just that.
I do agree that the newer highly leveraged speculators pose the big risk to the system. Whenever you are leveraged to the hilt you are playing a game containing high risk, and yes that even includes the "can't lose NZ property market".

I was definitely going to, primarily because term deposits were low and I haven't had much fun with shares, but now the figures don't look attractive.

Zach..I would say it is best if you have money in all three, Tds, housing and shares.

Eventually even they become highly leveraged again in a 40% investment deposit market.

Agree

Agree

Agree; it will definitely drive some people out of the game or reduce their portfolio size, at least.

The more substantial deterrent is DTI, but don't count your breath yet. The audiences is highly addicted to housing magic wealth projection not much differ than the alcohol, nicotine, gambling. You'll see the hard fights front, left, right, center, back, top, bottom.. each will produce their own lobbyist, politician, expert etc. all to deter this Nuke, NZ is too sick now for their housing issue. Prolong denial, todays admission is just.. acknowledgement of the current advanced stadium of terminal illness, .. basically NZ is now in the palliative care stages.

Does the tax deducability also apply to already rented houses?

Over the next four years as it is phased in yes it will. By 2025 no one will be claiming the tax on their rent in existing residential houses.

Yes, as it is phased in, it applies to all existing rental properties from 1st October this year, not just newly purchased ones.

Yep, otherwise it would be pointless.

Lets hpe Labour are not in power in 4 years... sheesh - they might have just broken the housing market

No we can't allow Kiwis to own their own property can we!! That's an outrageous idea!!!!!!!!!!!!!!!!!!!!!!!!!!

;)

Yes

15
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I read interest.co.nz more for comments as some are genuinely good.

I agree that this government has failed and no one grilled government on delay on DTI and Interest Only loan as they should be held accountable along with RBNZ. If Government would have acted along with RBNZ, would have given full marks to Jacinda and than if the housing crisis takes time, not a problem as Jacinda Arden - the leader tried.

Today's announcement is failure except TAX CHANGE, which is over all good but if government really wanted some meaningfull result should have gone fast and hard on DTI ( It also protect FHB from making wrong decession under FOMO) and on interest only loan as 41% investors who are on interest only loan are 100% speculators and one of the main reason of this ever rising house price at unheard peace.

Still not all is lost as is still on the cart and if better sense prevail, government can speed up action on Interest only and DTI soon or may be, they have delayed as among them had difference of opinion but Jacinda Arden, if in favour should speed it up as it is her where the bucks stop and will do a great justice for generation to come by being a Leader and acting hard and fast.

Only feedback, NZ has lot of politicians and so called experts but need a leader and still all is not lost as Jacinda Arden can speed up with Mr Orr.

100% agree - and the fear of DTI's coming in the future will see people rush out and buy now to get in while they can, in the same way purchases spiked before LVR introductions

What government was trying to achieve by today's announcement has achieved - not the outcome but publicity to potray that they are concerned for FHB.

Real impact / affect would have been with controlling of interest only loan ( may be strong and powerfull lobby prevented or Jacinda got cold feet) along with DTI.

This is the problem with politicians, they actually do not want to solve or try to actually solve as a result both interest only lo and and DTI were pushed back though agree that tax change is good but what was required now has not been done, may be for the same reason that they just want to potray and in reality not interested in solving.

Real shame.

Wait and see how Jacinda Arden along with Mr Orr plays around with words to delay and avoid.

36
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Investors take 4 out of every 10 houses sold.
So, they say, we are providing rentals
But those folk renting would have less need to rent if there were more properties not being sucked up by investors

1.Going by history, a lot of problems major problems are created by well meaning people. 2. We are acting surprised at the growth in house prices from 04/2020 to 03/2021. What else was expected when interest rates dropped to 2% and money availability not an issue. 3. They think owning is the best option. 4. Owning should just be an option, not at any cost. 5. Unless you buy when you are ready (saved up) and able, renting first to save up for a decent deposit, it is likely to end up very messy. 6. I can already smell the wind from pre GFC housing in USA- they tell me at the time in USA it was far easier to buy than rent -- even if you did not get approval to rent, housing loan was readily available to buy your own as it was encouraged because getting them housed in their own homes certainly looked better than rented/motel accommodation. 7. The mess will not be created this yr or next but it will come. There has be better ways to remove speculative investors who treat housing as a commodity, to name some -- raise interest rates, stop printing money, consult Tony Alexander etc etc.

Mike
What is the source of your 4 out of 10 houses go to investors?

Mike
Latest RBNZ mortgage data indicates that less than half your 40% of sales are to investors.
For the previous six months RBNZ shows between 16 to 18% of mortgages are to investors. This is up only slightly on the 12 to 15% for the year previously, and slightly less than that prior to the Auckland market peak in 2016/17.
As for FHB, percentage of mortgages have been around 10 to 12% but that is high over the period for which RBNZ data is available since 2014 - for the 2014 to 2016 it was around 6 to 7%.
So both your assertion of 40% of sales to investors is suspect, and rather than investors sucking up a higher percentage of properties in recent times compared to historical levels seem incorrect.
https://www.rbnz.govt.nz/statistics/c31 (columns U and X)

Light reading: numbers are relative, facing forward your right hand is my left hand, 60% down correction can be reported as 40% potential ups.
https://www.rbnz.govt.nz/financial-stability/financial-stability-report/...

Bottom line is, when a 30-40 something couple of highly specialised professional, needed by NZ but can't afford to lead a meaningful life here.. what is the point? then even for such needed Vaccine, NZ can only hope from buying it from overseas (ehem Not from China or India, but yes it's from US, EU) - by the way please provide us how many productive housing investors $ tied up to OZ banks? and really how many of those 'investors' tied up with say Agri banks production activity loan? - interesting isn't it? - We needs another stats, a worldwide comparisons, put it into ratio, as per country size, populations and the population exposure into 'housing as investment'.

Are you taking the piss?

- All homes under the newly lifted house price caps (these are the homes our desperate first home buyers are trying to buy) will see an increase in their potential sale price.
- Money is available at record low interest rates, and the government has just offered to give more money to first home buyers.
- Nobody with enough money to be flipping houses is going to stop doing that even if they are taxed on hundreds of thousands of dollars of profit. Where else in this economy are they going to make that kind of return?

You may have heard that old David Bowie song, Cat People.

This government is putting out fire with gasoline.

19
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"This government is putting our fire with gasoline."

Great - the sooner we have a massive explosion that burns the market down the better!

Be careful what you wish for.

Why is that?

House prices won't fall in a bubble. The economic conditions for such a fall will have extremely negative social consequences.

15
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And what of the extremely negative social consequences of continuing on our current course? If nothing substantial is done to address growing inequality, people will continue to be pushed towards civil unrest. But many seem to think it can no longer happen, we just don't do that here, no matter how dire things get for the people on the other side of this issue.

18
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Yes I lived in America when their property bubble burst and witnessed the impact first hand. People losing jobs while their houses were in negative equity and unable to pay their mortgages. It was all very stressful. People having stress related heart attacks and dying in my work place...I saw it all.

Then I come home to NZ and see us create a bubble on a completely different scale to what was witnessed in the USA - and everyone wanted to get rich from it, but not consider the end game - which as I say above...it isn't pretty. But a large proportion of NZ society have wanted this - in fact we've pushed politicians into supporting the price appreciation in our housing market. So we've made our bed and will now need to sleep in it.

Swap out 'large proportion of the population' with "noisy self interested influential lobby groups'. The minority.

I think you mean vacuum

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Ahh the old "high prices are bad, but falling prices would be even worse, so suck it up" trope.

Nobody cares anymore. Bring it on.

Agreed. I've run the numbers, if we were both made unemployed due to carnage we can still afford to comfortably service our mortgage/rates/insurance on benefits.

Bring it on.

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The house bubble is having extremely negative social consequences

Ah yes, of course one cannot warn about the dire consequences of a house price crash without being accused of supporting the wealthy investor class.

There is a happy medium you know, where house prices stabilise and more are built. More state houses are built. The government just has to admit that it will come at a great financial cost. Throwing a mere 3-4 billion dollars at the problem is a half-hearted, piss-take. It could easily be done, but it would have great political consequences.

Are there really that many hardworking families out on the street or is it mostly people who have stuffed up their lives in some way? Yes, people are struggling to BUY houses, but for the most part hardworking families have a roof over their head.

If we have a house price crash the scale some of you seem to be hoping for, that won't be the case. Many people won't have roofs over their heads OR jobs. Revenge-porn capitalism is a fantasy of far-leftists but always ends up hurting the poor the worst.

I think both the left and right are guilty in this - not just one side of the politically spectrum. Right wing are privatising the profits and then we have the left wing socialising all of the losses. It is actually madness. Its a very broken market...its kaput. Decades of ignorance and poor planning/policy may reap very bad financial and social outcomes. I just wouldn't have all of my eggs in one basket (from an investment perspective).

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Lets say house price crash leads to large job losses. Will the landlords will kick people out when they lose their jobs and have their rentals empty? Or will they collectively meet the market and accept rent someone on a benefit can afford? Lets remember the landlord no longer is making any capital gain, in fact they need any cash they can get to pay the mortgage and keep the bank from calling in the loan they are now underwater in.

The happy medium is no longer able to be happy for anyone but residential property investors who got in a while ago. The idea that we need to keep the well off wealthy for the good of everyone is a far right idea which always hurts the poor the worst.

Benefits won't cover Auckland rent prices. Auckland rent prices are required to pay for Auckland mortgages. All mortgages will increase in cost when interest rates rise. It will be an absolute disaster. The state won't be able to bail people out like they did with Covid.

#BITFD

Fake economy. Fake money. Increase interest rates and stop devaluing the NZ fiat currency units.

Listening to Jacinda and Grant talk about those nasty 'speculators' reminds me of former US President Nixon's speech in 1971. He used the same language when he 'temporarily' closed the gold-exchange window. Those nasty 'speculators', not the failing government policies that created the asset price inflation and consumer price inflation in the first place as they bow at the altar of Keynesian economics and MMT.

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Some yelling and screaming this morning from residential property investors.

This is only the first salvo – if the government do what they say they’re going to do (I know?!?) then there is possibly quite a bit more to come.

Remember – their intent is to drive capital investment away from property and into more productive enterprise – perhaps as Chris Trotter alluded, this is going to be their big “Do”.

perhaps as Chris Trotter alluded, this is going to be their big “Do”.

What has been announced today is not the policy change that Trotter was talking about.

Chris Trotter: “From all sides, now, comes word of the imminence of “something big” being announced. The Labour caucus is said to be both “nervous” and “excited”.”

Is this what you’re referring to – if so – any thoughts as to what it might be – it seemed that Chris was just taking a few stabs as to its possible reference?

Sounds like a big "Do Do"

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At least the Government has finally got the guts to what has to be done without worrying about vested interests.

All they've done today is increase lower-middle value house prices and tell investors they need to hang on longer if they don't want to pay tax.

And the less said about stimulating new builds the better. This government failed miserably with their first attempt, I won't be holding my breathe to see them succeed in doing anything with Kiwibuild 2.0.

Bring back the Kiwisaver entry boost! Then all the investors who sell up can put their sale proceeds into Kiwisaver, and even get a $1000 top up from the government!

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A very timid first step, but in the right direction - interest deductibility removal, for example, is better than nothing. Bright-line should have been extended to 15 years at least, and applied to sales from tomorrow, but again this is better than nothing.
Much more bold action is required, for example specuvestor should not be allowed to use equity in other houses, but only cash, when purchasing any new houses. The Government should have also directed the RBNZ to significantly tighten LVR's for specuvestors.
Some economists have stated that today's measures risk bringing the housing market to a “more abrupt stop” than intended - well, this is more than welcome : the sooner we stop this ridiculously inflated Ponzi, the better for the real NZ economy.

Make the Brightline test retrospective to, say, 2020. That will have an effect.

Matching it to when the 5 year implementation started makes the most sense to me. So anything purchased since 29 March 2018.

Between the bright line test and the tax deduct-ability changes there is no need for a capital gain tax. The bright line gets the short term flickers and the tax deduct ability gets the milking of inflation. The tax deduct-ability change may not sound like much, but it goes right to the heart of the attraction of property investment.
They still need to free up a lot more land and push down land prices. They should take up Nicola Willis's bipartisan offer on this. It appears sensible and sincere. While they ignore it National will be able to hold it over their heads and this will be relevant as this problem will still be very relevant at the next election. A bipartisan approach would totally depoliticize it.

Chris
Totally agree
I don’t like this government for lack of leadership and proactive planning and today’s announcements are well overdue.
The announcements, especially tax deductibility, is a good call to level the playing field for future generations of potential home owners. If we put self interest aside we should all be wanting to see high level of individual property ownership.

The Brightline test is a Capital Gains tax

Interest rates will go up as the US have to raise them to protect the USD from falling into oblivion this will cause huge problems around the world, anyone over leveraged will be screwed. House prices will a this point fall very quickly just a matter of time.

That's the only way house prices are going to fall under Labour or National. And guess who will be there to buy up all the houses at mortgagee sales?

Not first home buyers.

What makes you so confident about that? I'm a first home buyer and would jump on the opportunity to finally buy a house that suits me. I imagine that there are plenty more out there just like me.

Investors will effectively see the price floor as $1 above the FHB price caps set by the government. I’d if prices drop to $1 over the cap it’ll get picked up by an investor looking for a bargain.

Why not?

Bank lending will be one of the very first things that will be extremely restricted under that scenario. Exactly like now but in the reverse (i.e. exponential growth in lending amounts which reinforces the credit boom loop now will be replaced by exponential withdrawal by lenders reinforcing the credit crunch loop). Only people with cash will be in a position to buy. This is off course assuming that banks are not nationalised and credit rationed in a different way (i.e. not based on your financial worth, but with using some political or social criteria).

Yes Sam Hill's assumption that FHB's won't be buying is questionable. If house prices halve, then suddently the deposit requirement for a FHB is a hell of a lot lower. What was outside their LVR is suddenly within it. And instead of only property investors using funny money (equity) as deposits for buy new homes...well their funny money equity might have evaporated in the price correction and suddenly they no longer have the LVR to buy that house.

Changes to Uk buy to let (investor ) interest expense tax deductions explained. see attached link . NZ govt will more than likely follow a similar path . Interestedly UK house prices have increased since the changes were introduced.

https://www.which.co.uk/money/tax/income-tax/tax-on-property-and-rental-...

Of course.

Yes that's because PM Boris has been handing out free visas to fleeing HK residents. Article from the Telegraph: Hong Kong residents buy up UK properties ahead of expected immigration surge. https://www.telegraph.co.uk/news/2021/03/01/hong-kong-residents-buy-uk-p...

That's right. The cash from selling tiny HK apartments takes you a lot further in the UK - possibly can afford you multiple properties.

"Extending the term of the Bright Line Test for taxing capital gains on housing and by removing the tax deductibility of mortgage interest payments on residential investment properties." And about time too!! You had a very good run Speculators now it's time to level the playing field.

Here is my counter assessment.

To address and extinguish the ignition source of the housing fire, then you have to increase supply relative to demand.

To stop this ignition you either have to stop feeding the fire and let it slowly burn out, or you take action to extinguish the fire.

However, to date the Govt. does not know the difference between extinguish/decelerant, and accelerant. Are they pouring water or petrol on this fire?

So looking at this latest idea, we just need to look at what effect they will have on relative supply/demand.

Brightline test extended from five to 10 years.
If the timing of selling is not urgent then you will hold longer, so fewer properties for sale.
If you had to sell then no difference but you pay tax, Govt. gets revenue.
The immediate effect of changes so cannot rush to market and increase stock volumes.

The net effect is less supply so an accelerant to price increases.

Interest Deductibility loophole removed.
Interest cost as an amount of debt is low but will affect some investors. Given investors have to have such a high deposit, and interest rates are low, then most properties should be able to absorb this. And new properties are exempt. This is an issue, because most new property is built on the fringe, and the fringe sets the price for all pricing going back in. Any extra supply restrictions caused by extra demand on the fringe will cause price increases all the way back in. It also encourages new builds over deep renovations and does not give much incentive for renovating existing rentals. This should encourage these to go on the market for FHBs, or developers to demolish a perfectly good reno to increase density. Legislation yet to be set.

Some small pluses but big minuses, so still adding to a net less supply, an accelerant to price increases.

Price and Income Gaps on First Home Products Lifted.
This is an easy one. Savings, which this equates to, will always flow to the most restrictive part of the system, ie within one build cycle or less expect prices of land, and the house that will eventually be built on them, to rise by the extra increase in the grant, ie $10,000, or more likely the leveraged borrowing multiple that represents ie $50,000 to $60,000.
Price gaps lifted to enable house prices to rise to absorb this free money.

Increases demand relative to supply so an accelerant to price increases.

3.8 Billion Housing Acceleration Fund.
Has no relevance to increasing supply in the short term and is focused on the wrong areas of the country. I will make it easier for regional NZ as a supply vent to open up more affordable housing rather than encourage and reward the bad behavior of the larger metropolitan areas.

Since they are not increasing total supply, they must be trying to reduce the number of speculators in the market, giving less competition for FHB for what is available.

So how will we know this is working - Houses prices will get more affordable on a like for like basis.

Can't see that happening.

"Getting more affordable" is the rub. Becoming affordable is what we want, not getting less expensive over time.

Wet bus really... its far too late in the piece to save the Ponzi scheme called passive wealth streams

Property "investors" are now a huge part of the passive income cul de sac we find ourselves in
One that now relies on unhinged Population growth
But actually delivers less goodies per capita

So you dont want to discourage property "investment" ... you want to do away with property "INVESTORS" full stop ...

they are part of the blight

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Still no word on post-covid migration settings. Without that, this is just tinkering.

Fair point. Direct quote from our Faafoi's recent interview - Eventually when New Zealand reopens its borders to the rest of the world, an initial boost in skilled migration is predicted, but it's not expected to last.

Despite having more than a year of rethinking migration settings, our ministers are relying on predictions and expectations to do their job.

Excellent summary article Greg

In a very supply constrained market I see most new taxes being passed through to tenants. Keep an eye on rents over the next few years and I think you'll find they well out-pace inflation.

I tend to agree with you, rents will go up (even more). I have said before today that IMO house prices have reached their top, I stand by that. That means that, for an investor over the next years, with higher rents but say steady house prices, cashflow will improve, at some stage it will reach a point where the increased cashflow will make up for the loss of interest tax deductibility... Interesting

Rates and house prices will probably stabilise but only after the cheap FLP funding has been expended.

Rent freeze for at least 5 years just had to be part of this announcement to make it work. Had freezes been a part of it, I have no doubt it would have had the desired effect, Without a freeze it may well prove to have the opposite effect.

A rent freeze on top of the other announcements would definitely have many landlords sell in the near future. This would have two consequences,
1) the better off renters would be able to buy their own homes
2) the less well off renters will have to keep renting but will struggle even more than now to find a rental and rental prices will rise significantly.
Is this the outcome we want?

Not so sure I follow with point 2)...

Were there to be a rent freeze, then rental costs could not rise.
The number of houses doesn't change, so it should be no more or less difficult to find a rental than now.

Were there to be a rent freeze, then rental costs could not rise.

A house changes from being owner occupied to a rental property. What rent do you charge?

A house is sold by one investor and bought by another. Is the new owner forced to keep the old rent?

A rental property becomes an owner-occupied property for 6 months and then becomes a rental. What rent is charged?

I see your point, although I imagine there would be *some* nuance to the rules that would account for these?

Yvil..."a rent freeze would cause rental prices to rise significantly". ???

Bottom line is however the cost of a new build. With high land costs and what appears to be "Fixed" building cost, how are the prices ever going to go down ? At best we can expect to halt the runaway gains starting in October ? who knows how much property prices will increase till then.

Build costs have gone up massively, due to all sorts of new restrictions to supply. These are just more restrictions added to the land restrictions, consenting delays, labour shortages etc.

All restrictions add to cost.

Almost 30% of purchasers in the market are investors and 40% of them are on interest only loans. These new policies combined with higher LVR's and other possible changes by RBNZ on IO loans and debt to income are going to be a game changer for the market. Ad to that - Global interest rates are rising, the Global economy is still full of risk, migration is still low and there is a solid amount of supply coming on. It's going to be interesting to see how this all plays out. Possible correction ahead?

Good call Adam, I finally sense a real change as well (and you know I haven't agreed with you in the past about the house prices crashes).
Have a great day mate

Didn't think there were going to be house price crashes but in recent years have believed there was risk of it. Even more so now. At this stage i think we may see a correction, not a crash, unless interest rates rise significantly for any reason.

Did anyone see Don Brash and Ashley Church on TV# this morning?

You have to give it to Church to have the balls to say what he does without any hint of shame.

Thank God Don Brash was there to counter his assertions.

Funnily they both agreed that whatever the Govt. Housing announcement would be, it wouldn't work.

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The media need to stop treating him as a "property commentator" and start treating him as what he is: A lobbyist for Property Investors. Why is he given so much air time? It's embarrassing. He is allowed to skew the conversation in favour of the vested interests he serves and its treated as an independent commentator.

God, he claims investors leaving the market will create a shortage of rentals. When the interviewer pointed out that FHB purchasing those properties would reduce the demand for rentals. ..... so he start going on about immigration means it doesn't work that way. Then claimed ownership rates have been steady for 100 years. Fuck me.

It's amazing that he can say such obvious untruths with such conviction - and they believe him.

Why is he given so much air time.......for media too is a silent lobbyist as many so called experts, media presenters, etc have interest in rising housing price.

Now it will always be a tussle between house owner and FHB.

So...

I guess this means all those "bank economist" house price forecasts were absolutely worthless garbage.

Colour me suprised.

Those forecasts were always assuming that the legislative regime would continue.

I don't think anyone was actually picking the government would remove interest deductions like they have - the Greens proposals last week were timid compared to this, for example, and the article from Kiwibank out yesterday was saying they might put a bit of a damper on things but nothing significant.

Too little and too late. Queen Jacinda should resign immediately.

and then National comes in and reverses it anyway, ha ha

Well they finally have done something. There will be plenty of discussion as to what effect these changes will have but at least if these changes don't work they can try something else. NZ and especially Auckland house prices have been a problem getting progressively worse for the last 20 years. Why did it take so long for our government to do anything serious?

The more investors squeal the more obvious the government is doing the right thing. What a fantastic start to sorting out an out of control market full of greed. Good old Labour.

The house prices insanely increased under Labour watch and you are congratulating them for "sorting it out"? you cannot make this up! It is like an armature hunter shoot you in the leg mistaking you for a bear, while he is hunting in the middle of the town and have shot you on your front lawn, and then you praise them for putting a towel on your bloody leg!

They've admitted there's a problem and introduced policy to address it. Time will tell if it actually makes a difference but it's already far more than the last government did.

"The cost of infrastructure rather than availability of land is the major constraint Auckland faces in increasing home building. A fair share of this fund for Auckland will help ensure the infrastructure such as roading, water and public open space is in place to enable building to go ahead." - Phil Goff
I believe that the time lag in providing the infrastructure, that is developed sections is too long for private developers in many areas because developers take a risk several years out that the demand will continue to be there.

Unless there is a substantial residential building boom, the fundamentals will remain the same. Lack of supply and excess demand.

Supply and demand is a contributor but by no means the only factor.

If it was purely supply, price increases would be focused in areas where there is an actual shortage. You wouldn't have coastal areas like Whangamata have properties doubling on a rolling 3 year basis.

The anger i've seen from property investors means that this policy is likely to be very effective, and i'm happy about that.

This anger may take the shit out of government and may stop short of finishing, What they have just started.

Most important question is can I use this development to convince my wife to stop insisting we purchase another rental property?
Is it better to use the money to pay down some other mortgages?

I figured I would get about 8000 income after expenses which would be taxed at 33% (2640) leaving 5340
But now without being able to deduct interest as an expense I would be paying more like 6600 which would only leave 1400

It was a fine line before these changes and rather paltry but hey it all adds up. Now it doesn't seem worth it especially as the value of the property may be impacted as well. The income return on my equity has returned to something similar to a term deposit.

By using my deposit money to reduce other mortgages the return would be better being around 4000 after tax.

This has hamstrung those that want to build a rental portfolio that will provide a modest income. People like me who have in the past fed money into their rentals during their prime income earning years in the hope of creating an income stream many years later when they retire.

As an investor you are correct but most are speculators and are buying for short term before flipping and making heaps and they do not mind paying tax, as it is, even if they slog hard and work, do pay tax so all that is fine with many But they are able to gamble because of interest only loan.

Buying house by paying a premium as interest only for a million dollar is approx $500, So possible to gamble but if interest only is removed will be approx $900 per week and for that will have to think twice before going overboard.

So if government really wants to act on speculators so go after interest only loan without mucking around as Mr Orr is ready and it is government who is using tactics to delay and avoid.

You won't find much sympathy over your rental portfolio being hamstrung, when so many people are completely locked out of ever owning just one home of their own, unable to ever experience in their lifetime the security and stability that brings. Perhaps it's time to stop rent seeking, expecting a ridiculous portion of your tenants income to benefit yourself and find an income stream that's productive rather than parasitic.

Good to see the logic of these moves laid out - steadily discouraging investors from competing in the market and reducing the price they are willing to pay for property. I also like the discouragement of leverage. Suddenly there is less incentive to borrow to the hilt which will again reduce property investment.

Plenty of other investment fish in the sea - I'm sure you'll cope.

Don't worry, the joke is on them- they just made low end renters nonviable.

Just watch homeless rate accelerate and the outcry that follows.

Who said FHDs are altruistic? Landlords are by far much more moral.

They will still be viable. If the market requires it, the price will simply fall until returns are acceptable again. Otherwise, what will happen to the houses? If you're worried they'll be snapped up by FHBs instead, this is exactly what the government wants to achieve.

Invest it in productive industries instead of rentier industries. Make your profit from producing something.

I'm just providing some feedback as someone at the pointy end of this change. To tell the truth I am quite pleased this has come today as I was uncomfortable with my plan for various reasons.

Thats way to hard as it requires creative thought. Bricks and mortar maaaaate, who need to think maaaaaate.

My advice, sell one, reduce mortgage a bit if makes you feel better, keep some cash on hand outside the mortgage and spend some of the money having fun.

Thanks Theoracle. I did that about three years ago. A bit of a mistake really. I'm certainly not going to sell any more as they're nice little earners.

Can't wait for fire sale, it'll be best if it coincide with NZ QE II.

Nothing beats buying in cash, no finance condition required.

Cash is still king!

It is a step forward as did tax change to bring parity but not enough. If really wants to help FHB without wasting time call up Mr Orr sort it out and go for DTI and interest only loan as it is this that may help FHB more than any other that have been announced.

https://www.newshub.co.nz/home/new-zealand/2021/03/first-home-buyers-rea...

I am not an investment property person nor a fan of the tax breaks that these investors can access so I'm pleased to see the removal of tax deductions for leveraged interest on investment properties. However, this aside, the tax changes announced by the government this morning are hardly going to do anything to help the housing crisis. That horse has well and truly bolted as it has really been caused by a housing shortage rather than simply investors ratcheting up prices. If the latter is to blame and these measures are the magic bullet to fix the problem then the Reserve Bank can take the blame for it all by their uncontrolled distribution of cheap money. However, the only thing these policy changes will do is make the pain for renters even more acute. Already renters are in desperate competition to find affordable housing with rents constantly rising due to the tight supply of rental houses and landlords passing on recent government regulatory costs. With the price of property as it is now relative to wages, most tenants will not be able to afford to transition to FHB status so their woes just got worse should the rental housing supply fall. Just how these tax changes help the underlying problem I cannot see but heaven help these recent FHB when mortgage rates start to rise again, as they must eventually.

Tax change may affect some but ban on interest only loan will deter many to buy house as speculative stock, only if government was real serious and it is this that would have helped FHB in auction.

There is still the option to implement an extensive rent to buy of government housing stock and the government buying up properties and dead mortgages for such a scheme. I would also suggest a scheme in which the government incentivises both themselves and investors into the purchase and conversion of excess commercial properties into liveable properties. Options abound to alleviate need and the hysteria propaganda whipped up by vested interests.

A pretty fine line - dampening down one part of the economy without buggering up the rest. I see economists and forecasters are doing their numbers and realising this probably means interest rates are going to be on hold for longer, and our foreign exchange dealers seem to be thinking the same - watching the dollar reaction.
Both positives for the real economy.

A broke government with broken ideas continue to push its failed business plans on the remaining few working.
Wait till people can leave this sinking ship.

What's stopping them...they are free to leave whenever they please.

If following the UK model introduce buy-to-rent mortgages at 2 points higher than current rates to really see movement.

The removal of interest deductibility is a game changer, it will be the biggest single law change to ever effect the housing market. Residential investment will simply not be an attractive proposition for investors who are leveraged to any great extent, which is probably at least 75% of the market.

My one concern is that it will actually slow down the supply of new housing, ie if a developer is building a block of say 100 units and requires 60% pre-sales before getting funding, without investors (who say buy 40% of the units) the project will struggle to get off the ground. Hopefully the tax deductibility restrictions do not apply to new housing stock, as we desperately require this pipeline to continue for another 3 or 4 years until the supply side of the equation is evened out. In fact, if deductibility is kept on new housing stock only, then it could skew the market toward an increase in supply as investors will have no choice but to buy the new stock and sell their older houses. This could actually be a win win for home owners and the supply pipeline being increased.

The Government missed an excellent opportunity to further turn Kiwis away from the Housing Market with the incentives. All they would have had to do is move toward the OPEC standard to make the Kiwi Saver Investments-that 10% contribution people make to be tax free when money goes and is subtracted from their pay check. That's an extra $3000 or so a year on every $10,000 contribution that compounds year after year. Average Middle Class American families would have $20,000 per annum coming out of the salary totally tax free, and its been that way for 50 years.
Redirecting the favoured "go to" retirement savings scheme from used second hand Housing and into productive classes of investment is good for the country and critical for young families who have lost hope of ever owning a home.

I think it's time for investors to cut loose low end renters and repurpose their properties.

Repurposed into what?

These new laws screw everyone. Why the hell should renters be used and abused in this fashion when they are certainly not responsible for the housing bubble and greed of well-placed property owners and speculators. There needs to be legislation added to prevent this being "passed on" all the time. This is still pandering your friends Jacinda! Sounds like this strategy was artfully concocted together with "Sir Humphrey Appleby". The oerfect solution, Prime Minister. Appear courageous but in reality it's those nobody renters who will pick up the tab. Saved to fight another day. Most certainly, Prime Minister!

The interest rate deductions are a substantial change. Not enough by themselves, but something and more than I expected from them.

I’m also glad to see the money for infrastructure – a lot of people think it’s a real supply bottleneck.

Let’s see what else they put in on the supply side in the budget.

And let's cross fingers and hope there aren't too many unintended consequences.

About time. This will encourage more new home owners. Good. Get house owners up to 70%. Maybe a better society, one that cares about their homes, gardens and neighbourhood. They might want to erdicate Moth Plant.

The easiest next to do just a simple DTI for both FHB (3-4x) combine income then (4-5x) for passive ponzi waiting investing scheme. And then encourage the investors to put the $ for $ investment subsidy by the tax payers for them to join the more 'secure way' to get rich, into Crypto's - it's just a number game & waiting.

So MBIE say being a landlord is a business but now this mob says no interest deductions on rental properties. The only country in the world that wants to introduce such rubbish policy yet the one who think that we have a housing crisis. Just heard Robertson say on Newstalk ZB that hes not sure how landlords will respond to the latest initiatives from Cindy and Co
While many lefties and centralist voters will applaud the latest changes who will next be in the firing line. Commercial property owners , business?/
Be careful what you wish for socialists

We are mum and dad investors with one rental property we have worked very hard to own and house my elderly parents in it. By Labour firstly taking away the ability for us to offset wages and now stopping mortgage interest offsetting this will significantly effect us. I think they should have targeted people who are obviously in it for a business and if they truly are making these changes to help first home buyers....make lending rules for purchasing your first home much easier?

"the days of highly leveraged property investment are likely over", I certainly hope so, I don't see why taxpayer money was subsidizing this rort for so long, lining the pockets of some of the countries most wealthy people, year after year.
Hopefully this will also tip the balance of home ownership back up again, instead of steadily going down to where we are now close to only 50% owning their own home.
You don have to wonder if they gave the ring fencing enough time to start having an effect though.