Private property issue #88 - new government, new policies

It's official. Our new Government is sworn in, and there will be a lot of change for investors.

Last Friday, National, ACT and NZ First dropped 113 pages of documents.

And there is a truckload of new rules and changes that impact property investors. Some of those policies haven't made it into the media.

So here is what you need to know.

Just remember – some people are happy with the new Government. Some people aren’t.

This newsletter isn’t here to tell you that the Government is good or bad. It’s to let you know the policies that impact you as an investor.

How the Government’s policies impact demand for housing

Let’s go through the policies that impact demand and supply. Starting with demand –

#1 Property investors will pay less tax (and sooner)

Interest deductibility will come in way quicker than we thought.

Here’s how the final policy compares to what National proposed:

Instead of claiming only 50% of your interest costs next year, you can now claim 80%.

And the lower taxes will come back a year early.

Lots of investors left the market because the higher taxes hurt too much.

With those higher taxes gone, investors will be back in the market.

#2 – The Bright-Line gets rolled back to 2 years

It’s not in the NZ First or Act coalition agreements.

But rolling back the Bright-Line is point 20 in National’s 100-point economic plan. So it’s now official government policy.

This is a more investor-friendly policy. So expect more investors to say, “property is now worth it. Let’s give it a go.”

#3 – The risk of investing goes down with these tenancy rule changes

90-day “no clause” terminations are back. That means it’s easier to get rid of a tenant if you run into trouble with them.

The notice periods also go down. If you want to move back into your property, you only have to give 42 days notice rather than 63.

And soon, you’ll be able to better protect yourself by using pet bonds. You can charge a higher bond if your tenants want a pet.

This will decrease some of the perceived risks of investing. That will encourage more investors to enter the market.

#4 – They’ll rewrite the law to make it easier to get a mortgage

Remember the CCCFA? That was the law where the banks started checking how much coffee you bought and how much you spent on Uber Eats.

The three parties have committed to rewriting it to make it easier to get a mortgage.

Add these policies up and:

• Being an investor becomes more profitable (less tax)
• It becomes a little less risky (easier to get rid of bad tenants)
• It becomes a bit easier to get a mortgage

These will increase demand for houses, especially from investors. But they also have policies that impact supply.

How the Government’s policies impact the supply of housing

A whole load of policies aim to make it cheaper and easier to build new properties.

#1 – More properties will come to the market

I’ve already mentioned the Bright Line.

This will increase demand, but it will also increase the short-term supply of listings.

Some investors own properties they want to sell. But they’ve been holding on because they don’t want to pay tax.

This change will mean some investors will bring their properties to the market.

#2 – Easier to build granny flats and minor dwellings

Hidden in NZ First’s agreement is a policy to make it easier to build granny flats.

They want to change the Building Act and Resource Consent system. The goal is to let you build a minor dwelling (60 sqm or less) with only an engineer’s report.

This is a massive opportunity for property investors. If you’ve got a bit of land, you could build a minor dwelling to get extra cashflow.

#3 – Paying councils to approve more consents

KiwiBuild is out. National will cut the programme and use the money to pay councils to consent more properties.

This will give councils a push to allow more building.

#4 – The Government will make councils rezone land to increase housing supply

They’ll also force councils to rezone land for the next 30 years of population growth.

This will make more land available for building.

Right now, consents are going down. But this policy will sow the seeds for a building recovery from 2025 onwards.

All these policies will increase the supply of housing.

What will happen to the housing market?

Demand for properties will go up. But supply will also increase. What’s the net effect?

Demand could rebound quickly. Once the new policies come in, it’s easy for buyers to say, “right, let’s go.”

It will take time for the Government to put the supply-side factors in place. It can take 6 months to 2 years to build a house.

Demand and supply will increase. But house prices can rise quickly if demand goes up before supply does.

That could be one reason the Reserve Bank revised its house price predictions. That happened yesterday. They now see house prices rising 5.2% next year, rather than the 2.7% they thought before.

Want to learn more? There are so many more policies to talk about.

So if you want to learn more come to our last property investment webinar of the year. Click the link below to register –

I want to come to the webinar and learn about how the Government’s policies impact me.