Housing Policy: What will happen to the rental market?

In an attempt to address the housing shortage, Labour recently announced their housing policy aimed at dis-incentivising property investors.

The overall idea is to get rid of a so-called ‘tax loophole’, where investors can claim losses on their rental properties and are therefore eligible for tax deductions. However, this is not new information nor does it benefit property investors hugely, this is just how the tax system works.

While trying to create a ‘fair playing field’, this proposed change will actually have a negative effect on those investing in property, for the purpose of building a retirement nest egg, to benefit those aiming to get onto the property ladder.

Ashley Church from the Property Institute has said that the typical property investors are mum and dad type investors rather than wealthy and experienced large investors. Many of my own clients fall under the ‘mum and dad’ investors category, and I would hate to see them deterred from looking at a property as an investment option. 

The result is that they’ll sell their investment properties, and ultimately there will be less rental stock available than there already is.

As a property manager, I want to ensure not only the property investors are making a good return, but the tenants are in a well-maintained, liveable home. The cost to keep a home in this condition and comply with rental home legislation, while making a return, is difficult already – but with the introduction of this policy it would most definitely become more difficult.

Andrew King broke down the numbers: 

“If the ability to claim losses is taken away from rental property providers, it will increase the cost of providing the average NZ home from $6,184 a year to $10,293. This will add over $4,000 a year to this cost, an increase of over 65% or $79 per week.” 

It’s not the number of houses that will be going up, it’s the rent, and increases in rent makes it more difficult to save for a deposit and get on the property ladder.

I don’t think this is going to work.

Nick Phillips