What a National Party Win Means for the New Zealand Property Market

For some time now, the thought of a National Party and ACT Government in New Zealand has meant that property investors would rub their hands together in glee over proposed rewinding of Labour Government tax changes, and a likely result in house price rises, in particular, ‘existing’ investment properties.

This would also create a knock-on effect of property shortages and rent rises (and affect all properties).

The recent election victory of the National Party and ACT parties in New Zealand is expected to have a significant impact on the country’s investment property market.

Both parties have pledged to make changes to the current regulatory environment, which could make it more attractive for investors to buy and hold property in New Zealand.

This win has ushered in a wave of optimism among property investors, signalling a shift towards a more favourable investment climate and poised to revitalize the investment property market, offering a plethora of opportunities for both domestic and international investors.

Embracing a Pro-Investment Stance

At the heart of the National Party’s approach lies what they believe is a commitment to creating a conducive environment for investment, recognizing the pivotal role of property investment in driving economic prosperity.

The National party’s policies are designed to encourage investment in the property market. The general opinion is that this will have a stimulating effect on growth. How?

Renewed confidence is expected to translate into increased investment activity, boosting the overall health of the property market.

For those of us ‘on the ground’, actively involved in this space on a day-to-day basis, it’s clear we are seeing a tide change in the investment property space.

It seems fairly certain that we are now moving into a house price recovery and upward movement in property prices (at the time of writing, Auckland and Canterbury have had upward house pricing three months in a row).

The National Party has proposed a number of changes to the current tax regime for investment property.

These changes include:

• Decreasing the bright-line test of five or ten years to two years. This means that investors will only have to pay tax on any capital gains they make on property sales within two years of purchase, rather than the current five or ten years. This will come into place as of July 2024, meaning if you purchased your property before July 2022, you will no longer have any capital gains tax. I think they call that ‘money for jam’?
• Reinstating the ability to deduct mortgage interest expenses from rental income. This will mean property investors who own existing investment property (so not a new-build property, as you can already claim the interest on debt as a deductible expense) will be able to offset their mortgage interest costs against their rental income, saving them a considerable amount per annum. They won’t reinstate this straight away. Rather, they will phase these deductions back in incrementally year on year, to be restored fully in 2026.

These changes will make it more attractive for investors to speculate on property prices.

However, they are also likely to make it more difficult for first-time buyers to get onto the property ladder, as they will face increased competition from investors. 2022 and 2023 were really the times first-home buyers should have been jumping in.

National Party Plans to Change Rules Around Foreign Buyers of Property in New Zealand

The New Zealand property market has always been an attractive destination for foreign buyers, drawn by the country’s stable economy, stunning landscapes, and high quality of life.

Not to mention the constant population and infrastructure growth. However, the introduction of a ban on foreign buyers in 2018 significantly altered the investment landscape.

With the recent proposal to lift this ban, it’s crucial to decipher the potential impact on the market and explore the opportunities it might unveil for local investors.

The proposed lifting of the foreign buyer ban is likely to have a mixed impact on the New Zealand property market. On one hand, it could lead to an increase in demand for properties, particularly in sought-after locations such as Auckland and Queenstown. This increased demand could, in turn, push up property prices.

Also, the lifting of the ban could also have some other positives.

Increased foreign investment could lead to the development of new housing stock, which could help to ease the current housing shortage. Additionally, foreign buyers could bring new skills and expertise to the New Zealand property market, which could benefit the industry as a whole.

“We shall see” as they say!

Opportunities for Local Investors

While the lifting of the foreign buyer ban may raise concerns about affordability, it also presents potential opportunities for local investors.  With careful planning and strategic investment choices, local investors can leverage this change to their advantage.

1. Diversification of Investment Portfolios

The influx of foreign investment could lead to new and diverse property types, such as high-end apartments and luxury holiday homes. This diversification could create opportunities for local investors to expand their portfolios and tap into new market segments.

2. Increased Demand for Rental Properties

Foreign buyers often seek rental properties to generate income from their investments. This increased demand could present opportunities for local investors to acquire rental properties and benefit from a potentially lucrative rental market.

3. Collaboration and Partnerships

Local investors can explore collaboration opportunities with foreign investors, leveraging their local knowledge and expertise to form mutually beneficial partnerships. These partnerships could open doors to new investment opportunities and access to international networks.

Navigating the Changing Landscape

As the New Zealand property market adapts to the potential lifting of the foreign buyer ban and to favourable property taxation changes, local investors need to be prepared to navigate this changing landscape.

Staying informed about market trends, conducting thorough due diligence, and seeking professional advice can help investors make informed decisions and capitalize on emerging opportunities.

As always, I will shout from the rooftops to seek advice from a qualified and regulated financial adviser who specializes in residential investment property for wealth creation and protection.

Unlocking Opportunities for Kiwi Investors

The National Party’s victory presents a wealth of opportunities for Kiwi investors.

With a renewed focus on promoting investment and fostering a favourable regulatory environment, the party is laying the groundwork for a thriving property market. This presents an opportune moment for Kiwi investors to capitalize on the potential growth and returns that the property market offers.

The National Party’s victory heralds another new era for investment property in New Zealand

With a pro-investment stance and a commitment to regulatory stability, the party is creating an environment conducive to growth and opportunity. This renewed focus on investment is set to benefit both domestic and international investors, unlocking the potential of the New Zealand property market and contributing to the nation’s economic prosperity.

I am not ‘pro’ any political party, but it’s not hard to be objective here and argue that this recent government change will put a big smile on the dial of property investors here in the Land of the Long White Cloud.

Watch this space 2024!

 

Daniel Carney
Financial Adviser
Goodlife Financial Advice
Goodlifeadvice.co.nz