Investors Taking Deep Breath, But Property Remains Safe Bet
“We’ll definitely see fewer ‘mum and dad’ landlords enter the market with minimum deposits lifting to 40% for investors from 1 May. It’s a shame because many of them make great landlords who build strong relationships with their tenants,” says Derryn Mayne, Owner of Century 21 New Zealand.
Like others, the real estate boss says residential investors are taking a deep breath following the Government’s March housing announcements. Interest tax deductibility was wiped for investors and the bright-line test was extended to 10 years - taxing capital gains.
This week Tony Alexander’s Mortgage Advisers Survey reported more brokers ‘are seeing less business come through the door from first-home buyers’. At the same time, the survey revealed less investors are seeking mortgage advice, concluding that policy changes aimed at dampening investor demand for existing properties were having the desired result.
Ms Mayne says many of Century 21’s franchises nationwide, which oversee large property management portfolios, are reporting the Residential Tenancies Amendment Act 2020, which took effect in February, is also having an impact on investor decision-making.
“Not only is it harder to get into residential investment property, but there are many new challenges for existing landlords. Subsequently, we’re seeing small and large landlords exiting out of residential property. They’re opting instead to invest in the likes of the sharemarket, managed funds, commercial property, or even syndications promising a reasonable yield on commercial buildings,” she says.
Despite government and Reserve Bank measures to cool off investors, the Century 21 leader says residential property remains a safe bet for those who factor in that one day the record-low interest rates will inevitably rise.
“If you put money in the bank these days, you’re sadly going backwards. With the best 12-month term deposit rate sitting at barely one percent, when you minus tax and factor in inflation, there’s no income or gain there. Residential property, however, will always provide both.
“With the autumn market seeing some reticence creeping in, for those Kiwis still willing and able to get into investment property, they might be surprised at the opportunities now out there. Let’s not also forget that demand by tenants remains high and rents are still very strong,” says Derryn Mayne.