Property Investment

Property Investment – Revolutionised

The time has come for some relief for Property Investment. Legislation is being reshaped. The government promises to implement a suite of measures to provide relief to property investors. It also fosters a more transparent and equitable real estate environment. This article delves into the recent policy changes. Changes include updates to the CCCFA, bright-line test, landlord-tenant relations, interest deductibility, amendments to the Building Act, and more.

CCCFA Reforms Encourage more Bank Approvals

Last year, the Credit Contracts and Consumer Finance Act (CCCFA) was revised. The intention was to focus on enhancing consumer protection in financial transactions related to property. However, there were some unintended consequences, including a significant impact on the property market overall. The government has now revisited and reviewed this. Absolute details have not been published yet. At least we know for sure , is that it will lessen the “over the top” scrutiny of our spending. Therefore, the banks are likely to approve more lending applications.

Bright Line Test Shortened

The government extended the bright-line test to 10 years, which had a dampening impact on property investment. There is some good news. This is being reduced to 2 years. As such it will bring property investment relief and make it more attractive for property investment.

The introduction of the bright line test was initially designed to discourage short-term property flipping by taxing gains made on the sale of residential properties within a specified timeframe. Now, with the reduction to 2 years, hopefully there will be some stability to the real estate market. Hopefully, it will also encourage sustainable, long-term investments.

Therefore, regardless of when you purchased the investment property, you will be subject to a 2-year bright line test instead, of the 5 or 10 years previously legislated.

Landlord Notice to Tenants

Acknowledging the importance of fostering healthy landlord-tenant relationships, the new government introduced changes to landlord notice requirements. These modifications aim to strike a balance between the interests of landlords and tenants, ensuring fair treatment and adequate notification periods for both parties. Landlords are not able to provide a 90-day notice period to tenants, without “real reason” disclosure. 63 days’ notice is permissible if:

  • The owner of the premises requires the premises within 90 days after the termination date as the principal place of residence (for at least 90 days) for the owner or a member of the owner’s family.
  • The landlord customarily uses the premises, or has acquired the premises, for occupation by employees of the landlord or by contractors under contracts for services with the landlord.
  • The landlord customarily uses the premises, or has acquired the premises, for occupation by employees of a school board of trustees or by contractors under contracts for services with a school board of trustees. This reason only applies if the landlord is the Ministry of Education.

Reviewed Interest Deductibility Brings Relief

In an effort to create a level playing field, the government implemented changes to interest deductibility for property investors. These adjustments may impact the financial dynamics for some investors, but the overall goal is to promote a healthier and more sustainable property market.

Phasing in period of interest deductibility, with 100% interest deductibility by 2025/2026, starting with 60% in 2023/2024.

Investors Benefit from Reduced Red Tape

The Building Act underwent revisions to streamline regulatory processes and enhance efficiency in property development. Investors will benefit from reduced red tape, faster approval processes, and a more conducive environment for undertaking real estate projects. These changes hopefully encourage investment and foster growth. This simplifies planning rules and make resource consents for houses cheaper and faster. The Housing Growth Plan includes:

  • Unlocking land for housing – councils required to rezone land for 30 years’ worth of housing demand.
  • Reduced Red tape for developers to fund infrastructure.
  • Housing Performance Incentives for Councils – incentive payments for councils that deliver more new housing.

Resource Management Act Impacts Property Investment

This innovative approach aims to create a more collaborative and transparent decision-making process in resource management. Property investors will benefit from:

  • a clearer understanding of regulatory expectations,
  • simplify planning rules,
  • and make resource consents for houses cheaper and faster
  • leading to more informed and strategic investment decisions.

The government has taken bold steps to reshape the property investment landscape. The outlined policy changes underscore a commitment to fairness, transparency, and sustainability. These provide relief to property investors and also pave the way for a more resilient and dynamic real estate sector in New Zealand.

Contact us to explore your investment opportunities!