Changes to tax rules mean property investors will be able to keep more of their income from April 1, writes Catherine McGregor in this excerpt from The Bulletin, The Spinoff’s morning news round-up. To receive The Bulletin in full each weekday, sign up here.
Landlords’ business expenses column gets a big boost
After trailing the change in the National-Act coalition agreement, the government confirmed property investors will again be able to deduct mortgage interest from their taxes. The decision reverses a 2021 law change aimed at levelling the playing field for first home buyers who were being rapidly priced out of the market by investors taking advantage of historically low interest rates. Landlords will now be able to claim 80% of their interest expenses from April 1 this year, and 100% from April 1 next year. This is a change from the coalition agreement which had promised a 60% tax deduction in the current financial year – ie retroactively – followed by 80% and 100% in the years after. The government decided the retroactive deduction would have been too complicated to implement. While landlords will wait longer for the deduction, the increase to 100% will come a year earlier than originally planned.
Will the savings be passed onto renters?
The arguments against the 2021 law change had been twofold. Investors said they were being treated worse than other business owners who can routinely deduct expenses, including interest costs, from their taxes. Critics of the law such as Act’s David Seymour also said the increased cost to landlords was being passed onto tenants, exacerbating the rental crisis. However Labour finance spokesperson Barbara Edmonds is among those who highly doubt rent prices will stabilise as a result of the reversal, given landlords are under no obligation to pass on the savings. For some major investors the change represents a massive windfall, she noted. “[T]he Government has decided to give approximately 346 landlords who own at least 200 properties each around $464 million between them.”
Government to facilitate overseas investment in build-to-rent
The deductibility change was the second announcement in less than a week aimed at the rental property market. Late last week housing minister Chris Bishop said the government would amend the Overseas Investment Act to create a streamlined consent pathway that will allow foreign investors to buy into build-to-rent (BTR) developments. (The ban on foreign investment into residential housing and land remains.) While BTR is relatively new in NZ, interest is growing, writes Brent Melville at Businessdesk (paywalled). “Main players at this stage include Kiwi Property Group, which is rolling out its first major BTR project at Sylvia Park next month, and Simplicity Living, which has finished construction of 159 units to date, with a further 1,097 units either under construction or at the design stage.”
Fewer women than men own investment property
Friday was International Women’s Day, and property insights firm CoreLogic took the opportunity to release some new research on women and property ownership. The report found that slightly more women than men now own their own homes. Of all owner-occupied homes, 22.9% are owned by women, 20.7% by men, and the remainder are jointly owned. A more dramatic gap can be seen in the number of women and men who own investment properties. Putting aside jointly owned investment properties, 21.6% of owners are women while 26.3% are men. As with the gender gap in savings and investment, lower pay among women is largely to blame. “The gender wage gap means that, in theory at least, males can build financial wealth a bit faster, allowing for earlier and more investment in rental properties,” says CoreLogic’s Kelvin Davidson.