Realtor reveals how property investors manage recent tax changes

Report identified main drivers of changes in investor behaviour

Realtor reveals how property investors manage recent tax changes

Early this year, the New Zealand government implemented tax changes to slow down investor activity. Now, Hamilton's Lodge Real Estate revealed how investors are adapting to the new rules.

The new tax rules prevent investors from deducting interest payments on their rental properties from their taxable income, with interest deductibility being phased out until March 31, 2025. The changes do not apply to properties that received their code of compliance after March 27, 2021, but investors with properties falling into that category can continue to deduct interest payments for 20 years.

Lodge Real Estate director Jeremy O'Rourke said the realtor's agents had noticed a trend over the last few months of property investors “rotating” properties in their portfolios, selling off older properties to buy newer ones as they try to manage their investments against the recent changes.

O'Rourke added that another driver of changes in investor behaviour is the Healthy Homes Standards in 2019, which are now drafted into the Residential Tenancies Regulations 2019 and place specifications around the provision of heating, insulation, ventilation, moisture, drainage, and draught stopping in rental properties.

“There are certainly some investors who are choosing to sell off their properties and buy ones where this work has already been completed,” he said.

Read more: Experts reveal impact of new tax rules on property owners

Aside from the two factors, the impacts of the Reserve Bank of New Zealand's (RBNZ) recent official cash rate (OCR) decision and flow on interest rate rises on investor behaviour were also some concerns among the agents.

However, O'Rourke stated that Hamilton has not yet seen people spooked by the OCR increase, probably because “we haven't seen the full flow through to interest rate rises at the retail banks yet, but ultimately, we still have a lot of people wanting to move to Hamilton.”

While house prices for the last five months have been relatively consistent in Hamilton, O'Rourke said prices in September were strong. Therefore, he expects the official median to be up on last month.