Experts expect rents to rise under new housing package

by Roxanne Libatique14 Apr 2021

Experts have expressed their concern over the impacts of the new housing package on rent prices, with 69% of Finder’s survey respondents predicting rents will rise under the new policies.

The government’s new housing package aims to support Kiwis into homeownership by dampening house prices. However, Finder’s latest RBNZ (Reserve Bank of New Zealand) Official Cash Rate (OCR) survey found that the new policies could end up hurting those saving for their first home.

“While the government no doubt had the best of intentions when devising these policies, it’s possible that increased costs to landlords will be palmed off to renters,” said Kevin McHugh, Finder’s publisher in New Zealand.

“Removing tax deductions on interest costs for rental properties may be an effective way to curb investor activity, but it does come with the risk of driving up rents,” he continued. “This would put non-homeowners at an even bigger disadvantage than they were before.”

Michael Reddell of economics blog Croaking Cassanda added that any house price relief would be short-lived.

“The housing package does not fundamentally increase supply. However, it might push some investment properties on to the market, so it could have a short-term price effect,” he said. “That, however, will come at the expense of increasing rents.”

Over half (57%) of the Finder survey respondents also slammed the government’s decision to extend the bright-line test to 10 years. Meanwhile, 36% supported the decision, and 7% were undecided.

Kiwibank chief economist Jarrod Kerr said extending the bright-line test is a “stealth” capital gains tax.

“This extension will encourage investors to hold on to property for that much longer, but it takes a step in the right direction to level the playing field for investment,” he said.

ANZ chief economist Sharon Zollner added: “The extension of the bright-line test helps level the tax playing field, though it will likely have unfortunate unintended consequences in terms of reducing property supply responsiveness in times of strong demand.”

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