The industry has been warning the government of the impacts of tax deductibility and the bright-line extension since the announcement of the new housing package last month. Now, the New Zealand Property Investors Federation (NZPIF) has conducted a survey to see how these changes will affect the rental property industry.
The survey, conducted from March 29 to April 02, aims to understand how the new housing package will affect rental home providers. It included 1,719 respondents, with the majority being members of one of the 18 Property Investors Associations in New Zealand.
According to the survey, the government’s new tax laws will substantially affect just over 90% of rental property owners – increasing costs by around $3,140 per rental property and, on average, each investor respondent’s costs by around $15,000 in higher taxes.
The survey also revealed that 76.8% of the respondents said they would increase, or probably increase, rental prices to offset the tax increases. A further 8.9% might increase rental prices, with the median rental increase expected to be between $21 and $30 per week.
“While investors are not comfortable with increasing rental prices, the respondents feel that this would be their only real option for coping with the higher taxes caused by removing interest deductibility,” NZPIF said.
“With 70% of them currently not charging full market-rate rental prices, there appears to be room for rental price increases. Some respondents who had great tenants and had been subsidising them would have no option but to increase rents. However, if and when mortgage interest rates increase, they may be forced to take more significant action.”
The survey also showed that 21% of the respondents were planning to sell some or all of their rental properties, with many looking at their current strategy and considering selling their older properties and buying new builds. They also expressed some concern that large and negative events – such as death, divorce, job loss plus serious injury, or disease – might force them to sell their rental properties. However, 62.9% hoped they would not be affected by the bright-line extension.