Residential property investors retreat following new housing package

by Roxanne Libatique08 May 2021

The government’s new housing package has compelled property investors to retreat from the residential property market temporarily as they assess how the new rules will affect them – leaving an opening for first-home buyers (FHBs).

The new housing package aims to address the housing crisis in New Zealand by delivering a more sustainable housing market and supporting FHBs into homeownership.

Lodge Real Estate director Jeremy O’Rourke said one of the major changes, removing tax deductions on interest costs for rental properties, has left many residential property investors cautious about the impact it will have on them.

“First-home buyers have a good opportunity at the moment, but it’s not one that’s going to last forever because residential investors will return to the market, and first home buyers will be edged out again,” O’Rourke said.

O’Rourke expects residential property investors to return to the market once they realise that residential property remains a good investment over the long term, even though the government removed some of the short-term incentives for owning residential property.

O’Rourke also predicted that the new rules, including the bright-line extension, would only create a short-term gap in the market because they still have not addressed the key driver of the housing crisis.

“There are simply not enough houses. We’ve seen lots of attempts to ease demand for housing introduced over the years by both the government and the Reserve Bank, but they haven’t fixed the problem. They’ve just created a gap,” O’Rourke added.

“Fundamentally, residential investment remains a good investment, and investors will work that out over the next few weeks.”

Read more: Government launches new housing package to address crisis

The residential property market in New Zealand had eased in April following a bumper March. Activity in the housing bracket above $850,000 remained lively, but eased below $800,000, O’Rourke said.

O’Rourke also noticed an increasing number of properties listed in March and April, up 20% on February’s listings.

Most Read

NZ Adviser TV