APRIL 2021 Have the new rules had any effect yet?

[OnTheMove]

I can see a major correction occuring in some cities that do not have the incomes to provide the rents to cover mortgages required. I feel Auckland has a long way to go to be back at its median price ratio in comparison to much smaller cities.

Auckland has still only been doubling every 10 years for many decades, the last 2 though, have gone from being an 8-9% doubling over 10 years to volatile doubling within a 4 year period, often after money has been thrown into the market due to world economic events, ie GFC and now Covid.

When will the Govt realise a large part of the issue is not Auck doubling every 10 years, its the lack of Wage inflation keeping up, that makes housing unaffordable for many.

Of course just an opinion not a fact, nobody has a crystal ball.

[chook]

We have done extensive calculations and also consulted specialist accountants viewpoints and long story short this is the beginning of the end for residential property investment. Unless you have a highly positive cashflow property you are going to get seriously whacked with the deductibility rule change. Throw in a sideways (or even downward) moving market eg no capital gains and possible interest rate rises in the future and this spells an exodus of investors departing the market as its just not worth it any more. A lot of people dont actually realise the consequences yet until maybe they visit their accountant for their 6 monthly catch up, we are getting a trickle of owners coming to us who are in a whole lot of trouble who paid way too much for negatively geared property who are on a knife edge currently. Going to be interesting moving forward..

[artemis]

The below page has two simple pie charts at the bottom showing March % selling and % buying. More selling rentals than buying in March. Worth keeping an eye on month by month.

Although the doc says Taupo it actually looks like central North Island, but am not sure.

https://photos.harcourts.co.nz/Harco...March_2021.pdf

[McDuck]

That's new.

Some blokes in the know were just saying that they think FOMO has been replaced by FOO.

Fear Of Overpaying.

Ok with the TWA's already.

[McDuck]

This weekend seems to show a similar trend.

With even fewer sales.

[McDuck]

Noticeable, that the market is becomming more sensible.Landlords with multiple properties are preparing to quit those that are in poor condition and keep the better presented homes.

Thanks for that.
It's good data, straight from the coalface.

My favorite place to get it from.

I'm getting also, that listings are up, and that sales have remained roughly steady, but in the process dropping slightly.

[Bluekiwi]

It wont affect me, I just sell 1 or 2 of my 15 properties and I have no residential debt.
I am not "grizzling" for my sake, and obviously you are not overly affected either Aston.

I do however, know that about 7 of friends and contacts, have between 1 and 3 rentals.
They are in normal jobs with normal families and children at school.

Most of them have no idea what to do, and have said they may have to sell some of their rentals.
Ones job requires them to rent, so their one house rented, comes under these offensive rules.

So your plan Aston, is for these people to sell, prices go down, and people who cant afford house, now can and buy them.
So unless your super rich large investor, you get punished and are knocked back down to one house, and others get to move up from renting to one house.

Might as well just go straight to communism Aston.
If you are going to punish those who worked hard to try and provide for their retirement and families future.

You think, they should have instead what, invested in share market and have cash in the bank earning .8%.
Start up a business as well as full time employment ?

A 600k Investment property in Hamilton say, at 3% has 18k interest cost, so costs them 6k per year with this new tax.
When Interest rates go up to 6% in a few years time, not only are they paying 36k in interest, the new tax is now costing them 12k per year.

I am not sure this is good for NZ.

If FHB really wanted a house, they would work their way up like everyone else before them.
I bought a house and lived in Massey for 2 years, working 2 jobs, and renovating the property, before moving up.
I made lots of mistakes for sure.

FHB instead of complaining they cant afford quality properties in great locations.
Go to the outskirts, buy a dunger, do it up, and move on to the next.

[Aston]

Noticeable, that the market is becomming more sensible.Landlords with multiple properties are preparing to quit those that are in poor condition and keep the better presented homes.

This is good news and is the much hoped for outcome of the changes. No other investor or speculator will likely be interested in these "quit" properties, enabling FHBs to finally get a foot on the property ladder. These buyers will now be able to do exactly what you did when you bought your first property... improve the property over time, sell it for a profit, move further up the ladder.

Stop grizzling people and let go of some of your older houses and pass them on to people who need them far more than you do.

Bring on more changes I say... Rent control???

And yes I'm a landlord but not a greedy one and I totally support these changes, especially if it helps FHBs into the market.

[artemis]

Two losers and a winner. Loser 1 - landlord who buys an existing property after 26 March as none of their interest will be deductible from 1 October.* Loser 2 - tenant of said property who is going to pay at or near the top of the rent range, now and every year. Winner - revenue for government to spend on other stuff.

* Announced, proposed, but not enacted yet.

[ladyagent]

Noticeable, that the market is becomming more sensible.Landlords with multiple properties are preparing to quit those that are in poor condition and keep the better presented homes.

[Jeffa]

This is the way I see it.

Mum and dad investors with 1 or 2 rentals with normal jobs, it will get too hard once they realize the extra tax is costing them an extra 33% on the Interest cost they already have.

The bigger investors with commercial property and shares and cash in the bank, restructure so they have no residential debt.

But the bigger investors see this as another chance to get richer, so great excuse for them to increase rents.

So the big losers are Tenants and the smaller Mum and Dad investors, or those who couldn't afford their own home and bought a rental instead (probably younger pre first home buyers).

Looks like great Policy for National and ACT, I can see why National is so quiet, Labour have stolen their thunder.

I would like to thank Adrian for increasing my net worth and a big shout out to Grant and Cindy for my future NEW cashflow from rents increasing, it will come in handy when my international travel restarts in the next year or so.

If you look at this picture of Jeff Bezos that reaction looked uncannily like mine when Grant Robinson announced the new tax changes.

https://www.theguardian.com/business/2020/oct/07/covid-19-crisis-boosts-the-fortunes-of-worlds-billionaires

[McDuck]

Bit OT...

But... psychological distancing, of all kinds, occurs in all human, and probably animal, brains about all things.
It's a really strange version of the inverse square law of cause and effect.
So endemic to the very nature of the real world.
And a really really good argument against bigger city councils or centralized government and globalization.

[Chris W]

Housing like fashion is too personal to fall into psychological distancing theory.

Personal wealth is too personal to fall into psychological distancing theory.

[Bluekiwi]

This is the way I see it.

Mum and dad investors with 1 or 2 rentals with normal jobs, it will get too hard once they realize the extra tax is costing them an extra 33% on the Interest cost they already have.

The bigger investors with commercial property and shares and cash in the bank, restructure so they have no residential debt.

But the bigger investors see this as another chance to get richer, so great excuse for them to increase rents.

So the big losers are Tenants and the smaller Mum and Dad investors, or those who couldn't afford their own home and bought a rental instead (probably younger pre first home buyers).

Looks like great Policy for National and ACT, I can see why National is so quiet, Labour have stolen their thunder.

[McDuck]

Housing like fashion is too personal to fall into psychological distancing theory.

Ha!
I agree.
I'm not trying to minimize the effect of human emotions upon human actions.
It's just that there is a gap between what people would like to do and what they can do.
And another gap between what people say they will do and what they end up doing.
Of course, different people have different correlations between words and deeds.

Some people are not very rational at all.
Doesn't mean they can't cause a lot of trouble for everyone else.