Interest deductability surprise undermined by short-termism on capital for new supply and reliance on councils and private developers to deliver; $5.8b is to buy land & pay for housing infrastructure
In 2020 median prices went rom $628K to $745K or +1.4% a month. In 2021, first two months, to $780K, +2.3%/month. Anything less than that for the rest of 2021 has got to be a success. The calculations for buyers have just changed dramatically, starting in two days time. Scaring away a quarter of the market has got to have an effect. Probably sales volumes will slow first, but investors with several houses, losing money every month on each of them (or facing that prospect very soon) will surely have some kind of incentive to sell. It's still not clear to my why rents would increase.
IMHO, as investors exit the market slowly over the next 5-6 years, there will be a lot less rentals available. The reduction in available rental options will push up the price of rents - supply vs demand. Most investors won't sell at a loss and while we still have more people wanting to buy homes, we still have a supply issue and there is no reason for prices to drop significantly. More likely we will see a slow flat lining of prices as those exiting investor rentals drip feed into the market with some renters turning into home owners - but there will still be more renters than available rental options and there will be less and less houeses to rent as the years go by.
As a business proposition, residential housing is no longer viable - this will be the only business I know of where finance costs are non-deductible against revenue. Residential housing is now a social enterprise and probably always should have been but governments over the years have implemented policies to push the bulk of responsibility of housing to the private sector - now it's reining them in...will be interesting to see how things turn out over the next few years.
Two to three years ago, an investor who purchased a property with a $600,000 mortgage was paying 5% or $30,000 in tax-deductable interest, got a tax refund of $10,000 leaving a net-cost of annual $20,000
Today, with reductions of interest down to 2%, that same investor now pays $12,000 net annual interest, but the Government has taken the tax-refund away
Investors have no reason to increase rents. Those claims are scaremongering
Anyone recall landlords crying a river at the RBNZ reducing their interest costs by 50% over the past 2 years?
In 2020 median prices went rom $628K to $745K or +1.4% a month. In 2021, first two months, to $780K, +2.3%/month. Anything less than that for the rest of 2021 has got to be a success. The calculations for buyers have just changed dramatically, starting in two days time. Scaring away a quarter of the market has got to have an effect. Probably sales volumes will slow first, but investors with several houses, losing money every month on each of them (or facing that prospect very soon) will surely have some kind of incentive to sell. It's still not clear to my why rents would increase.
IMHO, as investors exit the market slowly over the next 5-6 years, there will be a lot less rentals available. The reduction in available rental options will push up the price of rents - supply vs demand. Most investors won't sell at a loss and while we still have more people wanting to buy homes, we still have a supply issue and there is no reason for prices to drop significantly. More likely we will see a slow flat lining of prices as those exiting investor rentals drip feed into the market with some renters turning into home owners - but there will still be more renters than available rental options and there will be less and less houeses to rent as the years go by.
As a business proposition, residential housing is no longer viable - this will be the only business I know of where finance costs are non-deductible against revenue. Residential housing is now a social enterprise and probably always should have been but governments over the years have implemented policies to push the bulk of responsibility of housing to the private sector - now it's reining them in...will be interesting to see how things turn out over the next few years.
Two to three years ago, an investor who purchased a property with a $600,000 mortgage was paying 5% or $30,000 in tax-deductable interest, got a tax refund of $10,000 leaving a net-cost of annual $20,000
Today, with reductions of interest down to 2%, that same investor now pays $12,000 net annual interest, but the Government has taken the tax-refund away
Investors have no reason to increase rents. Those claims are scaremongering
Anyone recall landlords crying a river at the RBNZ reducing their interest costs by 50% over the past 2 years?