First up, the ACT-National agreement means landlord rights to issue a 90-day notice without providing a reason or applying to the Tenancy Tribunal will be restored, while tenants’ notice period returns to 21 days and landlords’ to 42 if the tenant wishes to move or the landlord is seeking to sell the property.

A pet bond will also be introduced, where landlords can allow pets if tenants pay an additional bond to cover potential pet-related damages.

Second is a faster timeline for the reintroduction of mortgage interest deductibility – the biggest gain for property investors, who will be able to claim 60 per cent this tax year, 80 per cent in 2024/25 and 100 per cent in 2025/26.

New Zealand Property Investors’ Federation president Sue Harrison says this change alone means the government is going in the right direction. “The tax was the single biggest thing that was hurting the housing and rental markets. It is a huge relief as many property investors and landlords were suffering financially because of it.”

She doesn’t expect property investors to flood back into the market immediately. “There is still tax to pay for another year, so the policy is not going to be an overnight success, but it will arrest the flow of properties being sold because investors cannot afford to keep them.

“Investors have still got huge costs with tax, higher mortgage rates as well as council rates and insurance, in particular, escalating. They have to continue juggling those costs alongside maintenance and expectations around other things, such as topping up mortgage payments, so at least it gives some relief, although rental yields are still low.”

Investors return

The latest monthly mortgage data from the RBNZ for October shows investors are very slowly coming into the market.

Investors borrowed mortgages worth $1.021 billion last month – only the second time this year investors have borrowed more than $1 billion. The previous time was in March and before that it was in June last year.

The share of new mortgages to investors continued to rise to 17.7 per cent, up from 17.2 per cent in September. It has gradually risen every month since June. Investors last had a big share of the market (24 per cent-plus) in 2020 when the RBNZ removed loan-to-value (LVR) rules and the frenzied housing market boom took off. They stopped buying when the Labour government scrapped mortgage interest deductibility and pushed the bright-line test out from two years to 10.

During the election campaign National had promised to cut the bright-line test back to two years. This means investment properties can be sold within two years without incurring a capital gains tax. There has been silence on when this will be introduced.

Harrison says this is not such a “big deal” and not a game changer for NZPIF members, but it will help the housing market. It could bring investors back into the market more quickly but could also boost sales as “baby boomers” move to sell to boost retirement funds.

One of the National Party’s planks to sell $2 million-plus properties to foreign buyers for a 15 per cent tax is out the door after New Zealand First objected to it. National was going to use the policy to help fund tax cuts and will now have to find the money elsewhere.

The NZPIF says it will affect certain parts of the market – the upper end – but on the other hand it will be good for investors not to have to compete with foreigners when buying, which will possibly help the rental situation.

While the Labour government started a massive reform of the Resource Management Act, splitting it into two pieces of legislation (the Natural and Built Environment Act and the Spatial Planning Act), the new government will repeal that legislation by Christmas. Harrison says it will be interesting to see what replaces Labour’s efforts, but it is probably going to affect developers more than investors.

Working group

She says the new government’s policies are a step in the right direction, but to fix the lack of rentals at a time when thousands of new migrants are crossing NZ’s borders, a working group or a “think tank” needs to be set up to unpack how people are going to be housed.

“What is going to make the difference to increase the number of rentals, what has an effect, how is that managed and what are the solutions? We would like to be part of that.”

Harrison says it is no use letting sentiment drive the housing market; There needs to be practical and long-term solutions.