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Tax changes prompt some investment property sales, report claims

Government tax changes have hit landlords’ future cash flows and left investors requiring a higher yield from their properties, according to Infometrics New Zealand Housing Outlook report.

Monday, August 15th 2011, 3:47PM 1 Comment

by The Landlord

The report, compiled for QBE Lenders' Mortgage Insurance (QBE LMI), claimed the removal of landlords' ability to treat the depreciation of buildings as a tax deductable expense has prompted a focus on property yields to improve cash flow.

"As a result, investor demand for property has been reduced and, in some cases, owners of rental property have been looking to reduce their holdings."

However, Infometrics managing director Gareth Kiernan said signs of investors’ offloading property varied depending on the region.

Citing low listings numbers, he said it was apparent Auckland investors' have been holding onto their properties, though there were signs of investors' selling up in some provincial locations.

"If you look at specific markets, Wanganui is probably a good example, my understanding of the market is there's a reasonable amount of rental property and traditionally investors have got very good yields compared to other parts of the country," he said.

"We have seen upward pressure on rents there and some downward pressure on prices, so that suggests an adjustment coming through and some investors potentially reducing their exposure to residential properties. Masterton is another area where there's been a lot of properties on the market at investor level, so it probably depends on which regions you look at."

The report also claimed investors' offloading properties had helped lower prices.

"Although nationwide rental inflation had lifted to 4.8% per annum by May, some investors have been looking to reduce their holdings, placing some downward pressure on property prices at the bottom end of the market," the report said.

The report said that upward pressure on rents is now evident in the Auckland market, with rental growth in the region hitting a three-year high of 5.9% p.a. in June.

The report also claimed an improving economy over the coming 18 months would see rents increase as landlords sought to improve rental yields.

Auckland and Christchurch were highlighted as regions likely to see the greatest upward pressure on rents due to the relative shortage of accommodation, though increased spending from the agricultural sector could push rents up in provincial centres.

However, "even with a pick-up in rental growth throughout 2012 and into 2013, any increase in rental yields is likely to be limited by house prices rising at the same time."

« City Bay a riser while Devonport sinksRent and the regions »

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Comments from our readers

On 16 August 2011 at 9:38 am Jimpy said:
The report is right. I am a multiple property owner and have started to reduce my holdings just last week and will continue down to 50% in the near future. The government is obviously not interested in the public service that residential property investors provide, the risks and responsibility we take. So it's out with my rental investments along with my national party vote.
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Lender Flt 1yr 2yr 3yr
AIA 4.55 3.19 3.19 3.49
AIA Special - 2.69 2.69 2.99
ANZ 4.44 3.15 3.25 ▼3.39
ANZ Special - ▼2.55 ▼2.69 ▼2.79
ASB Bank 4.45 3.19 3.19 3.49
ASB Bank Special - 2.69 2.69 2.99
Bluestone ▼3.49 ▼3.49 ▼3.49 ▼3.49
BNZ - Classic - ▼2.55 2.69 2.99
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
Lender Flt 1yr 2yr 3yr
BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
Heretaunga Building Society 4.99 4.35 4.45 -
HSBC Premier 4.49 2.60 2.65 2.80
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 3.19 3.49
SBS Bank Special - 2.79 2.69 2.99
The Co-operative Bank - Owner Occ 4.40 ▼2.69 ▼2.75 ▼2.99
The Co-operative Bank - Standard 4.40 ▼3.19 ▼3.25 ▼3.49
TSB Bank 5.34 ▼3.35 3.49 3.79
TSB Special 4.54 ▼2.55 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.55 2.69 2.79
Median 4.55 3.19 3.22 3.39

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