RENT ROLL VALUES COULD FALL AS LABOUR POLICIES BITE
INDUSTRY SURVEY SHOWS CONCERN AROUND NEW GOVERNMENT
“ If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand — American Economist Milton Friedman Imagine a country where nobody is homeless. Imagine a country where nobody has any social issues such as drug addiction or alcohol abuse. Imagine a country where every child goes to school with shoes on their feet after eating a breakfast and then come home to a loving family where they get a warm healthy meal every evening. Imagine a country where everyone has a roof over their head and we all live happily in warm, dry and affordable homes.
This is the Utopian New Zealand being sold to us by our new Government. One cannot deny the good intentions that this Government genuinely has but, and there is a really big but, just how realistic is it and what will be the cost?
Good on them for having such aspirational ambitions however for every good intention there are undoubtedly unforeseen consequences. This was the theory of famous American Economist Milton Friedman. He said that you had to judge policies by their results and not their intentions, and he was also a critic of rent controls believing they caused a shortage of stock.
Not since the Savage Government of the 1930's has there been such a focus on housing and our industry is right in the firing line. Jacinda Arden's Government is about to make more changes to the Residential Tenancies Act giving more power to the tenant, enforcing improvements on hundreds of thousands of rental properties across the country, as well as undertaking a drive to build 100,000 social houses.
Information sourced from the newly published Housing Stocktake of New Zealand. Information sourced from the newly published Housing Stocktake of New Zealand.
However, as REINZ CEO, Bindi Norwell wrote in her article published in The New Zealand Herald, who pays?
For many a landlord, it may prove to be too much. Some will be forced to sell whether it is through their own choice or the bank's. This is unfortunate as we now need landlords more than ever. 100,000 social houses will not appear overnight and as landlords leave, we are starting to see a shortage of stock and rising rents around the country.
WHAT EXTRA COSTS ARE LANDLORDS POTENTIALLY FACING? Insulation of the property Additional heating so the property can be maintained at 18-degrees celcius Rental Warrant of Fitness Report every three years Increasing interest rates Meth Testing between tenancies Increased insurance premiums Increased management fees (Abolishment of Letting Fee) Tax rebate removed from negatively geared property What I do believe is this. The Utopian view of New Zealand sold to us by this Government is already developing unforeseen consequences which is hurting the people it was designed to protect.
TAX LOOPHOLES HURT MUM AND DAD'S MORE THAN LARGE SCALE INVESTORS The closing of Tax loopholes around negative gearing will cause major issues to small Mum and Dad investors. The Labour website says that the biggest exponents of this loophole are large scale property speculators.
I for one disagree. For every rent roll that I see, on average 80% of clients own one property and around 90% own no more than two.
The people who it will hurt the most are Mum and Dad who purchased a second property to help save for their retirement. Most rental properties will run at a loss when you take away the costs associated with running a property. This leaves an investor paying money into the property and then being able to offset the loss against their own personal income.
Closing this will hurt many and some will undoubtedly look to sell before this is implemented which will cause more strain on the already overstretched rental market.