[ad_1]
The new tax rules could push more Christchurch homeowners into new homes, encouraging new development and freeing up some established properties for home buyers, experts say.
The government announced Tuesday that it would stop allowing real estate investors to deduct mortgage interest from their tax bill, extend capital gains from the “bright line test” on rental homes from five years to 10, and launch a government fund to help land developers install roads and pipelines.
To encourage home construction, the government plans to exempt buyers of new construction from the tax and bright line changes.
Income thresholds for first-time homebuyer loans and grants are increased in the greater Christchurch area, but unlike the other major hubs, the price cap for qualifying homes has not changed.
READ MORE:
* Housing policy – what the changes mean for bach homeowners, investors, first-time buyers, renters, and homeowners
* Lower value property is still the best option for investors: CoreLogic
* Real estate investors ‘working hard, taking risks’, or not?
* Landlords who threatened to leave the rental market by the leasing law change everything bark and not bite
CoreLogic real estate economist Kelvin Davidson said that instead of a quick reaction, there could be “smoldering” as investors assess their changed situations.
The quicker effects may be psychological, especially after other rule changes affecting homeowners, such as new mortgage deposit restrictions and isolation standards, he said.
“I think we will see some existing investors selling because their sums will change and they will have to recharge their mortgage.
“Investors just have to take things with their chins – the profitability of the business is down,” Davidson said.
Joseph Johnson / Stuff
CoreLogic economist Kelvin Davidson says the rules could have different effects on regions.
“If investors sell and the first buyers buy those properties, that’s what the government wants. It will tip the scale a bit.
“It could be a game changer for some. This will push investors into new buildings. “
Davidson said different regional effects could emerge as a result of the changes in the law.
“In Christchurch and Selwyn, there is still a lot of construction and we still have land to build, unlike places like Wellington and Dunedin.”
Canterbury Real Estate Investors Association president Shirley Berryman said some investors were talking about selling, but there was always a knee-jerk reaction.
“It is imperative that investors plan. They have to think: can I give that back? Where will I be in five or ten years? “
Some investors who cannot pay their debts would be considering selling, especially retired homeowners with no additional income, he said.
“You just have to get your numbers out again and visit your accountant.”
Berryman said some investors who stayed stretched would decide not to expand their portfolios further, while others could switch from residential to commercial investment.
Alden Williams / Stuff
Rentals are limited by income at each location, regardless of landlord costs, experts say.
They had recently seen more young people buy investment properties, something that would now be more difficult, he said.
Both Davidson and Berryman said large rent increases were unlikely as a result of the changes.
Davidson said wages and salaries at each location limited rents, regardless of landlord costs.
According to figures from Trade Me, Christchurch’s median rent in February was $ 395 for apartments and $ 490 for a three- or four-bedroom home.
Property appraiser Natalie Edwards of Urban Edge Valuations in Christchurch said the latest changes would create a “two-tier market,” with buyers preferring new homes.
However, not enough was being built to meet buyer demand and all the new sections were being sold to construction companies, he said.
“You will get a market that only new construction can afford. It will have a great influence on new construction in places like Rolleston, it will drive up the price.
“The people who are doing the best with this are the developers and the builders.”
Christchurch’s affordability was attracting investors from out of town and that would not change, he said.
While she “understood the pain” of home buyers, the ever-changing investment rules were a “slap in the face” for homeowners.
Investors could “downsize” their portfolios and spread their investments to include stocks or business consortiums, Edwards said.
“It will change ownership like the golden ticket to retirement.”
One of the problems was that more people wanted to buy than sell because interest rates were so low, he said.
“First-time home buyers will always have to compete with people who have deeper pockets.
“There is no easy solution to this, I cannot see this as a magic wand.”
