Budget not driving property investors away

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If the Budget was designed to put residential property investors off their stride then it appears to have failed.

Friday, June 11th 2010, 3:52PM 4 Comments

by The Landlord

A survey by property investment website Landlords.co.nz and Mike Pero Mortgages shows that investors are not happy with the changes to tax and depreciation that Finance Minister Bill English unveiled in his Budget last month.

However, only a small proportion of respondents are looking to sell up their properties. Twelve percent of respondent are considering selling their properties and just 1.7% said they are definitely exiting the property investment market.

The large majority of investors will continue to be landlords and 21.4% said they will be buying more property.

The winners out of the Budget are advisers such as accountants.

While depreciation was seen as the biggest change that will have a financial impact on investors, most of them acknowledge that they will need to get advice on their investment structures.

Nearly half of the respondents held their properties in Loss Attributing Qualifying Companies (LAQCs), however the government is change the rules around these structures.

"Depreciation probably featured highly for investors as they could easily calculate what the changes mean to investors in dollar terms," Landlords.co.nz publisher Philip Macalister says.

"However the changes to LAQC rules will possibly have a bigger impact on investors."

Macalister says it is important for investors to understand these changes and make the necessary adjustments before the rules change next year.

Investors have mixed views on where house prices will go in the next six months, however they have a very clear idea about what direction rents will move.

Nearly two thirds of investors (59.6%) said they plan to increase rents in the next six months.

The survey also shows that property investors buy houses for sound, long-term reasons, rather than speculation and quick gains.

The large majority (95.6%) adopt a buy and hold strategy, however they are evenly split over whether they are trying to achieve capital gains or income.

Slightly more (50.8%) are investing for income, while 47.6% are looking for capital gains.

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