Budget hasn't put off property investors
Friday, May 28th 2010, 5:12PM 
7 Comments
It’s now a week since the Budget where finance minister Bill English tried to put the kibosh on the residential property market.
We’ve just completed a survey at Landlords.co.nz and the results show that while investors are not particularly happy with what Prime Minister John Key and English have done, it’s not enough to deter people from investing in bricks and mortar.
We will have full results from the survey on the site next week.
Looking through the data and the Budget in more detail, it’s clear there’s still plenty of work for property investors to do around their strategies and their property holding.
Perhaps one of the key points though is that much of this work will need to be done before April 1 next year when changes take effect.
The other interesting debate extending from the Budget is what will happen to house prices and rents. With the latter there is no doubt that rents will rise. By how much is one of those how-long-is-a-piece-of-string questions. Investors I have spoken to have a range of views on this from a big increase to small incremental increases over a period of time.
There is far less certainty around what will happen to house prices. One commentator who has had the most attention on this has been Kieran Trass. Funnily enough, his prediction was not too outlandish, rather it was his comment that if house prices didn’t fall by at least 5% in the next six to nine months he would walk the length of the country. (We’ll be keeping a close eye on this.)
My prediction is that house prices for lower-value properties will possibly soften in the short term and this may give some first home buyers the chance to get into the market. But judging from our survey, investors will still be active in the market which will help to put a foundation underneath it.
Maybe my prediction is similar to Kieran’s one? The only difference is I won’t have to leave my office if I’m wrong.
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Comments from our readers
On 28 May 2010 at 6:57 pm a said:
Budget is mildly inflationary, so properties will rise contrary to Trass' prophecy. Maybe its time he has realised that walking is good for his health, or maybe he's emulating the Aussie economist.
Disallowing depreciation, LAQC changes, rise of ACC and GST will affect rents by upto 6-21%. Watch this space, as this will just be the beginning of the "New Normal" in the residential rental market. Rent rises are also causative of the strengthening of the recovery in property markets. Investors are currently constrained by credit constraints imposed by banks, so first home buyers who miss this English send opportunity will tell stories of missed opportunities to their kids and grandkids.
On 28 May 2010 at 8:28 pm cam price said:
I agree, Keiran Trass and Bernard Hickey are baboons and couldn't find bananas if they were back at the zoo. I believe we are in for good growth, low interest rates, pressure pent up from the Budget policies to come clear, and property prices have crashed already. We're about to follow Aussie boom. Here we come. On 28 May 2010 at 10:31 pm Christopher said:
Landlords should be pleased with being let off the hook so lightly. There are still plenty of reasons for competent (not geared to the hilt/look after their tenants/maintain their properties)people to invest in property. If property prices decline over the next year (which i doubt)there will be a swag of reasons, not just the new depreciation regime and if they do decline then surely that is also an opportunity for new "investors" to purchase at a price that is sustainable without the depreciation subsidy.
I am also a landlord but i would prefer that our good young people stay and work in NZ.If my loss is NZ's gain, so be it.
re comment no.2 - such a raw statement about "banks". Be interesting to hear the details of the application(s) for a loan(s) that got knocked back. Try putting the loan to 3 banks. If they all knock it back you will know it didn't stack up anyway. Maybe the banks have "noticed" that it is the highly geared investors who are most at risk ?
On 29 May 2010 at 1:58 pm Steven Anderson said:
If the difference between viability of the investment option is the depreciation element then you definitely did not have a viable investment.
The Government has missed the boat in relation to property investment. They should have introduced a capital gains tax as opposed to the stupidity that it currently is. The selling point is easy, if you are an investor (i.e. hold) the tax hardly applies to you, if at all. If you are a speculator then you will be caught in the net and pay your fair share.
On 31 May 2010 at 5:58 pm John said:
Say Steven - you say "The Govt... should have introduced a capital gains tax". To do what? Just in case you missed it, in the last year in Aust, house prices went up 20% and much more in Melb and Sydney. And guess what - they already have a capital gains tax. Hasn't slowed property price increases at all.
Lastest driver of house price increases in Aust is annoyance at the sharemarket etc. Same move to real estate as seen in the 1987 sharemarker collapse. Suspect the same thing will now happen in NZ.
On 3 June 2010 at 1:33 am Me said:
I don't suppose Bernard Hickey or Kieran Trass will be losing any sleep over your views "Cam". Rightly or wrongly their views are at least well researched and show some intelligence. Commenting is closed
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You say "there is no doubt that rents will rise". Why? What in your opinion drives rental levels? I would be interested in the views of others.