Landlord polls: Rents will lift, sales will be low

Three recent landlord polls show the majority are going to lift rents in response to the Government’s decision to scrap mortgage interest deductibility against income.

Friday, April 9th 2021, 12:35PM

Andrew King

The most recent poll was undertaken by the New Zealand Property Investors Federation (NZPIF) and sits alongside polls done by independent economist Tony Alexander and New Zealand Property Investor magazine.

On average NZPIF’s members own 5.3 properties each. The 1,719 survey respondents say they will have to fork out $3,140 every year in extra tax for each property.

NZPIF’s poll shows the Government’s extension of the bright-line test to 10 years and removing tax deductibility will affect more than 90% of rental property owners. The result increasing each investor’s costs, on average, by about $15,000 through the higher tax.

To offset the tax increases 76.8% say they will increase or probably increase rents. A further 8.9% might increase rents and the median increase is expected to be between $21 and $30 a week.

About 21% say they will sell some or all of their properties, with many looking at their existing strategies. They may, for example, sell their older properties and buy new builds, which won’t be subject to the scrapping of mortgage interest deductibility.

More than 19% say they will not buy more rental properties.

Federation president Andrew King says he is not surprised at the results of the survey.

“They are similar to the other two surveys, so it gives a fairly accurate picture of what landlords will do to compensate for the Government’s changes.”

While investors are not comfortable with increasing rental costs, many feel this would be their only real option for coping with the higher taxes. King says as 70% of them are not charging full market rent there appears to be room for increases.

“Some landlords who have great tenants and have been subsidising them will have no option but to increase rents. However, if and when mortgage interest rates rise, they may be forced to take more significant action.”

Nearly 63% of survey respondents hope they will not be affected by the bright-line test extension.

Among the comments, some respondents say they will change their way of life to try and hold on to their properties and good tenants rather than sell.

Other respondents will move to cheaper properties themselves in order to keep their rental property, take part-time work or find other ways to increase personal income to help compensate for higher tax.

It’s what we do

While the Government has been labelling property investors as speculators, the survey found respondents had an average of 63% equity in their properties and the longer they owned them the higher that became.

Not only upset at the Government’s tax changes, they were unhappy at being labelled as “speculators” by the Government. Upsetting them even further is the Government claiming they are exploiting a “tax loophole” to avoid paying their fair share of tax.

Meanwhile King says even academics are taking a “swing” at property investors and particularly the federation, but he laughs it off.

It has been accused by Auckland University economics professor Robert MacCulloch of “engaging in heavy industry lobbying” and public scaremongering to stop the Government from pursuing the tax changes.

King says everyone is entitled to their own view and MacCulloch has not come up with anything factual pointing to how the federation is scaremongering or protecting too loudly.

“We are a lobby group and speak for our members. Like hundreds of other lobby groups around the country we talk to MPs and officials in government departments on different issues.

“It’s what we do.”

He says the accusation of scaremongering is totally wrong.

“Does he want tenants to remain ignorant about what their landlords are facing?

“Tenants are entitled to know the facts about the Government’s changes and how they might be affected. I am sure tenants don’t want to be ill-informed.”

King says in some ways it is quite flattering to be seen as lobbying too hard.

“It means we are doing our job.”

Tags: Bright-line test landlords NZPIF property investment rents tax