Rent hikes and property price falls expected in New Zealand as a result of new Budget

Property prices may fall in New Zealand as a result of the new Budget but the impact on the rental sector is less clear, according to real estate experts.

Landlords may try to push up property rents to try to make up for paying more tax on real estate investments, some say. Or they may rush to sell, a move that could push sale prices down.
Michael Shaw, a tax partner at Deloitte, said it was hard to tell if rents would rise as investors tried to make up for the extra tax they had to pay. But a wider impact could be price falls as investors off load rental properties from their portfolios.
‘There could be more properties put on the market that have to be sold quickly and that may reduce prices,’ he said. Analysts were divided after the Budget on whether rents were likely to rise because landlords will pay more tax. Some said the market would not allow increases.
Jason Wong, head of investment strategy as AMP Capital Investors also expects prices to fall and new developments could be put on hold. While developers said the measures were not particularly helpful.
‘Curtailing property investment is not the answer. The residential construction industry is one of the few sectors driving economic recovery,’ said a spokesman for Milestone Homes.
An online survey after the budget announcement suggests that around half of landlords are prepared to put up rents because of a move announced in the Budget to stop depreciation of buildings as a means of reducing tax.
The survey, conducted by ShapeNZ for the New Zealand Business Council for Sustainable Development, also found that more landlords approved than disapproved of the Budget.
Asked if denying depreciation would cause landlords to put up rents, 65% of New Zealanders and 69% of landlords said yes. Only 17% of landlords said no and 14% said they did not know.
When landlords alone were asked if they intended increasing their rents as a result of being denied depreciation, 47% said yes, 39% said no and 13% did not know.
The Budget also increased funding for Inland Revenue's property transaction audit team, which looks for property speculators who fail to declare the profit as income. Some people buy rundown properties with the intention of selling them at a profit. They claim they are rental properties and never rent then out, tax experts have said.