For once as property investors, we seem to be on the same page as tenants and the likes of Renters United. Rents are going to increase as a result of the proposed changes to the interest deductions on residential property. How can they not? Some investors caught out by the change may choose to sell. The likelihood is that the properties they sell will be purchased by first home buyers so that’s a property lost to the ‘investment pool’. Those investors negatively geared and impacted by the change to the interest ‘loophole’ who decide to stick it out will likely want to mitigate loss as much as possible and the only way to do that will be by increasing rents. The Government will be worried that their polices could be associated with rent increases as any such increase will negatively impact a large portion of their voter base (renters) so expect to see a lot of smoke and mirrors around this over the coming months. Already moves are afoot to deflect attention away from them being responsible for rental increases: https://www.stuff.co.nz/national/politics/300264332/jacinda-arderns-office-gets-ready-to-fight-rising-rents-talk-with-social-media-campaign
NZ Property commentator we follow, David Faulkner from Real-iQ is already claiming that some form of rent controls were now “almost inevitable”. Faulkner is based in Wellington and in a recent Stuff interview claimed, “the inevitable thing that many Landlords will do is increase the rents and increase them significantly as interest payments will be an additional cost to the Landlord of nearly $100 a week”. At times we’ve agreed with Faulkner’s views and predictions and at other times we’ve disagreed. On this occasion we’re going to sit on the fence but overall disagree with what he’s saying. First and foremost, not every Landlord out there is negatively geared, in fact by all accounts those landlords are the minority, not the majority so to convince the market to accept a (circa) $100 p/w rent increase would require the majority of rental properties to push for such a hike. Secondly, interest deductions on properties purchased prior to March 27 are to be phased in over the next 4 years, and a lot can happen in 4 years – like a General Election for example! Recent talk by the Finance Minister of rent controls we feel at this stage is just posturing and to a certain degree scare mongering. That’s not to say that it definitely won’t happen so if and when it does, we’ll hop over onto Faulkner’s side of the fence.