Unpacking the change in government and what it means for the rental industry

While we wait to see the final wash up of votes in November, the change in government last weekend certainly brings with it some positive change for the property industry.

Pre-election, National promised to re-introduce interest deductibility for rental properties, and return the Brightline test to two years from 10. Interest deductibility is where investors can deduct mortgage interest expenses from their rental earnings for tax purposes, reducing the amount of tax they pay. The Brightline test taxed financial gains made when a house is bought and sold for income, and under National this tax will now occur if a house is sold within two years.

All going well, and if National sticks to these promises, I think we can expect a general lift in investor activity as more people come back into the property market.

Pre-election the feeling among buyers was one of distraction, even more so than usually present in the lead up to an election. Buyers, including investors, were holding off on making big decisions before they knew the outcome of the election and the resulting economic policy that would influence their decision-making.

Business decisions were set to have an influence too, with businesses deciding whether to consolidate or expand post-election. If they were to consolidate because of stricter economic policy, we would have seen more belt-tightening that would have trickled down into the property market. We may now see businesses feeling more economic certainty and deciding to expand, which will create opportunities and an increased appetite to invest.

While the change in government won’t have an immediate impact on house prices, and it will be a few more months for the tax and housing policies to take effect, we may see an increase in activity this side of Christmas as investors who have been waiting in the wings act quickly before pressure is put on house prices.

The rental market shows no signs of slowing down. We continue to see high levels of demand and low levels of property available, and I think we can confidently expect to see the property market flourish as investors make their return to the market.

We consistently see more than a third of rental properties every month going to people new to Hamilton. With no signs of our population decreasing any time soon, there remains a real need for quality rental properties to service an ever-growing population of renters, for those both new to the city and those already living here.

While we welcome the return of interest deductibility and a two-year Brightline test, it’s worth recalling how far the rental industry has come in recent years. The Healthy Homes Bill set the standard for ensuring homes were warm, dry, and fit for people to live in, and an enhanced Residential Tenancies Act (RTA) lifted the bar for both landlords and tenants, striking a balance between protecting landlords’ interests and making sure tenants got fair rights for the rent they pay. While some changes will be made to the RTA, such as the return of no-clause tenancy terminations, we believe the effect on good tenants will be minimal, if none.

Here's looking to the next few months and an eventual upswing in investment and rental opportunities for tenants.

Jason Waugh

General Manager, Lodge Rentals