Government changes present opportunity for property investors and tenants in 2024

Nearing the end of the year it’s always a good opportunity to take stock on some of the key changes and activity that has occurred, and this year has certainly had its moments!

For us the big discussion has been around the significant changes now on the horizon for the rental industry thanks to the introduction of our new coalition government.

Overall, the feeling is now one of certainty about the direction for New Zealand’s rental property market, and we’re feeling positive as the year closes out and we look to 2024.

While decision-making had been put on hold prior to the election, the policy changes coming through, from the reinstatement of mortgage interest deductibility, to reducing the bright line test and the return of 90-day no-cause evictions, has given everyone more confidence.

Let’s look back on the year and some of the key changes that occurred to give investors some more breathing room.

The Government has determined a faster reintroduction of mortgage interest deductibility which is one of the biggest gains for property investors. Rental property owners will be able to claim 60% this tax year, 80% in 2024/25 and 100% in 2025/26.

While the change isn’t expected to see property investors flood back into the market just yet, as they potentially grapple with higher interest rates and tighter lending, it will encourage investors to hold on to properties they may have been considering selling, or to buy more property.

This is good news for rental property owners and good news for tenants with the supply of rental properties hopefully increasing over time.

Under the previous Government property owners needed to hold on to an existing property for 10 years to avoid being charged tax on any capital gains. This Government has promised to reduce that back to the original two years.

While we don’t expect to see a glut of rental properties being sold because of this change or for it to have any impact on tenants, it is still a welcome adjustment for investors.

The return of 90-day no cause evictions has caused quite a stir, but good tenants should not be worried about this change. No landlord goes into a tenancy agreement with the intention of terminating it. I have seen it compared to buying car insurance. You don’t buy car insurance with the intention of crashing your car.

Good tenants will not be affected, but it does provide some peace of mind for landlords if something goes awry.

Other changes include reducing the required notice period for tenants to 21 days (from 28). This will make it easier for tenants to transition between rentals without facing the situation where they are paying for two properties, waiting for the tenancy agreements to line up. Notice for landlords has also been reduced to 42 days (from 90) if the landlord wishes to sell the property or do renovations.

The introduction of pet bonds will also make it easier for tenants to have pets. Currently, landlords cannot charge more than four weeks’ rent as a bond. The intention is for landlords to be able to change extra for a pet bond but exactly how that will work is still being determined.

So, as we farewell 2023, the rental property market in New Zealand is set for some significant change – and we’re here for it. At Lodge Rentals, we’re looking forward to a positive 2024 with an increase in investment and more opportunities for tenants.