Three big changes every property investor should know.
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SubscribeMany property investors have found it hard over the past few years due to rising interest rates, tighter lending by banks and the removal of Mortgage Interest Deductibility. The Bright-Line test also introduced previously meant investors had to hold property for 10 years to avoid incurring a capital gains tax.
But from July 1 2024, the new coalition government is introducing changes that should make property investing more attractive.
1. The return of mortgage deductibility.
This is a bit of a gamechanger and will have the biggest effect on property investor finances. The government has introduced a phased approach allowing property investors to claim 60% in 2023/24 tax year, 80% in 2024/25, and 100% in 2025/26.
What this change effectively means to property investors is they will now enjoy a positive boost in cashflow as their borrowing costs decrease. Their rental yield will improve, and they can look ahead with more certainty and confidence – especially if mortgage rates start dropping towards the end of the year.
2. Bright-line. Brighter news.
You’ve probably heard of the Bright-Line test, but not everyone understands what it is and why it’s there. It was introduced to try to dampen a red hot property market and dissuade speculators. Bright Line meant property had to be held for 2 years before selling – otherwise you’d be liable for capital gains tax. The previous government pushed the Bright-Line test out to 10 years, making investors hold on to property for far longer which was unattractive to some property investors who left the market. Under the new government, the Bright-Line test will revert to 2 years which will again make investment more attractive and reduce tax exposure. This change will apply to properties acquired before July 2022 and sold after July 2024.
3. 90-day no-cause evictions
The return of 90-day no cause evictions has received quite a bit of negative press. However, good tenants should be less concerned. The change gives landlords an out if the tenancy is proving troublesome. Prior to this, landlords would have to go through an arduous process with rental tribunals and lawyers to evict and tenant.
While these changes are significant the rental market, property investment is still best viewed from a long-term perspective and any decision should always be discussed with your financial advisor.
The Fletcher Living team is, as always, ready to show you our range of investment property options across Auckland and Canterbury.
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