The following is a summary of political and regulatory news affecting the residential rental property industry.
• Limitations on foreign investors 1/6/14 Crockers Market Research
• Tax warning issued for new landlords 4/6/14 NZ Herald
• Property Group has new head 5/6/14 NZPIF
• Government has no solutions to tackle risks to economy 12/6/14 Labour Party
• New Zealand housing is too expensive 12/6/14 Labour Party
• Healthier flats may burn tenants 21/6/14 Manawatu Std
• Boarding houses 25/6/14 Parliament
• Labour’s alternative Budget 25/6/14 Labour Party
Limitations on foreign investors 1/6/14 Crockers Market Research
A recent Crockers Market Research showed:
• A quarter of those surveyed stated that they had no problem with foreign investors buying investment properties in NZ, while 60% thought that there should be some limits around what foreign buyers can invest in
• Generally there was a much higher acceptance of foreign investors buying commercial properties, and to a lesser extent apartments. In contrast, acceptance of buying town houses and suburban houses was much lower.
• 61% of those interviewed said they want to see legislation restricting foreign buyers in NZ
Tax warning issued for new landlords 4/6/14 NZ Herald
The IRD is warning first time landlords to check how much tax they may need to pay on rental incomes ahead of the July 7 deadline. IRD is concerned there may be a number of people in Auckland and Christchurch who have temporarily rented out property to meet shortage demands and don't know they have to pay tax on the income. Those who rent out a residential property, a room in their own home, sleepout, caravan or holiday home may have to pay tax on the income.
Property Group has new head 5/6/14 NZPIF
Experienced investor Terry le Grove is the new President of the NZ Property Investors’ Federation (NZPIF). Mr le Grove, together with Executive Officer Andrew King, sees his role as meeting with key politicians and other government officers, and achieving better understanding and communication over the issues facing the rental property industry.
Government has no solutions to tackle risks to economy 12/6/14 Labour Party
The National Government has no solutions to tackle the serious risks to the economy identified by the Reserve Bank, says Labour’s Finance spokesperson David Parker. Conversely, Labour has ideas to curb all these risks. “Labour will take the pressure off house prices by clamping down on speculators, taxing capital gains, building 100,000 affordable homes and banning foreign buyers from purchasing houses.
New Zealand housing is too expensive 12/6/14 Labour Party
Labour’s Housing spokesperson Phil Twyford says the IMF has confirmed that New Zealand has some of the most unaffordable housing in the world. Labour wants to “restore housing affordability to give every New Zealander the opportunity to own their own home”. It also says it has a plan to fix the housing crisis. “This includes building 100,000 affordable homes, cracking down on speculators, and reforming monetary policy.”
Healthier flats may burn tenants 21/6/14 Manawatu Std
Concerns have been raised by property investors over the impact on rental prices if compulsory insulation and heating standards are introduced. NZPIF executive officer Andrew King said the federation has concerns that Labour MP Phil Twyford's Healthy Homes Guarantee Bill could reduce the supply of rental properties and put strain on tenants through unnecessarily high rental prices. The bill would require all rental housing - state, social and private sector - to meet minimum health and safety standards in regard to insulation and effective non-polluting heating. Landlords would also have to make a declaration, or guarantee, as part of any new tenancy agreement that their property complied with the standards. The Tenancy Tribunal would be given powers to enforce the standard. Twyford said he expects the changes to make little to no difference in rental costs. He said he is mystified by the NZPIF announcement because in March this year the federation expressed support for the bill.
Boarding houses 25/6/14 Parliament
The Social Services Select committee met on 17 and 25 June to continue their inquiry into boarding houses in New Zealand.
Labour’s alternative Budget 25/6/14 Labour Party
Labour announced its alternative Budget on 25 June. Of interest to property investors; Labour promises to introduce a 15% capital gains tax, close trust loopholes and ring fence losses.
Capital gains tax parameters
Rate: The CGT will be set at a simple low flat rate of 15% with no indexation for inflation
Gain: The tax will be applied to net gains.
Exemptions: The family home, personal assets, collectables, small business assets sold for retirement and payouts from retirement savings schemes, including KiwiSaver, will be exempt.
Scope: The CGT is broad based and comprehensive.
Implementation: The CGT will be forwarding-looking and only apply to gains accrued after implementation. Past gains will not be affected.
Point of Taxation: The tax will be applied on realisation. In most cases this will be the point of sale.
Treatment of Gains at Death: Capital gains on inheritance passed on after death will be rolled over to the heir, and not payable until the gain on the asset is realised.
Trusts: The Government will ensure trusts are not used as a means of avoiding a CGT.
Capital Losses: Losses can be carried forward and offset against future capital gains.
Treatment of traders: Assets currently taxed at the individual’s marginal or at the business tax rate will continue to fall under the existing regime.
The policy will remove the ability of landlords to avoid paying tax by offsetting rental property losses against their personal income. This measure targets negatively geared rental properties and means that losses may only be offset against future rental profits.
ISSUES UNDER WATCH
Healthy Homes Guarantee Bill (Lab: Phil Twyford) That every rental home in NZ meets minimum standards of heating and insulation Bill awaiting first reading expected late July 2014
State house WOF trial Minister of Housing trialling a WOF system on 500 state houses Trial results due July 2014
Building (Earthquake-prone buildings) Amendment Bill
(Nat: Maurice Williamson) Sets a requirement for buildings to be earthquake strengthened – also applies to multi-storey or multi-unit residential buildings Bill has been referred to the Local Government and Environment Select Committee. Submissions closed: 17 April. Committee report due: 5 September
Overseas Investment (Protection of New Zealand Homebuyers) Amendment Bill (Lab: Phil Twyford) Bans non-NZers buying residential property Bill pending ballot selection for Parliamentary debate
Energy Efficiency Conservation (Warm Healthy Rentals) Amendment Bill
(Greens: Metiria Turei) Requires that standards be in place by October 2014, that all residential rental accommodation be efficiency rated and publicly notified by 2017, and that all residential rental accommodation meets the minimum energy efficiency standards by 2019 Bill pending ballot selection for Parliamentary debate
(Nat: Judith Collins) New legislation to replace the Trustee Act 1956 (estimated 300,000 to 500,000 trusts currently operating in NZ) Bill being developed
Other Brief description Status
Boarding house inquiry Social Services Select Committee inquiry into boarding houses (commenced July 2011) Report pending
General election Parliament will be dissolved for the General Election on 14 August Election Day: 20 Sep 2014