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Opportunities Ahead: Key Government Changes Affecting Property Investors and Tenants in 2024
As we move towards the end of Q1 2024, there’s no better time to take stock of last year and what lies ahead this year. Overall, the general feeling is one of certainty about the direction of New Zealand’s property market.
With the National Party now sworn in government, expectations are high for significant changes in the rental industry. This year is looking positive for many property investors, as many can now breathe easily with investor-friendly laws reinstated and revised.
Last year, the government revised several rental policy laws. From reducing the bright lines test to stronger pet bond regulations, these laws provide a substantial boost in morale for property investors.
Let’s look at these 3 laws in detail.
Bright line test reduction
The bright line property rule meant that landlords who wish to sell a rental property would have to pay income tax on the sale if they have owned said property for less than 10 years.
The property rule meant that property owners had to hold on to their properties for more than 10 years to avoid the tax. The bright line test rule was first introduced in 2015, with a period of two years instead of 10. The year limit was extended to 5 years in 2018 and 10 years in 2021.
This is a welcome change, with property investors only requiring 2 years to hold on to their properties before selling. It’s forecasted that there won’t necessarily be a big influx of properties on the market in the coming year, and neither will it impact tenants significantly.
Return of Mortgage Interest Deductibility
One of the biggest gains for property investors is the return of Mortgage Interest Deductibility. In 2021, new tax laws were introduced so landlords couldn’t offset interest payments against their rental income.
With the return of Mortgage Interest Deductibility, property investors can now continue deducting the interest costs of their property mortgages against their rental incomes. Owners of rental properties will be able to claim 60% of their interest costs this year, 80% in 2024/25 and 100% in 2025/26 financial year.
With many property investors still grappling with higher interest rates, this new Interest deductibility rule isn’t going to attract a swarm of property investors flooding into the market. However, it is encouraging news for rental owners to refrain from selling their homes.
It’s good news for landlords and tenants that positive steps have been taken to improve the rental crisis.
Reinstating the 90-day ‘no-cause eviction’
A ‘no-cause’ eviction meant that landlords could ask tenants to move out of the rental properties without a substantiative reason. This reinstatement means landlords will now have to give tenants at least 90 days’ notice to shift out from the properties. Essentially, this law will not affect good tenants, and it will provide landlords with better peace of mind.
Additionally, the notice period for tenants has moved down from 28 days to 21 days. It eases the burden for tenants transitioning between rental properties and helps them avoid paying for two properties simultaneously.
Meanwhile, landlords now need only 42 days’ notice (from the original 90 days) to inform tenants if they wish to sell the property or do renovations. It’s worth mentioning that these notice periods are minimum notices, so landlords are always welcome to provide more notice if necessary.
Pet bonds
In good news for landlords renting to tenants with pets, new pet bond laws have been introduced. Currently, the landlord’s policy allows property owners to ask for 4 weeks’ worth of rent for tenants with pets. But this may yet change.
Property owners can now ask for more extra bond money than the usual 4 weeks to cover potential damage from pets. However, the specifics of this have yet to be determined.
What this means for property investors
2024 is set to be a good year for property investors, with significant positive changes ahead for the rental property market in New Zealand. Landlords are encouraged to secure their assets with the right insurance and minimise financial risk, which will help them prepare for the opportunities ahead.
Bonded NZ helps property investors remain efficient in economic uncertainties through comprehensive and tailored business insurance. Whether it's public liability or professional indemnity insurance, our cost-effective options help them secure their business at every angle.
For more information about our services, contact our team today.