Staircase Update

Why 2024 is THE year for property investors.

"Get ready for an exhilarating ride as 2024 unfolds, offering a perfect convergence of market dynamics that spell great news for property investors,"  says Liam Cox, Staircase Sales Manager.

Here's why:

• The once abundant surplus of housing stock has vanished, creating a more favourable environment for investors.
• Construction of new homes has slowed down, contributing to increased demand for existing properties.
• New Zealand has welcomed a staggering 200,000 new residents over the past year, further fuelling the demand for rental properties.
• Predictions of dropping interest rates are on the horizon, enhancing the attractiveness of property investment.
• Rents are on the rise, translating into higher potential returns for landlords.
• The government's rollback of most anti-landlord policies is creating a more landlord-friendly regulatory landscape.
• The revision of the cumbersome CCCFA promises smoother processes and potentially fewer hurdles for property investors.

With esteemed economist Tony Alexander forecasting a growth wave spanning approximately six years, now marks the opportune moment to dive into the property market.

Reach out to our team today for an assessment of your potential to make a rental property purchase this year. Don't miss out on this prime opportunity!

Finance Update

With the arrival of the new year, positive economic news is filtering in from both external and internal markets. Mortgage rates are set to fall, with the first drops already observed in late December and early January. While these drops mainly concern longer-term rates, which have decreased due to banks' ability to borrow funds abroad at cheaper rates, short-term rates are also expected to decline soon. Some economists forecast a 1% drop in the next 6 months, although a 0.50% drop is probably more likely.

Another important development on the horizon is the latest update from Commerce Minister Andrew Bayly, which outlines the overhaul and simplification of the current CCCFA (Credit Contracts and Consumer Finance Act). This is significant because the CCCFA, while a necessary tool, has been perceived as overly restrictive when borrowers approach banks for lending. This new "trim down" will continue to protect vulnerable borrowers in our society while enabling more borrowers to access funds to help them achieve their financial goals.

Property Management Update

At Staircase, our Property Management team has noticed a consistent rise in rents in recent years, fueled by the growing demand for quality housing. This trend is expected to continue as New Zealand addresses its shortage of high-quality housing. We conduct annual rent reviews proactively to ensure competitive rates that maximise returns for our investors.

With the new Government now in office, we eagerly await the implementation of proposed changes by the National-led Coalition. We closely monitor these developments, anticipating their positive impact on the rental market. At Staircase, we are steadfast in our commitment to providing exceptional service and insights to our clients as we navigate these changing dynamics together.

Accounting Update

New build residential investment properties with CCC (Code Complaince Certificate) after 27 March 2020 will continue to have full interest deductibility. Other proposed tax changes by the new government are as yet unconfirmed by Inland Revenue.

Proposed Personal Income Tax Cuts:

National's proposed threshold adjustments before the election, applying from 1 July 2024. The new personal income tax rates that will likely apply are:

• 10.5% up to NZ$15,600
• 17.5% on NZ $15,601 to NZ$53,500
• 30% on NZ$53,501 to NZ$78,100
• 33% on NZ$78,101 to NZ$180,000
• 39% on NZ$180,001+

Proposed Rollback of Non-Interest Deductibility on Residential Investment Property:

Interest deductibility is proposed to be restored to property investors on properties bought with CCC before 27th March 2020 over the next couple of years as follows:

• 2023/24 income year (i.e. the current year): 60% of interest costs will be deductible
• 2024/25 income year: 80% of interest costs will be deductible
• 2025/26 income year: 100% of interest costs will be deductible.

Proposed Rollback of the Bright-line Test:

A proposed rollback of the bright-line test from 10 years and 5 years to 2 years has been indicated. The new government has proposed that Properties acquired before July 2022 if sold after July 2024, are not expected to be subject to the 5-year or 10-year bright-line test.