“As an investor, I was completely despondent”
The government’s new plan to address the housing crisis has been met with mixed reactions from both the public and the mortgage sector, and investors in particular feel hard hit in the wallet.
The plan, which includes doubling the bright-line test from five to 10 years and closing a longstanding tax loophole for investors, means the profitability of investment properties will fall. However, Nest Home Loans director Jeff Kerwin said the measures are likely to achieve the government’s aim - to clamp down on investor competition, and to provide an easier path to property ownership for first home buyers.
“As an investor, I was completely despondent when I heard the news,” Kerwin told NZ Adviser. “I was not happy whatsoever.”
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“My take on it is that the government already can’t supply enough state housing,” he explained.
“You have homeless people living permanently in motels, which is not ideal. The whole idea of the private sector is to help people get housing, and this is removing all the incentives to do that - so from an investor’s point of view, it was horrific.
“But if I put my mortgage broker hat on, I think the flow-on effect of what’s going to happen will be good for the first home buyers.”
Under the new rules, investors will no longer be able to use interest on their loans as a tax deductible expense. Kerwin said this means ‘mum and dad investors’, with less than five investment properties, will likely be ‘profit neutral,’ and many have no better option than to sell up.
“They won’t be able to find the money to suddenly pay all these big tax bills, so what will happen is they’ll have to sell,” Kerwin said.
“That’ll create more listings on the market, which is what it needs right now, and that’ll help first home buyers. This is the essence of what the government is trying to achieve - less investor competition, and helping first home buyers, so I think they’ll achieve what they’ve set out to do.”
“I’m actually quite looking forward to helping more first home buyers, as that’s predominantly what we do,” he added. “I’ve spoken to my team, and we’re all quite excited about the change.”
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Kerwin said that the changes will also be good news for mortgage advisers, whose services will be in higher demand as the complexity of purchasing a property increases.
“Whenever there are big changes in the market, there’s another layer of difficulty for people to buy houses - and that drives more and more people to use mortgage brokers,” he said.
“So I see this as a positive for the adviser industry overall, because it will be harder for first home buyers and investors to get lending. They’re going to need more options, and that’s exactly what we do.”
