The Reserve Bank delivered good New Year’s Day news for investors looking to increase their portfolios, by loosening the LVR restrictions.
From January 1, 2019 lenders have been able to allocate 5% of new investor loans to borrowers with less than a 30% deposit, while previous LVR rules stipulated that banks could only allocate 5% of their residential lending to investors with a 35% deposit or less.
Insulation in slow lane
The Government has warned that landlords who haven’t installed underfloor and overhead insulation by July 1, 2019 will face a $4,000 fine.
Insulation is required unless it is physically impossible or extremely cumbersome to install and the deadline was included in a 2016 law passed by the then National Government.
However, an MBIE survey last year showed that up to 220,000 rental homes were still not insulated to the required standard and the insulation industry says it doesn’t have the capacity to insulate the required number of properties before July 1.
Housing Minister Phil Twyford said there would be no leniency for landlords who found themselves unable to book an insulation retrofit in time, as the deadline had been known for years and the Government would not shift it.
The tenancy compliance team has the capacity to carry out some 2,000 investigations of rental properties every year.
The insulation deadline will eventually be followed by a 2024 deadline for changes mandated in the Government's Healthy Homes Guarantee Act.
Tax breaks for the chop
Many investors will be hit by the introduction this year of changes that will limit their ability to claim tax breaks. A Government Bill, which had its first reading on December 12 2018, means investors who run a property at a loss will not be able to claim that loss against other, non-property related, income.
Scheduled to come into effect in in the 2019-20 tax year, the Bill introduces ring-fencing for losses to be claimed only against future rental property income. The default will be for losses to be ring-fenced within an investor's property portfolio, although they can also opt to do it on a property-by-property basis.
More purpose built rentals
Purpose-built projects for long-term renting, as well as investment vehicles and funds undertaking large scale investments of residential projects for invest-to-rent products, are predicted by Colliers International to take off in New Zealand this year.
While there are only a handful of these projects currently, it says the number will more than double in 2019 driven by high house prices, positive attitudinal shifts towards renting and increasing legislative and tax requirements on ‘mum-and-dad’ investors.
After a year in which many coastal properties suffered damage in frequent wild weather events, the Government plans to carry out a nationwide risk assessment in 2019. It also plans to look at how the issue is dealt with financially and develop a way of sharing the risk between property owners, local and central government, insurers and banks in the face of rising sea levels and storms increasing in severity and frequency.
The Reserve Bank has warned of properties being lost to the sea entirely and says some existing properties could ultimately become uninsurable.
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