Blog: The Landlord says...

Property investment issues haven’t been something to feature on the agenda of recent election campaigns, however I predict this year will be different.

Already there are signs that Labour and National will be talking about property. The NZ Herald on the weekend had a short piece on the front page saying that new Housing Minister Maryann Street was looking at housing affordability issues, possibly including changes to the way investment property is taxed.

Landlords.co.nz has confirmed something is happening in this story here and it is one we will watch closely.

This whole issue of home affordability is a story you will read and hear a lot about this year. In the past week I have heard from a number of quarters that officials in Wellington are furiously working on the issue.

I’ve been a little sceptical about this subject. Sure it is harder to buy a property at the moment, but I tend to think that some of these surveys are so general in their approach that they don’t paint a particularly accurate picture.

The question to ponder is: What does it mean for property investors?

That’s the bit which is a little more tenuous. In broad terms, if people can’t afford to buy a house then they are likely to be renters. This means a bigger rental market. If the government introduces changes to make it easier to buy property, then the opposite happens.

What is unclear is whether it is a big issue or one which impacts investors only marginally?

The other bit I struggle with is the so-called solutions to the issue. If you believe some, it’s all about the Resource Management Act (RMA) and land supply issues.

I’m not convinced that is the full picture. Or put this way – yes they are issues, but not the primary ones.

It is more likely the RMA/land supply issues are being pushed by opposition politicians and lobbyists for their own agendas.

As I said, this will be a hot issue this year and we would love your thoughts on the subject.

PS: It would be foolish for a government to mess with the tax treatment of property investment, given New Zealanders’ propensity to invest in real estate as opposed to financial markets.

There are something like quarter of a million landlords in New Zealand and for many of them property is their retirement fund.

To mess with this is political suicide.

Good to see the Reserve Bank left its official cash rate at 8.25% today. No-one really expected a cut, and it was highly unlikely the bank would follow the US Federal Reserve and slash 75 basis points from its rate.

One of the wonderful things about these announcements is that interest rate watchers and economists try to read between the lines and look for any coded messages in the statements.

It appears to me that the guv (Alan Bollard) is reiterating the hard line message about don’t expect cuts soon, however there is a slight mellowing of his views.

Previously he always took the line no cuts. Now he is saying no cuts, but if the world economic situation keeps turning to custard then he may consider a cut.

Well that’s my reading of it!

Doesn’t the property market look like a safe place to put your money these days. We have heard heaps of stories about how house prices are falling – or more correctly that they are increasing but not as quickly as before.

Those stories looks pretty tame against the carnage going on in sharemarkets around the world at the moment.

The latest big bit of news is that the equivalent of our Reserve Bank in the US – the Fed Reserve – has chopped 75 basis points off its official cash rate. Cuts of this magnitude are rare (last time 9/11) and it has been made at a special meeting, not the Fed’s regular one which is scheduled for next week.

The good news for investors is that these cuts may well help to drive down long term home loan rates in New Zealand.

We have already seen this with Kiwibank and Westpac both lowering their five year rates this morning.

While five year rates still are not cheap there is a place for them in property investment portfolios. You can keep an eye on changes here.

The other thing to watch is the Reserve Bank’s OCR announcement tomorrow. We will send out an email on its decision in the morning.