There’s some good news for property investors, with changes to the investment property tax rules changing from the 1st of April, 2024.
The government has agreed to restore deductibility for mortgage interest on residential investment properties. This is to be phased back in, from 1st April 2024, investors able to claim 80% of their interest expenses, and 100% from 1st April 2025 onwards.
Interest deductibility was available for investors until this policy was changed under the Labour Government. There was a big outcry from investors when this was removed, so many will be very happy to see this policy be updated. It also brings property investors back in line with many other businesses in New Zealand, where business expenses are a deductible expense. It’s also expected that landlords will now be more likely to make improvements to properties, which they might not have been so quick to do while Labour’s policy was in place.
David Seymour, the Associate Finance Minister said the new government policy would benefit both investors and renters, with upward pressure on rents being reduced.
“Landlords have been hit with a double whammy of rising mortgage interest rates and increasing interest deductibility limitations during a cost-of-living crisis. These costs are inevitably passed on to tenants, one of the reasons New Zealand has all time high rental costs. This heaped pressure on landlords and renters alike by reducing the number of rentals, pushing rents up and making it harder for Kiwis to save for their first home,” he said.
“Competition helps keep prices affordable. Reducing supply reduces the number of options and drives up prices. Removing the ability for landlords to claim interest expenses made residential properties less attractive and reduced the pool of properties for tenants to choose from. To overcome New Zealand’s many challenges there needs to be an environment where investment and development is encouraged. This change is a step in the right direction.”
This change to interest deductibility will be celebrated by investors, and makes investment property an even more attractive option. If you are considering purchasing an investment property in the near future, we encourage you to get in touch with us and we can help you navigate the process and the ever changing environment. Call us on 0800 005 676