NZ Property Investor April 2022

Tax — it’s one of those nuanced topics that are hard to understand, but vital to get correct. In the past year interest deductibility (or the removal of it) has been the headline tax issue for investors, and as the tax year ends the reality of this regulatory change has come to bite. Investors nationwide will be feeling the effect of this change: whether it will lead to a sell-off (as some have predicted) is uncertain, but it’s definitely going to be a squeeze for many. Our columnist accountant Mark Withers (from Withers Tsang) has taken time out of his hectic schedule to explain the basics of tax from an investors’ point of view. He says there are three key areas that investors need to be aware of when it…

Despite numerous submissions, only minor changes have been made to the bright-line rules by Parliament’s Finance and Expenditure Committee when reporting back on the Taxation and Remedial Matters Bill. While the changes have been welcomed by Chartered Accountants Australia and New Zealand (CAANZ), they still leave several traps, says New Zealand tax leader John Cuthbertson. They are still at the margins, and those selling their homes need to be aware that traps still abound, he says. “But a little bit of leniency is provided for construction of the main home.” Where a new main home takes more than 12 months to build, potentially exposing the build to the bright-line, a new “reasonable time” test will allow the construction period to be counted as “main home days”. There is still ambiguity…

There are bigger forces at play than just the Credit Contracts and Consumer Finance Act (CCCFA), such as rapidly rising inflation here and abroad when it comes to the housing market, says Jeremy Couchman, Kiwibank’s senior economist. “Omicron is pushing up domestic generated inflation in an already capacity constrained economy. Meanwhile, the war in Ukraine has seen commodity prices, such as oil, surge. “The RBNZ’s fight to rein in inflation is likely to see mortgage rates rise further and they are already being adjusted upwards to this new reality,” says Couchman. The CCCFA’s proposed changes include removing regular “savings” and “investments” from would-be borrowers’ expenses that were measured against their intended loan. They also reduce the need for lenders to comb through bank statements of all borrowers — an apparent…

Townhouses are now the dominant housing type being constructed across Auckland and often suit property investors, who account for 24% of ownership of those built in the past two years. There are two main types of townhouses – small-scale brownfield redevelopments, where existing homes were removed and new townhouses built, and large-scale greenfield master-planned developments with a mix of housing types in the greenbelt suburbs. Property company Valocity has conducted analysis into newly-built townhouses and says they are popular with investors because they are cheaper than freestanding homes and are still eligible for interest deductibility against rental income. Valocity researchers Wayne Shum and James Wilson say townhouses will continue to be popular as developers seek more efficient use of land. Auckland’s Unitary Plan has boosted townhouse construction as it removed…

A Rotorua landlord was surprised to find ETB Realty let his property to a tenant who had to pay exemplary damages for smoking methamphetamine at her previous flat also rented to her by the company. It wasn’t until halfway though his tenancy that landlord Martin Bader became aware Nasya Burton had been ordered by the Tenancy Tribunal to pay exemplary damages of $770 to her previous landlords for smoking meth at their Sunnybrook property. A subsequent test at his Western Heights property clearly showed meth had been used at the premises during the tenancy. Burton’s tenancy at Bader’s Western Heights property was short-lived. It was ended by tribunal order after 3.5 months when she abandoned the premises. ETB Realty then applied to the tribunal for exemplary damages for unlawful use,…

Q I own several standalone, freehold properties in Kohimarama (Auckland). There are a number of leasehold properties in the area. Is it legally possible to convert my properties to leasehold? I am thinking of selling the properties, but retaining the land. A This is a good question. It invites a brief explanation of the types of ways in which we own property in New Zealand. A fee simple estate is the closest land concept we have to complete ownership (sometimes called Allodial title). A leasehold estate is where there is an underlying owner (the landlord) and someone who obtains a right to occupation and exclusive possession by something less than complete ownership. By this mechanism a lessee or a tenant in NZ obtains an interest in the land, but does…