Landlords are not as keen to expand their housing portfolios, are keener sell and tax isn't a big influence, according to a new survey of 592 investors out today.
Just as the Government moves to axe landlord mortgage interest deductibility from Friday, the Crockers/Tony Alexander Investor Insight report for September surveyed landlord sentiment.
Finance Minister Grant Robertson said yesterday the interest limitation proposals announced earlier this year aimed to stem investor demand for existing properties.
So how are landlords feeling? The answer, in a nutshell, seems to be: a little gloomier about buying more places.
Yet tax was specifically cited in the survey as not driving them out of the market: "Fewer investors are citing tax changes as a factor behind any decision to sell. Overall, the effect of the tax changes appears to be fading."
The survey was, however, taken before yesterday's announcement clarifying the rules baring landlords from deducting the interest costs of their mortgage from their tax bill.
Changing landlord sentiment towards buying fewer places might please the Government, trying to encourage first home buyers.
Private landlords now house around 1.4 million tenants and threaten to sell when the Government makes reforms, like the widest-sweeping changes to tenant law in 35 years which came in from February 11.
That gave tenants significantly more power and axed no-cause terminations, meaning landlords have a much narrower range of options in ending tenancies. They now must give reasons, which are now highly restricted.
The survey found 26 per cent of landlords are considering selling in the coming year, up from 22 per cent last month, with 47 per cent planning to buy a new place and 53 per cent an existing one.
"This is a change from the past two months. But it is too soon to say if the growing discussions about rising construction costs, increasing sales prices asked by developers and delays in construction timeframes are causing investors to switch back towards searching listings of existing properties rather than financing new ones," today's survey results said.
Asked about how they are planning their finances, 31 per cent facing mortgage renewals plan to fix mortgage interest rates for three years and 27 per cent for two years.
Most landlords want land if they buy new places, not just buildings.
Of the landlords planning to buy an existing property, 66 per cent want a standalone house. Only 23 per cent would opt for a townhouse and 11 per cent an apartment.
"The key difference in property purchase preference by investors is relatively low intentions of purchasing an existing townhouse," the survey said.
They don't see rents rising fast either.
"There is a slight easing trend in the average rent increase desired by investors."
They fear access to money will get harder: "Investors perceive a slight toughening instance from their banks."
Andrew King, NZ Property Investors Federation president, said the survey results were in line with what he was hearing and what federation surveys found too.
"Removing the deductibility of mortgage interest has caused investors to be extremely put off buying further rental property that they were previously considering. This is bad news for the industry as we are in the middle of a rental crisis with tenants needing more rentals not fewer," King said.
A federation survey shortly after the new tax rules were announced earlier this year showed that landlords were reluctant to sell existing rental property, but were put off buying additional rentals that they were previously considering, King said.
In an attempt to counter the extra tax payments they will face over the next few years, 77 per cent of respondents said they would look to increase their rental prices. This is extremely consistent with Crockers/Tony Alexander results and 70 per cent said that they would be looking at rental price increases of at least $21/week," King said.
The new tax rules will not apply to new builds in an attempt to encourage investors to build new rentals rather than existing properties. However, the federation survey found that only 7.7 per cent of respondents were considering building or buying new property to rent out.
Moving to commercial property was the highest reaction to the tax changes, King said.
"Despite the new rules coming into effect this Friday, details of the new laws have not even gone through the Parliamentary process yet. The federation agrees with opposition parties and tax experts that the introduction of the law should be delayed until the rules have been properly defined," King said.
"Ideally the Government would reconsider the ill-advised rule changes altogether as they will reduce the supply of rental property, increase rental prices, negatively affect tenants and make it harder for first home buyers to save a home deposit," he said.
But Revenue Minister David Parker said: "We want to curb investors' appetite for existing residential properties but also want to stimulate investment in new housing. That's why we're also proposing an exemption for property development and for new builds, allowing interest deductions in full."
Peter Lewis of the Auckland Property Investors Association asked why build to rent had suddenly become seen as the solution to a rental housing supply
"Build to rent proposals are being promoted as the solution to the lack of rental housing at the very same time as private investors are being forcefully expelled from the market," Lewis claimed, referring to the new tax and brightline rules.
"Apparently it is quite okay to be a residential landlord if you are a large corporate owning a substantial number of rentals, but not if you're a ma and pa citizen owning just a few.
"The political think-tanks and parliamentary claque are blindly following some idealistic will-o'-the-wisp off into a seductive and delusional never-never land that takes no account of the vast differences between tenancy legislation overseas and that imposed here," Lewis said.