Landlords likely to be biggest losers

Experts have blamed low house-sales data on imminent Government tax changes. Photo / Herald on Sunday

The Budget's changes to the housing market could force rents up in the $200 billion sector but deliver first-home buyers big opportunities.

ASB economist Chris Tennent-Brown said falling home ownership rates needed to be redressed and the Budget might be just the vehicle to achieve that.

"It would be nice to see the first-home buyer on the same footing as the landlord when they're competing to buy a house. At the moment, the landlord has all the tax benefits and the first-home buyer can't compete."

A sudden, sharp rental price rise or a flood of rental housing hitting the market were unlikely outcomes in the short term, Mr Tennent-Brown said.

"It will gradually become apparent that housing is less attractive than it used to be to those who hold considerable amounts. Budget changes have the potential to have a real impact over the next year."

QV senior registered valuer Glenda Whitehead is predicting a shortage of rental properties, and rising rents.

Experts have blamed low house-sales data on imminent Government tax changes. This has been the single most detrimental factor, they say.

Interest rates, restricted bank lending practices and unemployment are no longer being blamed for spooking buyers.

A landlord bailout from the sector could open the door for those aiming to buy as they cash in on Budget changes.

Philip Borkin of Goldman Sachs JBWere warned that Thursday's Budget was causing house sale jitters.

"Uncertainty surrounding the Budget is clearly influencing, but in our view the issue now is how the market behaves post-Budget," he said, commenting on the April Real Estate Institute figures.

Financial adviser Martin Hawes expects the Budget to be particularly tough on landlords. He picks an end to depreciation and to landlords' ability to ring-fence property tax losses against personal income.

Jane Turner of ASB Bank said the housing market had been in a holding pattern for some time. "Housing turnover remains very low."

This year, the Tax Working Group said $200 billion of investment in rental housing generated net rental losses of $500 million in 2008 and $150 million in tax revenue losses, although some have questioned those figures.

The group said it was illogical for landlords to be able to claim depreciation on houses which were in fact rising in value.

Deutsche Bank is predicting depreciation on housing could be reduced or abolished.

ASB said these changes would boost Government revenue and discourage unproductive investment and debt accumulation in rental housing.

Predictions:

* Rental housing investment incentives abolished.

* Housing a less-popular investment class.

* Depreciation rules likely to be changed.

* Rental housing's ability to lower PAYE axed.

* Landlords' cashflows could be hard hit.

* Door opened for more first-home buyers.

* Rents forecast to rise over long term.

* Rental property shortage could also increase.