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Property market update: Market changes revealing opportunities for investors
Only a few months after the re-introduction of rules and regulations to slow the property market, data from April shows the effects of those changes are already starting to take shape.
In March, the RBNZ re-introduced loan-to-value-ratio restrictions requiring most investors to have a minimum 40 per cent deposit to qualify for a loan, with the initiative kicking in from May.
Meanwhile, the government removed the ability to claim interest as a tax deduction on investment properties, and extended the bright-line test (the rule that determines whether a vendor must pay capital gains tax on the sale of property) from five to ten years.
Sales in the residential property market in New Zealand eased last month following a bumper March, possibly owing to increased supply. The number of listings coming onto the market has increased 20 per cent since February.
Luke Jackson, Head of Resimac NZ, has observed that as the dust settles on these changes, savvy investors, both Mum-and-Dad types or seasoned professionals, are finding ways of getting into the market despite the challenges.
We spoke to Luke about how to make the most of investment opportunities in this landscape.
Understand cashflow
While LVR changes drew much of the focus from commentators early in the year, the new tax laws are another consideration when purchasing an investment property, says Luke.
"While higher Loan-Value-Ratios (LVRs) will often determine whether the upfront purchase is possible, the ongoing cost of an investment can often be a deciding factor as to whether it's affordable long term. The good news is there are a number of options available."
Luke says that finding a property that can become as close to financially self-servicing as possible, along with the right loan product, can make investing in property much more achievable.
"If you are able to secure a property where rental yield is good, and your repayments and costs are close to equal to rental income, this could lighten the load of your tax obligations under the new laws," he says.
Where Resimac can help
Resimac's specialist investment loan is designed specifically for investors looking to keep the cost of investment low. By only paying the interest owing for up to 50% of the loan for 20 years, initial monthly repayments are reduced.
"In this new landscape, positive cashflow is extremely important so an interest-only loan can help investors keep monthly costs down," Luke says.
"With this particular product, we are able to assess your application for the loan based on the property and its rental return, rather than including additional properties as part of the loan," he says.
"Remember, with any investment it's always a good idea to talk to a financial advisor beforehand. They will be able to help you plan how to manage cashflow on an investment property."
If you have any queries or want to chat more about the features of our loan options, our qualified team members are on hand to help. Please contact via email at ask@resimac.co.nz or phone on 0800 466 656.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual's financial situation. We recommend seeking advice from a finance professional before implementing changes relating to your finances.
