What are the reasons for increasing housing costs, market rents and renter’s clichés? What are the changes to the tenancy law in 2015, the winners and losers?


Rent Increase

Renter’s Clichés, Winners and Losers


Rental housing market –what are the changes?


Don’t be fooled by this emotional plea – think rationally.  Increasing housing costs are results of actual inflation and a swinging housing market. Market rents are driven by supply and demand, the economy and of course housing politics. Be certain the costs of housing hit everyone who occupies a home regardless as owner-occupier or tenant.


As the housing politics are sold by media commentators, well, they need good stories for their income, right? Unfortunately that is not always helpful for the general public, while fear and greed are fatal motivators. Remember, capital gains tax (CGT) has been sold to the public for improving affordability of housing, and the solution for upgrading cold, damp and dated Kiwi bungalows a warranty of fitness (WOF) for rentals


What has been happening by date (June 2015) are two major changes;


1) The "bright-line" test has been introduced by tax officials (announcement in the Government Budget in May).  The clarifications of CGT rules  provide greater details about how the CGT is intended to work.  The bright line test will apply to property acquired and sold from 1 October 2015.


2) Tenancy law changes announced by the New Zealand government include that every rental home will have to be fully insulated within the next four years.



Winners and Losers


By design  the financial risks are passed onto landlords and law changes to evict tenants in default do not make it easier, but also not for renters. Accordantly to rent increases for home improvements, unfortunately, renters have to pay as tax-payer for upgrading the national social housing stock owned by the government’s biggest slumlord as well.


As they say "There is no such thing as a free lunch". To those improvements are expenses attached. Landlords already get billed on tenants’ behalf for council services, public amenities and consumables like water. As a result the rents are lifted up when levies increase. Council’s levies have continued to rise above inflation for years.   For home improvements like insulation, heat-pumps and similar occupants like homeowner-occupiers and renters alike will pay for desired comfort.



Renter’s clichés


Without venturing into the amazing world of renter’s clichés about the greedy landlords and get quick rich property investors—if you believe that, why not doing it getting rich quickly? The reality is the majority of property investors give up after few years of disappointments. 



Interestingly most clichés are repeatedly used in politics such as;


Residential house prices (housing market) are driven up by property investors

· That  theory totally ignores that only less than 10% of the population are property investors and around 65% of all homes in NZ are owner-occupied.

· Why would investors push up market prices, when the net yield not covers the holding costs? How can somebody convince a lender or the bank to provide a loan for an investment that makes loss? Try your bank!



Rents are too high

That statement is “a pretty cattle of fish” for two reasons.

· There is another picture if you follow statistics, e.g. “The latest OECD Housing report claims that New Zealand house prices are 70% too high compared to rent prices. ” Or the rents are to low.

· For practical reasons it is difficult to compare rents with other countries.  It is  why NZ’s rent includes household’s consumables like water and fees for council service provided to residents. In EU countries those expenses are billed to occupants’ residential address directly. In NZ these expenses are labelled as rent.



Property investments are advantaged by taxation


· A landlord business pays the same tax rate on profit (currently 28%) as every company else. Private landlords, who have a day job are taxed on income (PAYE) as everyone else and rental income accordantly on individual tax rate.


· Currently loss from rental properties can be set off against other income. That negative income is tax deductible in the same way like loss from any other taxable business activity. Try to imagine what happens when a landlord gives up because of making loss—tenants lose their rental home.




To take from here


Not thinking rationally you take the risks being taken for a ride by housing politics, which have failed over decades. Ask yourself, how can that change over night and with zero contributions?  Rent well—it’s your life.



Please feel free to comment or recommend this blog

on FacebookTwitter, or Google +1


 [  To Top  ]  [ Home Page  ] [ Renter’s Blog Posts ] [ Next Post ]

Klauster Properties Ltd - Renter’s Blog

Rent or Own - Decision at some stage in life?

http://klausterproperties.info/Renting - Winners and Losers
Follow kjs2006 on Twitter

Renter’s Blog lead to a real person, IT professional, investor, landlord and business owner with interests in sharing experiences. Life is a dream with a deadline, happiness comes from making the right choices and having realistic expectations.


Confession: I have been a happy renter for more than 25 years before buying a family home and later becoming involved in property investments and developments.


I used to live in apartments or rental homes, worked in many different countries and experienced different housing standards and renting cultures. I would love to see a social and legal frame work around housing policies that supports renters and landlords alike.

Share your view—follow this blog!