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【MARS Blog】The good, the bad and the lucky Sept 2021

作者: 老墨儿    人气: 1980    日期: 2021/10/11


Sept 2021

I don’t believe anyone can accuse this current government of sitting back and running the country with a laissez-faire approach. That’s not necessarily a good thing as ruling with a stick instead of a carrot is not tolerated long term in a democratically run country. Be that as it may, the govt may have decided that a Marxism approach is called for in order to squeeze the gap between the haves and have nots. Property investor’s who had planned for their retirement with an investment property may have to think again as what used to return a positive or neutral cash-flow will soon be negative if they still have a mortgage.

So, if investment property was the key to your retirement, you may have to refine your plan.

 

The good

But chin up, all is not lost, while the government has closed some doors creating a very dark place for some, a light is appearing, and a gate has recently opened. Like herding sheep, the Labour government is herding the property investors towards the open gate which they hope the investors will rush through, baaing all the way. In doing so, the government is hoping that using the leverage of property investors they will be able to solve their ongoing and climbing, community housing issue.

As a property investor, after escaping through this gate you will then have presented to you a property investment opportunity where you can write off interest deductions forever. Well, at least until they change the law again. The catch is that the tenant will need to be a registered community house provider or be temporary accommodation for people that have special needs (1). Quite clever actually, everyone wins, the government, tenants in need and the property investors.

 

Some residential tenants have been kicked to the kerb since the government bought in the abolishment of the 90-day tenancy termination rule in 2020, but this situation is now likely to change. Prior to this rule, unsociable, late paying or damage causing tenants could be evicted after 90 days in a periodic tenancy if the tenants were not what the landlord thought they were. Landlords are a lot more careful now when it comes to scrutinising the tenancy application. ‘Better to have the place empty than to be stuck with a bad tenant’ became the rule. Why the government couldn’t forecast this remains a mystery.

Finally, an incentivised (carrot) solution is proposed which seems, on the face of it, it may just work.

The bad

Like any explorer this intrepid and stalwart government will boldly go where no government has gone before. It has no choice; we are in unprecedented times. However, these moves must be tempered with knowledgeable advisors, so mistakes are limited and they don’t have to create new legislation to fix the legislation they put through six months ago. The government felt the sting of this lesson when it came to the kiwi build debacle (2) and then again with the after-effects of their changes in the tenancy Law as mentioned earlier in this blog.

 

Another more recent proposal is a clause to be inserted in commercial leases that will allow for a ‘fair rental’ to be paid when the tenant cannot fully operate their business in the premises. What followed was an uproar by some of the big players on the landlord side as they say they were not consulted (3). To be fair however, this clause is already in leases that were written up post the Canterbury earthquakes in 2012 and the proposed law change just puts this clause into leases written up prior to 2012. The big players have an issue with it as the effect of this clause could overwrite what the landlord and tenant had agreed to earlier.(4)

The main point here is that the govt is allowing submissions on proposals to be heard by a select committee, however many in the industry are wondering where they get the ideas for the proposals in the first place. Experts in the trade that have been on the street and at the coal face for decades have learnt the cause and effect of certain actions and have a sixth sense of what will work and won’t work. This has been proven as their businesses have had continued success over this time and continue to grow.

The creation of these new ideas behind closed doors without consultation with people in the industry is a reflection of good leadership. Putting together proposals without consultation and relying on submissions to the Select committee may speed things up, but it makes for flaky legislation with unexpected consequences.

The lucky

With the applied hit and miss approach taken by this government you would expect that odds are, amongst all the misses there will be a hit where a group will come off as the winner.

If the temptation of renting out to community housing tenants doesn’t appeal, then a 5 year brightline new-build with a 20-year interest deductibility scheme just might. If the investor sells within the twenty years, the purchaser also benefits as they will receive the balance of the 20-year interest write off (5).

As a result, some people listened to these changes and their eyes widened like they had won lotto. If it weren’t for Covid restrictions, you might bump into developers dancing in the street waltzing with their financiers and heading for the office of Mars Realty (6).

This move was certainly not expected and came as a nice sweetener, not only to property developers but all the suppliers to the new-build industry. The reasoning behind this policy is to entice property investors to create new property to correct the supply deprived market for tenants. If that’s not enough, the ‘new-build’ definition includes relocatable houses, modular builds and other buildings that engage in a change of use to residential accommodation.

So many changes, reversing, re-routing and redirection, we all wait with bated breath on what will come next!

1. https://images.weserv.nl/?url=https://taxpolicy.ird.govt.nz/-/media/project/ir/tp/publications/2021/2021-other-interestlimitation/2021-other-interest-limitation-2-properties-not-affectedpdf.pdf?modified=20210927235322&modified=20210927235322

2. https://images.weserv.nl/?url=https://www.newshub.co.nz/home/politics/2019/09/labour-s-flagship-policy-where-didkiwibuild-go-wrong.html

3. https://www.nzherald.co.nz/business/property-groups-say-they-have-given-320m-in-rentrelief-amid-plea-for-lease-law-tweak/IZGR75KHOSQPOLANUJWHCFRBQM/

4. https://images.weserv.nl/?url=https://www.russellmcveagh.com/insights/september-2021/rent-relief-for-no-access-in-anemergency-inserted-into-leases

5. https://images.weserv.nl/?url=https://taxpolicy.ird.govt.nz/-/media/project/ir/tp/publications/2021/2021-other-interestlimitation/2021-other-interest-limitation-4-exemptionspdf.pdf?modified=20210927235350&modified=20210927235350 6. https://images.weserv.nl/?url=https://www.marsrealty.co.nz/

 

Jeff Brill - Author of "The Sophisticated property Investor" 

老墨儿点评:

资本主义市场经济崇尚小政府,大市场,让经济在尽量宽松的环境下发展。但新西兰标榜民主国家,还要考虑人缩小贫富差距,所以不能完全放任市场经济的发展,一边刺激地产发展,解决住房短缺问题,一边提高OCR,试图给房价降温。


近期出台的抵押贷款政策,让地产投资者从新评估自己的资产和负债,利率的提高将会降低投资类房屋的现金流,甚至成为负值。但是从长期来看,贷款利率是波动的,但房价和租金是持续上涨的。


新西兰政府既希望解决住房紧缺问题,又不想房价上涨过快。出台了一些列政策,而我们看到的则是Kiwi Build计划的失败,全国房价的飞涨。到底是工党在下一盘经济的大棋,还是面对火爆的地产市场,他们捉襟见肘,黔驴技穷呢?


最近一项关于商业租赁的提案引起房东们的不满,提案称,允许租客在无法在该场所充分经营业务时,支付“公平租金”。


在过去一年多的时间,由于疫情对实体经济的冲击,大多数国家的房价都在暴涨,新西兰排到了世界第二,而制造业和金融业高度发达的经济体美国,也在去年房价上涨了10%以上。我们离恢复正常生活还需要几年时间没人能给出准确答案,但是这次公共卫生危机给经济带来的影响,可能5年都无法彻底恢复。


虽然政策如何变化不可预测,但从长远来看,地产依旧是明智而稳健的投资。