A South Auckland real estate agency is urging landlords to “beat the rush” and bring their investment properties to auction on July 2, the day after the bright-line rule change comes into effect.
Ray White AT Realty, which has offices in Manukau, Manurewa, Mangere and Mangere Bridge, has sent an email out to its database of customers advising them that the reduction of the bright-line period from 10 years to two years will “bring a surge of listings to the market”.
The changes to the bright-line rule, which take effect from July 1, are expected to bring tax relief to property investors and make it easier for them to sell.
Under the current bright-line rule, vendors who sell a property that isn’t their main residence within 10 years of initial purchase are liable to pay tax on any capital gain they make.
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In the lead-up to last year’s general election, National said it was reducing the bright-line period, as well as restoring interest deductibility for rental properties, to get more landlords back into the market.
In its email sent out last week, Ray White AT Realty explained the tax changes and outlined a timeline for taking a property to auction on July 2.
“We expect this change will bring a surge of listings to the market so we would like to give you the opportunity to beat the rush and share some key dates,” the email said.
The timeline outlined in the email was as follows:
– Staging and photos, May 30 or 31 (or earlier)
– Campaign start day, June 5
– Bright-line, July 1
– Auction, July 2 or 9
Kiwis who bought investment properties or holiday homes at market peak, when the cost of borrowing was cheap, are feeling the pinch now. Higher interest rates and the cost of upgrading properties to healthy homes standards have forced many investors to reassess their position.
Ray White AT Realty co-owner Tom Rawson said the agency was already fielding enquiries from stressed landlords, adding that there was nothing stopping those affected by the current tax rules from marketing their properties ahead of the change as long as any resulting sale and purchase agreements were signed after July 1.
He expected the tax change to lead to an increase in listings – which are already at high levels – so he was encouraging investors to start marketing their properties now.
The number of homes for sale is already at elevated levels. Photo / Fiona Goodall
Rawson said investors who purchased between 2021 and 2023 would probably make a loss if they sold now, but those who purchased between the end of 2019 and early 2021 could expect to make a profit on their property.
“There’s a two-year window where they perhaps would have had to wait a little bit longer, but now they can sell earlier,” he said.
Rawson said the reasons for selling would be varied: some owners might be hurting from higher interest rates, some might have decided they were unlikely to make any further gains from their investment, others might want to redirect their cash to paying down other debts.
“I think we will see a small spike in listing activity, which just helps buyers out there, giving them more opportunities to buy. I think the investment properties that come to market will be pretty sharply priced so that might ruffle a few feathers.”
Property Brokers general manager of property management David Faulkner said the only people who were going to sell a property at the moment were those who had to, including those who were struggling financially or who were going through a relationship break-up.
He expected cashed-up investors to re-enter the market. “I think there will be some great investment buys over the next four to five months because I know a lot of people are coming off low interest rates onto higher interest rates.”
Valocity senior research analyst Wayne Shum says many investors are likely to wait for lower interest rates and improved market conditions. Photo / Fiona / Goodall
Faulkner did not think the number of investment properties that come to market as a result of the bright-line rule change would be significant enough to make any difference to the rental market, which was currently sitting at a good level.
Valocity senior research analyst Wayne Shum said the return of interest deductibility and recent changes to tenancy laws would encourage many investors to hold on.
He said there was only a small pocket of stressed investors who would benefit from the bright-line change. He was not expecting another big lift in listings, arguing that those who could afford to hold on would likely do so until interest rates were lower and the market picked up.
QV operations manager James Wilson agreed that the number of investors selling up wouldn’t be enough to make a huge dent on the property market.
“For the most, the reversal of bright-line back to what it was. I think most investors would have been buying for long-term rental income and it’s unlikely we will see a massive mindset shift.”
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