Investors appear to have hit pause on new purchases as they come to terms with the Government’s housing shake-up.
Last week the Government announced that it was extending the bright line test on investment purchases to 10 years and changing the tax rules around interest costs.
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Tom Rawson, director of Ray White Manukau, in South Auckland, where investors have been highly active in the last six months, said the last time there was so much uncertainty in the market was last year, when the Government put the country into an alert level 4 lockdown to combat Covid-19.
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Investors, he said, would be hitting pause while they assessed the ramifications of the changes. As of last week, buyers will be unable to deduct interest costs on mortgages for new investment property purchases, but there will also be gradual reduction in the ability of those already owning investment properties to deduct such expense over the next four years.
“First home buyers should make the most of the opportunity,” Rawson said, adding that there would be less investor competition in the market “and there are still houses to buy”.
One such house was 10B Toatoa Place, in Mangere Bridge, which sold to a young family on Sunday for just under $1 million.
The new build four-bedroom home, which was listed with Ray White agents Shaan Joshi and Jared Hards, had attracted a lot of first home buyer interest.
Rawson said only one investor was on the phone during the auction and had stopped bidding at early $900,000.
“I don’t think they [investors] have grasped the rules yet because in theory they should be all over new builds.”
Harcourts Papatoetoe owner Harsimran Singh said he had noticed a change in the market this weekend.
“People have sat with the news, taken a step back and realised it is what it is,” he said.
While long-term investors would likely take the changes in their stride, speculators would pull back.
Those who normally buy to resell within four to six weeks are taking a wait and see approach, Singh said.
In Gisborne, another housing market where investor activity had contributed to a rapid rise in house values, there was little sign the Government’s housing fixes was impacting buyer decisions.
Bayleys agent Kerry Low said not much has changed in the first week since the announcement.
She had ten and seven people show up to two open homes with only one investor viewing a rented property on the market.
“In three to four weeks' time it could be different, but at the moment it’s work as usual,” she said.
