A better investment market

“Reinstatement of interest deductibility starting from the new tax year on 1 April brings property investors back in line with every other business in the country, where interest costs are a legitimate deductible expense," Tim Horsbrugh, New Zealand Property Investors Federation (NZPIF) executive committee member says.

“In the existing economic climate, renting has emerged as a more cost-effective alternative to property ownership and reinstatement of interest deductibility is of crucial signifience to the rental sector.

Corelogic statistics show the average family allocates 49% of its income to servicing a mortgage, contrasted with 22% spent on rental payments.

“Many rental property owners find themselves financially stretched, as they try to figure out how to supplement their mortgage payments to keep tenants living in their homes,” Horsbrugh says.

“The policy is fair. It is not a 'tax cut' for property investors; rather, it ensures that property investors contribute their fair share of taxes on profits. It will also have positive implications renters, as it mitigates the upward pressure on rental prices.

A more balanced and sustainable rental market will result, he says. "By helping to alleviate the financial strain on property owners, a more conducive environment is created for affordable housing and stability for tenants."

The federation says it views these developments as a pivotal step to encourage greater participation and investment in the rental sector, leading to improved housing availability and affordability for tenants.

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