A prominent property expert says the Government's big changes to tax rules "won't make a jot of difference whatsoever" to making homes more affordable for Kiwis, nor make it easier for first-home buyers to get on the ladder.
But another says while it will still be difficult, over time it will free up some older properties for owner-occupiers.
The Government earlier this year said it would phase out the ability for landlords to reduce their tax liabilities by deducting interest paid on their mortgages, calling it a "loophole" which gave investors an unfair advantage over owner-occupiers, who can't. New builds would be exempt, the Government said, but took until this week - just days ahead of the new rules coming into effect - to reveal the finer details.
Landlords of any property which received its code compliance certificate after March 27 this year will still be eligible to deduct interest for up to 20 years from the time the property's code compliance certificate was issued, The Government revealed on Tuesday.
Economist Tony Alexander told The AM Show on Wednesday it would encourage investors to fund new builds, rather than competing with owner-occupiers to snap up existing properties.
"If you're going to keep your tax deduction of interest expenses for a new build, you're more inclined to purchase one of those or sign up for one off the plan rather than buy an existing house. That's exactly what the Government is aiming for - they want investors to help finance an increase in house supply and back away from buying properties which are already out there, and leave a few for first-home buyers."
But property commentator Ashley Church told Newshub it's a "madcap theory" that won't make any difference at all because investors no longer care about the weekly rental return - it's all about capital gains.
"Once upon a time investors used to buy properties for something called rental return - they bought property on the basis it would make enough money in rent to cover the cost of owning that property and they would make a small stipend off that investment. Those days are long-gone."
He said if the policy was going to have any impact it would have been seen after the announcement in March - but prices have continued to rise since then.
In the past, Church has claimed the housing crisis doesn't exist and paying a mortgage is easier now than it was 20 years ago, when the median price was less than a quarter of what it is now.
Alexander said one side effect could be to push owner-occupiers towards older homes, since new builds - anything made in the next 20 years, essentially - might attract higher bids from investors, knowing they will end up paying less tax on them.
"It definitely is pushing owner-occupiers generally to buying existing properties, of course of which there aren't that many listed for sale. It doesn't necessarily change the outlook all that much for prices... you're only boosting the housing stock 2 to 2.5 percent a year. It's going to take a long time before any increase in supply affects prices all that much."
As for rents, landlord groups have claimed the new rules will push them up. Alexander said historically, increases to landlords' costs haven't been linked to increased rents, which tend to consistently go up regardless of what's happening in the rest of the property market.
"The rents still end up largely being determined by the underlying ability of the tenant to pay."
The UK introduced similar tax deductibility rules in 2017, and there was no measurable effect on rents. Price growth stalled in the few years after.
