The Upcoming Election: The Impact It Could Have On Property Prices And What It Means For You…

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It's that time again... 

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The political campaign trails are rife with verbal shot-firing as unwarranted propaganda begins to infiltrate our social media feeds, billboards and radio ads as marketers play a bigger role in swaying us from pillar to party. It's that recurring time when glorious promises are cast in stone, only to wind up as future fickle disappointments. Luckily, we have the Rugby World Cup to semi-distract us from the circus that is the pre-election pomp. 

Here at Rosefern we don't like to get involved too heavily in the political debates - but we work in property so we must be aware and keep our fingers on the proverbial pulse, it would be remiss not to. 

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So, to help you keep up to date too, we've written a short but hopefully informative blog post on the potential impact of the election on property prices. 

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What it all could mean for your property prices (and property prices in general)

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If you're not an expert in property investing you might assume that a change of government won't impact your investment property. However, this election will likely impact property prices as a new government may come in with different policies. If you're looking to grow your property portfolio it's more important than ever to know how the government is likely to impact property in New Zealand. We've written this blog to give you a bit of an overview of what the parties are proposing and why it may impact your property investment journey.

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Let's break it down into two main questions that you should be asking;

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1. What are the leading political parties proposing? 

2. How will the election affect my property prices? 

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What are the leading political parties proposing? 

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Taking a deeper look into the leading parties and their proposed policies you'll see our artisticly colour-coded infographic on the 5 parties policies we'd like to take a look into. As you can see, we have bolded some of the policies you property people may be interested in reading...

How will the election affect my property prices? 

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Well, a lot of people are sitting on the sidelines right now, waiting for the big event to occur before making their next property investment. We take a look at two of the biggest 'property bargaining chips' and show you how it could affect property prices;

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Interest Deductibility:

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What it is? Interest deductibility allows property investors to deduct the interest paid on loans used to purchase investment properties from their taxable income.

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Potential Impact on Property Prices:

• Parties Proposing to Restore or Maintain Interest Deductibility: National and ACT have indicated policies that favor the restoration or continuation of interest deductibility. If these parties gain influence, it will likely incentivise action in the property investment sector, potentially driving up demand and property prices. This is because the cost of owning becomes cheaper for investors. This will likely re-stimulate the stagnating construction sector too. 
• Parties Proposing to Restrict or Remove Interest Deductibility: Labour will be standing firm on the policy it introduced and while this could deter property investment activity, it will push investors into the new home bracket that is exempt from interest deductibility. This will likely see the first home buyer segment of the market become more active and the sales of existing homes continue as their affordability to investors dwindle. 

Bright-line Test:

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What it is? The bright-line test determines how long a property must be held before it can be sold without incurring capital gains tax.

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Potential Impact on Property Prices:

• Parties Proposing to Extend the Bright-line Test: Labour previously extended the Bright-line test to deter property speculation. They will be remaining with this stance and encouraging the purchase of new build properties as they are exempt from the 10 year existing property brightline. The 5 year brightline and interest deductibility on new builds has kept investor activity in the new home market steady over the past year. We expect little to no movement in property prices should this be kept as it is. 
• Parties Proposing to Reduce or Abolish the Bright-line Test: ACT has indicated a policy to abolish the bright-line test entirely, while National suggests reducing its duration to just 2 years. These stances would potentially drive up demand and property prices as market confidence would shift and property ownership becomes a more favorable asset class to create wealth. We would expect to see a rise in the number of investors buying older homes once more but with the extra barrier of Healthy Homes Act to comply with being a small but manageable hurdle for most. 

It's quite obvious that political stability and investor confidence play a significant role in market sentiment which in turn, affects property prices. However, once the election results are clear and a stable government is finally formed, investor confidence is likely to be restored - whichever way the result goes. We believe we'll see more action return to the market as investors will be able to map their financial futures more clearly, even if the policies aren't in their favour, Kiwi's still love property and see it as a vehicle for their future financial freedom. 

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Depending on the colour of the badges will depend on the level of activity we see - in our humble opinion. 

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Red flags: stable 

Blue flags: wee pick-up

A Luxton-Seymour combo would likely light a fire under the property market.

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But only time will tell!

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Finishing on a more important note…England for the World Cup! Sorry Kiwi friends!

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