The New Labour Government & Its Impact on The Property Market: Part 2

Opteon Country Director – NZ, Derek Smith with Part 2 of his look at potential new government policy and its impact on the property market.

This time out, it’s policies affecting tenant rights and overseas investors.

Tenant Rights

Tenant rights are to be further strengthened by the introduction of a series of new policies designed to make renting a more attractive longer-term alternative to home ownership including:

• Increase 42-day notice periods to 90 days. This means a landlord must give 90 days’ notice to terminate a periodic tenancy should they wish to sell or move back into the property.
• Abolish ‘no-cause’ termination of tenancies. Currently a periodic tenancy can be terminated for no given reason with a 90-day notice.
• Rental increases to be limited to once per year. Currently once per 6 months
• Rental increases to follow a formula specified in the rental agreement
• Ban letting fees. Letting is an essential service usually provided by an agency. It is likely this will be passed on to the owner to pay as it is overseas
• Healthy Homes Bill ensuring rentals are warm and healthy to live in. Government to subsidize insulation upgrades and heating up to $2000

The effect of this policy will be minor on the overall market. It will further shore up the tenant’s position which is already heavily favoured by the current Residential Tenancies Act. Some smaller landlords fed up with being a landlord may take their capital gains and exit the market.

Ban on Overeas Speculators

Officially known as the Overseas Investment Amendment Bill, this simply extends the definition of ‘sensitive land’ to include residential. The legislation will mean that foreign buyers will not be able to buy residential property unless they are either increasing the number of residences and then selling, or converting the land to another use and are able to show that this will have wider benefits to the country. New Zealand and Australian citizens will be exempt from the regime, irrespective of where they live.

This will have little effect on the market as residential speculation from onshore and offshore parties has largely vanished in the last 12 months. The horse has well and truly bolted. This is seen as more of a political move than anything else.

More to Come

Labour Governments typically meddle more than National and we expect more of this type of policy to be released throughout the next few years. A more bloated Government means boom times ahead for both residential and commercial property sectors in the Wellington area which has suffered over the last decade of the leaner National governments reign. Expect new ministries with new offices and state employees to pop up around the city driving all markets higher.