Ask any property investor what they’re focus is right now and you’ll probably get a reply along the lines of: “cashflow and profitability”. Many might say ‘no change there’ but there has been shift in investment strategy for many landlords.
Once upon a time not that long ago, purchasing negative equity properties was a purposeful strategy that was encouraged by experts as it worked well tax-wise, mostly through reducing personal tax obligations, and they were also keen on the capital gain potential. However with the Government’s changes to rules and regulations, investors in the know have dropped it altogether.
Fast forward to 2018 and the talk on PropertyTalk is what’s squeezing the life out of the rental market?
As aforementioned the new Government’s tweaking of the rules and regulations, has resulted in many landlords caught in the headlights; so frightened are some they’ve packed up and fled the market.
Plus ‘non-doer upper’ buy and hold investors don’t usually buy in the boom phase of the property cycle and New Zealand has spent a long time in this phase this time around.
Then there’s the Airbnb threat too. Property investors are asking the question: Is it really more profitable to swap over to Airbnb?
While there are many threats to the rental market, long term buy and hold investors remain resolute. Their properties are with professionally run property management firms and while there are more challenges than usual they’re manageable. Yes rents are going up to cover the extra costs for compliance with the new regulations however as one investor pointed out the grass is not always greener; insofar as his experience with Airbnb proved less profitable and more investors will experience this too and return their properties to the rental market. After all cashflow and profitability rule.