NICK COWDY / Residential Sales Consultant, Principal Agent

The New Zealand government’s decision to reinstate mortgage interest deductibility for residential investment properties has sparked a significant conversation about the future of the housing market and affordability. Associate Finance Minister David Seymour’s announcement underscores a policy shift aimed at alleviating the financial pressures on landlords and renters, amidst rising mortgage interest rates and a challenging cost-of-living crisis.

From April 1, 2024, property investors will be entitled to claim 80% of their mortgage interest expenses, increasing to 100% by April 1, 2025. This move reverses the 2021 Labour Government’s phase-out of interest deductibility, a policy initially designed to cool the housing market and provide an edge to first-time homebuyers.

Seymour champions the restoration as a measure to “ease pressure on rents and simplify the tax code,” addressing the double burden of rising mortgage rates and restrictive deductibility that has contributed to New Zealand’s high rental costs. The policy is seen as a step towards creating a more attractive investment landscape, potentially increasing the rental property pool.

The policy, however, has not been without its detractors. Labour’s finance spokesperson, Barbara Edmonds, has criticised the government for favouring wealthy investors over first-time homebuyers and renters.

Edmonds’s critique extends to the broader implications of the policy, suggesting it represents a shift in governmental priorities away from social welfare initiatives towards the interests of “mega landlords.” She argues that the policy does not guarantee that the savings landlords experience will be passed on to tenants, potentially exacerbating the affordability crisis rather than alleviating it.

While the government maintains that the policy will benefit the housing market by slowing rent increases, experts and opposition voices caution against expecting a decrease in rental prices. The debate underscores the complex interplay between tax policy, housing affordability, and market dynamics.

As New Zealand navigates these policy changes, the conversation continues about the best path forward to ensure a balanced, fair, and sustainable housing market. The government’s decision marks a significant pivot in strategy, with long-term implications for investors, renters, and first-time homebuyers alike.

Interest Deductibility