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What is the outlook for the New Zealand property investors in 2019?

21 December 2018

It’s been a big year for property investors, new government regulations, bans, new bills. No doubt a lot has happened! Now it’s time to plan for another busy year with plenty of changes ahead.

Property reports from neighbouring Australian market are causing fears among NZ investors. Uncertainty about new government regulations and tax changes are also contributing to the investor confidence to be at all times low.

So what are some of the changes that have just come into effect or about to be introduced in 2019 that will affect you as a property investor?

Phase two of The Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) Act has come into force on Jan 1, 2019

Under the AML Act rules real estate agents and lawyers will have to verify the source of funds for property buyers, and further confirming that the buyer is a NZ resident and not a foreign buyer. This change is likely to reduce foreign investment into NZ property market significantly.

New rules are also likely to create more paperwork, extend processing times and make the process of buying a property more cumbersome. But on the other hand, the new act should help maintain reasonable house prices (backed by historically low interest rates)

Insulation deadline

Changes made to the Residential Tenancies Act (RTA) in 2016 mean all rental properties need to have ceiling and underfloor insulation installed. From 1 July 2019, it will be compulsory for all rental properties to meet the new minimum insulation requirements.

All landlords should check that the insulation at their properties meets the standards and take action if necessary before the new requirements become compulsory.

What happens if I don’t comply?
Failure to meet the insulation requirements is an unlawful act under the Residential Tenancies Act. Landlords may face fines of up to $4,000 for failure to comply.

Check if you need to take action to upgrade or install new insulation before 1 July 2019 here

Letting fees ban

The letting fee ban was passed by the government in November and has officially come into effect on Dec 12th last year.

There is no doubt that NZ landlords will feel this extra burden as a lot of real estate agents are choosing not to absorb the fees. Property management companies have started to respond to this change in various ways from passing letting fees to their customers and increasing their management fees to introducing ongoing monthly “admin fees” and flat rate “tenancy fees”.

It is likely that the tenants may still be the ones paying more in the end, as there is a high likelihood that new charges will ultimately be passed on to them in the form of higher rents.

Bright-line test

The bright-line test will now catch all residential property investors who sell within ten years. We doubt there would be many investors with short-term resale intentions. It’s also important to remember that even if the sale is outside of a ten-year window, the IRD still has the power to tax any gains.

When a property has been bought with the firm intention of resale you'll have to pay tax on any profit from the sale; the intention to sell does not need to be the main reason for buying the property - it could be one of many reasons for buying.

The bright-line test for new builds is kept at five years.

The Residential Tenancies Act review and Healthy Homes reform

The submission has now been closed, and the officials in the new Ministry of Housing and Urban Development are analysing the feedback and preparing their report for Government to consider. Draft legislation is likely to be presented later this year. With so many potentially significant changes to the RTA, it’s unlikely to be a speedy process.

Increased council rates and compliance

Short-term and holidays rentals always looked like a lucrative investment option. In the last year councils across the country have started introducing increased rates on short-term rentals. Queenstown was the first to introduce commercial rates on holiday accommodation providers, with Rotorua council shortly followed suit. Other councils of Tauranga, Christchurch and Westland likely to propose similar rules.

The industry is still growing despite this, with major cities reaching a record number of houses available for short terms lets.

If you’re considering converting your rental property into a short-term holiday rental, it is essential to understand local council rules, rates and taxes and factor them into your decision.

Relaxation of LVR restrictions

From 1st January the banks can now lend to more people wishing to borrow in excess of 80% of their owner-occupied property’s value, and landlords may be able to borrow up to 70% of the value of an investment property.

This change should encourage strong interest from both first home buyers and property investors alike.


From 1 April 2019 losses on rental property will be ring-fenced. A property investor will no longer be able to offset their losses against other sources of income such as salary and wages or business income.

Investors owning more than one rental property would still be able to offset deductions from one residential property against income from other properties.

The ring-fencing policy is likely to affect first-time investors mostly. They are typically the ones to have high debt and most vulnerable to losses during early years of ownership. And so they usually make up the loss from their day-job.

Capital Gains Tax

The Tax Working Group is preparing their final submission to the government with a recommendation of whether or not to introduce a capital gains tax, and in what form. This submission is due in February 2019

Numerous opportunities in the prop tech space will continue to emerge in 2019.

Both landlords and tenants stand to benefit from the advances in technologies in property management, advertising rentals, portfolio analysis, financial reporting and much more.

It’s just impossible to gauge the impacts of all the recent and upcoming changes, so in the end, it’s important to remember that it’s not all negative. To date, the interest rates remain at all times low, vacancy rates are low, overseas student market remains high, and rents and yields are still stable. Brace yourself for another year ahead and let’s see how it all plays out.

The information contained in this article is exclusively for promotional purposes. It does not in any way constitute legal advice and should not be relied upon as the basis for any legal action or contractual dealings. The information is not, and does not attempt to be, a comprehensive account of the relevant law in New Zealand. If you require legal advice you should seek independent legal counsel. does not accept any liability that may arise from the use of this information.

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