New Zealand Property Investors' Federation

The NZPIF is the umbrella body for 17 local Property Investors' Associations throughout New Zealand.

(027) 357 9243


On the 23 March 2021, the New Zealand Government announced new policies with the aim of tilting the balance of the housing market towards first-home buyers. According to the Prime Minister, these would make residential property investment "less lucrative" for speculators.

The Government media release stated that the key policy changes were:

  • $3.8b for accelerating housing supply
  • First Home Grant caps lifted, as well as higher house price caps
  • Bright-line test doubled from 5 to 10 years
  • Interest deductibility loopholes scrapped
  • The offer of a $2b loan to Kāinga Ora to scale up land acquisition

Revenue Minister David Parker said interest deductibility favours debt-driven residential property investment over more fully taxed and more productive investments. "To reduce investor demand for these investments, the Government will remove the advantage investors have over first home buyers."

. Tax experts have since clarified that the tax rule allowing the mortgage interest of a rental property owner to be a tax deduction was not a loophole, but standard practice allowed to all businesses

It was later revealed that Inland Revenue and Treasury officials had advised Government not to prevent rental property providers from being able to deduct mortgage interest costs.

The policy impact statements from both Government departments showed that no analysis on the consequences of this major policy change has been completed.

In order to help fill the information gap and provide some insight into what may happen due to these policy changes, the NZ Property Investors Federation (NZPIF) conducted a survey between 29 March and 2 April 2021.



Property Investors Association members from around New Zealand were invited to participate through an email sent to them on 29 March and a reminder email was sent two days later on 31 March 2021.

A link to the survey was also posted onto the NZPIF Facebook page and onto the Property Investors Chat Group page on Facebook. This was done to obtain participants who were not NZPIF members and to ensure the findings from the survey were more representative.

The survey was conducted through Survey Monkey and 1,719 respondents participated. Seventy three percent of respondents were members of Property Investor Associations (PIAs).

Survey results


The survey found that respondents owned an average of 5.3 rentals each, with an average rental property value of $609,407.

Most respondents, 70.3%, do not charge tenants market level rental prices. Forty percent charged rental prices between $5 and $25 under market value, while 30% of the rental prices were more than $25 pw under market value. This shows that there is room for rental prices to increase even without market levels increasing.

Respondents paid an average mortgage interest rate of 3.42%. Just over 90% of respondents had debt on their rental property. The average increase in tax from removing mortgage interest deductibility was $15,083 per affected rental provider and $3,140 per rental property.

If this figure is representative of the total rental property owning population, then the cost of the extra tax could be $1.5 billion.

To cope with this tax increase, the majority of respondents, 76.8%, will either "increase" or "probably increase" rental prices. A further 8.9% "might increase" rental prices.

Approximately 21% of respondents would consider selling either some or all of their rental properties. About half of these would sell all of their rentals, with the other half considering selling 34% of their portfolios

It appears from these results that the Government's new tax laws will affect the large majority of rental property owners, increasing costs by around $3,000 per rental property. Respondents' primary response will be to increase rental prices which seems feasible given that 70% are currently below market levels.

Financial position

The survey showed that respondents owned an average 5.3 rental properties worth an average $609,868. This figure may be higher due to blocks of flats.

Removing twenty-one respondents with properties worth more than an average $2m reduces the average rental property value to $570,577.

Number rentals



Net value

Value per Property

Debt per rental



$ 3,232,300

$ 1,194,600

$ 2,037,700

$ 609,868

$ 225,396


Results show that there is a high level of equity, 63%, in the rental properties owned. This may be because most respondents are members of Property Investors Associations – see next table.

The following table shows that PIA members have a higher average number of rentals (5.3) compared to non-members (2.9). PIA members' equity is also higher than non-members, at 67.4% compared to 53.4% for non-members.

Number rentals



Net value

Value per rental

Debt per rental


PIA members


$ 3,690,000

$ 1,202,000

$ 2,488,000

$ 683,333

$ 222,592


Non PIA members


$ 1,895,000

$ 883,000

$ 1,012,000

$ 653,448

$ 304,482



The number of years investing also has a large effect on the level of equity and on the number of rentals and net worth.

Unsurprisingly, those who have been investing for longer have a larger number of rental properties, a higher net value and higher equity.

More experienced rental property owners have higher total debt levels. This means that overall they will be more affected by having the deductibility of mortgage interest removed.

However, this is offset somewhat by having a lower debt level per rental property. This lower debt level per property means people who have invested for longer have a lower cost per property and are therefore less likely to increase rents than newer investors. This is because the extra cost can be spread over a larger number of rental properties.

Years investing

Number rentals



Net value

Value per rental

Debt per rental


0 to 2 years


$ 964,450

$ 673,340

$ 291,110

$ 567,324

$ 396,082


3 to 5 years


$ 1,754,600

$ 1,103,500

$ 651,100

$ 584,867

$ 367,833


6 to 10 years


$ 2,533,100

$ 1,087,500

$ 1,445,600

$ 666,605

$ 286,184


11 to 20 years


$ 3,723,100

$ 1,356,800

$ 2,366,300

$ 600,500

$ 218,839


20+ years


$ 5,642,900

$ 1,446,700

$ 4,196,200

$ 581,742

$ 149,144



Rental prices

The survey revealed that a large proportion of rental property providers (70.3%) do not charge a full market rental price. This is likely a result of rewarding good tenants with a reduced weekly rental price.

This calls into question a commonly held belief that rental property owners will always charge whatever they can get for a rental property. It also demonstrates that rental providers are not as greedy as often portrayed by some opinion writers and online commentators.

Market rent level

$5 to $25 pw below

More than $25 pw below




It appears that people who own and manage their own rental properties are more likely to have lower rental prices than those who employ a property manager to manage their properties.

Only 23.7% of owner managers have their rents at market levels while 39.5% of rentals managed by full time employed property managers have rents at market levels.

36.3% of owner managers are also more likely to have rentals prices more than $25pw lower than market levels, whereas only 19.7% of rentals managed by full time employed property managers will have rental prices at this level.

Market rent level

$5 to $25 pw below

More than $25 pw below





Employ P/Mngr





Although not completely consistent, there is also a tendency for newer rental property owners to have more rents at market level compared to rents charged by more experienced investors.

Market rent level

$5 to $25 pw below

More than $25 pw below


0 to 2 years





3 to 5 years





6 to 10 years





11 to 20 years





20+ years





Bright line extension to 10 years

Previously the tax applied if the purchaser bought a property intending to sell it for a profit. This lead to some people claiming they were buying a property to rent out and then changing their minds and selling it, thereby avoiding tax.

Inland Revenue was given a high level of funds to find and tax these people who were fraudulently claiming they were rental property owners rather than traders/speculators. However this was not sufficient to stop the practice so the Bright Line test was introduced by a National Government in 2015 as a way to clarify who should pay tax when selling a property.

The NZPIF understood the reasoning behind the move but recognised that it could have an effect on genuine rental property owners who, through reasons beyond their control, were forced to sell before owning the property for two years. We recommended that a hardship clause be included in the new law so that owners with a genuine issue would not be adversely affected by the law. This recommendation was not taken up.

Despite our concerns, the vast majority of rental property owners have been holding their properties for more than two years. However, in 2018, the Labour Government extended the Bright Line Test to five years and in the latest changes extended it once again to 10 years from 27 March 2021.

This has changed the effect of the Bright Line Test from capturing the activities of Traders/Speculators to being a partial capital gains tax on rental property providers.

The new 10-year rule increases risk for a rental property owner in the event of a serious life event, such as a marriage breakup, job loss, Illness or death, meaning the property must be sold.

While respondents to the survey are concerned by the rule change, it only affected future rental property purchases, reducing the likelihood of these future purchases rather than affecting existing rental properties.

A total of 58% respondents will not be affected by the rule change or at least don't expect to be.

Just over a quarter of respondents (25.6%) would have bought another rental property but won't now because of the Bright Line test.

Bright Line

No effect

Won't buy more


Increase rent?


NZPIF is a Not-For-profit Organisation and does not provide financial, legal, tax, or accounting advice. Information provided by, on behalf of, or under the auspices of NZPIF is necessarily of a general nature. NZPIF and its officers and agents have no responsibility or liability of any kind to any person for such information. NZPIF recommends you consult appropriate professional advisors before making any investment decision or entering into any investment or transaction.

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