National will offer a mixed bag of challenges and opportunities

Clive Fernandes

Clive Fernandes

Auckland, November 8, 2023

What does the change in government mean for investors?

As New Zealand braces itself for a possible change in governance with a National-led coalition, investors are keeping a keen eye on proposed policy shifts. 

The National Party has already outlined several changes that could deeply affect the investment landscape, particularly in property and financial markets. Here is a breakdown of these policies and their implications for investors.

Mortgage Interest Deductibility

One of the most talked-about changes in the pipeline is the proposed reinstatement of mortgage interest deductibility for all properties. Under the new government, investors could start deducting 50% of their mortgage interest this tax year, with the rate increasing incrementally to 100% by 2026-2027. While this move would benefit existing property investors by lowering their taxable income, it is essential to note that high mortgage rates coupled with low yields could still result in running losses for the average investment.

Foreign Buyer Regulations

A significant relaxation of foreign buyer restrictions is also on the cards. Under the new policy, properties priced at $2 million or above could be open to foreign investors, albeit with a 15% tax imposed. The National Party is optimistic that this move will generate an annual tax revenue of approximately $740 million.

Brightline Test

Another major change to watch out for is the reduction of the Brightline Test duration from five or ten years to a mere two years. Critics argue this might induce market volatility by discouraging long-term property investment and increasing prices.

Economic Indicators

Aside from these proposed policy shifts, economic indicators show patterns investors should be cautious about. Kiwibank recently forecasted a 1.9% increase in consumer prices this quarter. Similarly, the Reserve Bank expects a 2.1% quarterly rise in consumer prices. Inflationary pressures like these could impact investment yields across sectors.

KiwiSaver Policy Changes

In a move aimed at increasing choice and reducing fees, the National Party also wants to allow KiwiSavers to invest in more than one provider. While this may sound advantageous, there are opposing views.

As CEO of a KiwiSaver advisory firm, my own opinion is that adding the option to invest in multiple providers will increase complexity and could drive up fees due to the added administrative burden on KiwiSaver providers.

KiwiSaver is a crucial asset for many Kiwis, and it is imperative they make the right choices. Tools like the free National Capital KiwiSaver HealthCheck can assist investors in ensuring they are in the appropriate KiwiSaver fund and strategy.

A likely change to a National-led government offers investors a mixed bag of opportunities and challenges. From policy changes affecting property investment to fluctuating economic indicators, understanding these shifts will be crucial for savvy investment in the coming years.

As the country prepares for this significant transition, investors should keep abreast of these changes and plan their strategies accordingly.

Clive Fernandes is Director of National Capital, a financial advisory firm that provides personalised investment advice, primarily focusing on KiwiSaver.

Disclaimer: The views expressed in this article are the author’s views. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.

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