Conditions are improving for property investors thanks to recent OCR cuts and changes to the Residential Tenancies Act. These shifts create an environment of increased opportunity, financial feasibility, and greater confidence in the market.
OCR Cuts: A Welcome Boost for Property Investors
The Reserve Bank of New Zealand’s decision to cut the Official Cash Rate (OCR) by 50 basis points to 3.75% signals a more favourable borrowing environment. Lower interest rates mean reduced mortgage repayments, making property investment more attractive for new, existing and returning investors.
Upcoming Removal of Interest Deductibility Restrictions
As of 1 April 2024, property investors can claim a deduction for 80% of the interest on funds borrowed for residential property investments; then from 1 April 2025, investors can claim 100% of the interest deduction instead of 80%.
Residential Tenancies Act Changes: A Shift in Investor Favor
Recent adjustments to tenancy laws have further enhanced the investment landscape. The government’s latest changes are designed to restore a more balanced approach between tenant rights and investor interests. The most beneficial changes for landlords are around tenancy terminations:
Periodic Tenancies
- Landlords can terminate a periodic tenancy without providing a specific reason by giving 90 days’ notice.
- Landlords can terminate a periodic tenancy without providing a specific reason by giving 90 days’ notice.
- Tenants can end a periodic tenancy with 21 days’ notice (it was 28 days’ notice).
- A 42-day notice is permissible in the following circumstances:
– The owner or their family member requires the property as their principal residence within 90 days of the tenancy ending and will reside there for at least 90 days.
– The landlord’s employee or contractor needs the property for occupation, provided this use is stated in the current tenancy agreement.
– An unconditional agreement for the sale of the property requires vacant possession.
Fixed-Term Tenancies
- Ending a fixed-term tenancy on the expiry date will be easier, but action is still required if you want the tenancy to end.
- Fixed-term tenancies will automatically roll over into periodic tenancies unless:
- The landlord or tenant gives notice to end the tenancy between 90 and 21 days before the fixed term ends. No specific reason is needed for this notice.
1. The landlord or tenant gives notice to end the tenancy between 90 and 21 days before the fixed term ends. No specific reason is needed for this notice.
2. Both the tenant and landlord mutually agree on an alternative arrangement. - The current law applies to tenancies that started on or after 11 February 2021 and expire on or before 30 April 2025. However, the new regulations will take effect for fixed-term tenancies expiring on or after 1 May 2025.
Healthy Homes Standards Compliance
With the Healthy Homes standards requiring compliance for all rental properties by 1 July 2025, most investors have already completed the necessary work or allocated funds to ensure compliance in the near future. For investors looking to enter or expand within the rental market, many properties currently in use as rentals are likely to meet these requirements already. When considering a rental property purchase, verifying its Healthy Homes compliance status is essential to avoid unexpected costs when securing your first tenancy.
The Property Investment Market in 2025: A Stronger Outlook
With these favourable conditions, we expect more investors to enter—or re-enter—the market. The combination of lower interest rates and investor-friendly tenancy laws is already sparking renewed confidence, with increased inquiries and activity in the rental investment market.
At Aspire, we welcomed 108 new customers in Q4 of 2024 and 50 in the first six weeks of this year, so we can see the signs of renewed interest in the rental property market. We now proudly manage over 1,000 rental properties across Auckland, Hamilton, and Tauranga. We specialise in helping property investors navigate these changes in the market. Whether you’re looking to maximise your rental returns or expand your portfolio, our expert property management services help your portfolio to perform at its best.
Interested in making the most of these changes? Contact us today to discuss how we can help maximise your property investment potential.
