More investors cashing out of residential property

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PHOTO: A net 19 percent of investors intend to sell residential property over the next year and a net 2 percent intend to buy commercial property, a Tony Alexander survey shows. Photo credit: Getty Images.

More investors are cashing out of residential properties – and some intend to put their money into commercial buildings, recent data and commentary suggests.

An October Tony Alexander Portfolio Investment Survey shows of 1753 respondents, a net 19 percent intend to reduce their residential property investments over the next year. A net 2 percent intend to buy commercial property, Alexander confirmed.

Intention to buy shares was strongest, followed by managed funds, survey results showed. Along with commercial property – particularly industrial and warehousing property – crypto assets and precious metals were among the options considered by investors.

Asked which assets they intend to sell to free up cash, the highest percentage said residential property, followed by shares and savings accounts.

“I don’t expect the bulk of people moving out of residential will go into commercial – but some will,” Alexander told Newshub.

New Zealand Property Investors’ Federation executive officer, Sharon Cullwick told Newshub recent conversations with investors show a “definite shift” towards commercial and industrial investing.

While residential investors weren’t selling up completely, some were offloading older properties and “diversifying their portfolio”, effectively spreading their risk.

“There are advantages of having a new property compared to an older property…investors are moving into commercial properties and to new builds as well,” Cullwick said.

Removal of tax incentives and increased compliance is making residential property investment a lot more difficult, Erskine and Owen director and cofounder Alan Henderson told Newshub.

Under Government housing measures introduced on March 23, along with doubling of the bright-line test, residential properties purchased on or after March 27 (with the exception of new builds) aren’t eligible for interest deductions. For properties purchased before March 27, the claimable amount dropped to 75 percent from October 1, and will be phased out by April 2025.

Changes under the Tenancies Act, and Healthy Homes standards give landlords fewer options for ending tenancies – and there’s increased fines for non-compliance.