The final quarter of the 2016 tax year sees a different sort of climate for property investors than prevailed for the previous three quarters.

Interest rates keep falling in a fiercely competitive market for mortgage lending, which encourages refinancing to keep debt costs down, and buyers to bid property prices up across much of New Zealand. The Reserve Bank has hinted at cutting interest rates further due to concerns about the health of the global economy.

A tightening of loan-to-value ratios (LVRs) for investment properties in Auckland - requiring a minimum 70% owner equity - has contributed to a softening of house prices.

The corollary of the policy of discouraging investment in Auckland real estate has seen investor funds flow out into the regions, with house prices outside Auckland increasing sharply as a consequence.

A major factor in the softening of Auckland property prices has been changes in rules for foreign real estate investors, requiring them to apply for IRD numbers and disclose their overseas tax jurisdiction details to Inland Revenue in the process.

The policy on tax disclosure has created a big processing backlog of applications for IRD numbers and may have discouraged some potential foreign investors from entering the New Zealand property market.

China’s official crackdown on its citizens moving capital abroad above permitted sums is also a likely factor in dampening demand for property in New Zealand, particularly in Auckland.

New Zealand immigration policy under its Investor and Investor Plus categories permits immigrants with specified amounts of money to receive permanent residency in exchange for buying investment properties.

This policy undoubtedly contributed to inflation in the Auckland property market.

Enforcement action by China’s government will have choked off a lot of the foreign funds that would otherwise have been linked with Investor and Investor Plus immigrants, taking many cash-rich buyers out of the market.

Tax Return Time

March is of course time for property investors to get their own tax affairs in order for filing income returns with Inland Revenue.

Any major expenses in repairs and maintenance should usually be booked before the end of the tax year rather then left to carry over into the next one, especially if tax deductions are a significant part of the financial equation.

Reorganisation of how property investment related income and expenditure data are managed may be desirable, including tidying up how these are reported through banking arrangements.

For example, time management considerations could justify setting up separate bank accounts for each property investment as well as having a separate credit card for investment property expenses.

These arrangements can simplify extraction of financial data for tax reporting, rather than muddling everything together into omnibus accounts that might even include personal expenditure.

Time is not only money, it is also usefully applied to other activities - apart from inefficient collection of information necessary for tax accounting.

It could make sense to switch credit card suppliers if interest rate concessions, including zero interest rates on balances for set periods, will produce economic benefit within the context of property investment.

Better use of internet banking facilities, including using text or email alerts reporting when rents have been paid or defaulted on, could be handy to set up for tenant management purposes.