Property investors probably consider themselves to have mixed blessings as a result of the pandemic. On the one hand, the immediacy of losses to stocks and equities and KiwiSaver funds has us relieved to be in property. On the other hand, the property sector is not, and will not, be immune to the fallout we will experience as the impacts on the economy become more widely felt.

The income-generating properties we hold are not liquid assets in times when confidence dries up and buyers become scarce.

For many investors, the focus will be on managing struggling tenants through the crisis and trying to ensure that rent payments, at some level, can be maintained, particularly as restrictions to terminate tenancies for rent arrears come in.

It is clear that the Government sees property owners, both commercial and residential, to be the providers of a cushion for their tenants, given the absence of any direct support from government to assist when tenants can’t meet rent obligations.

The banks’ response also has been less than concessionary thus far. Mortgage holidays are the concession you make when you aren’t actually making any concession at all. Interest charges are still going on in full – leading to ever greater interest costs over the term of the loan, and repayment terms are not necessarily being reduced, just pushing out the pain investors will experience if they need repayment holidays.

Whilst many property owners have responded quickly and with compassion to reduce rents and even suspend rent requirements from tenants in difficulty, the banks have offered no actual concessions on interest.

However, the Government’s loss carry back scheme does apply to all business, so can equally be applied to the property sector as it can to the business sector.

When considering the loss carry back scheme though, investors will need to determine whether in fact a loss in 2020 or 2021 will actually eventuate. A reduction in profitability is not the same as a loss and losses on property sales will not be deductible for most.

Reducing tax payments on the strength of predicted losses that don’t actually eventuate will still leave investors exposed to penalties and interest, despite the “flexibility” we are told IRD will exercise.

The key message from the IRD has been that when applying for penalty and interest remission due to the impact of Covid, the benefit of doubt will go to the taxpayer, but that taxpayers will still be expected to pay taxes due and stick to instalment arrangements. How taxpayers in the worst effected sectors can be expected to predict their ability to meet instalment arrangements is not clear though.

How the loss carry back scheme will align with the introduction of loss ring-fencing rules – that were designed specifically to strip away assistance investors enjoyed from the tax system in nztimes of loss – has not been clarified. A move now to scrap the loss ringfencing rules would be welcomed by investors but the chances of this seem slim.

Investors will also enjoy the benefits of lower interest rates where they are on floating facilities or fixed facilities that expire during the low interest rate climate. Investors seeking to estimate their positions should do so with reference to expiry dates on current fixed rate facilities.

Calls to kick start the economy by offering visas to wealthy foreigners who may now be more focused than ever on New Zealand being a safe haven, at least from a health perspective, are interesting. A simpler approach may be just to lift the foreign buyer ban and signal that we are open for business again to foreign investors.

This may at least provide some additional exit options for investors finding themselves just too stretched if, for example, the loss of an income leaves them no choice but to sell.

Whilst it’s hard to remain positive when the pain of recession has been brought on us so abruptly, we are lucky enough to live in a sparsely populated island, with attributes we all know will extend beyond the pandemic. We should not forget that in many respects, we are residents of the best country we could hope to be in.

From day to day, focus on the things you can control and the outcomes you can influence and go about your business with compassion and flexibility and we will all come out the other side ready to enjoy a new, brighter future. ■