THE DETAIL/RNZ
One of the effects is sending investors out of the market which reduces supply and “actually makes the problem worse rather than makes it better,” Brad Olsen tells Emile Donovan in today’s Detail episode.
EXPLAINER: If you are a tenant, or looking for a rental, the idea of a Government-enforced cap on how much your rent can rise probably sounds like a great idea. If you’re a landlord, it might well sound like the worst idea you have ever heard. But some landlords, who have just been hit by that suite of changes, designed to help first home buyers, say they will be forced out of the market if rents can t change. And many economists say that most forms of rent control are actually self-defeating.
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About a fifth said they would sell some or all of their properties. But economist Shamubeel Eaqub said investors could find it harder to raise rent than they expected. Rents were not usually set according to investors’ costs, but instead driven by the limit of what tenants could afford to pay. “Rents are set at what the market will bear,” he said. “People will charge the maximum they can get in the market.” That had been evident when, in a period of falling interest rates, when many investors’ costs had dropped, rents continued to rise.
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Rent prices are driven most by what people can afford to pay, rather than what covers landlord costs, Shamubeel Eaqub says.
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The Property Investors Federation has been accused of “heavy industry lobbying” over the Government s housing changes. (File photo)
An economics professor has taken a swing at the New Zealand Property Investors Federation (NZPIF), accusing them of engaging in “heavy industry lobbying” as they argue against the Government’s new housing policies. Auckland University’s Robert MacCulloch says the group is attempting to scare the public and dissuade the government from pursuing changes, which include a doubling of the bright-line test and ending interest deductibility for investors. He said he usually tried to be non-partisan and avoid picking a fight, but his impression of investors’ reaction to policy change was “not so much arguing good or bad economics, but heavy industry lobbying.”