should you sell your rental property, rental investment, rental property investmentWith all the changes the government has introduced to residential property investment, is now the right time to sell your rental property and cash up? We look at the reasons to exit the market – and the reasons to keep holding.

Although property prices rose by over 30% in 2021, the predicted flatten out or drop has certainly come into effect in many Auckland suburbs as well as other regions around New Zealand. But with the government’s changes to the tax system for property investors, many landlords are wondering if this is the perfect time to cash up and sell.

Let’s take a look at why you might sell – and the reasons to keep holding.

Reasons To Sell Your Rental Property

First, we have entered a period of flat or low price growth, so it’s possible that capital gains will be weak for the next few years. Then there are the issues around borrowing: interest rates are rising; banks are being pickier about their lending; and interest-only loans are far harder to secure or renew.

Then there are the various changes that have made it more expensive to own rentals, such as the phasing out of interest payment deductibility and the Healthy Homes Standards. If you’re planning to exit the rental market, all these factors make a pretty compelling case.

Reasons To Hold

But not so fast – there are also good reasons to hold onto your rental. Property is traditionally seen as a good hedge against inflation, because not only do rents rise alongside other costs of living, but inflation supports higher asset prices. Plus, any debt you have against your property remains the same, while your income (hopefully) increases, effectively eroding your debt.

If you do sell, that presents another issue. Where should you put the money you gain from selling your rental? Where would you get a return that outperforms inflation?

Consider Your Long-Term Financial Goals

One of the biggest deciding factors in making the decision to sell your rental property should be your long-term financial goals. Does your rental fit into these? Is it moving you in the right direction? If so, you should keep it. And if not, this could be a great time to rethink your investments.

We can help you with analysing your rental property’s affordability, the potential returns on alternatives, and thinking about your long-term goals – so give us a call or drop us an email. We are Property Accounting experts and we’d love to have a chat.

This publication has been provided as general information associated with the topics covered. It is not intended to be specific advice. We strongly recommend readers seek independent advice from a suitably qualified professional adviser prior to acting in relation to any of the matters discussed in this publication. No person or entity involved in this publication accepts any liability for any loss or damage whatsoever which may directly or indirectly result from any advice, opinion, information, representation, or omission, whether negligent or otherwise, contained in this publication.