Mortgage interest write-offs unlikely to spark market - CoreLogic

Residential property investors will soon be able to write off mortgage interest expenses from rental income - but the change is not expected to spark up the market, says CoreLogicNZ.

The research firm says national average house values rose 0.3 percent last month to $1.62 trillion, with the average yield on rentals increasing by 3.2 percent to the highest level since 2020.

But CoreLogic chief property economist Kelvin Davidson said the yield was relatively low by historical standards and may not be as good as the returns available from savings and other investments, such as term deposits.

"Rents are nowhere near enough to cover the mortgage for a typical debt-backed purchase in the current market, let alone other running and maintenance costs, so an investor's cashflow needs to be supplemented from other income," Davidson said.

He said the income gap could amount to several hundred dollars a week.

"In a nutshell, it remains tricky to get the sums to stack for 'mum and dad' investors at present."

In the meantime, Davidson said first home buyers' market share of 26 percent remained consistently high.

He said many homeowners (57 percent) will need to need to refix their existing mortgages at higher interest rates over the next 12 months.