NZPIF slams Labour's ring-fencing plan
Labour’s proposal to ring-fence the tax losses on rental properties will just drive up rents, the New Zealand Property Investors Federation says.
Wednesday, April 30th 2014, 12:00AM
by The Landlord
The proposal was included in the party’s monetary policy, revealed this week.
The party said it would ring-fence losses on property investments to stop them being offset against other income.
It would also ban non-resident foreigners from buying property and would introduce a capital gains tax.
The NZPIF said a similar policy had been tried, failed and reversed in Australia. During the two-year period it was tried in Australia, national rents rose by over 25%.
Executive Officer Andrew King estimated that if Labour’s policy was to be introduced in New Zealand, the median rent price would rise by $92 a week, to $462.
"We have seen so many policy changes over the last few years that are harmful to providing rental property to tenants that people are going to give up," he said, pointing to depreciation changes and the removal of LAQCs, as well as loan-to-value ratios.
King said unlike the capital gains tax proposal, Labour’s plan to ring-fence rental tax losses targeted the rental industry directly and would make it extremely difficult to provide new rental property.
He said that during periods of mortgage interest rate rises, rental property owners usually absorbed much of the extra cost. But this was unlikely to occur if those losses were ringfenced.
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