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Philip Macalister
Philip Macalister
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Property investment rules to change - forever

Friday 29th of January 2010
The talk about changes to the tax system has died down a little and now reality is starting to sink in.

Most commentary has been around the fact that the proposed changes are designed to whack residential property investors. The anti-property brigade has been in strong voice once again pushing the spurious line all property investors are fat cats rorting the system; thankfully investors have been putting up a pretty good defence.

While things are still murky around what the government will do and how far it is prepared to go to alienate a good chunk of its support base, there is acceptance change will happen.

As I have digested the changes and talked to other investors it has become clear this is big.

Indeed I would argue the changes are once-in-a-generation stuff. The rules around residential property investing will totally change. The business will be totally different and investors will have to change their approach.

I have heard that many investors have got the heebie geebies and are already looking to exit and have put properties on the market.

I’m not sure that is necessary. The changes don’t necessarily mean that investing in residential property will no longer be profitable. It means you will need to think about how you approach it.

One change I suggest will happen is that some of these companies who find properties for investors and sell them to them on the basis of depreciation gains and tax benefits will struggle to survive.

Also the changes are likely to drive up rents over the medium term. While that is a plus for investors, tenants won’t be happy with the government.

The March issue of NZ Property Investor will be giving you lots more information about what these changes mean and what you can do adjust.

I’d love to hear your thoughts on the changes and how you plan to adjust to them. You can comment below or send an email to thelandlord@landlords.co.nz

PS: I was in Auckland this week and attended one of Kieran Trass’s breakfast presentations. He has plenty of views on the changes and also some ideas on what to do. If you are in Auckland and want to attend one of these Wednesday sessions click here.
Comments (3)
Rod Philson
I agree with Heather. <br />Having spent the last 12 years selling new homes to investors and managing them on their behalf I can see a problem looming for our government if they pursue the changes they are reviewing. <br />Many of my clients will be forced to sell their new (Less than 10yrs old) brick and tile investment properties if the government changes the tax rules in regard to depreciation. They purchased these properties to hold long term with the intent that they would eventually supply them with inflation proof income as recommended by the governments retirement website www.sorted.org. - which states that unless one has other income sources than the expected pension one will be required to work long past the age of 65 before retiring on less than $13,000 pa.) <br />The long term effect of the changes will be that the good rental stock will revert to home owner occupation over time and the available rental pool will be reduced to substandard "old do up" type accomodation again, with ever increasing rentals as landlords try to have their properties self fund. Rent increases will be fueled by rising interest rates and the increased demand due to net migration increases currently being experienced. <br />The Australians tried this several years ago and it was a total failure. <br />I hope our government have more sense than to copy the mistakes which have been proven to fail in Australia, and in tern give those who voted them in a chance to retire in some form of comfort and dignity, having worked hard and then gone without to put their hard earned dollars in to paying off a mortgage rather than pissing it against the wall every Thursday / Friday night. <br />This could be the last straw for those who have hung in and chosen to remain living in NZ. <br />Australia and its other benefits may soon reverse the net migration figures, yet again, as those left here with half a brain or more, choose to cross the ditch en mass leaving behind a country destined to become a land of zero opportunity for those who legitimately try to better their lot.
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14 years ago
Jeremy Jones
Personally I dont think National woudl dare levy a land tax. For one, I dont think they would be able to win another election if they did so. <br /> <br />I dont really understand why the Govt is so anti property investors in the first place. I only have one investment property at the moment (although I have had more). To me it is my retirement fund. Now why would the Govt want to ruin peoples retirement funds? Do they want us to be totally dependent on the State instead of trying to look after ourselves? <br /> <br />And if they did bring in a land tax or other property tax, it would NOT make me invest any money in the sharemarket which seems to be their objective. Shares are not my investment of choice and is too much like gambling to me. I would be more likely to buy property in Aust. <br /> <br />I already pay a huge amount of tax (and rates which are also a tax). I will never believe it is fair or just to try and increase this burden in order to keep more civil servants in meaningless work.
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14 years ago
Hamish Patel
Well it looks like depreciation is gone, which is probably a good thing. I mean borrowing thousands of dollars from the tax payer and paying it back with inflated dollars was a bit unfair.
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14 years ago
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