Otago Property Investors Association Inc

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otago@nzpif.org.nz

News & Updates

Recent updates

29-01-2010

POLITICAL & REGULATORY REPORT for January 2010

Although Prime Minister John Key has ruled out capital gains tax on sale of the family home and administrative issues surround a new tax based on an assumed rate of return on net equity at say 6% (ie disallows the claiming of interest and depreciation losses, etc), the following relevant recommendations are now in front of the Government to decide upon in the coming weeks:

  • Increase GST to 15%
  • Removal of the 20 per cent depreciation loading on plant and equipment
  • Removal of tax depreciation on buildings if evidence shows they do not depreciate in value
  • Introduction of a “land tax” at 0.5%

In other political reactions, predictably the Green Party strongly supports a capital gains tax and land tax on investment properties.

The TWG report can be viewed at: http://www.victoria.ac.nz/sacl/cagtr/twg/Report.aspx

[Note that the TWG report did not address the issue of losses generated in the sector. This maybe pursued as a medium-term matter elsewhere].

Any policy changes (the Government may be more inclined to increase GST, implement “depreciation-related” and the land tax recommendations) are to be announced in the Budget with likely effect from 1 April or 1 June 2011.

TREASURY REPORT – Rental housing

The Treasury published (24 December 2009) a set of working papers including one describing a model of domestic housing that can be used to analyse the impact of various housing policy proposals. The model includes rental and owner-occupied housing.

 The paper is highly technical however it concludes that:

  • Increases in the stock of housing would reduce rents and house prices
  • A reduction in tax concessions for landlords would raise rents and moderate house prices
  • Additional subsidies for owner-occupancy would tend to reduce rents and raise house prices
  • Significant reductions in rents and house prices would follow a fall in the cost of housing, through, for example lower regulatory and consent costs
  • Falling real interest rates result in lower rents, higher house prices and lower owner-occupancy rates
  • Despite the widespread attention owner-occupancy rates have attracted, the authors state that they are not a particularly helpful guide to the state of the housing market.

 The Treasury paper can be viewed at: http://www.treasury.govt.nz/publications/research-policy/wp/2009/09-05/

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