A Labour-led government would phase out negative gearing for property investment over five years, leader Andrew Little announced Sunday.
Speaking to party delegates at the Labour Party’s election year congress, Little said the corresponding income would be earmarked for a government-subsidised insulation plan for private property owners.
Rental property losses would be ring-fenced under the proposals, meaning investors would no longer be able to use tax losses on properties to offset tax on other income, Little said.
The practice would be phased out over five years, with loss deductibility reducing 20% per year over that timeframe.
Labour had already announced it was to tackle negative gearing, but to date had not provided details on how it would do this, and over what time period.
Little claimed the move would net the government an extra $150m a year once fully implemented, raising $1.2bn over ten years.
That money will pay for a Labour plan to grant a maximum of $2,000 to private homeowners – owner occupiers and investors – to fund up to half the cost of insulation upgrades or double glazing at the current building code, or for them to install a “clean, fixed form of heating.”
Housing getting further out of reach
Much of Little’s congress speech was dedicated to housing issues. He told delegates that the $315,000 first home he and his wife bought in 2000 would be worth $830,000 today.
“Its value has nearly tripled. But here’s the thing: Families’ incomes haven’t tripled since 2000. Nowhere near. That’s why housing is getting further and further out of reach,” Little said.
“New Zealand’s housing crisis - yes, crisis - is not just about out of control prices. It’s about the insurmountable barrier that many first home buyers now face. It’s about the rapid increase in rent that tenants are seeing now,” he said.
“It’s about the fact that what is happening with housing is now the main cause of growing inequality and growing poverty in New Zealand today.”
Little said that while door knocking for the Mt Roskill by-election, he had come across one street where multiple houses were each filled with more than one family.
“That’s not the New Zealand we want. We can do better. As Jacinda and I travel the country doing public meetings, housing is the number one issue people raise with us, every single place we go,” he said.
Little said a resident in Hamilton’s Jebson Place had told him a “once a thriving state house community” had been gutted as houses were emptied yet not filled with new families.
“So, I told her why I was there that day. I was announcing that Labour will tear down all those abandoned old buildings. And in their place we are going to build a community of 100 affordable KiwiBuild and state houses – a place for families, once again,” he said.
Labour will lead the largest house building programme “since Michael Joseph Savage carried that dining table into 12 Fife Lane,” Little said.
“We’ll use the money we get from selling the first bunch of houses at cost to build more homes and sell them. And we will keep on doing that - build, sell, build, sell - helping more and more and more families buy a place of their own.”
Building houses was only part of the answer, Little said. The other was “dealing with those things that jack up prices and put homes out of reach for so many.”
“If we want to make sure all Kiwi families get a fair shot – that when it comes to buying a home they have a level playing field – we’ve got to get the speculators out of the way. We can’t let our homes be gambling chips anymore,” he said.
Demand-side policy
He outlined three steps on the demand-side of Labour’s housing policy:
“First, we’ll ban overseas speculators from buying existing houses. Simple as that. We’ll do that in our first hundred days.
“Second, we’ll make speculators who flip houses within five years pay tax on their profits.
“Third, today I’m announcing Labour will close the tax loophole that allows speculators to claim taxpayer subsidies for their property portfolio.”
“Right now, speculators can take losses from their rentals and offset that against their personal income. It allows them to avoid paying tax. This loophole is effectively a hand-out from taxpayers to speculators. It gives them an unfair advantage over Kiwi families,” Little said.
On the side of first home buyers
Families did not deserve to have the odds stacked against them by their own government, Little said. “They deserve a fair shot. With Labour that’s what they’ll have.”
“Now, let me be clear. This isn’t about the mum and dad investor who has bought a rental as a long-term investment. The vast majority of them don’t use this loophole. Those that do will have time to adjust,” he said.
“This policy is about the big speculators who purchase property after property. It’s about those big time speculators who are taking tens of thousands of dollars a year in taxpayer subsidies as they hoover up house after house.
“I say to people who would defend these loopholes - how can we as a society possibly defend handing out subsidies to property speculators when most young couples can’t afford to buy their first home,” Little said.
“You ask me whose side I’m on? It’s families. It’s first home buyers.”
Below is the Labour Party factsheet on its negative gearing proposal:
Losses from rental property investments will be ring-fenced. Speculators will no longer be able to use tax losses on their rental properties to offset their tax on other income, a practice called negative gearing. This move has been recommended by the IMF and the Reserve Bank.
The biggest users of this loophole are large-scale speculators who own multiple rentals and use losses on new acquisitions to continually reduce their tax. The speculators’ tax loophole helps them outbid home buyers for properties because the taxpayer effectively subsidises part of their cost of servicing mortgages.
Ending this loophole will not affect most people who have bought a single rental as a long-term investment because most of them are not using it. Those that do use this loophole generally only do so for a few years after purchase.
It is time to end the subsidisation of speculators by taxpayers. Removing the speculators’ tax loophole will put home buyers on a level playing field and give them a fair shot at buying a home. For a smooth transition, this change will be phased in over five years, with loss deductibility reducing by 20 per cent a year.
Removing the speculators’ tax loophole will save taxpayers around $150 million a year once fully implemented. Total savings in the first ten years will be $1.2 billion. Labour will use this money to help 600,000 families heat and insulate their homes to modern standards.
Below is its factsheet on the insulation proposal:
Removing the speculators’ tax loophole will save taxpayers around $150 million a year once fully implemented. Total savings in the first ten years will be $1.2 billion. Labour will use this money to help families insulate and heat their homes to modern standards.
All property owners will be able to access a grant of a maximum of $2,000 per dwelling to pay for up to 50 per cent of the cost of insulation upgrades and double glazing that meet or exceed the current building code, or of the cost to install a clean, fixed form of heating.
Eliminating the speculators’ tax loophole and redirecting the savings into home insulation will assist with making 600,000 homes warmer and healthy to live in.
This investment will complement Labour’s Healthy Homes Bill, which will require all rentals to be fit for families to live in and support the delivery of our climate change goals.
135 Comments
Your concern is legit on the 5 year period and the tax break but too many decisive steps with immediate effect will crash the market. These moves are a reaction to the mess National has caused in its 9 years of governance. Overly stringent rules will lead to foreign speculators all pulling out at once, leaving the market in shambles.
I know some people find the idea of crashing prices interesting, but negative equity and delinquency across the country will ruin the economy for generations to come. A slow, effective roll out is the best way ahead.
My intuition about "crashing the economy" is similar to yours. However, if you can point to any govt in the world that has been able to manage bubbles on the way down, feel free to point them out. Only NZ and Australia seem to be of the mindset that we can game the future.
I believe John Key knew we had a bubble brewing all along and his high immigration tactic was two-fold:
1. Generate an increased work force / tax income to pay the pension bill that is about to explode with the boomer retiring.
2. Try to reduce the downside of the property bubble when it bursts. If you can keep demand high enough through new arrivals, I think his theory is/was that it will limit deflation. It could of course have just extended the upside, and if people start losing jobs on the downside and flee, well it could well be far worse.
I have been a centre-right supporter throughout my adult life, but even to me this sounds like a great plan.
It is not like these speculators and landlord cannot afford to pay $150 million in taxes. Rental and buying-selling real estate makes up nearly $40 billion of our economy. The proposed tax is a drop out of the ocean towards a decent cause.
Why blame the speculators ?
They are doing nothing wrong , just taking advantage of runaway demand caused by runaway immigration and Auckland council incompetence .
If there were no supply constraints there would be fewer speculators
They are merely doing something which is perfectly legal , and if they trade in property they pay tax , so we all benefit
If you are righ,t look forward to paying more for your meat & milk, as a Farmer I am sick and tired of the constant barrage of regulation and criticism from Townies & Greenies who have no idea of the reality of Farming - just try and run your life when your income is halved - Milk price $8 one year falling to $4 another as well as fighting the weather and pests who now include the 2 legged variety.
If you are righ,t look forward to paying more for your meat & milk, as a Farmer I am sick and tired of the constant barrage of regulation and criticism from Townies & Greenies who have no idea of the reality of Farming - just try and run your life when your income is halved - Milk price $8 one year falling to $4 another as well as fighting the weather and pests who now include the 2 legged variety.
All good as there is the need to address demand side pressures.
But not sure why the tax loss offset rule change needs a five year lead in given the tax savings are only estimated to be $150 million pa, against income tax revenue of roughly $27 billion pa. That implies it is a very small cohort claiming tax losses against other income. Better to just make the change immediately as its overall effect will not impact all that many rental homeowners. But those it will affect will sell up quickly - improving supply for aspiring purchasers.
Thums up to Labour for first admitting that their is a crisis and though supply is one reason but not the only reason and are going to tackle demand specially speculators and overseas buyers.
Accepting that their is a crisis is first step in solving it unlike National. So to expect anything from national is hoping too much (Though national will come out with some bribe being election year).
NZ need change of government and hope people think wisely and vote in the interest of the nation.
As Labour hasn't got a snow ball's chance in hell of getting into power it's all just posturing to impress those who can't think for themselves.
As there are over 300,000 investors in NZ plus their family and friends, Little will alienate more than he can convert.
The problem for Labour is that the country is doing very well and most people are happy with their lot.
300,000 residential property investors??!! And how many of those own more than one investment property. If that is the case then something extremely serious needs to be done because that is ridiculous. I think we now know why we "need" 70,000 immigrants a year, to prop that nonsense up.
Any idea how many of those 300,000 are negatively geared? I think you're in your own political bubble if you think change can't happen - I think you underestimate the severe discontent from the many house-less, or those like me that own but would like their kids to be able to afford a house.
Any person can say that supply though an issue is not the only issue for current housing crisis.
Even if we accept the National argument that what is happening in housing sector is the result of supply only than also increasing supply is one part of the solution and the other if not more important than equally important is tackle demand to ease pressure on supply. Crisis have to be tackled from both side but to my mind question that arises is WHY national is not ready to accept the demand side of the problem. Must be something to hide or some other ulterior motive can be the the only reason of not understanding basic economic by national or are so full of themselves that feel can say and do anything and will get away but not any more not this time.
Nothing will be solved by not acting on demand. Demand and supply both have to be tackled to solve any problem.
Mr Little Andrew has not said something that does not make sense. He has said the very basic truth but because of national denial, lie and manipulation looks as if he said something extraordinary.
Gordon, won't affect me whatsoever grandad, as all the properties are cash flow positive.
Wish I could have some more tax deductions but all maxed out and still positive.
As Big Daddy says Labour can say what they want as they haven't got a hope in hell of getting in as they really haven't got much idea on how to do anything.
Where is there detailed affordable housing details that they go on about?
The average Kiwi is happy with the way things are going in the country and if they weren't then they certainly wouldn't be going to OZ or Brexit!
Why do so many people want to come NZ if things were crap.
Heather Du Plesis item in the Herald this morning was quite apt in that there are so many moaning people who are just that, moaning people who do,nothing but moan about everything.
NZ is a great place to live and still a very affordable place to buy a nice home but just not in Auckland.
We may well be surprised by the outcome of this election - for those who are already on the property ladder National has been great - but there are just as many people who cannot get on the ladder, but want to and even National voters wondering how their children will ever afford a home are becoming tetchy. So there may just be a Trump/Brexit style outcome brewing amongst the voting masses that could just see Labour take out this election with their coalition buddies. The mood is definitely changing and really English vs Little - they seem equally dull.
Both our kids are homeowners, and they wouldn't want to deny that opportunity to anyone else - now or in the future. It makes no difference whatsoever to either of them personally whether house prices go up, down or stay the same, given if they sell they'll simply be re-purchasing in the same market.
I suspect there's a huge number of young homeowners like them that are not blind to the future for their children, and desperately want a change of government too.
for many of us that own prices going down or sideways don't matter s if you want to buy and sell its in the same market.
the only ones that complain are the flippers and investors using leverage to game the environment.
the smart money got out last year or deleveraged
Rick I think it is interesting to compare Andrew Little now in 2017 with John Key in 2007. Andrew is a bit awkward, defensive and has a tendency to stick to his pre prepared lines a bit too much -so misses opportunities to tell why his policies are so important. But he has led a party that has created a comprehensive set of housing policies -which addresses most of the main supply and demand factors inhibiting the housing market. It is really worth checking them out http://www.labour.org.nz/housing
John Key was confident, glib and had the gift of the gab in explaining why housing was an important issue for New Zealanders. Yet in hindsight we learnt that John Key had led a party that had not done its policy homework and was/is in denial that this is a problem. Anyone who hasn't watched John Key's 2007 housing videohttps://www.youtube.com/watch?v=cWPgoAI1cLE really should.
It is going to be interesting to see how the next cycle of housing story evolves....
This Self Centered. Self Inflicted Crisis, should be allowed to fail, all rentals taken over by the Citizens of this thieving MP twisted, warped Housing Corroborative Cooperative., 300,000 strong.
Led by most Members of Parliament........Illogically and Ill-legally and not in the Citizens best.....INTEREST.
Maybe then we can get back to houses being Homes, not a Taxpayer Dodge for the Privy Privileged.
The one thing I am totally sick of is talking about houses and doing...absolutely burgher, crap all...about it..
Not as if they were worth the damn effort, talking around the Houses....They were and are still a Tax Dodge.
Recognise that fact....Leverage the brain, not the price of bleedin houses. ..that is the Truth.
Then maybe we will not have people rabbiting on about houses as if their lives depended on it.
Cut to the to chase, cut to the quick, damn quick...and start building a better Country, not tin pot, shonkey, edifices for gloaters, up to their gonads in leveraged, artificially, bloated ....debt.
Led by people who should know better, but dippy to the Max.
And on that subject, clear out the Aussie Banks and then we can call New Zealand ......Home...again.
And do not import rich-listers........and inflated debt.
Not a millstone around some people's scraggy ....bloated and inflated, necks.
Maybe we could be "Business Like".....for once.....not do uppers....and double and triple and multiple dippers
Silly sods.
There....enuff said....I think.....
Don't bovver to respond....I am orf this........TOPIC.
Very good ideas from Labour which will attract a lot of voters. A couple of remarks:
1) "we’ll ban overseas speculators from buying existing houses", how will Labour assess if the overseas buyer is a "speculator" ?
2) "we will keep on doing that - build, sell, build, sell - helping more and more and more families buy a place of their own.” sounds absolutely wonderful. How will Labour be able to build more houses at cheaper prices ?
I'm not criticising, I like their ideas, I'm genuinely asking how ?
just looked it up they are adopting what many countries are doing,
"Under our policy only citizens and permanent residents will be able to buy existing homes"
I totally agree with this policy BUT like you I ask how do you police it,
if you use a front person how do you know, if caught what happens?
There is an obvious solution to this problem. Bank credit officers inspect source of funds when you make your loan application for anti-money laundering compliance. This scope of this compliance activity can be extended to ownership of funds which won't be that hard to establish. This is a small price we have to pay for large future gains.
>"How will Labour be able to build more houses at cheaper prices? I'm not criticising, I like their ideas, I'm genuinely asking how?
I would suggest one element lies in why Pharmac is able to buy medicines more cheaply than individual Kiwis would be able to. Bulk purchasing power. Drive down the materials cost of the builds.
Another interesting effect would be that on speculators in the market. Will they look to move their money out of housing if they see the government starting to ramp up supply, because the promise of great future capital gains reduces?
From what I understand generic drugs are a component of Pharmac's success.
That's anathema to a building industry based on brands and certification.
The building model fails when the composite structure performance is what counts.... Think leaky homes.
Branz should give Pharmac a call.
There is also the economies of scale effect.
At the moment only 5% of the new build market are affordable homes. Mostly what is being built now is bespoke 200sqm+, 4 bedroom, double garage, master bedroom with ensuite, 2 living areas..... McMansions.
If instead humble yet functional 2-3 bedroom 80-150 sqm KiwiBuild homes are built in bulk. The number of sqm is smaller and the cost per sqm is smaller too, because of economies of scale effect -prefabrication, standardised designs etc.
Add to that the ability to source building materials cheaper -because of the Pharmac effect -then the build costs and thus the selling costs of KiwiBuilds are definitely a lot cheaper than what the market is currently delivering.
If the speculators are knocked out of the market by Labour's housing demand and supply policies then the affordable prices of KiwiBuilds should stick - they will not be inflated/speculated away.
Be interesting to hear how they are going to identify what is an 'overseas speculator', in under 100 days. The 'Chinese sounding names' witch hunt policy was an abysmal fail. Official data indicates only minor levels of foreign ownership but we all know that's a crock, yet government officials have been unable to deliver a reliable way of identifying whether a property is really overseas owned or not, given the multiple ways this can be disguised.
Despite these major obstacles Labour claims it can within only 4 months of being elected, develop and implement a reliable method of nailing who actually owns a property. Yet the Aussies who have had a foreign buyer exclusion policy for years, admit they cannot prevent extensive evasion of the rules.
Little must know that at the practical level his policy is going to be very difficult to implement. Appealing to the justifiably strong objection that most Kiwis have to foreigners screwing over our young FHB'rs is an easy sell but it's dishonest to claim that there are quick and easy fixes for the issue.
Yep, make the consequences of breaking the law strong enough to be a deterant - for both parties, the middleman and the buyer.
And look to implementations in other places, including Vancouver, where investors have openly said they're going to start looking elsewhere instead. Also, work on putting in place stronger anti money laundering practices / trust practices National's been studiously putting off for as long as possible.
"Speculator" was just marketing-speak. Their actual policy means anyone not a citizen or permanent resident. Yes, dodging with a local front person is possible but just because a rule can be broken doesn't mean it's not a good rule. Absolutely no benefit from overseas buyers of existing houses IMHO.
A lot of Labour's housing plan's would be a major stimulant to the productive side of the economy -so it is not true that a downward house price correction would result in unemployment. What it does do is transfer economic opportunities from the property ponzi elite down to workers and FHB.
Building 100,000 KiwiBuild homes will create a lot of employment. Likewise private sector house building will also increase to take advantage of the removal of restrictions on building Auckland up and out. Infrastructure bonds issued by a special infrastructure unit in Treasury are another good idea which could create a lot of employment and bring a lot of surety/stability to the house building market.
I think the bigger concern on the employment front will be a shortage of construction workers. Labour's industry training apprentice schemes will therefore be an important component of its housing policies.
If the banking system did get itself into a bother -well the government could always restart State Advances -to stimulate the economy and ensure FHB had available finances for buying KiwiBuilds or other houses from the private sector.
The sort of tax changes announced today by Andrew Little will help even up the investment playing field. Unproductive investments in housing will not get so favourable treatment compared to productive investments. Again another stimulant to the productive economy.
Well said. A more targeted hiring from overseas around construction-related jobs is needed.
Between July to April 2017 we have given out only 8% of our work visas to workers from building and material trades, engineers etc. (I ran a pivot on data from INZ website). English and Joyce time and again maintain their position on record immigration as an inlet for construction workers.
Key particularly got under my skin when he said immigration is a sign of success because "everyone wants to be with the champs". Let the focus be on bringing in skilled persons not admirers.
Jeez, one anti-investor policy announcement and your nasty side comes out. Not everyone with a job earns enough to afford to buy a house, and there's another bunch of us who earn enough but the sums don't add up yet given current house prices and rent levels. Not everyone is in your fortunate position, show a little empathy.
MFD not s nasty side at all.
What I am saying is that a Labour/greens coalition will not work as the Greens will not be good for growth at all and they won't be able to work together.
The housing issue is only one thing that NZ should be worried about whereas a National has done a very good job at running the country since they have been in.
I hear this a lot, my question is always what is your evidence that Labour governments perform worse economically than National governments? The evidence I've seen does not support what you're saying. There's certainly a perception that National know better, but I don't know what it's based on other than party PR.
Agree housing is just one issue (although it's a big one), other areas that are important to me that National have failed on are water quality, DOC funding, mental health care, and drugs policy. National have failed in many ways and won't be getting my vote.
Great policy from Labour on multiple fronts. It address erosion of the tax base, the unfair tax bias towards property, but it also stabilizes the domestic banking sector by removing the intensive towards cash flow negative (pure speculative) real estate investments. If they were really going for he housing market's jugular vein they would have done a UK style buy-to-let tax change and gone after tax delectable expenses in general but they havn't done that.
Election is fast becoming and option of join the ponzi vs torpedo it.
Prices are more disconnected from incomes than they have ever been, and it is sucking the financial heartout of NZ. The many (renters and single home owners) are being sucked dry by debt servicing/rent, for the few (banks and specuvestors) who are enjoying their record profits year on year, and free cap gain/tax offsets. Allowing overseas speculation/immigration has simply bosted this inequity beyond measure to the averageman born in NZ.Slam the door on overseas ownership. We cant buy land in China or much of India, so slam that door.
Property needs to return to the same investment profile as shares and business. Pay tax on earnings and if losses are too great, you go broke. Banks need to be brought in line with their lending practice - dti ratios. Dare I say it - tax on equity sounds like a simple catch all as well.
If your feeling screwed by the stupid property prices, and are sick of the speculators farming debt while laughing about their tax savings, you now have options.
I would rather see housing treated like any other investment - as per what Terry Baucher said last week. From a tax model it is better to have the same rules across the board rather than different rules for different assets.The more complex the rules the greater the chance for "tax planning".
Building more housing is good so long as it doesn't crowed out the private sector. Also, how does that jive with Little's statement before that he doesn't intend for house prices to decline? And does this stay within the 30% of GDP limit?
So at what point do we start treating food and water the same way we do housing?(each is a basic human neccesity) Are we going to keep increasing demand and limiting supply to the point where prices are beyond the buying power of the average person? Is that what our future looks like under this system?
Sorry to interrupt a happy party,
So, Labour expects to upset the rental and investment market for the sake of $150m a year ... Well, great,
Did anyone there think about the consequences on rents or what will they do if rents start going up by 10-20% a year? --- No, it wont happen? ... Ok, so what will labour do when the shortage in rental properties ( as it is now) was abruptly pushed to the upside say by only 5% in Auckland?? -- --- what will happen when there are fewer rentals in the pool ( as some investors/speculators might rush for the gates) ?? --- will they introduce a cap on rents too??
What if the housing market did not drop by more than 10 %, if at all ( as there are all sorts of reasons for that ) ?? -- Even worse, what if the market kept going higher according to most predictions because of demand after September ? -- then what?? --- Hmmm, what if the BANKS ( and others) refuse to play ball ?? and impede these policies to protect their margins, shareholders, and Balance Sheets ?. Will they Nationalize the Banks too??
What if loads more people, not affording the new rents, become homeless and sleeping in cars ?? --- will we have another Oooops from Labour --- or just keep blaming National after they're gone ? Will they spend the $150m pa on Insulation or housing the homeless in motels??
So, Labour thinks that they can do the above and still achieve 4% unemployment eh? because dropping house prices by 20% ( let alone the 30-50% dreamliner) will hardly affect the economy. right ? ... it will be employment and sales and margins as usual isn't it? .... and the economy will not crash at all ( not even dented), people will all keep their jobs and have a pay rise because of this and their immigration policies !! right? we will not have a fresh round of price hikes or any inflation due to banks asking for more equity through personal guaranties etc - right?
IMHO, this policy will drown labour's chances like it did with CGT policy last time - they did not learn the lesson of Not fiddling around with Free Market Forces especially when the economy is doing so well. Using fashionable buzzwords like tax offsets / speculators / tax payer subsidy / etc and demonizing property investors ( as if they existed recently) plays to the tune of their die-hard supporters and some ill-informed people, but Most Kiwis are smart cookies and can add 2 and 2 together. I doubt most would want another Nanny State again !
Building of thousands of kiwi built or whatever homes is another wishful thinking, anyone remotely engaged with the building industry today will laugh his eyes off , especially when you couple that with their immigration policies and those of their coalition partners... their ideas sound like music to the ears of the desperate to get them to vote them in office - then excuses will pour out due to the huge disconnect of these promises with the bitter realities in the markets, councils, bureaucracy, and facts on the ground.
Governments do not control everything in life !!
Will be interesting to see what the polls will come up with after these announcements and if they will gain Labour any additional support.
After all, they only have 29% or so of the votes so far !! -- All the best
why do property investors always trot out the argument this will reduce the number of rental houses?
the total number of houses will not decrease they don't disappear just because an investor sold it.
my major hope for this policy is to try to level the buying power of investors verses FHB,
in fact I would like a 70/30 advantage to a FHB, which is about the range our housing stock should sit at for the good of society
Yes, the argument that it will reduce the number of rentals blows my mind. Are they really this stupid or do they think other people are? If a landlord "can't afford" the rental property they are certainly not going to be able to afford to leave it empty. So it will be sold either to a family to live in or a wealthier landlord. No decrease in housing either way!
My assessment of the cause of the crisis in housing is that it is principally a demand side problem. These policies seem a fair attempt at demand side reduction. Extending the 'bright line' from 2 to 5 years is a far more rational position. Presumably the IRD are resourced and organised well enough to manage that. The foreign purchaser identification will need some work and resourcing. I support the principle. I do wonder about the ring fencing of losses. Will losses from past years be able to be brought forward to the future to be used as offsets when the property make positive cash flow? Also I wonder if an unintended consequence of the abolition of negative gearing will reduce a landlord's incentive to carry out upgrades to rentals? However given the current cluster f**k of policies by the incumbents I'd say this looks good. It's a pity there wasn't much apparent coherence between what Grant Robertson had to say about immigration and this. I wonder what the backroom conversation was like?
Like it or not this election will be vote for change. Can see the writing on the wall though people who have been benefitting by national may not like to hear it. Polls or no polls - Sentiment of average kiwi on street is for change.
Also this election voting percentage will be high as will be voting for change.
Can save this post and read after voting and this is not a predection but based on mood of the nation.
The polls would seem to indicate otherwise. I don't sense the mood for change at all and I think most people are happy with how things are going. Also when you consider Labour/Green budget commitments it looks like they agree with the past 9 years. But we shall see in September.
You are on another planet if you think that National has not done a very good job over the time since they took over from Lavour.
Yes we all know house prices have gone up and many can't afford to buy in Auckland.
People around the country can still,afford to buy although it has got harder due to the LVR amendment.
Most of the people on here that keep moaning would have never been able to purchase a home in Auckland even if the prices were still a lot lower, just as it was 20 years ago when everyone didn't own.
Some on here keep telling us that there is more money in the sharemarket so,surely they are better to rent and gamble in the shares aren't they?
TM0.5 - do you have some examples of this "very good job"?
Would it be the crippling of those lazy FHBs, or the sale of those crappy power companies, the gutting of the useless Kiwisaver and Cullen Funds? Or would it be the massive run up in govt debt -as a property investor you would know you can never have enough debt?
Perhaps it's just because you are fond of sitting in traffic all day or joining the waiting list at your hospital or watching the massive spike in illegal drug imports and crime as immigration goes off the wall.
Ahhh, so the sharemarket is a gamble. Thanks for clearing that up.
I dont think or look at policy in purely personal terms. I know there are a lot of people worse of than me, and a lot need a hand up. National fail miserably when it comes to looking after the vulnerable, and those that need it most.
If I look at National's terms from a - what have I gained personally point of view, and I gauged success monetarily, then they have done amazing. But I see a lot of decay and backsliding by too many to give them the thumbs up. I have never voted for them anyway.
I spoke to a young nursing colleague working in Australia this weekend. She left from Christchurch last November with two other young registered nurses. They went to smallish town a few hours out of Melbourne. In Christchurch she wasn't able to save anything. In Australia -their rental (the 3 of them flat together) is better quality and cheaper. Her salary is higher as well. In six months she has saved $10,000. She would consider returning to Christchurch or elsewhere in NZ -because the quality of nursing is better in NZ -if housing was more affordable. All of NZ's District Health Boards are short of experienced health professionals.
How many health professionals would return to NZ if housing was more affordable?
What about in other professions and industries?
Housing is an issue for all of NZ. The crisis is at its worst in Auckland. But everywhere in NZ would benefit from Labour's housing policies.
Bendigo -150km from Melbourne and 93,000 urban residents. So it is a smaller more distant version of Hamilton. But Bendigo is better connected to Melbourne by both motorway and train than Hamilton is to Auckland.
NZ has plenty of smallish towns and in fact my nursing colleague is originally from a small north island town. I am sure she would not mind returning to one -if it made sense wrt cost of housing versus income. But it doesn't currently make sense and that shows that NZ's housing problems are wider than just Auckland.
Remember the 1980s? All the news was about the share market. Its gains, its value etc. Fast forward to the 2000s. All (literally all) the news is about the housing market. Which doesn't earn a single cent to the export earnings of the country. And in which many times more is invested than in the productive sector. Don't tell me that is healthy in any way. The country is long overdue for a rebalancing in its investment habits. Especially since the majority of the money is borrowed from overseas and will need to be paid back at some stage. Which can only be done through exports.
Whats the fuss? Investors buy to create more housing rentals. Whats wrong with that? Speculators buy/build to sell to make a buck AND they pay taxes called capital gains tax. Investors hold on to their property long term, if they dont they are put in the speculators net for extraction of CGT. Whats the fuss? If enough voters complain about milk prices, guess what? We might have a proposal for more milking sheds and may be some votes.
So to be clear, you're comparing people (residents of NZ) with cows? Cows, make more milk. People, pay more rent. I guess that sums up the NZ economy.
I think you miss the whole ethical/moral issue around exploiting people over a basic human right (shelter) - in order for investors/speculators/landlords to make money while risking the stability of the economy.
So if we don't have these high levels of immigration (and in fact if we reversed immigration so it goes negative again) and we prevent the inflow of foreign capital (and lets say borrowing as well) how do we pay for the boomers pension and what do we think will happen to house prices (and the health of the economy)?
It would appear that we've dug ourselves into a hole that is going to be difficult to get out of..We must have been living well beyond our means for a long time to get here.
Okay, firstly I am not convinced by this "we need more people to look after us when we are older" argument, we are an adaptive lot and it just means working age people get paid a bit more. That's what happened after the black death in Europe anyway. We use pricing as a way of making choices about the allocation of resources because it works. It may be uncomfortable when prices change too rapidly but is effective.
It is not that immigration is necessarily bad, it is the rate of people moving here faster than we can cope, and more importantly that they bring more money with them than we have a productive use for. So the excess money goes into pushing up asset prices, thus decreasing overall productivity, not increasing it.
the need more people to pay for the older people is a ponzi, what happens when the people you brought in to pay for the first lot get old, then you need more to pay for them and so on and so on.
we need to look at other ways to fund it which the superfund was set up for and to the shame of nationl underfunded when it was the best buying in the world.
i look at places like norway and singapore and wonder why our politicians can not see further ahead than the next election
http://www.swfinstitute.org/swfs/norway-government-pension-fund-global/
The UK general election is next month. Jeremy Corbyn leader of the UK Labour party has made a big push on housing -promising to build 1/2 million houses. https://www.theguardian.com/politics/2017/may/08/corbyn-pins-labours-el…
Theresa May leader of the Conservative party has countered with plans to encourage more Council housing to be built.
http://www.telegraph.co.uk/news/2017/05/13/theresa-may-unveils-plan-bui…
All pollings/indications are that the Conservative party will romp home as UK Labour is internally divided and the politics of Brexit have supported Theresa May -unofficially she is going back to the electorate to get a high vote/a mandate to better negotiate terms and conditions of Brexit and Britain's new relationship with Europe.
But despite Theresa May's strong position she is not secure enough that she can ignore the housing policy challenge.
the interesting thing is the generation voting, the conservatives will romp in but labour are building a support base among the younger voter (with a terrible leader) on the back off issues of housing, jobs, study fees.
the divide is happening in many countries and as the older voters die off power and policies that favoured them will change
http://metro.co.uk/2017/04/26/labour-would-win-the-election-if-only-you…
I think you have the causation not quite right. The boomer generation grew up believing in a lot of impossible things based on Soviet propaganda about how society should be organised. I grew up in 70s Britain and I find I am constantly finding that I have swallowed bits of silly dogma in my youth. As the people with the silly ideas retire then new ideas have room to breath. Science advances one death at a time, and this is the same process.
The key difference is this, absolutists alway want to control you, whether they are Soviets, Absolute Monarchists, Dictators, Socialists, Militarists, Religious Fanatics, or, most dangerous of all, Bureaucrats. Our society is based on the idea of freedom of choice, that we can create a better world as independent individuals, not as serfs of the state.
I agree with most of the policies outlined here but phasing in is not economic. We have an old tax computer system which is in process of being replaced. Make the change start in a tax year eg 2019/20 and don't phase in, people have taken the risk and can down size over eighteen months. Remember the maximum cash tax benefit is only 33%.
The policy of spreading just makes accounting more difficult than it needs to be.
Just be a bit careful what you wish for. It could happen. Housing, like anything, has a lot of moving parts attached--immigration and demand/supply are just a few. Its also cyclical, like any other you may pick on. I did not hear a lot of noise from these investor bashes when the Key government took out depreciation claimable from residential investment properties. Aussies have not even had a chance to look at this (i heard a whisper they are thinking about it). Removal of depreciation claims left investors worse off, but Hey Nats did it. They were not worried about loosing votes, they did the "right thing" as per their interpretation. In fact investors came out and said there will be shortage of housing and investors will be put off from investing. Investors carried on, if one fell off, two or three got ready to take some risks. My point is, why did Labour not do what John Key had done. Ofcourse we have a promise of lot more houses from a new govt if it happens. I sincerely hope they do not drive Kiwi Builders out to Aussie by playing foolishly with the market.
Housing is a natural requirement for all, whether it be owning or renting.
It has never been anyone's right in NZ to own their own home and never will be in NZ.
The reality is that forever in NZ there will be owners and renters just like in Britain where more people rent than own.
It is extremely monotonous when people just want to tax other people's assets or investments just because they haven't got that asset to tax!
It is called jealousy and not a great trait to have!
There will always be people who do more with their lives financially and then there are others who,just sit back and expect them to be financially looked after by others and not have to do anything.
This is because NZ has developed a culture through the generous welfare system that NZ has.
It has developed generations now that think that the country owes them a living when quite the opposite should be the case.
I have experienced this over the past decade or so.
You can complain as much as you like and gloat if people are hammered with extra taxes if they done something to better their financial situation.
The reality is that if you re prepared to sit back and do nothing and expect the country to pay for your lifestyle then your values need looking at!
Not sure where to start TM2 - You're last sentence is classic: 'The reality is that if you re prepared to sit back and do nothing and expect the country to pay for your lifestyle then your values need looking at!'. Umm just confirm that you don't actually have a job and are a professional landlord? So in fact it is you who is sitting back doing nothing and expecting the country to pay for your lifestyle. I.e. those people out there working, doing real jobs that build the NZ economy. God I hate landlords, you guys/girls are a bunch of turkeys....
Independent, yes I am a full time landlord and no I wouldn't call it a job as I do not have set hours.
We do not just sit back and do nothing at all.
We are at the beck call of all our tenants at all times.
We repair anything straight away even if it is something that was just not wear and tear, plus we also spend money on improvements.
Some landlords may not do alot from the time they purchase the property, but do not tar all landlordswith the same brush.
It is not all beer and skittles being a property investor and I respect investorsthat purchase property and maintain them so that they can improve their lifestyle into the future.
There will always be jealous people who want to knock others just because they haven't had the foresight to try and better themselves
This is clearly evident on this site and it is not a great look.
It sounds like being a caretaker. In reality, property has become the be-all-and-end-all of the Anglosphere-led post-GFC "recovery"--basically a target for excessive leverage sourced from a financial system that retains power as no other path seems available to generate wealth. Most residential property landlords (cast from the Roy Hoy Fong mold) seem to be partially aware of this, but I very much doubt they have any have any understanding of the mid- to long-term implications. As we have seen, property bubbles do nothing but drive financial instability, yet that is way beyond the ability of most to comprehend or confront, despite the historical context.
Independent Observer: Yes you hate landlords and yes "the man" does obnoxious talk much of the time. But recognise that a lot of folk, including landlords and farmers and IT nerds work very hard at what they do despite not having an employer or regular paycheck. And it's honest work.
Hilarious.
You said, "It is extremely monotonous when people just want to tax other people's assets or investments just because they haven't got that asset to tax!"
But that is not what the Labour proposal intends to do. The policy instead plans to tax the other income of those who own rental properties in the same manner as the government taxes the income of their tenants and every other homeowner.
Or am I missing something?
Kate, pleased that you thought it was funny.
Personally won't affect us as investors as we are positively geared on every property and pay tax as such.
The ring fencing for the losses on property for the negatively geared will not help the first home buyers whatsoever as it will force up rents.
Investors that would have normally built new homes to rent out won't bother if they can't claim the shortfall so iin Auckland that will be a problem as well.
Labour continues to spout off ideas that they think will appeal to certain people without the thought of the consequences and any detail.
Seriously though, do people really think that the Labour Party have the successful people that have the ability to be able to run the country going by past record?
Force up rents...umm no. Landlords are already charging as much as they can. Force them to sell up, yep. They no longer have the advantage over home owners, thus it will be more economic for the home owner.
Great for society as our young people get into their homes, start renovating (the landlords sure aint) and care for homes and suburbs again.
Expect more to come..as the polls will lift and encourage more of these fight back polcies. The 'correction' will now acclerate..regarless of wether labour might win or not.
Yes, cartels can only operate within their boundaries. "Passing on costs" sounds all very well, but the h'hold income is unlike public finance: it cannot be created. H'holds have limitations on what they can spend based on their income. "Passing on costs" to consumers or tenants merely means that less money is spent in other sectors of the economy, primarily those sectors most exposed to consumer spending, like retail. Spend less on retail and this affects the wider economy so businesses close (sorry new immigrants); jobs are lost (sorry new immigrants and 1st-plus generation NZers); and downward pressure on incomes.
This is simple economics but not many people are really inclined to address it.
most investors buy current lower quartile stock and are in direct competition with the FHB for the same properties
the negative gearing allows them to go deeper in price as they can claw some back so that has been why there numbers have shot up whilst the FHB has decreased. we know this from plenty of Stats out there
so yes it is a good thing that it will be ring fenced and make investors become more postive geared and mean that a FHB is on an equal footing when competing to Buy
This coming from a policy maker in Wellington who made sure Auckland government workers (Nurses and policeman etc) do not get paid more than those working in Akaroa. Seems a bit short sighted considering these hard working individuals now cant afford to live in Auckland.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.