Labour has announced that they are removing the ability of rental property providers to offset losses. They call it a speculation tax loophole, but it is a tax provision available to all investments.
“Labour sees the policy as helping first home buyers compete with investors, but the benefit of tax deductibility has been greatly exaggerated,” says Andrew King, Executive Officer of the NZ Property Investors’ Federation.
If an investor pays $10,000 more for a property it will cost them an extra $391 a year in mortgage interest after claiming a tax deduction. If a home owner did the same, they would pay an extra $583 a year, or just $192 more than the investor. Yes the investor has an advantage, but it is not so great that the investor will pay a significantly higher price for a property than a home owner.
Even with a tax deduction and fronting up with a $54,000 cash deposit, it will cost an investor $6,184 in the first year to buy and provide the average NZ home to a tenant.
If the ability to claim losses is taken away from rental property providers, it will increase the cost of providing the average NZ home from $6,184 a year to $10,293. This will add over $4,000 a year to this cost, an increase of over 65% or $79 per week.
A new Government study shows that it is cheaper to rent a home in NZ than it is to own one. The average NZ home currently costs $6,975 a year less to rent than it does to own. This is a saving of $134 each week.
Labour's proposal would likely result in increased rents, making it be harder for first home buyers to save the deposits required to purchase homes. Labour’s policy will not make it easier for first home buyers.comments powered by Disqus