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Uncertainty prevails, as Government is yet to detail interest deductibility tax change three weeks out from rules being applied to most residential property investors

Uncertainty prevails, as Government is yet to detail interest deductibility tax change three weeks out from rules being applied to most residential property investors

Most residential property investors will in three weeks’ time need to start complying with a major rule change that will see them pay more tax.

The Government in March announced that from October 1, most residential property investors will gradually no longer be able to deduct interest as an expense when paying tax. The rules already apply to investors who bought property on or after March 27.

The move came as a surprise and is aimed at cooling the housing market by easing demand for property by investors.

However, the Government is yet to detail exactly what the rules will look like, and what will constitute a “new build”, which will be exempt from the change.

A spokesperson for Revenue Minister David Parker told interest.co.nz that details would be unveiled at an undetermined date before October 1.

He said it was “likely” the rule change would be introduced through a Supplementary Order Paper (SOP) linked to the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill.

He said the SOP would go through the full select committee process. The bill was introduced to parliament on Wednesday, and is yet to have its first reading.  

Rules might not be set in stone until March 2022

The pinch for property investors is that even if the SOP is published within the next three weeks, it could be tweaked before the bill is passed.

Chartered Accountants Australia and New Zealand tax lead, John Cuthbertson, expected the bill to be passed by March 31, 2022.

So, property investors might have to wait until then before all the details of the rule change are set in stone, even though the change applies from before then.

Uncertainty around new builds

Cuthbertson worried about the uncertainty around the ins and outs of the new rules, and how investors would account for the change with their record-keeping until the bill is enacted.

He said a number of questions also remained around how the change would interact with other tax rules, like the bright-line test and the ring-fencing of rental losses.

Chartered Accountants Australia and New Zealand’s submission to the Government on the proposed interest deductibility rule change and extension of the bright-line test from five to 10 years is over 100 pages long. 

Cuthbertson noted the headline issue people want clarity on is around what constitutes a “new build”, exempt from the rule change. For example, is a dwelling considered “new” for five, 10 or 20 years, and does it matter who owns it during that time?

National’s Finance spokesperson, Andrew Bayly, agreed.

“Taxpayers have a right to know how the new interest limitation rules will work in practice: for example, what is the definition of a ‘new build’ and who will be entitled to the concession to deduct interest and for how long; and whether build-to-rent properties will be captured under the interest deductibility rules," he said. 

Warning over change being rushed

Bayly wants the change to only take effect on April 1, 2022 - if at all. National has committed to reversing the change if elected to government.

Tax accountant, Terry Baucher of Baucher Consulting, also suggested the change take effect from April. 

He didn’t believe this would see investors rush into the market and pump up prices before then, as the message around the fact investors will need to pay more tax in the future has already been delivered.

Without the details of the rule change ironed out, government officials have been unable to estimate how much it would cost investors.

Treasury’s best guess was that it would’ve costed $800 million if fully implemented in 2018/19, and had current interest rates prevailed.

National is also adamant the change needs to go through the proper select committee process, so members of the public have another chance to have their say, before the legislation is finalised.

As for the issue of the tax change likely being enacted via an SOP rather than a stand-alone bill, barrister Graeme Edgeler said this shouldn’t matter, provided the SOP goes through select committee.

SOPs are usually used to make policy changes to a bill after it’s been introduced to Parliament.

Edgeler said the mechanism shouldn't make it harder to update the rules in the future. Using an SOP rather than a separate bill can save Parliament time. 

Here’s a brief summary of what the Government has proposed the rules look:

  • Deductions for interest expenses on residential properties will be restricted from 1 October 2021.
  • Interest deductibility on a mortgage on a residential investment property acquired before 27 March 2021 will be gradually phased out between 1 October 2021 and 31 March 2025. Non-grandparented interest would immediately cease to be deductible from 1 October 2021.
  • Interest deductibility on a residential investment property acquired on or after 27 March would immediately cease to be deductible from 1 October 2021, unless an exemption applies.
  • Property development and new builds would be exempt from the interest limitation rules. In addition, new builds would be subject to a five year brightline test, rather than the ten year test.
  • Non-residential properties (for example commercial or industrial properties) would not be subject to the new rules. Also excluded would be employee accommodation, farmland, care facilities such as hospitals, convalescent homes, nursing homes, and hospices, commercial accommodation such as hotels, motels and boarding houses retirement villages and rest homes.
  • The main home would not be affected by the new rules. Interest related to any income-earning use of an owner-occupier’s main home such as a flatting situation would continue to be deductible.
  • Community housing providers will not be affected by the interest limitation rules if they are charities or otherwise tax exempt. The Government also proposes to exempt Kāinga Ora and its wholly owned subsidiaries from the interest limitation rules.

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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.

126 Comments

Leading to less rental availability due to accidental landlords selling before they get caught. 

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6

...and more housing stock on the market. A house doesn't get burned down when a landlord sells. 

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32

It’s well established that landlords selling properties does reduce the housing stock. that seems to be due to rental houses having a far greater number of occupants than the average owner occupied home.

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13

Correlation does not equal causation.

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2

@Dongleberry You seem to have identified home ownership as the cause of the housing shortage, if you identify people buying their own home to live in as the problem would you also advocate that home owners selling their houses to the government to then rent off the government as a solution. Or does your hypocritical logic only support a world view where YOU are the landlord and saviour.

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3

It's not actually 'well established' that landlords selling properties reduces housing stock. See this article for a debunking of that claim: https://blog.andrewduncan.co.nz/property-investors-impact-on-housing-si…

Basically, whether it does reduce housing stock depends on the answer to two questions:

1. What is the average occupancy rate of a rented vs an owner-occupied property? 2. Given the type of property it is, is the occupancy level likely to change whether it is rented or owner-occupied (e.g., I knew some very wealth individuals when I was a student who owned the property they lived in and rented out rooms to friends. The occupancy rate of these flats was not lower than the occupancy rates of flats, despite the fact they were owner occupied). 

 

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3

Tinkering with tax will do nothing for the overwhelming majority of tenants. The absolute high point of homeownership in New Zealand in the 20th century was in 1990, when 60% of adult NZers owned homes.....2 out of 5 NZers did not. 

Even if landlords do sell, they're prevented from doing so for years because of massive six figure tax bills. I talked with someone two days ago who has had a tenant move out. They want to sell but can't for two years without paying a bright line tax, so it's going to sit empty until then and be renovated for sale in 2023

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4

Don't want to burst your bubble there chief but the tax is only payable on the PROFIT, not the total sale price. But nice trolling with the Even if landlords do sell, they're prevented from doing so for years because of massive six figure tax bills. 

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11

This house is in Lower Hutt and is worth probably about a million now. It was bought three years ago for less than 600k. If it gets sold now the tax on it will be 150k-200k at 39%.

 

Lower Hutt median price has increased by 37% in the last 12 months if you doubt these numbers or still think I'm trolling.

https://www.reinz.co.nz/Media/Default/Statistic%20Documents/2021/Reside…

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5

39% of 400k is 160k max.  They are still walking away with a small fortune where we should have a comprehensive CGT on every sale except the single family home. Cry me a river. 

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17

Last I checked, $160,000 is still "a massive six figure tax bill". 

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4

But doesn't prevent a landlord selling .

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5

No more than having to pay PAYE stops me from getting up and going to work each day. You know, actual labour. Why property investors think they should be treated like gods is beyond me. 

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It does if they have basic financial literacy and can afford to cover the rental shortfall from their own pocket.   Sell now and pay $160k in tax, or flick it over to an interest only mortgage and keep the rental at a ~$5k/annum loss for another year or two then sell and keep the $160k. 

If labour had really wanted to get landlords out of the game in a hurry, they would have suspended the brightline test for properties purchased before the announcement for a year to encourage them to sell.

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He won't be paying a cent of it. It's easily avoided by keeping the property empty for another two years.

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5

That loophole needs to change.

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A house down the road from me just sold for $800,000 more than what it was purchased for last year.  The tax on that would be $312,000 if the property had been a rental. 

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1

That sounds completely fair

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If I make 800k in a year in my business. I have to pay tax on it.

It's insane.

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Not if you sell the business. Also you can deduct interest if you borrowed for business assets or working capital. Property is the only asset class that gets these special tax laws made for it. 

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Yeah no you still have to pay tax on any business profit you make regardless of whether you sell the business or not.

Property is the only investment class that has escaped reasonable taxation for all these years.

Yes interest deductibility is a new one, but look at the social destruction increasingly wealthy property hoarders are creating for our country. The government is trying to send a message and I would support an even stronger one.

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6

You have to pay tax on net profit from property investment as well, which goes back to the point of the original article - residential property is the only asset class where borrowing for investment is not tax deductible. The end result is going to be rents are set to skyrocket due to this legislation.
It’s disingenuous to suggest property is somehow tax-advantaged relative to other assets. Peter Beck just made over a hundred million yesterday and he can sell all his shares tomorrow without paying a cent in tax. The same is true for all the players in the startup bubble economy (well, except the workers with employee share schemes, the IRD goes after them). If the government wants to send a message they can start by making it easier to get housing built and cutting red tape. That’s exactly what Scott Morrison’s government is doing, they realise that government restrictions are the entire reason western economies are in this mess, nothing to do with a lack of officious and unfair taxes on households.

https://www.afr.com/policy/economy/new-inquiry-into-restrictions-on-hou…

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Property investors are only being asked to make sure their investment stands on its own two feet. Why should the taxpayer underwrite year after year of loss in the form of refunds (mostly driven by interest, an advantage property investors have over owner occupiers who actually own houses to live in) and then the 'investor' gets to walk away with a huge tax-free windfall at the end? 

Investors can yank themselves over the fact they now have to pay nominal taxes-year-on-year while they accumulate their absolutely massive gains. It's hardly the 'poor me' story of the century, considering the extreme cost in terms of social cohesion while they fill their bags at the expense of younger Kiwis. 

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Oh my god, imagine having to pay tax on income you havent had to lift a finger for. Its criminal.

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100% this. The entitlement of the property ‘investors’ is just sad. 
‘BuT I’m PrOvIDiDInG PeOpLe ShElTeR and deserve my gains’

 

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12

No one has to pay the tax if they don't sell the property within the brightline. That's the point.

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5

It really is pathetic. 

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2

It’s pathetic lawmaking. The point of the original brightline tax was to ensure that those flipping properties were captured - someone might buy a property in a rising market and sell it after a few months, banking the proceeds to pay down their mortgage. Someone else might move houses 6 times in 7 years, renovating and upgrading each time. Behaviours like that were not previously taxable and were clearly done for the purpose of capital gain. A 2 year period captures transactions like that with little overreach.

The extension to 5 years and pending extension to 10 years solves none of those problems and creates new ones like incentivising empty homes. IRD and Treasury both warned Nash and Little that these changes would result in increased rents, they didn’t care because there were votes in it - the strongmen were standing up to property investors. The entire approach to housing under the current government has been spineless, incompetent and incoherent, their divide and conquer politics have succeeded in vilifying landlords, ensuring Labour can avoid scrutiny over their policy failures while passing law after law that their advisers tell them will increase rents and make the market worse for everyone. Meanwhile prices just keep going up and up and they pile on more and more regulation. Their next moves are to go after first home buyers and stop them from purchasing to slow the market with DTIs and LVR restrictions. What’s actually needed is less populist bullshit like tax changes and more focus on fundamentals like infrastructure, land zoning and cost of building materials. We’ve seen Twyford push through some good policy in this area like the National Policy on Urban Development but there’s been little action on RMA reform or building materials. What has been proposed on RMA reform is progressing at a glacial pace and appears to have been hijacked by the Labour Maori Caucus to emphasise Iwi land rights and ensure cultural outcomes take priority rather than getting more houses built. What it will likely do is entrench the Kiwi culture of overpriced housing due to shortages of dwellings and lack of infrastructure funding. At least that will be consistent with the last 4 decades of governance in this country, we would hate to see a cultural change where governments spend money on new greenfields, some developers might make money off it, and there is nothing politicians hate more than seeing the private market make a profit.

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I am not a fan of a difficult CG law, however, for most property investors, the intention is to make money from a rising asset price plain and simple. Based on this intention - leaving a house empty for 2 years to escape paying tax is telling - any capital gained should be taxed.

The solution is pretty easy in my opinion, the government needs to become the biggest landlord in the country. If you want to be a private provider of rental accomodation, money is lent at business rates.

Currently there is no political will to do anything, I guess the day may come.

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3

The government is, and always has been, the biggest landlord in the country. They’ve proven incapable of meeting demand and the standard of their homes is significantly worse than that provided by the private market based on census data.

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3

How far back does your data goes.

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If someone had a pattern of doing that it was "clearly done for the purpose of capital gain" then yes, the existing Income Tax Act captured that quite clearly.

What you're after is a law that somehow captures people who are intent on breaking the law. We have that too, it's called an anti-avoidance provision. 

But sure, now that we've locked in gold plated, apparently untouched gains for investors, they're suddenly off limits and it's everyone else's fault. 

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The whataboutery displayed by so many on Interest and in NZ generally over house prices defies belief - by any measure we have vastly overpriced housing relative to average income. "If it was in Sydney, it'd be double that". But it's not and we're not - it's a million dollars+ for the average house in Auckland, where average salaries are $68,000; where people have to sleep in cars; where families are housed in 'emergency' accommodation motels which get taxpayer-funded subsidies, which also flow into oh-so-benevolent landlords' pockets: who then have the bared-faced arrogant cheek to complain they may have to pay a percentage back out of their ridiculous gains. Leave a house empty for a couple of years to avoid paying tax, while people are struggling to get a roof over their heads? You should hang your head in shame.

Good on you for being lucky enough to buy early / be able to leverage / able to borrow from parents / able to see the future (if you can, why not just buy a lotto ticket?), but spare us all the moans about having to pay your share back to a system you've taken advantage of. And please stop the woeful comparisons to other places, has it ever occurred to you that people are suffering there too? Standard three bedroom, semi-detacheds in London suburbs are now converted into flats, with sheds in the garden to accommodate more poor souls - are they all 'lazy, avo-on-toast munching' entitled millennials too? Here's an idea, avoid paying six-figures in tax by selling the house for what you paid for it plus, say $100k. Seller reduces his tax bill, FHB gets an affordable home, that's win-win isn't it? 

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The more landlords that sell up the better. We need more houses available for owner / occupiers. 

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27

Renters may not afford the capital cost nor desire ownership.  They rely on access to rental availability.  

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8

Do you think property investment might have played a part in forcing prices so high that people can't access home ownership and therefore have to rent?

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21

One of a range of factors. 
However, accidental landlords are often not pursuing investment and driving prices - they simply wish to move/buy elsewhere and keep their old house to rent out. Often at below market rental rates. 

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5

Doesn't really work when it's the default get-rich-quick scheme and every man and his dog are getting in on it at a far higher rate than we can supply houses to the market, does it? 

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10

See Dongleberrys comment above.  
 

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4

Again, greater availability of houses and more homes on the hands of owners would see less people being crammed into rentals to cover yields on grossly inflated property prices, driven up by investor activity and people trying to flip properties at the lower/entry level end of the market.

You can't keep claiming the bugs are features m8, it might work for software but given the social costs and externalities I'm not sure it can be considered moral anymore. 

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6

Take away with one hand and give with the other is the name of the game.

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0

"Question marks remain over major tax change due to affect most residential property investors from Oct 1"

 

Hi Jenee,

let us be honest, everyone knows that tax change will not have any impact to talk about. Government and RBNZ are aware, so do you, hence the question.

Capital Gains are so strong that over shadows everything and unless and untill both government and rbnz act strongly..........ponzi will continue.

This all is playing with time as Jacinda, Robertson and RBNZ are open that do not want house price rise to stop.

Problem is that neither wants the ponzi to stop but being under pressure to act, come out with lip service or tweak a little ensuring that party continues.

We have repeatedly commented many a time and am sure you too know and understand that trying to contain is a FARCE.

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9

The basis of your post seems to be that the Ponzi will go on forever?

 

 

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3

Will Jacinda and Orr allow the ponzi to stop.

It is too BIG.

Characteristics of a Ponzi either it moves up or down and has no room for balanced approach.

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0

RBNZ has already signalled they're going to implement DTI ratios, which will be another anchor on the housing market, alongside this interest deductibility change.

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8

The 'new rules' which aren't rules were only going to be effective if house prices declined.

Given Labour want house price increases and have a proven track-record of delivering subsidies to that end - these tax changes are meaningless and will probably increase rents.

Though touted as to "tilt the housing market in favor of FHBs", this is proving to be a ridiculous assertion, especially given Labour don't want FHBs in the market at these prices.

It was always an aberrant use of tax law but now it serves no purpose. These tax measures were announced along side an infrastructure spend.. yet there has been no movement on land banking and after the 'bike bridge' fiasco and Minister Roberson finding billions of dollars every-other-day - all credibility is lost.

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9

these tax changes are meaningless and will probably increase rents.

If the landlord is making an after tax profit then his tax is effectively being paid by his tenant from his, the tenant's, already tax paid income. So make rental income tax free. Then, if necessary, impose on the landlord either a land tax or a tax based on the landlord's equity.

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1

If this government actually knew what it was doing, it would be a fine thing indeed.

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8

Wouldn't be surprised if this announcement gets delayed because of covid...hey it is Delta after all...

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9

Many people have diverted from business into property business, so this can be never be stopped specially now, as many have switched in to housing business -  only economy in NZ.

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8

You are correct. Many have switched to housing business as no other business offer so much easy money in such short time on top of it have assurance from prime minister of the country,  Jacinda and her knights  -  that come what may she will not allow the ponzi to fall.

So many who have switched will not stop speculating after tasting the blood unless this assh%$@ acts but ......

 

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10

Compared to other pacific rim countries with similar income levels NZ homes are quite cheap. Check out the prices of a 2 bdrm apartment in the capital cities of places like Korea, Taiwan, Japan. The richer countries of course are more expensive again, Singapore ( non government subsidized ) or of course Sydney,  Vancouver, San Francisco or Hawaii.forget about stand alone houses they’re for the truly rich. 

 

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6

The richer countries of course are more expensive again, Singapore ( non government subsidized ) or of course Sydney,  Vancouver, San Francisco or Hawaii

 

I never knew that Sydney, Vancouver, SF, and Hawaii were countries. Thanks for enlightening me. 

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Apparently it is 'well established'

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Silly comment J.C. 

Comments like this are why I have drifted away from Interest.co.

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7

You obviously haven't drifted far enough because you felt driven to reply to comment. 

For some people, including myself, literacy is important in discussions. If people want to discuss why 'Sydney house prices are representative of Australia', go ahead by all means. But saying that 'Australia has expensive house prices' is fair enough but Look at Sydney' as an example is kind of BBQ banter that I usually don't involve myself in. Putting out lack of literacy and accuracy is useful in discussion.     

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6

I totally agree with J.C. comment. Moreover, using Sydney prices as representative of the whole of Australia is extremely disingenuous to say the least, and I am really trying hard to be polite here.

Just as an example, the price per sq. mt. for an apartment in Brisbane is around half of that in Sydney. An apartment in Auckland costs around 60% (on a per sq. mt. basis) more than in Brisbane. And many apartments in Auckland are just leaky dumps. Brisbane has also much bigger population and much better services than Auckland. And did I mention the different salary levels in AU as compared with NZ ?

Any comprehensive analysis of housing costs in NZ versus Australia (actually, versus virtually any other country in the world) overwhelmingly  points to the NZ housing market being an extremely over-inflated bubble, a Ponzi scheme with no economic fundamentals justifying such ridiculous prices.  

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7

Using Brisbane as a proxy for Australia is disingenuous as well. House prices in other capital cities are not as cheap as they are in Brisbane.

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4

Using Brisbane as a proxy for Australia is disingenuous as well. House prices in other capital cities are not as cheap as they are in Brisbane. 

Not correct. According to Domain, median house prices in Brissie are higher than in Perth, Adelaide, and Hobart. But house prices in Brissie are still 50% lower than the national median. What that shows is the distribution of house prices is wildly skewed towards the "bubble center" of Sydney, Melbourne, and Canberra.  

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I don't think any reasonable person would read the comment as implying it represented the whole of the country. You can give examples using cities especially when those cities have a large amount of the population living there like Sydney for example with 20% of Australia's population.

I suspect the response is more emotional than scholarly. I don't have an issue with the general gist of the argument if presented in an adult way but the tone was very poor.

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I don't think any reasonable person would read the comment as implying it represented the whole of the country. You can give examples using cities especially when those cities have a large amount of the population living there like Sydney for example with 20% of Australia's population.

Wrong. If Sydney house prices were representative of Australia, then the median house price nationwide would be more or less the same as the median house price in Sydney. It's not. Sydney median house prices are 50% higher than the national average. 

If you don't like data-driven facts over BBQ banter, that's up to you.  But there's no crime in accuracy and literacy. It should be encouraged.

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You're just being pedantic over a rather minor thing. Not the first time. All Auckland investors would have understood Dongleberry's general point. We read it as, "Compared to other pacific rim countries with similar income levels NZ homes are quite cheap in the major urban areas."

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If you're going to compare house price to income, then actually do it. Using Demographia as a reference point, if Australia is your comparative yardstick, NZ has a median multiple (2nd only after HK) of 10 and Australia has a median multiple of 7.7. The median multiple for the U.S. is almost half that of NZ. 

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0

I am from Korea, and lived Tokyo for a while. 

2 bed room house (appx, 70~90 m2) in main part of Seoul is now selling at 4m NZD. showing 1.5m jump from pre-Covid.

Moreover, that increase is after Korean government introduced up to 80% captial gain tax when you own two or more houses.

Banks are not alllowed to make a loan to any house cost more than 2 m.

NZ house is still a bargain.  

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10

“NZ house is still a bargain.”

NZ house price has been catching up in the past 20 years. Hard to believe for some but there are still room to go. 

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Grant Robinson inventing something that he has no idea about. Stay out of the property market. Just remember Grant this situation now was created by your Reserve Bank Of NZ not Covid 19 this was happening Sept 2018, its a world wide event of Debt, End of story

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2

Dont worry Cindys mother Helen Clark will sort things as she interfering with everything else

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9

Cindy's mother is in boots and all owning 6 rentals as well as the Mt Eden one she lives in.

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If only she had had six kids who would now be contributing tax payers, v.s. rentals she may have a different perspective.

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It will get delayed until end of fy. Middle of fy is bloody stupid.

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2

Anyone who believes that interest  tax deductibility changes will increase housing supply and reduce prices is dreaming. The latest north and south article spells out how the structural shift in the market has occurred over successive governments. NOTHING the current government is doing will lead to an increase in supply to meet demand.Printing more money is  leading to inflation and higher prices for all goods and services making non asset owners poorer. Labour HAS failed to deliver anything meaningful apart from providing handouts to its voters with money created from thin air, SHAMEFUL.

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They've kept the motel industry afloat tho.

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NOTHING the current government is doing will lead to an increase in supply to meet demand

You realise that right now they country it's building the most houses per capita ever? Higher than the previous peak in the 1970s? And with immigration shut down, this building rate is meaningfully biting into the housing deficit that built up while National was in power when they turned in the immigration taps in order to boost growth but didn't bother to fund the infrastructure required to support it?

The government is also building the most state housing of any government since the 1940s.

It seems that apparently this still isn't enough to stop price rises, and perhaps the only thing that will be in a glut, perhaps because the market is acting irrationally.

 

 

 

 

 

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" You realise that right now they country it's building the most houses per capita ever? Higher than the previous peak in the 1970s ?".Lathanide can you provide the data to support your comments.

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Turns out I mis-read/mis-remembered the thing I saw. Housing consents in the year to 2021 July were 45,000, which beats the previous peak of 40,000 set in ~1973, but there were only 3 million people then vs 5 million today. So still not exceeding it per-capita, but it's much higher per capita that at any point under the previous National government.

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Consents does not equal builds. And a consent doesn’t equal additional housing stock either.

Secondly, the consents is not because of the Government. In the same way that low consents in the period 2009-2012 had anything do with the National Government at that time.

You will soon be rivalling xingmowang as the chief propagandist on interest.co.nz

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The numbers from the 1970's are consents, so it's comparing like to like.

Also I'm never said consents are because of the government. Simply observing that consents under this government are higher than anything achieved under the previous National government.

In the same way that low consents in the period 2009-2012 had anything do with the National Government at that time.

Yeah, because the National government couldn't possibly have done something like insulated the construction sector from the worldwide downturn, borrow lots of money and pump it into building state houses when labour was available (and lots leaving to Australia).

Oh wait, they could have done that, but they simply chose not to for ideological reasons - denying there was a housing crisis and tax cuts were better at winning votes.

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Lanthanide, you said that: 

You realise that right now they country it's building the most houses per capita ever

When it was pointed this was incorrect, you’ve used consent data to support your narrative. But the consent data does not support that conclusion either. 

You then started a comparison between Labour and National because everything is about Labour and National, right? You know full well that many issues could have been resolved by now had their been bipartisan consensus and Labour not opposing it simply because they were opposition (Andrew Little’s claim John Key was scaremongering about domestic terrorist surveillance) has not aged well. You are continuing the tribalism that has created these problems over successive Governments (both red and blue).

I can guarantee you that these issues will not be even close to being resolved, even after a third Ardern term, and are likely to be worse. 

 

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When it was pointed this was incorrect

Actually when the person asked me for the source, that's when I knew I was incorrect, and said so. This happened on Sunday because I actually had other things to do on Saturday after I made my comment.

You then started a comparison between Labour and National because everything is about Labour and National, right?

I didn't "start" a comparison. The comment I was replying to already referred to "the current government". There's an inherent claim in that statement that 'some other government' (ie, a National one) would be doing better, even if the evidence shows the previous government sat on their hands and denied there was a housing crisis while pumping up immigration.

Andrew Little’s claim John Key was scaremongering about domestic terrorist surveillance

Maybe if Collins hadn't dropped the review of the domestic terrorism laws when she was Justice minister in 2013, there would have been more evidence that the laws weren't fit for purpose and Andrew Little wouldn't have said those things.

I can guarantee you that these issues will not be even close to being resolved

The comment I was replying to is that the current government would do nothing to lead to an increase in supply to meet demand. Except supply is already increasing dramatically under this government, to meet demand. I never claimed it has been or would be "resolved" by this government, or a 3rd term of this government.

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Lanthanide - That is simply not true !

The amount of houses being built has risen but not exceeded the 1974 peak taking into account the population of 3mil at that time now 5mil.

It would seem likely that we have reached the peak of building this cycle.

Immigration is just on hold, there is a demand for labour worldwide and NZ will need to open up probably at a reduced rate for our economy to be able to fully function.

"The government is also building the most state housing of any government since the 1940s" - sorry this is Labour political spin !

Around Auckland most of the new houses are high density boxes that do not compete with real houses on real sections.

The Brightline test put out to 10 years reduces the pool of houses coming to the market and incentivises more money being put into the family home to avoid Capital Gains.

The list of regulations for rentals is doing nothing more than reducing the pool of rentals and costs being put into increased rents.

Everything this Government has done is contributing the the situation becoming worse.

There are more property price rises coming particularly in Auckland.

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Auckland is heading for English style Coronation street type development. I assure you these types of developments do count as real houses. If you disagree try asking the guy living in a cave at the Mount. There are plenty of people like him in Orkland, but in cars, under bridges and in converted motels.

Suremanly it's not just all about tax free gain and parasitic income tax offset? If sadly it is I can see more tax changes coming.

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31 August 2021, for the year ended July 2021 "the number of dwellings consented per 1000 residents was 8.8"  This is significantly below the peak of 13.4 dwellings per 1000 in the year ended December1 1973. Stats New Zealand.  Then one needs to look at the mix and tear down numbers and the added new dwellings for a true comparison . 

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"The government is also building the most state housing of any government since the 1940s" - sorry this is Labour political spin !

Around Auckland most of the new houses are high density boxes that do not compete with real houses on real sections.

Are they houses that people can live in built and owned by the government, or not? Even if small, they're going to be brand new and of better quality than what a lot of people in the country own and live in.

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Rodger Douglas. I'm just going to leave this in your mind.

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Factually incorrect. This is worse than your comment the other day that all National has for policy is tax cuts. You need to get out of your Princes St bubble repeating Labour Party slogans because blind partisanship and ideology is actually unhelpful to resolving the problems in NZ, which are complex.

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What's clear is that the disgusting creatures who announced this law have no care for its consequences outside of their own political futures. It has already succeeded in taking the heat off them, something which was already easing due to the deadline they had imposed on investors to buy now or buy never with LVR restrictions before the end of March.

The future should be clear and obvious - rents are set to break new records as investors face cashflow shortages of ~9k/year on current rates or ~32k/year based on 'neutral 5 year rates' which the RBNZ are using to justify their tighter LVR restrictions. It will be interesting to see which renters are able to afford market rates of another $600/week and which are not. Investors will likely be blamed again for this government policy.

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You don't seem to understand the new rules?

On my rental property I'm currently paying about $7,300 per year in mortgage interest - a lot less than many, but lets continue for calculation purposes. In 4 years time, this will not be tax deductible at all. Thus I'll have to pay 33% tax on this $7,300, which is an extra $2,409 cost to my cash flow. Per week that'd be an extra $46 in rent to cover it.

If you were currently paying $32k per year in mortgage interest, when it is no longer deductible, at the 33% tax rate this would cost another $10,560 in cash flow, or $203 per week. Not $600.

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People are going to be paying a lot more than 32k/year in interest.

If you buy a rental for the average Auckland house price of $1.14 million, fully geared, and are paying interest at the RBNZ's 5 year neutral rate of 7% (their rate, not mine), you will be paying 80k/year in interest. That doesn't get taxed at 33% for everyone, particularly those with rental income, a lot of them will be taxed at the new top rate of 39%.

39% tax on 80k income is....$31,200 = $600/week

It's a multibillion dollar tax grab by Grant and Jacinda that renters are going to be paying for. Renters United know it, that's why they're campaigning for rent controls....the more regulation and tax that gets piled onto property investors the worse the situation gets for those at the bottom of the heap. 

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You actually believe that retail interest rates are going to get to anything like 7% within a decade?   cute.

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RBNZ are the ones who are claiming that so they can force through their DTIs and tighten LVRs to go after first home buyers. Surely you’re not suggesting it’s just another power grab outside their mandate? We should take them at their word.

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Lol, what a load of emotive claptrap that is.

And yes, the RBNZ can tighten the LVRs and DTIs are on the way, not to target FHB, to target risky lending, they've already reined in investors, now its the OOs turn. 

And no, its not outside the RBNZs mandate. Its exactly what is ma dated, financial stability.

   Retail mortgage rates aren't entirely under the RBNZs control, and if the economy starts slowing after a few OCR increases those will get wound back when we start missing the inflation target (in a few years, not the next couple)

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Hmmm, gosh. Whatever will happen to house prices if interest rates were at 7%? I bet they'll stay exactly as they are.

Hmmm, gosh. Whatever will happen to house prices if tenants are 'forced' to pay $1,200 per week in rent but cannot afford $1,200 per week in rent. I bet they'll sty exactly as they are.

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That's incorrect. Labour will just pump out more of my taxes as landlord supplement (or print).

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Everyone will be on the social housing waitlist, living in motels at a cost of $2000-$3000 a week, and WINZ would be placing people into private rentals and subsidising the $1200 a week via the taxpayer funded Accommodation Supplement. 

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Per week that'd be an extra $46 in rent to cover it.

The tenant should pay a fair rental, but he shouldn't have to contribute to the costs of the house itself since the latter is really your property, not his. If you are not prepared to pay those ownership costs, from your other income if necessary, the perhaps you should not have bought the property in the first place.

The interest, being an 'ownership' cost, should never have been deductible in the first place.

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I have little to no faith in ANY of our politicians right now. 

Imagine bringing in new rules designed to improve housing stock quality for tenants (arguably fair enough) at a certain date, only for the rule to not apply to their own stock for another 3-4 years. I've heard that is about 1/3 of the rental inventory from NZ. 

Shameful, rules for thee but not for me.... 

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Looks like the insomniac vested interest crew have been alerted

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Time zones my friend, time zones...

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Best example to prove how all so called experts / advisor spin for biased vested reason.

This gentleman representing real estate ( if he was independent as proclaim will not highlight it that am independent) to suit his vested biased interest - spin and media takes him seriously :

https://www.newstalkzb.co.nz/on-air/simon-barnett-and-james-daniels-aft…

 

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Kneejerk muppetry.

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It's no big deal. Investors didnt buy just for the tax loss offset because that would clearly be a parasitic act against the rest of NZ tax payers. They bought to provide housing for the good of society. That's what the keep say...

Pretty sure there is a "tui" in there somewhere.

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In an ideal world landlords would rent out only properties which they owned unencumbered. One of the problems with the rental property market, I think, is that too many landlords are letting out properties which they are still paying for, and  then they expect the rents they charge to be sufficient to cover their mortgage payments as well as their other outgoings. 

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Just another step down the road by this Socialist Communist government to serf ville, they will have all of you plowing the fields in due course to get your fair share of the corn comrades.

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Am i allowed to plant corn in the scappy backyard of my mouldy 750 p/wk 3 beddy renter?

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If you can find time in between the different jobs you are working to keep giving all your money to someone that is besides themselves because the bloody government wants to take a "6 figure" tax payment from them for a property they have owned 5 years, all for the social good of course, to keep you and your flatties warm and dry, at least somewhat warmer and drier than being outside anyway, but now that those long 5 years of pure generosity are up it's probably time to pack it in and sell up and pocket the balance 6 figure sum, although, the poor bugger is half considering holding for longer just to avoid the tax bill, but it's probably not worth having tenants because they just cause so much damage to this pristine asset, so with great sadness everyone gets turfed but what choice did the poor landlord have, bloody government.

Honestly my heart just breaks for these poor mum and dad investors.

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Honestly it doesn't

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Is it really moudly. Any tenants I had who complained about mould, didnt open the house up once a day to let our out, used gas heaters and dried clothes inside. Have you tried cleaning the mould ??? Like I do with my own 1970's house ?

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Even if landlords do sell, they're prevented from doing so for years because of massive six figure tax bills.

This shouldn't stop them from selling as they would still retain 67% (probably) of any capital gain.

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Nobody in their right mind will sell because they only have to hold a few more years to pocket a few hundred extra grand.

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Precisely, and even if it's a P house, they still win

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Your forgetting the additional capital gains on top of that over 2 years so thats another $50K plus. But your right nobody is going to hand $200K in tax to the government for no reason.

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Serve 'em bloody right if the property market collapses in those 'few years' - if they are greedy enough to want a 100% return rather than 67%. Not that I'm in favour of capital gains taxes of course, but my opposition is partly due to to the fact that few speculators would be deterred by the loss of that extra 33%. 

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Well I guess they'll have a decision to make. Wait a couple of years and keep 100% of the gain, or sell now, keep 67% and give the remaining third to the government.

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Unless values start dropping, and investors are really the only reason I wish the market would fall right now.

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Prices would have to drop by a fair bit in order for you to be worse off by holding for 2-3 years.

Even a 5% price drop, which is plausible, would likely not make it a bad bet. 10%+ price drop, alongside holding costs such as rates, could seriously start cutting into any benefit.

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Would have to drop by 30% to break even. Interesting comment though, you seem to think others being worse off will somehow make you better off. Really underlines the envy politics that are at play and the divisiveness being fuelled by our current government.

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If it is 'envy politics' to wish for house prices to drop so those who don't own are better off, then it is just as much 'envy politics' for an investor to wish prices to stay the same or increase. Drops in house prices are bad for those who do own and good for those who don't, prices staying flat or increasing are good for those who do own and bad for those who don't. Simple as that. 

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You are making misguided assumptions. I own the property I live in, I have a small mortgage and it is valued at more than the average property price in Auckland. I am not in Auckland. I have little other savings (I am under the age of 40).

I have been a landlord occasionally as a result of circumstance. I had great relationships with my tenants but fundamentally I found the situation distasteful. Why should I have the ability to exert that level of control over someone else's life. If you work relatively hard and want to you should be able to buy a house in this country. That is my firm belief.

Property pricing in New Zealand is hysterical, it's wrong and I want it to change. I will be impacted by that but don't care, as I will still own the home I live in regardless of what it's worth.

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Instead of leveraging their paper equity into an ever growing mountain of illiquid default risk, property speculators could have got off their arses and worked on real businesses with a good ROC and no CGT. This wont be as obvious now as it is when everyone dashes for the one fire exit at the same time.

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Agree. But that requires effort. Speculations is a lazy form of investment. Why actually work and pay tax?

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This policy will substantially increase inequity in NZ.  The losers will be renters & the winners will be property owners.

Rents will continue to go up at unprecedented rates.  Housing prices will continue to increase at unprecedented rates.

Rental property supply will continue to decrease & demand for rental properties will continue to increase resulting in a higher demand for emergency accommodation.  This will result in greater inequity between property owners & renters.

There is inequity in the tax treatment of owner occupied houses & rental properties because no tax is paid on your own home but there are taxes on rental property.  As a result housing asset prices will continue to increase because investment will shift to tax-free owner occupied houses.  
 

There will be a shift to landlords improving their own properties for tax free gain & less maintenance will be spent on rental properties. Again the losers will be renters & the winner will be property owners.

WHAT A DISASTER THIS POLICY IS GOING TO BE.

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... yes .... they're well intended ... but Labours policies over the past 4 years have backfired badly on the very people they purport to assist ... child poverty has risen , drugs & gangs are growing out of sight , house prices & rentals through the roof , productive farmland switched over to radiata pine plantations for carbon credits , and apples rotting on the tree cos the pickers aren't allowed in , covid-19 locking down because of a painfully slow vaccine roll out ... ...

4 years of consistent failures .... 2 to go ... sigh ...

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WHAT A DISASTER THIS POLICY IS GOING TO BE.

The 'disaster' is due to existing conditions in the housing market where, if little or no interest was being paid, the policy would have no effect. I happen to think that if investors in the market cannot invest without borrowing then they should stay out of the market altogether. But if they must borrow and invest then their mortgage payments, including the interest, should not be taken into account in determining the rent to be paid. It seems to me that attempts to get the tenant to pay for the landlord's property, by including those costs in rents, is one of the factors which are pushing up rents.

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Whatever this people do, is to further support the housing ponzi though is said that are doing to contain the ponzi and help FHB.

Hypocrites B$#@ and worse is that this assh$#@ get away with this farce.

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Free up land, get rid of the red tape, and put a focussed effort into increasing construction and supply. 
 

Yes coronation street houses are needed. This is the future of Auckland not all these stand alone dwellings on 1000 or even 500sqm. 
 

Stop meddling and interfering with all these restrictions, regulations and taxes which will only create a synthetic market. 
 

Get that supply up and rents and prices will stabilise and probably even reprice. 

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Could even incentivize Coro-style development:

  • Guaranteed seat in the snug at corner pub
  • Bingo sessions with Ena Sharples
  • Free hairnets

Oh, wait, Bupa, Ryman, Summerset et al have already cornered That market.....

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