Gross residential rental yields below bank deposit rates in parts of Auckland as investors chase capital gains. Yields on a slippery slope around the rest of the country

You cannot hate on people for doing what they are incentivised to do.
This is a flaw in central government policy, not a flaw in ethics or character.

If the purpose of buying the property is capital gain it's taxable. Anybody who is negatively geared clearly has an intention of capital gain and should be taxed accordingly. Each and every one.

"For investors chasing better income returns, the indicative yields remain above 6% in Whakatane, Rotorua, Hastings, Wanganui, parts of Taranaki, Palmerston North, parts of the Hutt Valley, Blenheim, parts of Christchurch, Timaru, Ashburton, parts of Dunedin and Invercargill"

Only PN an 'parts of chch' have strong population growth expected out to 2043 (18-20% respectively).

Don't chase yields in small towns with declining population as eventually you'll have no one to rent too (same number houses, less people) that's why yields are so good. Wanganui and gisborne are classic examples, although many would be surprised at how poorly rotoruas and lower hutts population is predicted to be (flat at best out to 2043)

Correct but worth noting many investors are cash buyers so looking at bond yields and cash deposits as alternative places to get a return. Anyway we agree the property market is "fully valued" if not over valued however you look at it unless you expect rents to leap up which I can't see happening.

Sharetrader, you can purchase a property that is cashflow negative initially, but with time as inflation increases wage and rent levels properties become cashflow positive. I would say any property purchased more than 10 years previously, would now be cashflow positive. Many businesses lose money initially think Xero and other start ups. This is how the large money is made but need to hold for at least a decade. Similar to Buffett, high return on capital companies, large portion of profits reinvested, generating even further cashflow, reinvested and so on. But this system akin to investment in property (not speculation) does require patience and time to generate the big returns. Obviously at this stage if purchasing in Auckland, you could be waiting for a fair while for rent rises to convert properties to cashflow positive status.

The intent is not clear (however I believe it would be the intent of many investors in that situation). The investor may be playing the long game and expecting rents to rise over time (not completely crazy). The investor might be expecting interest rates to drop further (optimistic but not completely crazy either). The investor might just be minimising losses until they are in a position to develop the land further or waiting for council rule changes. The investor might just be stupid (you can't fix that) and there is no law against being stupid and losing money.

ask the Donald...

Nah ST, its those damn dodgy tradespeople mate. They need watching like a hawk. ;-)

Me too , no sympathy , but I have even less sympathy for the Government that has allowed this to happen

haha..thanks for calling my Mum and half the readers on this website idiots...jury is out on who are the idiots in this discussion...i have a hunch ;-)

Im living in Christchurch and yes those yields are achievable in certain instances depending on the property type/locality. Sometimes you need to think outside the square. There is a certain type of property where investors are achieving 15%+ returns.

Interesting you should say that - I notice that the latest Spark bonds that were issued only a month or so ago are now trading with a yield above the coupon rate i.e below par value so to speak.

By treating residential real estate as a risk-free asset, the banks have made it very, very dangerous.

Correct , as an ex-banker , I can honestly say it is reckless, and would not have happened 20 years ago , when we valued houses carefully , and checked income rigorously .

Hell ,some banks even checked if the applicant family wife was of child bearing age as a pregnancy could interrupt the mortgage payments of dual income families .

Ask any two year old what will happen to his/ her building blocks if he/ she keeps stacking them up on top of one another , relying on the bottom ones to sustain the top ones.

Our housing is like a an inverted pyramid which is unstable and can topple with the slightest gyration

I absolutely agree, and support yr suggestion, However, this incentive on speculators is enabled by the banks who lend above the LVR that the rental property can support on a standalone basis (above the prudent LVR). I call this lending reckless because of the risk on the entire system caused by lending above the prudent LVR.
The credit flow caused by investors refinancing and recycling their property price growth into additional purchases is much much greater than can be caused by owner occupiers: - this rocket fuel for credit explosion would be eliminated if banks lent responsibly by confining themselves to lending only up to a prudent LVR to investors.
If banks did so they would eliminate the opportunity for negative gearing.
Unfortunately, the internal risk assessments of banks will be managed and manipulated to ensure that they do not look arrive at such an inconvenient result, - and they certainly won't look at the wider system risks and damage caused by lending to "investors".

Key will copy opposition policy if he has to. I'd imagine it wise to for opposition to keep some powder dry. Leaving it as late as possible in the electoral run up to announce such changes as you suggest. What benefit would it be to labour to get too clever this far out..... Just to see Key copy cat (but with watered down versions the msm ignore)?

I note the Treasury has looked at the taxation of investors but they noted:
"If funds are sourced domestically the over-deduction of interest (by rental property owners) will be balanced by over-taxation of the interest in the hands of the lender."
Well that is reassuring!

Awww c'mon mate , its a cool flag !

Let the children have their symbol. 'Freedom of expression'

..I believe he will remove it once key has been kicked for touch. It's to remind us of all the dumb decisions (or lack of decisions) of our leader. Well thats how I look at it anyway.

Isn't that just a sign that when long term rentials become uneconomic landlords switch to book a batch style rental models? If we remove interest deductibility on long term rentals Won't landlords just move to short term book a batch / air BnB / hotel models.