Earlier this month, the New Zealand Government released an Issues Paper proposing to ‘ring-fencing’ investors’ losses on residential property so they cannot be offset against unrelated wage/salary income, in a bid to level the playing field between property investors and first home buyers.
Today, the Property Institute has hit back, warning the Government that any changes to ‘negative gearing’ will have a “disastrous impact” on the housing market and significantly worsen rental availability and affordability. From Interest.co.nz:
“[The moves] will have a disastrous impact on the market and will significantly worsen the shortage of rental accommodation in our largest cities,” chief executive Ashley church says…
Ring-fencing tax losses will be the ‘final straw’ for many investors and will largely have the effect of pushing them out of the market – further compounding an already serious rental crisis, he says…
Private Landlords provide the lions share of rental accommodation in New Zealand – and in doing so they have saved the State billions over the past few decades, he says.
“Scaring them out of the market is foolhardy, bloody minded, and will constitute a massive ‘own-goal’ for the Government.”.
History doesn’t repeat but it sure does rhyme. We heard the same garbage arguments from Australia’s property lobby when Labor first announced its policy to restrict negative gearing to newly constructed dwellings.
Let’s think about this issue logically for a moment. If New Zealand landlords decide to sell their properties in response to these reforms, what will happen to them? They won’t vanish, but rather will be purchased by owner-occupiers, including first home buyers. In this event, the supply-demand equation for rental properties will be exactly the same, only homes for let will have transfered into homes for sale.
Less landlords does not mean less houses. It means more owners and less renters.
