Property investors uneasy with tax changes
Thursday 5 August 2004
New Zealand Property Investors Federation president Craig Paddon says it is no surprise that submissions are flooding in well-ahead of deadline on the government""'s property depreciation tax paper Repairs and Maintenance to the Tax Depreciation Rules.
By The LandlordPaddon says the proposals in the paper, if adopted, will have a wide-ranging impact on the property investment market in New Zealand.
"The proposals will create disincentives to invest in property, especially for small-time Mum and Dad investors," he said.
The issues paper says the present depreciation regime on rental housing properties, that currently allows an annual deduction of 4% of a building's diminishing value over 50 years, may be "too generous".
Accordingly the issues paper advocates replacing it with a limited straight-line depreciation of 2% a year (which would be equivalent to about 3% a year on a diminishing value basis).
"This means that, for example, a landlord who owns a $150,000 building will have their taxable income increased by around $7,500 over the first six years - forcing them to pay an extra $2,500-$3,000 in tax over that time," Paddon says.
Paddon says under the proposals tenants are the ones who will suffer as landlords will need to increase rents to recover any cashflow losses and to maintain yields.
Read More - Opens in a new window
Commenting is closed
There’s a major housing market downturn coming and it’s likely to reduce the number of investors in the market, according to ANZ economists.
Periods of house price decline are rare and "short-lived", says economist Tony Alexander, amid forecasts of a drop of 10%-15% this year.
Tales of strife and problems abound in the commercial property world these days, but the impact of the Covid-19 pandemic has not been as devastating for all commercial players.
Mortgage lending fell to its lowest level on record last month as the property market ground to a halt during the Covid-19 lockdown.