REINZ says Budget should have delivered tax cuts

REINZ says allocating $1.4 million to investigate a pilot shared equity scheme is “a dollar short and a day late”, and that the government should have gone further and cut tax rates, thereby removing the incentive to invest in property for taxation reasons.

It argues that by raising the top marginal rate on personal income from 33 to 39 cents in 2000 the government created an incentive for those on the top rate to invest in rental property, because by negatively gearing such an investment they can pay less tax overall.

REINZ argues cutting tax rates would have removed this incentive and removed an artificial driver of house prices.

“The resulting fall in interest rates and inflationary pressure would be beneficial and a more stable housing market would result,” says REINZ national president Murray Cleland. “An alternative would be to make a set amount of mortgage payments tax deductible as is done in other countries.”

The institute does not think other Budget measures to help first homebuyers are sufficient. “The Welcome Home scheme is limited to 2000 first homebuyers, which looks to us to be paltry given that over the last decade 10,000 migrants have arrived in New Zealand every year,” says Cleland.

REINZ also noted that Kiwisaver would reduce the pool of money available for rental property investment, and says measures to increase IRD surveillance of residential property investors will “hinder the objective of ensuring a good quality stock of affordable rental property”.