New Zealand Introduce new property laws

Just over the weekend the NZ government has decided to introduce a couple of new property laws including:
1. 33 percent to 39 percent capital gsins tax on properties sold within 10 years,

2, They have scrapped the practice of claiming interest deductibility for investment properties.

What do you think about this and what impact will it have on the NZ property market? Do you think we are not far from implementing APRA policies again.
Here is the article
Housing changes kick in from this weekend as Government unveils major policy

 

These rules do not apply to commercial and some residential properties.

 

NZ are replicating what the UK did. Our Treasury and Govt has to be looking at both and wondering and no doubts will be looking at data to model on our economy. NZs big reason for doing this is the 20% increase in prices for first home buyers in just 18 months. Thats like here. This mini boom we are in is to the benefit of existing owners and investors. There has to be some sort of easing to limit the parlay into property which is a self fuelled boom. Nobody predicted the UK axing interest deductions. Nobody saw the NZ Govt following the UK. In the post pandemic world there needs to be more tax revenue.

The policy in both countries doesnt remove negative geariing which is always the focal issue which even the Libs assured us they would not do. But they never mentioned cancelling interest deductions. The policy in UK / NZ is a bit smarter than that. Instead it denies deductions for interest that cause negative rental income. So most property generates tax. Not negative gearing. It discourages borrowing to buy property and you cant just buy a loss maker to offset the profits on others. If it was to be bought in here it may be well accepted by the punters who dont own property, first home buyers, renters and self funded retirees. It could see sale of investor property in some cases especially those highly leveraged. That would need to be replaced of course. And new construction still needs support but - how much ?? Jobs are one thing but are there too many developers all chasing a fast profit ? The scheme to encourage super funds to invest in affordable housing could be expanded.

 

People will just go back to using a company to invest/hold in RE and claim the interest.

 

going forward you can do this but if you have a portfolio now, it will trigger CGT and stamp duty which is nuts

 

Yet Govts can print money willy nilly to "support" us in "bad" times. Why dont they fund themselves by printing more money? There is no need for taxes at all!

 

How will this work? Is it only individuals that cannot claim?

 

when ur a company you can claim all expenses. The government cant/wont say you cannot deduct interest otherwise all the corporates in the world would be outta luck...

the government can only bully small people like us investors

 

New Zeland let’s face it is a partially socialist country pretending to be capitalist in nature.

 

The whole tax system world wide is based on a simple premise:
Any expense incurred earning an income is tax deductable.

Eventually it may change, though by then it won't matter.

 

I admire their ability to take decisive action. Looks like they will allow a scaled introduction for retrospective purchases.

It will be interesting to see if this action does cool the market.

 

not really, prior to ardern they had 0 CGT, negative gearing, and very low marginal tax rates

they were actually ranked higher than australia in terms of economic freedom

 

Sure "revenue" is needed to run the country, but what sort of percentage of one's income ?
If Govco keep adding/taking various taxes over and above income tax and reducing/remove claimables we will reach a point of it not being worth one's effort.
More people choose the unemployment system already.....

 

Various groups in Australia want to go the route of introducing land tax for all land owners. Instead of doing a blanket "confiscate all private land" overnight which would lead to massive rebellion, introduce land tax which is already gaining popular support amongst some sectors of the community. Once generally accepted, crank up the percentage of tax charged and voilà - homeowners forced to sell on masse due to inability to sustain massive yearly tax costs.

 

Socialism

 

Wait, so you guys feel the ultimate goal is for the state government to confiscate little bits of private property from its people by introducing a land tax based system and replacing the current stamp duty reliance?
What would be the end goal here? What is the government trying to achieve? Is the federal government involved too?

 

Interesting that a change to tax treatment of private individuals property investments = socialism. What about if there was a tax cut/benefit proposed by the govt instead of this proposal? Would it immediately swing away from being socialist and rejoin the ranks of the capitalists?

 

Every single gov (irrespective of whichever continent they are on- fed, state, local) once in power, wants higher revenue base and more control. Some do that via enriching business (tax cuts etc) to enable the business to thrive and create more jobs (indirect) which results in larger tax base down the track - more employment, increasing profits etc.

Some governments want the gravy train to commence immediately via direct taxes and removing tax breaks which were initiated earlier on by other governments. Pandering to the latter via direct increased taxing results in higher revenue which is subsequently channelled towards projects that pander to their poll base and in preparing for the next elections. In NZ's case, Ardern has a history of emotional decision making and knee jerk policies to pander to her woke-base rather than for enriching the wider business eco-system and relying on indirect taxes which create more value as a whole.

Socialists (semi-socialists) gov have found covid as an underlying reason to browbeat opposition to their wider tax agenda, bigger gov, more handouts and cementing their electability. All politics.

 

Basically investors are subsidising housing for renters because they can reduce their own high taxes through negative gearing.

Let's say interest deductibility is removed for future investments, it will result in following:

1) No new investors subsidising rents so rents will go up sooner or later making renting very unaffordable for the low income segment of the society.
2) Those without an option to invest will now spend the money on their own residences which will make Owner occupier places in Sydney even more expensive.

For example, a Sydney investor will no longer be subsidising a low income family in Logan and concentration of wealth into desirable owner occupier areas will increase causing even more disparity between parts of the country.

Unless Government spends considerable amount of investment into social housing and guarantee rental subsidies for low income AND make personal mortgage payments tax deductible like in the US, just abolishing tax deductibility would cause a havoc in our current housing markets.

 

Thanks for the response but you haven't actually addressed the specific questions I raised.

How would this land grab work? What's the goal of this insidious land grab disguised as land tax? Just for general revenue?

How would the government even get to "steal" the land? In the event of a forced sale of land to recover an extremely late land tax due, all the government would get from the forced sale Is the overdue land tax, the property would then be sold by the receiver/mortgagee in possession to someone else.

So again my question (granted not to you) is what would the end goal be of forcing these en masse land sales as @Angel suggested? I just don't see any actual benefit gained by the government from such a convoluted and insidious plan to secretly cause en masse land sales under the guise of land tax replacing stamp duty