Tax changes will affect tenants   2 Sep 2014

NZ Property Investors' Federation

Tax changes will affect tenants


The arguments for a Capital Gains Tax (CGT) have so far focused on tax equality, increasing tax revenue and reducing house prices. The Labour Party must have undertaken research into the effect on rental prices of their tax policies, but this hasn't been made public in the campaign yet.

The NZ Property Investors' Federation (NZPIF) has studied the potential effects of both a CGT and ring fencing rental property losses. These two policies will have a direct and major impact on rental prices.

The NZPIF figures show that the cost increases of these two proposed taxes on the average rental property will be around $100 per week, most of this coming from ring fencing rental property losses.

It is difficult to predict what effect this will have on rental prices. However Andrew Coleman from Motu Economic and Public Policy Research said "a capital gains tax will lower returns to landlords, and, for a given level of house prices, rents will be higher than they would otherwise have been."

There is no doubt that a proportion of the proposed tax increases will be borne by tenants through higher rental prices and more overcrowding.
In deciding if it is worth asking tenants to pay this price, we need to carefully analyse the benefits expected to be gained through increased tax revenue and lower house prices.

ENDS

Notes to Editors.
The NZ Property Investors’ Federation (NZPIF) is the only national voice representing private owners of rental properties. Twenty associations around New Zealand are affiliated to the NZPIF and these represent 3,000 memberships and 7,000 members.

The NZPIF has done the following analysis.
Using the latest REINZ and Tenancy Bond Centre data available, the current median dwelling is worth $427,000 and would rent for $450pw.
After accounting for expenses and current tax laws, it would cost a rental property owner $6,005 in the first year to provide this property as a home for a tenant. This is a large cost.

If a CGT was introduced, then the return to the owner would be reduced. Assuming property prices increase on average by 2.5% a year, then the lost return per year would be $1,683 if the property was sold in five years, $1,794 if sold at 10 years and $1,914 if sold at 10 years.

On a weekly basis, this would equate to between $32 and $36 or around 7.5% of current rental prices.
If ring fencing of losses was introduced, the first year’s cost of owning a rental property would increase from $6,005 to $9,971. This equates to a $77pw loss of cash flow which is 17% of current rental prices.

Link to the quoted Motu Economic and Public Policy Research - http://www.victoria.ac.nz/sacl/centres-and-institutes/cagtr/twg/publications/3-long-term-effects-of-cgt-coleman.pdf

Add a comment

News

Hilary Timmins' Award-Winning UK Documentary Series To Inspire NZ Students

29 Jun 2020 Education
Dream Catchers, produced and directed by Hilary Timmins, celebrates the success stories of more than thirty inspirational New... more

New Zealand reaffirms support for Flight MH17 judicial process

7 Mar 2020 News By Rt HON WINSTON PETERS
Ahead of the start of the criminal trial in the Netherlands on 9 March, Foreign Minister Winston Peters has reaffirmed the need to... more

Business

NZ Government's Economic package to fight COVID-19

17 Mar 2020 Business News By RT HON JACINDA ARDERN
The Coalition Government has launched the most significant peace-time economic plan in modern New Zealand history to cushion the... more

NZ Government announces aviation relief package

19 Mar 2020 Business News By Hon Phil Twyford
Transport Minister Phil Twyford today outlined the first tranche of the $600 million aviation sector relief package announced earlier... more

Living

Diversity was Key at New Zealand Trade Tasting in London

6 Jun 2022 Food & Wine
New Zealand Winegrowers Annual Trade Tasting was recently held in London, on Wednesday 4 May, in Lindley Hall. It was the first... more

Kiwi author stuns Behind the Butterfly Gate

12 Jan 2022 Arts By Charlotte Everett
Hidden behind the Butterfly Gate is where the secret has been kept for 76 years...  New Zealand writer Merryn Corcoran’s... more

Property

Fairer rules for tenants and landlords

17 Nov 2019 Property By Minister Kris Faafoi
17 NOVEMBER 2019 The Government has delivered on its promise to the over one million New Zealanders who now rent to make it fairer... more

New Zealand Government will not implement a Capital Gains Tax

17 Apr 2019 Property By RT HON JACINDA ARDERN
The Coalition Government will not proceed with the Tax Working Group’s recommendation for a capital gains tax, Jacinda Ardern... more

Migration

Boosting border security with electronic travel authority – now over 500,000 issued

19 Nov 2019 Migration By Hon Iain Lees-Galloway
19 NOVEMBER 2019 We’ve improved border security with the NZeTA, New Zealand Electronic Travel Authority, which helps us to... more

Christchurch reinstated as refugee settlement location

18 Aug 2018 Migration
18 AUGUST 2018 HON IAIN LEES-GALLOWAY The announcement that Christchurch can once again be a settlement location for refugees... more

Travel

Gallipoli Anzac Day services cancelled

19 Mar 2020 Travel & Tourism By RT HON JACINDA ARDERN
The New Zealand and Australian Governments have announced this year’s joint Anzac Day services at Gallipoli will be cancelled... more

New Zealanders advised not to travel overseas

19 Mar 2020 Travel & Tourism
New Zealanders advised not to travel overseas more

Sport

The Skipper's Diary: Sir Richard Hadlee honouring his father and NZ's Forty-Niners

27 Oct 2019 Cricket By Charlotte Everett
NZNewsUK London Editor Charlotte Everett spoke to Sir Richard Hadlee about why he’s chosen to publish his father’s... more

PREVIEW: All Blacks v England semi-final

26 Oct 2019 Rugby
The two most convincing quarterfinals winners are set to square off in a semifinal showdown for the ages when the All Blacks meet old... more

Columns

Gordon Campbell on the Gareth Morgan crusade

11 Nov 2016 Opinion
Gordon Campbell on the Gareth Morgan crusade First published on Werewolf The ghastly likes of Marine Le Pen in France and Geert ... more

Gordon Campbell on the US election outcome

10 Nov 2016 Opinion
Column - Gordon Campbell   Gordon Campbell on the US election outcome Well um.. on the bright side, there (probably)... more

Kiwi Success

Congratulations to Loder Cup winner

26 Sep 2018 People By Hon Eugenie Sage
25 SEPTEMBER 2018 The Loder Cup, one of New Zealand’s oldest conservation awards, has been awarded to Robert McGowan for 2018... more

Appointments to New Zealand National Commission for UNESCO

16 Aug 2018 Appointments
16 AUGUST 2018Appointments to New Zealand National Commission for UNESCO HON JENNY SALESA Associate Education Minister Jenny Salesa is... more

Recruitment

Historic pay equity settlement for education support workers

14 Aug 2018 Recruitment By RT HON JACINDA ARDERN
14 AUGUST 2018Historic pay equity settlement for education support workers RT HON JACINDA ARDERN HON CHRIS HIPKINS Prime Minister The... more

Historic pay equity settlement for education support workers

22 Aug 2018 Recruitment By RT HON JACINDA ARDERN
14 AUGUST 2018Historic pay equity settlement for education support workers RT HON JACINDA ARDERN HON CHRIS HIPKINS Prime Minister The... more