Property Institute of New Zealand chief executive Ashley Church has said Labour’s proposal to scrap negative gearing for property investors risks making the country’s housing crisis significantly worse.
Church said removing the ability for property investors to claim tax losses is a direct attack on Mums and Dads who are trying to provide for themselves in retirement.
If the policy comes to fruition, Church warned it would have a “dramatic and rapid effect” on the availability of private rental accommodation in New Zealand.
“Your typical Property Investors are average Mums and Dads – not wealthy cigar smoking fat cats – and their ability to purchase an investment property is usually leveraged against the equity in their home and their ability to claim losses in the early years, like any other business does,” said Church.
“This move would certainly stop them investing – but in the process it would quickly lead to a shortage in rental housing which would fall back on the Government – so it would end up costing the taxpayer a lot more in the long run”.
Church also pointed out that it is only in the early years of a property investment that negative gearing is a factor.
“Over time, rents rise and properties become ‘positively geared’ – at which point the additional income becomes taxable. Is Labour suggesting that they will forgo this tax income – or that they’ll make property investors pay tax on profits while removing the ability to claim losses?
“The shortage of houses in Auckland is at crisis point and there’s a need for smart and innovative solutions that harness the power of Mum and Dad investment to get those houses built quickly. That might include giving preferential tax treatment to Investors who build, or buy, new homes – not punishing them for doing so.”