Articles by Matthew Gilligan
The Tax Working Group report was publicly released at a press conference yesterday, 20 January 2010. Please read our summary including our response of interest to property investors.
The full report can be read in full HERE.
The highlights of the report seem to be:
Ring Fencing of Losses
Targeting of Existing Property Investors
Targeting existing property investors in this way (taking their wealth) is not fair, neither is it in the public interest in the writer's view. I hope the government works this out and decides not to change the depreciation regime. Trailing it and hurting average mum and dad investors that make up the bulk of the investment base in residential property. These are ordinary (voting) public trying to get ahead.
Perhaps the government should consider the political popularity as it will certainly impact voting. This will not be an election winner for them; hundreds of thousands of investors will be affected.
Also consider the banks position. Many investors are geared (borrow) 80% of the property value. If property prices drop 10-20%, banks will be in breach of their banking covenants and be obliged to call up loans and mortgagee sell investors. This will destabilise the banking industry, - totally unacceptable one would think.
Reduced house prices and reduced disposable income from investors will also dampen consumption. Not good at time when the government is trying to re-activate consumption.
However, if the depreciation regime is grand-fathered (affecting new investors, leaving existing investors as they are with current rates until they sell existing property), the impact would be less of an issue.
This addresses the 'level the playing field' argument between property and shares (an argument I don't agree with, that is driven by people with vested interests in shares like Brash (a shareholder in Huljich Wealth Management) and Weldon ( NZSE CEO).
These people have huge upside in attacking property, and personally I do not believe this issue has been addressed by the media.
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