Capital Gains Tax In NZ
So Its On Again…The old Capital Gains issue
Heres the issues I think:
Some see property as an obsessive addiction of NZ Investors, damaging “Productive” investment.
I suggest NZers have been right to put spare money ,& debt, into Property.
Property has tax , leverage & utility values ( You cant live in share certificates, but I guess you could burn them to keep warm!).
But its just that everywhere else in the Economy has done so poorly! Put it in the bank? 3%? And taxed? Finace companies/ Shares? Why do you think banks dont lend much on them? Business, in a country with 90% of the businesses employing less than 5 people? Exporting? When both govenments have let the NZ dollar be the kicking boy/moneymaker for global traders for 20 years? They say making money on the NZ dollar ( and damaging our brave exporters) is as easy as shooting fish in a barrel. No, cant see many other places to invest in NZ. Maybe get the money offshore? Works for our richest!
No, property is the place to be.
Now Capital gain: There is already the ability to tax capital gains ( in shares too). But only as a trading activity. The worry is if you tax capital gains at acrual, where do people get the money to pay it yearly, without selling the asset!
Exempt the family home, & you get everyone investing in “The monster Family Home” like Oz
Only tax rental? Holy cow!
35% Nz houses are rentals. Say 7% State houses. total stock, $600 billion. So private rentals worth say $180 billion.
Now, are tax costs to be passed on to tenants?
Of course not! Tenants rent is dictated by supply & demand, not a landlords desires or costs. Is the tax to be offset by a decrease in tax somewhere else? I say…bloody unlikely, certainly for landlords!
So would a capital tax decrease atractiveness to the owner? Probably. So what do they do? Sell? If so to who? Someone who would accept a lower return? Are they crazy? of course not! They will need a BETTER yield! IE pay less! So value goes down.
How much? SAy 20%?
Now that is $36 BILLION, on a current value of $180 billion. Ye Gods…Imagine destroying $36 billion of NZers equity! $4 Billion lost in Finance companies looks like Chicken Feed! What would it do to the economy?
Hmmm be interesting to see where it goes.
My prediction… NOWHERE!
September 14 2009 02:37 pm | Landlords/Investment and New Zealand Real Estate Market
