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!