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21
JAN 10

Tax Working Group - landlords comments




http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10621370

Mass exit of landlords? Tenants on the street? Rental increases? What total self-serving nonsense.

The screams are to be expected. As a broken tax system is repaired, advantages removed with a “broad and balanced” objective the past winners will certainly not like it. The TWG has done a good job; they could have been more emphatic on the recommendations but the necessary material is there to support government decisions. It remains to be seen if they are tough enough.

The discussion on the impact on rent is simplistic. It is reasonable to assume rents are, right now, as high as the market will stand and the trade off for seeking a higher rent is no rent at all as properties stand empty. As I understand it, rents are correlated strongly to income not the cost of provision. All roads lead back to the traded economy and well paid jobs.

If the current property owners cannot service their debt after rebalancing the tax breaks, they will have to sell, probably with the tenant in place at a price that makes sense to the new owner under the new rules. That is going to hurt the current owner, not the tenant or the new owner – but fewer rentals and people on the street no way!

The market will clear at the price that makes sense, maybe the seller will not be willing but sell they will.

The advantages handed to other parts of the economy (fiscal policy) have resulted in declining investment and loss of jobs (monetary policy) in the real economy and falling earnings and wages. Historical wealth transfers from the traded economy are not sustainable.


tags: tax working group, landlords
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