Capital gains tax will increase rental prices - expert

10 Jul 2011 08:18a.m.

Mike wrote:

Capital gains already taxable in NZ by the IRD if you trade.

The biggest cause of rise in rental prices has been a growing population and the resource management that has constrained development of new housing over the last decade.

A growing population, immigrants, this tries to fit more people into the same number of homes. Supply/demand means the price goes up.

If a capital gains tax is put on rental housing what will happen? Above it mentions 200000 investors for 300,000 houses, which on the scale on NZ is still small time investment. The average of that is 1.5 houses, and typically the average investor has a huge mortage on the house as unlike Joe Bludger the investor is able to work hard, and save on the same or less income - ie they aren't rich at all but because they are not bludgers they make bludgers look bad so Labour/Greens want to tax them out of existance.

If the capital gains tax is only when sell, then the investors just wont sell. Those 300,000 homes are mostly not short term buy/sell items. A rental housing investor buys the home, then holds on to it for a very long time, often till they die type lenght of time. So a capital gains tax when it is sold will mean properties wont be traded, ie avoid the capital gains tax.

If the capital gains tax is made on the property value, now the govt will have to go around valuing every property every 5 minutes to deem they are worth more so they can tax, ie at huge cost to NZ taxpayer ... Then what will happen? if they then put a cost onto the property investor, the investor will have to come up with cash to pay the tax, from the tennant. If the property goes up $50,000 and capital gains of say 15% charged - not hard with the housing shortage, thats $7500 more that will have to be charged to the tennant. Call it $150 per week charged on the rent required for the investor to pay the capital gains tax.

Labour/Green just want people to pay more in rent each week and be poorer.

08 Jul 2011 09:42a.m.

Ruz wrote:

I can't actually see the connection between rents and capital gains. Unless of course the Property Investors Association is suggesting that the real reason why its members acquire rental property is to generate a capital gain which makes them property speculators, not investors acquiring an asset to generate rental.

07 Jul 2011 09:03p.m.

AndrewF wrote:

Well said Brad! A well reasoned and informed opinion.