Time for perception of landlords to change

In this year's Budget Finance Minister Bill English announced plans to ring fence tax losses from holiday homes.

Essentially the owner of the holiday home can no longer use these losses to offset other income if the gross income from the property is less than 2 per cent of its land value.

The plan got some attention, but it doesn't impact on too many people. Also it was considered, generally, to be a reasonable move.

There are growing fears amongst people who invest in residential property that once this law is on the books it can be easily expanded to capture the ordinary property investor.

This is a retrograde step and, while the Government may try and introduce such a change by stealth, would create a huge backlash from property investors.

The government and others seem to have this perception that property investors are all gungho, speculators looking for a quick buck.

Sure there is a handful of these people, but the bulk of them are ordinary, middle class Kiwis holding down a daytime job.

Investors are being prudent and using the savings from cheap home loans to repay debt, rather than using the money to buy more houses.

They are being sensible business people and increasing prices (rents) to cover their increasing costs.

And they are taking advantage of the current market conditions and locking in low home rates by moving some of their lending from floating rates to fixed rates. That gives them some protection from the time which will come where home loan rates increase.

People who own their own homes can look to property investors for tips about what they should be doing at the moment. Instead of spending the extra cash from cheap home loans on extras, like boats, cars and holidays, use it to pay down debt.

Comments from our readers

On 12 July 2012 at 4:22 pm Tony van der Lem said:

The people who would be worst affected by the ring fencing of rental income losses, would be tenants, landlords would have no incentive to put money into maintaining rentals if they have to use tax paid savings. On top of the removal of depreciation allowance on building, such a move would generate a rental shortage crises.

Time for perception of landlords to change

The anti-property investing brigade and will be salivating at news that the government may be heading down the track of making it harder to be a landlord.

Tuesday, July 10th 2012, 12:00AM 1 Comment

Comments from our readers

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