About Grant Robertson’s bright line tax statement

Written By: - Date published: 10:39 am, March 28th, 2021 - 217 comments
Categories: economy, election 2020, grant robertson, housing, tax, uncategorized - Tags:

Media has been abuzz with comment about how last election Grant Robertson has backtracked on a promise on not extending the bright line test.

Last December Henry Cooke wrote this:

The bright line Finance Minister Grant Robertson painted about the bright-line test before the election has become extremely blurry under questioning at the first question time of the new parliamentary term.

The first session back also gave ACT leader David Seymour a chance to flex his new parliamentary muscle, cutting in across National Party leader Judith Collins thanks to his party’s larger presence in the House.

But it was housing that took centre stage throughout the showdown, as National and ACT grilled the Government on whether it would backtrack on a firm promise to not extend the bright-line test on taxing residential property sales.

Robertson had told media very clearly before the election that his changes to income tax thresholds would be the full extent of Labour’s tax changes this term. He even specifically ruled out extending the bright-line test on Newstalk ZB.

And recent decision to extend the bright line test has led to a number of comments suggesting that Robertson has misled the country.

While reporting of his earlier comment is correct context is important.  The dominant thinking at the time was that Covid would cause house prices to ease.  For instance Treasury’s PREFU released shortly after Robertson’s statement said this:

Housing market activity has been more resilient than expected in the Budget Update, supported by pent-up demand, involuntary savings during Alert Levels 4 and 3 and looser monetary conditions. However, various competing forces make the outlook for house prices particularly uncertain.

Border restrictions are likely to constrain net migration in the short term and heightened uncertainty around the economic outlook constrain demand for housing. Low interest rates and the temporary removal of the Reserve Bank’s loan to value ratio restrictions are expected to provide some offset. On balance, we forecast a period of weaker house prices over the year to June 2021, with prices falling 5.1% from their March 2020 levels, dampening consumption growth (Figure 1.7). House prices then recover as net-migration rises, economic confidence recovers and monetary policy remains accommodative throughout the forecast period. Rising housing wealth is then expected to support the recovery in consumption growth over the final three years of the forecast period. However, given the recent resilience in the housing market, there are upside risks to our forecasts if current sentiment is maintained.

And boy were they wrong.  Instead of market conditions easing they intensified as cheap interest rates and confidence at how well the country was handling the crisis combined.

Faced with a crisis, and it is a crisis, Robertson chose to change his mind.  In fact it appears that he may have ameliorated Treasury’s view which was that an extension to 20 years for the bright line test was appropriate.

Was Robertson wrong to change his mind?  No, we have a crisis.  Politicians should be allowed to change their mind if circumstances change.  To insist that they stick to historical views views and not change their minds when faced with A crisis is crazy.

No doubt the beltway will continue to be fixated about this and National and Act will continue to suggest that Robertson deceived the public, even though it is clear that all he did was change his mind in the light of changed circumstances.

217 comments on “About Grant Robertson’s bright line tax statement ”

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  1. Ad 1
    28 March 2021 at 10:59 am

    It's even more excellent precedent for the government to change its mind in other areas.

    Robertson and Woods have been the two ministers delivering this term.

    I really have no idea of the relationship between Ardern and Robertson, but if Ardern wanted to check out after this term and hand it to a Robertson-Woods combination, they set themselves up for internal renewal pretty well.

    • Corey Humm 1.1
      28 March 2021 at 5:09 pm

      Unless the leadership change happens within that six weeks election cut off period Grant would have to win a primary and Grant won't win a labour primary. The socially conservative labour members and union members didn't go for Grant both times because of his sexuality, during the last primary on the nation I remember union members at meatworks saying "no we can't have a gay man we're Christians" as a gay man myself that infuriated me not for obvious reasons but mostly cos I thought Grant would have been great in 2014 and 2015. He's funny, smart and charismatic but instead we went with Cunliffe and Little , two good men but some of the most uninspiring candidates imaginable.

      I actually wonder if Jacinda would have won a traditional primary, I mean Grant and Jacinda ran as a joint ticket in 2015. Jacinda isn’t particularly left wing and unless they allowed young people to join the party during the primary due the party process she’d lose to whatever candidate had union ties regardless of her being more electable and exciting than the old union bloke the unions and membership would want.

      It's interesting both of the two leaders who were elected primaries were historically unpopular but the leader chosen directly by caucus is historically popular.

      I reckon when Jacinda goes though, it's the next generation of mps who were elected during the last couple terms who need to take over , not Grant not Megan and those newer mps need to be given more experience and roles so they know how govt works when they run the 7th labour govt.

      • Ad 1.1.1
        28 March 2021 at 6:42 pm

        The six week window worked a treat last time.

        Robertson may well wish to stay precisely where he is. But Ardern will need a replacement by mid-2023.

      • mickysavage 1.1.2
        29 March 2021 at 7:28 am

        Um Corey Grant almost won last time and lefties and trade unionists did not give a toss about his sexuality. Post Jacinda at this stage I cannot think of anyone else who could lead.

        You obviously were not in the party when the campaigns were happening.

        • Sabine 1.1.2.1
          29 March 2021 at 7:35 am

          Is it not nice, that we now discuss the resignation of PM's for what ever reason, and the country will end up twice with unelected numkins. Leading to what in the end?

          And while Grant may win the vote of the Labour caucus, will Grant win the vote of the electorate?

          So even if j.a. would consider serving her full term, and she should, after all she ran and wanted the job, who will take on over after her? That so reminds me of the after math of H.C and J.K. Personality politics of one, while the rest of the Ministers are so unpalatable that really the other party does not have to win, they simply don't have to be the others. A bit like J.A. won.

          • Phil 1.1.2.1.1
            29 March 2021 at 12:32 pm

            …we now discuss the resignation of PM's for what ever reason, and the country will end up twice with unelected numkins. Leading to what in the end?

            The fact that our PM's can resign and the government continues to run without hiccup, is probably the single most important feature of our functioning democracy.

        • lprent 1.1.2.2
          29 March 2021 at 8:36 am

          Yeah – not many party members I know could care less about any adult sexuality.

          • mickysavage 1.1.2.2.1
            29 March 2021 at 8:47 pm

            Aye to that.

          • alwyn 1.1.2.2.2
            29 March 2021 at 8:53 pm

            "not many party members I know could care less about any adult sexuality"

            All of pension age are they? One of the disadvantages of growing old I'm afraid.

  2. Stuart Munro 2
    28 March 2021 at 11:01 am

    The Right are desperate to make some kind of capital out of the government's housing policies – but nothing seems to bite. That would be because, outside of the circle benefiting from The Herald's real estate advertising revenue, there is little or no support for the status quo. Even comfortably off families are finding their young people have no show of buying housing – and as the Mandalorian might put it "This is not The Way"

    The government have lots of searoom on housing policy, and they might as well use it, because, as can be seen, the commentariat are going to exert their limited rhetorical powers but considerable bandwidth to carp whatever they do. May as well be hung for a sheep as a lamb – rent caps will take volatility out of the market and redirect investment to more productive enterprises than rent-seeking.

    • Patricia Bremner 2.1
      28 March 2021 at 4:27 pm

      100% Stuart A good summary.

    • Jenny how to get there 2.2
      29 March 2021 at 6:53 pm

      Rent caps 'almost inevitable', property manager says

      Miriam Bell15:51, Mar 29 2021

      “…… Landlords will try and aggressively push rents to levels that will be beyond sustainable for many renters and the Government will be forced to act.”

      David Faulkner, Property Management Consultant, Real-iQ

      https://www.stuff.co.nz/life-style/homed/renting/124687179/rent-caps-almost-inevitable-property-manager-says.

      If Grant Robertson wants to deliver relief to first home buyes and renters, his next move to cool the overheated housing market is inevitable.
      (Not 'almost inevitable').
      When property consultants are saying it, for Grant Robertson to not take this next logical step, would be to deliver a major social injustice to renters and first home buyers, marking a major backdown by Robertson in the face of landlord and investor hostility.

    • Jenny how to get there 2.3
      29 March 2021 at 7:02 pm

      National and Act after failing to hold Robertson to not increase the Bright Line Test – sensitive to their wealthy and middle class constituency the Nacts are now trying to hold Roberston to not impose a rent cap.

      ACT's housing spokesperson Brooke van Velden says Finance Minister Grant Robertson has "dropped another bombshell on property investors" after failing to rule out putting limits on how much landlords can hike rents.

      'Another bombshell': ACT, Collins on attack after Robertson's latest rent comments (msn.com)

      • Stuart Munro 2.3.1
        29 March 2021 at 7:19 pm

        I imagine the maths on rent caps is being gone over rather carefully at the moment. Robertson knows that Labour's traditional constituency would be very glad to see them, and without them some poverty issues are likely to deteriorate further.

  3. Sabine 3
    28 March 2021 at 11:17 am

    Well lets hope that the PM will change her mind on the 'NO increases in benefits' statement from before the last election, or is that one of those statments that will never be walked back?

    The housing announcement was too little and about to be too late and he wants to be considered a thought of as a man who makes tough choices? Lol.

    in the meantime rents will go up to be paid for via the Accomodation Benefits, more people will be unable to afford any housing at all, but its ok because we are paying for it via Emergency Housing. And all the other stuff that comes with it too will be paid for by the Tax payer.

    Labour, 3 years late and still no spine.

    • Adrian Thornton 3.1
      28 March 2021 at 2:50 pm

      @ "Labour, 3 years late and still no spine." shuffling seats on the Titanic is how this Labour govt will be remembered for by future generations when this housing debacle is examined.

      Just like their climate change policies….ultimately meaningless.

  4. Incognito 4
    28 March 2021 at 12:07 pm

    Robertson penned an opinion piece for Stuff this morning.

    https://www.stuff.co.nz/life-style/homed/housing-affordability/300261217/we-have-made-some-hard-choices-to-help-deal-with-the-housing-crisis

    The rhetoric is strong as always. For example, he uses the word “loophole” five (5) times, which is BS.

    No mention of rent caps though, which is something that ACT is really keen to see ruled out 😉

    • mikesh 4.1
      28 March 2021 at 12:41 pm

      It is not a loop-hole. It is an anomaly in the tax system.

      • Incognito 4.1.1
        28 March 2021 at 12:43 pm

        It is now.

      • Herodotus 4.1.2
        28 March 2021 at 1:07 pm

        Every other industry that claims interest as a tax deductible expense that loophole still exists. Is it also a loophole that rates, maintenance etc are still deductible for landlords but NOT for owner occupiers ? There still is an advantage for landlords over buyers.

        • Incognito 4.1.2.1
          28 March 2021 at 1:34 pm

          You seem to have a rather quaint definition of “loophole”. Businesses borrowing with the intention of earning money in/through that business and then deducting the interest component of the loan is a ‘loophole’? If yes, then Robertson and this Government will be consistent and close this ‘loophole’ across the board, won’t they?

          • alwyn 4.1.2.1.1
            28 March 2021 at 2:08 pm

            "a rather quaint definition of “loophole".

            Something we can agree on!

            If Robertson wants to do something that he had previously rejected he is quite entitled to do so. Just don't insult our intelligence by saying it isn't a change. And don't double down on the insult by describing it as something that it patently isn't.

            Why are politicians, of all varieties, incapable of ever saying that they have changed their mind or that they made a mistake and are now correcting it?

            • solkta 4.1.2.1.1.1
              28 March 2021 at 5:47 pm

              James Shaw is very able and willing to say when he has made a mistake, but i guess you choose not to notice.

            • Incognito 4.1.2.1.1.2
              28 March 2021 at 8:55 pm

              What ‘mistake’ are you referring to in the context of this OP and this thread?

          • Sabine 4.1.2.1.2
            28 March 2021 at 2:08 pm

            Funny how i would not be surprised to see that happening.

        • Paul Campbell 4.1.2.2
          28 March 2021 at 6:45 pm

          The different of course is that other industries pay tax on their profits

        • mikesh 4.1.2.3
          28 March 2021 at 11:41 pm

          Is it also a loophole that rates, maintenance etc are still deductible for landlords but NOT for owner occupiers ?

          I see your point. However, rates, maintenance and insurance are incurred as a consequence of purchasing a property, and where rental properties are concerned, are therefor involved in the gaining of taxable income. On that basis they are deductible. Where owner-occupiers are concerned these expenses are not deductible, since those properties are not earning taxable income for their owners.

          Does interest participate in the earning taxable income? I guess that depends on whether, on the one hand, the borrowing of money is taken to be the start of the earning process; or whether on the other hand, the process starts when the money is invested in a property. I prefer the latter interpretation because, for someone investing without borrowing the time of investment would be the start of the process. It seems sensible to assume that both situations would have the same starting point. Also, it seems intuitively obvious that interest has no discernible role to play in the actual process.

          • ghostwhowalksnz 4.1.2.3.1
            29 March 2021 at 8:02 am

            Bill English killed off the 'depreciation deduction' for housing because that too was abused by investors

            Yet the depreciation deduction still exists for other forms of investment.

            Where a deduction is abused it should be looked into

            Previous changes like the bright line test and ring fencing of the 'losses' on investor housing havent had the required effect.

            • mikesh 4.1.2.3.1.1
              29 March 2021 at 8:10 am

              How was depreciation abused.

              • ghostwhowalksnz …
                29 March 2021 at 10:56 am

                It was supposed to be paid back if the asset didnt depreciate when it was sold. IRD said vitually no one paid it after the sale, it became uneforceable and unable to be corrected . It became a rort.

                • Tricledrown …
                  29 March 2021 at 11:29 am

                  I have worked for many landlords all who sold their properties were very aware that on the sale of the property if it had increased in value all tax deductions had to be repaid.

                  [Same typo in e-mail address again and you are still not paying attention to replies, notes, and warnings. The incorrect e-mail address is now in the Black List so that Moderators no longer have to waste their time fixing your typos and trying to get your attention – Incognito]

                • mikesh …
                  29 March 2021 at 11:48 am

                  I knew that the excess depreciation was supposed to be paid back when the the property was sold. However, I always was of the opinion that this was not entirely fair since depreciation was a legitimate expense regardless of how much the property sold for. Any excess in the selling price, over and above the book value, should have been considered a capital gain.

                  • ghostwhowalksnz …
                    29 March 2021 at 3:50 pm

                    The tax code allowed was it 1.5% or 2% deduction every year, as a flat line depreciation to zero value. It wasnt a lot each year and was more useful on a high value brand new house, well all new houses are high cost.. say $3000 psm cost to build and more.

                    Its the same for other assets,easy to consider is cars or computers which we know reduce in value . That is also the case where the IRD deduction for depreciation may not match the actual value , often greater. Any profit from using depreciation isnt meant to be kept. Its a real no no in accounting as capital and operational expenditure is strictly separate.

    • Jester 4.2
      28 March 2021 at 5:38 pm

      It should not be called a "loophole', that is incorrect.

  5. Bazza64 5
    28 March 2021 at 12:21 pm

    Not too concerned about government changing their position on this, we have a ridiculously overpriced housing & rental market and they had to do something about it. All politicians make promises about not increasing taxes & then they break those promises. George HW Bush promised if he became president “read my lips, no new taxes” and guess what, some new taxes due to a change in circumstances, and they all do it.

  6. woodart 6
    28 March 2021 at 12:31 pm

    when circumstances change, only a fool will stay on a fixed unchangable course. journos trying to tie a poli into a unmovable course deserve to hit an iceberg.

    • Herodotus 6.1
      28 March 2021 at 1:15 pm

      So how is Adern's and Roberston's lying any different to Keys GST ?

      Funny how the acceptance of a lie is now OK ???

      • Incognito 6.1.1
        28 March 2021 at 1:37 pm

        You can work this out for and by yourself, can’t you? A clear clue is given in the OP. Please engage your brain.

        • Herodotus 6.1.1.1
          28 March 2021 at 1:58 pm

          Robertson and co have spent plenty of energy into trying to tell us that there was no lie. That Robertson was to definitive, now we are told that " change his mind" and "Ardern said she didn’t count this as a “broken promise” and noted Labour itself had been “silent” on the issue" So what is it a change of mind or no broken promise ?? Perhaps you should engage your brain and in what Adern and Robertson have been quoted in this 🤔

          https://www.stuff.co.nz/national/politics/300259542/housing-grant-robertson-says-he-was-too-definitive-when-he-ruled-out-a-change-to-the-brightline-test-judith-collins-says-he-lied

          • Incognito 6.1.1.1.1
            28 March 2021 at 2:05 pm

            Nope, it is not my brain that’s stuck with the wheels spinning in the mud of National, ACT, and JC’s spin.

            I’ve read the OP and you obviously haven’t if you’re asking stupid questions such as ‘what about John Key and his GST lie’? If you really think they are equivalent, you’re not thinking clearly and you need to engage your brain, clearly.

            • Herodotus 6.1.1.1.1.1
              28 March 2021 at 3:25 pm

              It is only MS who has posed the commented that there has been a change of mind – I cannot find anywhere that Adern or Robertson have stated that there has been a change from what they went into the election on, in fact that the actions in line with what they went in to the election on From link 15:50 We were silent on the brightline test. So it is here that there has been the comment that what was announced was contrary to what was promoted at the election.

              https://www.stuff.co.nz/national/politics/300259542/housing-grant-robertson-says-he-was-too-definitive-when-he-ruled-out-a-change-to-the-brightline-test-judith-collins-says-he-lied

              • Incognito …
                28 March 2021 at 9:16 pm

                What is “link 15:50”?

                You have now twice linked to the same article on Stuff and you’re still asking if and why there’s a change of mind!?

                You write:

                I cannot find anywhere that Adern [sic] or Robertson have stated that there has been a change from what they went into the election on …

                It is in the OP and in your link!

                Either you and I are hopelessly talking past each other or you still need to engage your brain. This is turning into an odd convo.

                • Herodotus …
                  29 March 2021 at 10:29 am

                  15:50 is the time into the interview that my comment refers to.

                  and again the comment in OP is MS oponion supposition not a supported fact, but it appears many have accepted this as given, well there is nothing available that supports this. IMO Be wary of opinion being presented as the truth 🤭

                  and perhaps we are talking past each other but I am frustrated with oponion=fact

                • Herodotus …
                  29 March 2021 at 10:50 am

                  Also from re reading many time MS post after your responses to ensure that the fault is not totally mine 😱the paragraph you refer to is written to me as a defense lawyer defending his client with a hypertherical situation it is framed as a question “was it wrong for Robertson to change his mind …” not that Robertson did change his mind. There is a very distinct difference between the 2 framed as they could be read as the same 🤫 but that is mine and my own oponion .but good to be challenged to make sure that one has not mis read mis con screwed the text .

                  [Fixed typo in user name and fixed typo in e-mail address]

            • Herodotus 6.1.1.1.1.2
              28 March 2021 at 4:01 pm

              "If you really think they are equivalent," considering that both parties have never acknowledged that what they said was a lie, so in that context YES they are the same. I like many would accept the government making comment that this U turn was due to the current conditions, but guess what ??? They haven't, they have reverted to that there was no conflict – Even MS and yourself accept that there is a conflict.

              Unless you can point to me where Adern or Robertson have acknowledged this. All I have read was that there is no conflict.

              • Incognito …
                28 March 2021 at 9:26 pm

                Extension of BLT =//= John Key’s GST hike

                Conflict, what conflict?

                The wheel’s spinning hard but the hamster’s missing.

                • Herodotus …
                  29 March 2021 at 9:46 am

                  Where is MS or your link that Roberston or Adern have claimed that there has been a change in mindset. You have challenged me, how about some support for your comments that there has been an acknowledgment that this is a U turn by anyone in government. I will help you out There Is No Link !!!! The OP as you have based your feeble argument on is what MS is written as an observation NOT from Adern/Robertson. But thanks for the attack "still need to engage your brain." good to see this tactic tells about how shallow your defence is. Straw comes to mind . So put up (where has Adern/Robertson said?) of whimper of away, you silly little acolyte.

                  Alwyn in 4.1.2.1.1 also has the same thought I note.

        • alwyn 6.1.1.2
          28 March 2021 at 8:18 pm

          Buy "OP" do you mean Robertson's magnum opus on Stuff?

          If not what do you mean?

          • Incognito 6.1.1.2.1
            28 March 2021 at 8:29 pm

            OP = original post

            In other words, the post here on TS under which you’re commenting. It is a common online term that has been around for yonks.

            Robertson’s piece on Stuff was an opinion piece, not a “magnum opus” and I don’t understand how you can conflate these two.

            • alwyn 6.1.1.2.1.1
              29 March 2021 at 11:05 am

              Back in the old days, when I was involved with developing computer systems, there was a specific meaning for "magnum opus". It meant "The one that never worked".

              That seemed quite appropriate for Grant's proposal.

              By old days I mean the 1960's and early 1970's. A bit before your time I would imagine. It was yonks and yonks and yonks ago.

              • Incognito …
                30 March 2021 at 8:34 am

                Lovely to read your autobiography/CV and good to hear that you agree that magnum opus =//= opinion piece.

                Can you please tell me the Lotto numbers for tomorrow’s draw, thanks.

                • alwyn …
                  30 March 2021 at 10:43 am

                  Why are you writing lies about my statements?

                  You are writing lies when you say that "you agree …".

                  Au contraire. The usage for magnum opus I gave is exactly what Grant's opinion piece describes, and in fact it accurately describes most of our Governments policies.

                  Lets face it, they can't even keep track of how many people have appointments to get vaccinated and they dish them out to people who just "walk in". Is there anything they can do properly?

                  https://www.nzherald.co.nz/nz/covid-19-coronavirus-ministry-of-health-apologises-after-woman-son-miss-out-on-vaccine/DGJW66F3HL6QRR3OPRJPRACMUE/

                  As far as the (winning) Lotto numbers go I can easily give you an answer. They will all be different integers between 1 and 40. There will be 6 of them.

                  Surly you have better things to do than play Lotto?

                  • Incognito …
                    30 March 2021 at 1:08 pm

                    What a load of nonsense you write again. By your own rather unusual and archaic meaning of “magnum opus” it is not anything like an “opinion piece” by Robertson. Going by the more generally accepted meaning of “magnum opus”, that would be Budget-2021 or one of his other Budgets. You also assert that it “never worked”, which means that you can or claim to be able to foretell the future, hence my request for the Lotto numbers \sarc Of course, you cannot help yourself and include another little snide remark about something and/or someone you disagree with; such is your sad little MO. In the same vein, you divert away from the topic with more irrelevant nonsense.

                    Surely, you have better things to do than being a constant nuisance on this site?

        • mikesh 6.1.1.3
          28 March 2021 at 11:49 pm

          The 2.5 percentage point increase in GST was recommended by the tax working group that met during Key's prime ministership.

      • David 6.1.2
        28 March 2021 at 3:30 pm

        Except when the left lie Heradotus it’s simply speaking too definitively and not a lie at all.

        Why would you ever believe anything to to come out of Robbers mouth again given he can brush off lying so easily? Same also applies to the PM.

        • Incognito 6.1.2.1
          28 March 2021 at 9:32 pm

          Except when ignoring context is the convenient thing to do when you’re too lazy or incapable of mounting a decent argument to support your narrative. Herodotus, at least, is making an attempt, I think, but you, not so much 🙁

          • David 6.1.2.1.1
            29 March 2021 at 5:49 pm

            Does a lie need context? Surely a lie is a lie pure and simple.

            Maybe lies only need context when Labour do it?

            Contextual lies. Another version of “speaking too definitively “ perhaps.

            • Drowsy M. Kram 6.1.2.1.1.1
              29 March 2021 at 6:22 pm

              Does a lie need context? Surely a lie is a lie pure and simple.

              What were his eyebrows doing? wink

            • Incognito 6.1.2.1.1.2
              30 March 2021 at 7:59 am

              You strike me as a straight up kinda guy who calls a spade a spade and ‘knows’ that black = black and white = white and there are no shades of grey. To the lazy ‘thinker’, context and nuance are inconvenient words that unnecessarily cloud simplistic views of the world. Your motto is likely KISS and it would not surprise me if you had that as one of your bumper stickers among the many other slogans that you frequently use to show that you are a sophisticated and liberated person with modern views and opinions based on the latest headlines and fads. If you were any younger, you would probably aspire to be an influencer on Instagram donning a man bun because looks and perceptions are the new reality. To you, a lie is a lie pure and simple. FFS! Grow up or stay or The Wiggles YouTube Channel!

  7. Tiger Mountain 7
    28 March 2021 at 1:26 pm

    “But you said ‘X’…” is hardly a stinging criticism of politicians these days. 67.2% of voters in a referendum said no to NZ National Party asset sales–‘pony puller in chief’, Mr Key responded with a firm one middle finger salute.

    The deputy PM’s change of tack is largely inconsequential anyway for generation “student debt” and gen “exploited by scumlords”.

    It seems Carter Holt Harvey may have gone on strike too according to media reports on RNZ yesterday. Framing timber Carter Holt Harvey says is in perilously short supply at the 3 main building merchants. Until the facts are known it looks like possible capital strike to me. What is apparent is raw logs are still exported in bulk at various ports as we speak.

    Time for Grant to impose a national rent freeze, drop all public housing rents if they can’t bring themselves to increase benefits, and cut the Accomodation Supplement sugar fix to private landlords.

    • Incognito 7.1
      28 March 2021 at 1:42 pm

      Almost exactly six months ago, we had a six-month rent freeze due to Covid. Rents can only be increased once every 12 months unless by mutual agreement between the tenant and the property owner. Rents that are out of line with market rates in the same area can be challenged although I don’t know how practical and effective this is in reality.

      • Sabine 7.1.1
        28 March 2021 at 2:11 pm

        Rents are out of of line everywhere, not with market rates but with the incomes of pretty much everyone. And the only option is to apply for a accomodation benefit, get flatmates, or live in a ditch. Whats a tenant to do, go complain to the tenancy tribunal?

        • arkie 7.1.1.1
          28 March 2021 at 3:29 pm

          Whats a tenant to do, go complain to the tenancy tribunal?

          That's what it's for.

          • David 7.1.1.1.1
            28 March 2021 at 5:19 pm

            Agree arkie

            while we are at it, I think countdown is too expensive, Contact is too expensive, BP is to expensive, my dentist is too expensive, public transport is too expensive

            let’s get Robbers and Jax to implement price controls here too. 1970s here we come …

            • Incognito 7.1.1.1.1.1
              28 March 2021 at 9:40 pm

              That’s what the Commerce Commission is for.

            • Foreign Waka 7.1.1.1.1.2
              29 March 2021 at 2:58 pm

              Then increase income. Obviously something is really wrong here. One section of the population is held over a barrel. What do you want to see? A repeat of the 1700's?

          • UncookedSelachimorpha 7.1.1.1.2
            29 March 2021 at 10:51 am

            Sounds nice in practice. In reality you are likely signing yourself up for a lifetime of blacklisting for any future rentals.

            • arkie 7.1.1.1.2.1
              29 March 2021 at 11:02 am

              I have used the services of the tenancy tribunal, I did not subsequently have difficulty entering new tenancies. Blacklisting is also borderline illegal and is being investigated by the Privacy Commission.

              "We've seen media reports that some groupings of landlords or property managers are coming together and pooling information about people that they think are bad tenants.

              "When the media reports came these websites clamped down and shut their privacy settings so we haven't been able to look at them."

              However, Edwards said if any tenants believe they've ended up on one of the lists, they are entitled to ask for access to all that information and check that it's accurate.

              New Zealand Property Investors' Federation's Andrew King told Breakfast that blacklisting tenants was morally wrong, but added that there was a growing concern from landlords about getting the "wrong" person as new laws are set to come into effect.

              Phase two of changes to tenancy laws come into effect on February 11, which as a whole make it more difficult for property owners to get rid of renters.

              https://www.tvnz.co.nz/one-news/new-zealand/privacy-commissioner-launches-probe-into-blacklisting-tenants-unreasonably-intrusive-vetting

              • solkta …
                29 March 2021 at 11:11 am

                They don't have to be told by other LL/property managers as all Tribunal decisions are online and searchable by tenant name:

                Tribunal orders

                You can search for Tenancy Tribunal orders online. These orders show the decisions made at Tenancy Tribunal hearings. If part or all of an order has been suppressed, then certain words used may not appear in the search results.

                You can search by:

                • keyword(s)
                • application number
                • decision date
                • name of the landlord, tenant, body corporate, person, trust or company used at the hearing
                • address of the property
                • damages and compensation

                https://www.justice.govt.nz/tribunals/tenancy/orders/

                • arkie …
                  29 March 2021 at 11:15 am

                  The first step in the tribunal process is mediation, I would imagine many issues are resolved in this part of the process.

                  But that search feature may make it easy to identify landlords who are frequently dealt with by the tribunal, perhaps develop a blacklist even.

                  • solkta …
                    29 March 2021 at 11:21 am

                    Well that is a rather powerless position to be in to have to sort it by mediation or face the consequences.

  8. RedBaronCV 8
    28 March 2021 at 1:52 pm

    Governments can and should change their track if necessary. Frankly I'd be more than happy to see more tax changes if it hit the income that goes offshore or to upper end wealth. We could do with it in the community. I would also like net migration to go back to close to zero for a whole variety of reasons rather than the shoulder shrugging that has gone on in the past.

  9. Jester 9
    28 March 2021 at 5:42 pm

    Jacinda said she would not bring in a CGT while she is leader. Was she being too definitive when she said that?

    • Stuart Munro 9.1
      28 March 2021 at 6:17 pm

      Certainly not – and she hasn't – she has merely extended National's one. She could have drawn the brightline at 50 years without lying too. Don't tempt her.

      • RedLogix 9.1.1
        28 March 2021 at 6:51 pm

        Given that the average property changes hands about every five years, a brightline test that's twice as long as this is for all practical purposes a CGT.

        • Stuart Munro 9.1.1.1
          28 March 2021 at 7:57 pm

          Quite – although that five years represents a level of dysfunction best reduced.

          But lying is something else altogether – and a CGT would, as was discovered last time it was explored, impact things like the goodwill value of professional businesses, and no doubt hit farms, which have undergone massive increases of capital value, and stock, which apparently used to be driven around existing tax legislation sufficiently profitably to incentivize non-compliance with rules designed to prevent or contain things like foot and mouth and mycoplasma. Not to mention changing the default position of our sharemarket, which has often prioritized creating capital gains rather than trading profitably in the conventional sense.

        • Pat 9.1.1.2
          28 March 2021 at 8:06 pm

          Average is a bit over seven years…its thought investors as a group tend to hold longer than average.

          • gsays 9.1.1.2.1
            28 March 2021 at 9:48 pm

            Just don't call 'em speculators, they don't like that. wink

            • Incognito 9.1.1.2.1.1
              28 March 2021 at 9:55 pm

              Indeed, call them “mum and dad investors”, just as ACT is doing, even in their Petition.

              • Pat …
                28 March 2021 at 10:19 pm

                Not sure about them necessarily being 'mum and dad' investors but a large majority own only one investment property….that may be because theyre just starting out in property investment and could be a whole host of other reasons.

                'The total number of active landlords with bonds lodged, as of February 9, 2021, was 120,330, the ministry said.

                Of those landlords, the number who lodged just one bond, which would generally but not always be for one property, is 93,706. That equates to about 77.9 per cent of the total."

                https://www.stuff.co.nz/life-style/homed/real-estate/124320645/nearly-80-per-cent-of-landlords-own-just-one-property-data-shows

                "However, conclusions based on MBIE’s rental bond data can’t be considered definitive."

                Theres roughly 600,000 rental properties and roughly 150,000 investors so an average holding of 4…..roughly.

                • Incognito …
                  29 March 2021 at 7:24 am

                  I don’t like the term “M & D investors”, but you can see why it particularly sticks with politicians to spin a narrative. Just as the word “loophole” invokes a sense of dodgy practices that needs to be stomped on. A number of MPs own one or more rental properties, which I find ironic 😉

              • ghostwhowalksnz …
                29 March 2021 at 11:08 am

                Mum and Dad?

                Im not an investor my self but the ones I know about – next door and a family member- seem to have them for 15-20 years. I presume because over that time they really are making an income

            • RedLogix 9.1.1.2.1.2
              28 March 2021 at 9:55 pm

              Investors tend to buy and hold and work towards a positive cash flow over time as we have. For this reason a CGT doesn't really concern us. By contrast speculators tend to flip quite rapidly and are only concerned with capital gain.

              So yes there is a difference.

              • Incognito …
                28 March 2021 at 9:58 pm

                The difference is lost on those who can ill-afford or not at all afford buying their own home to live in and who will face renting in perpetuity.

                • RedLogix …
                  28 March 2021 at 10:50 pm

                  The real difference is between the those whom the bank will give a mortgage and those they won't.

                  Twenty years ago the bank was prepared to lend us a bundle of money, and we used it to provide homes for a number of people who either didn't want a mortgage or would never qualify for one.

                  In the first two decades of operation we had to invest in a significant amount of shareholder capital into the business from my day job. That's on top of four years of hands-on sweat equity doing the building. We went the extra mile, highly insulated, double glazed, underfloor heating, pleasant surrounds, universal access (on the first two), etc.

                  And since then we've treated the business partly as a social good, keeping rents lower than market. We been happy to accept a reduced cash flow in the expectation that once the mortgage was paid down, the business would return a reasonable, taxable profit for our retirement.

                  Well that's off the table now. If we do nothing we will be paying far more tax than receiving cash income from the business. And while various people will point to the capital gain on paper, that was never part of our business plan.

                  We run the business very conservatively and never borrowed more than 60% LVR. We only once used the increased equity from capital gain just before we came to Australia in 2013 when we bought a neighbor's house for a non-business reason, which I'll not 'overshare' here. But it's left me with a mortgage that still has a significant interest component. So overall my outgoings are almost equal to the income – removing the interest deductibility will likely tip us into a cash flow loss.

                  Clearly this govt is signaling that people who invest in their future are no longer welcome in NZ. We will be selling over the next few years and moving the capital to Australia where it's welcome. None of our tenants will be in a position to move into home ownership – and they're going to be hit hard. We also had a substantial development extensively planned (with over $100k of planning costs already sunk) that will now just have to wait until I can do it without a bank loan.

                  Interestingly we've just been talking to my daughter and her partner who work as courier drivers and by the nature of their work they're very much in touch with community mood and local business sentiment. Since the announcement she tells me it's like the first week of the COVID lockdowns, everyone pulling back on the uncertainty and hunkering down.

                  • Pat …
                    28 March 2021 at 11:14 pm

                    median house price 2000 $175,000…2013 $350,000

                    median house price 2020….$725,000

                    Interest rates have fallen from 8.5% to 3.5% in that period

                    • RedLogix …
                      28 March 2021 at 11:23 pm

                      Indeed – and due to those high interest rates, in the initial two decades we had to put substantial shareholder funds into the business to keep it solvent. This was well understood by the govts of the day, that due to the high capital intensity of residential rental businesses that it would take a considerable period, decades even, for them to make a profit. It was why the LAQC regime was introduced as a cash flow smoothing measure.

                      Yes interest rates have dropped that period, but setting aside the principle component of the mortgage, the reduction in interest has been largely cancelled out by the increase in other fixed costs like rates and insurance – which have almost doubled.

                    • Pat …
                      28 March 2021 at 11:32 pm

                      Id suggest you had 20 years to reduce those 100K mortgages (a whole 5k pa to clear)

                      You have numerous options available to rebalance your portfolio

                      And should you decide you dont wish to, you have done well enough out of the market settings the past 20 years and should be happy the gravy train lasted as long as it did.

                    • RedLogix …
                      28 March 2021 at 11:38 pm

                      What gravy train?

                      I've put many hundreds of thousands into it from my own day job over twenty years and just at the point when it was starting to show a small profit (and I do mean small) – the govt taxes it away.

                      And no I'm not going to post my financials here, but your numbers are way off.

                      What you don’t understand is that business owners everywhere are looking at what’s happened here and realise this govt can’t be trusted.

                    • Pat …
                      28 March 2021 at 11:48 pm

                      they're your numbers.

                      "Twenty years ago the bank was prepared to lend us a bundle of money,"

                      "..never borrowed more than 60% LVR."

                      "We only once used the increased equity from capital gain just before we came to Australia in 2013 when we bought a neighbor's house…"

                      "…(on the first two),.."

                      so you have at least 4 rentals which have at the very least provided a non taxable capital gain of around a couple of million….lifes hard.

                    • RedLogix …
                      28 March 2021 at 11:54 pm

                      @pat.

                      Nope you're still wrong. As usual a lot of people here telling me all about how the business works when they haven't done it themselves.

                      And then make a virtue of their ignorance.

                    • Pat …
                      28 March 2021 at 11:56 pm

                      Havnt done it myself…know plenty who have.

                    • RedLogix …
                      29 March 2021 at 12:03 am

                      Until you have some skin in the game it's easy to overestimate how much you know about anything.

                    • Pat …
                      29 March 2021 at 12:06 am

                      Lol…i think you protest too much. No skin in the game but close enough to know how its played.

                    • RedLogix …
                      29 March 2021 at 12:12 am

                      No you don't. You've gained a superficial and incomplete impression based on a bunch of people telling you what they wanted you to hear.

                      What you don't hear from so much are the numerous people who give it away because it turns out to be far more difficult than they expected.

                    • Pat …
                      29 March 2021 at 12:14 am

                      Know a few of those as well…and was the main reason I stayed out.

                    • RedLogix …
                      29 March 2021 at 12:37 am

                      As per the numbers you provided above, about 78% of landlords have just the one unit.

                      At a median rent of $500pw that's a total income of $25k pa. If they have a mortgage, their cash outgoings will probably amount to between 75-95% of that – leaving at best around $5k pa in profit before tax.

                      With the deductibility of interest gone – that will likely reduce to somewhere near zero or negative.

                    • Incognito []
                      29 March 2021 at 8:05 am

                      With the deductibility of interest gone – that will likely reduce to somewhere near zero or negative.

                      Yes, this is the issue for many for whom a tiny positive cash flow will turn into a constant negative trickle or flow even, a constant financial drain and strain on one’s household budget. I’d expect many will take it on the chin but with less income it will have a chilling effect on their spending behaviour, i.e. it’s like a pay-cut. The other thing that might happen is that investors will try lower risk and future shocks by fixing for longer periods, which again will have a chilling effect on the economy. Much of NZ’s economy is indirectly driven through and by the housing market and the consumption by investors who feel financially comfortable and secure. It’s anybody’s guess what will happen over the next four years and thereafter. Bigger shocks may dwarf these relatively minor changes, e.g. another pandemic, a natural disaster, a giant dinghy wedged in a ditch somewhere, a war in the ME, a country going ‘nuclear’, et cetera.

                    • Pat …
                      29 March 2021 at 12:42 am

                      “With the deductibility of interest gone – that will likely reduce to somewhere near zero or negative”

                      I think thats the point. of the package….and it depends a lot on debt ratios.
                      And the government have increased the ability of FHB to provide the market for leveraged investors to sell to…and pocket their capital gain.

                    • lprent …
                      29 March 2021 at 12:48 am

                      I'd suggest that you read RL's comment (either that or you’re too stupid to understand that other people may have different motivations than yourself). Especially the bit where he stated that he wasn't doing rentals for capital gain, but for an operational profit.

                      We been happy to accept a reduced cash flow in the expectation that once the mortgage was paid down, the business would return a reasonable, taxable profit for our retirement.

                      That appears to be the thing that you're curiously thick on. I really hate reading comment streams where people fail to read the others comments before they throw their own stupid interpretations of behaviour.

                      Like your statement further down …

                      so you have at least 4 rentals which have at the very least provided a non taxable capital gain of around a couple of million….lifes hard.

                      Not everyone is a speculator chasing capital gains, nor want to be.

                      For instance, I've got an apartment currently being rented. The only reason for renting it was because my partner wanted to get her own apartment, without getting me to contribute – just in case we wound up breaking up. After all we'd only been living together for a decade at the point that she brought it.

                      I've been living in her apartment for the nearly four years and paying much of the mortgage. My apartment pays for itself even with the higher 'investor' interest rate that the bank wanted.

                      So my property is still currently on hold in the unlikely event that we do decide to live apart. I can't see any reason to sell it. It is a better apartment than my partners IMHO.

                      However it is now likely to go cash negative. I could sell it and take a capital gain. But I can't buy anything else in Auckland, and I may want to stay here even after I retire.

                      I could boot my tenants and move into it. In which case my partner probably can't pay for her apartment.

                      Or I have enough kiwisaver due for release in a few years. I'll look at getting it out early on 'hardship from government policy'. Pay off the remaining mortgage so I can get rid of the interest payments and reduce costs. Which is what I was intending to do in a few years anyway.

                      FFS: I don't buy property for capital gains. I invest for that.

                      I buy property as a place to store my computers, comm lines and myself. I only brought my apartment about 24 years ago because capricious landlords were forever booting me out. Annually, it was costing me a bomb in cash and lost time to install adequate comms lines in the each new rental. Not to mention the immense aggravation of moving. I brought a apartment purely to get rid of those operational costs.

                    • RedLogix …
                      29 March 2021 at 12:52 am

                      Good so now you have a clear idea that landlords far from being wildly rich, are by and large providing an essential social service for relatively little cash gain.

                      That leaves the capital gain, which all property owners partake in. Hoping that landlords all decide to dump their properties on the market and crash prices, destroying equity across a wide swath of the economy will hurt everyone – the poor the most.

                    • Pat …
                      29 March 2021 at 1:05 am

                      Thats all well and good, however the Government package is aimed at the market in total and many have bought for capital gain….and even those that havnt can still utilise the path out should they so choose and not be subject to tax on any capital gain (assuming they purchased prior to mid 2018)…they could have designed a different package that DID tax capital gain in some form for those selling out of the investment market…they didnt.

                      As stated in the comment you appear to object to so strongly it is my understanding the policy is to enable first FHB to enter the market at the expense of leveraged investors who sell….but not tax those investors that choose to do so.

                      And as yourself state you intended to pay down your investment mortgage in the next few years anyway…well you have 4 years to do so before the full interest liability occurs.

                    • lprent []
                      29 March 2021 at 1:36 am

                      Just lucky that I’m getting close to retirement age eh!

                      Of course I might have to make myself jobless to pull the kiwisaver. A perversion of policy. But there are a few not for profit tasks that are looking interesting.

                      Or I could shift the apartment to being my office, get an remote job and charge the interest as a business cost on my contract income. It would be cheaper than most commercial office space.

                      Would have been a real pain 4 years ago. The choice would have been between my apartment and my partner.

                    • Pat …
                      29 March 2021 at 1:31 am

                      @Redlogic re 29 March 2021 at 12:52 am

                      I have no problem with private investors providing rentals and earning a return on that investment…I do have a problem with property bubbles that shut out a large (and increasing) proportion of society from affordable housing and all the consequential problems and as appeals to sanity have failed the government had to do something (finally) and this is possibly the potentially least damaging option that has an outside chance of NOT crashing the property market….which imo will crash anyway in the not too distant future….and free up some housing to FHB and maybe even increase supply to the rental market if enough BnBs and vacant properties enter the market.

                      As a multiple investment property owner you have options to reduce your leverage so as to mitigate your future costs as the interest deductibility is removed…..and remember, just as the interest deductibility was removed it can be reinstated should conditions allow.

                      We cannot continue to run our housing market for the benefit of only 150,000 investors…..or speculators.

                    • Incognito []
                      29 March 2021 at 8:14 am

                      We cannot continue to run our housing market for the benefit of only 150,000 investors…..or speculators.

                      Why leave out owner-occupiers? And the whole FIRE economy that’s a cornerstone of NZ’s economy? Loads of people are benefitting from rising property prices. Except those who do not own property and/or never will.

                    • Pat …
                      29 March 2021 at 1:43 am

                      @ Iprent

                      4 years ago property prices wernt 10+ times median income….and Redlogic is I am sure is able to take a gentle ribbing.

                    • lprent []
                      29 March 2021 at 8:54 am

                      I wasn’t defending RL – that was more of a side issue.

                      I was mostly having a look at the implications for my apartment.

                      4 years ago property prices wernt 10+ times median income

                      As I pointed out, and as RL pointed out, raised property prices are only relevant if you want to sell. I don’t want to sell. But this tax is going to cause both of us to have to either do something about rents, kicking out long term tenants, changing the usage to commercial or something. I certainly can’t afford to go into reduced work and income with increase in costs. I’m already supporting my partner and her nascent business.

                      The reason that I’m looking at it right now is that there annual lease rollover in late April. The mortgage is due to roll in June. Any decisions I make will be in the next few months.

                    • mikesh …
                      29 March 2021 at 12:13 pm

                      At a median rent of $500pw that's a total income of $25k pa. If they have a mortgage, their cash outgoings will probably amount to between 75-95% of that – leaving at best around $5k pa in profit before tax.

                      Once the mortgage was paid off they would own the property unencumbered. If they were to apportion the value of the property, even valuing it at its original cost, over the years in which the mortgage was being paid, and topping up the incomes for those years accordingly, it would probably be seen that the were doing ok.

                      You are not taking into account the fact that the mortgage payments payments you are so blithely building into the rent will eventually result in outright ownership. You seem to think you have the right to have the tenant pay for your property.

                    • RedLogix []
                      29 March 2021 at 1:28 pm

                      And amazingly they get to live in it at the same time.

                    • mikesh …
                      29 March 2021 at 8:09 pm

                      “And amazingly they get to live in it at the same time.”

                      The tenant pays rent for the right to live in the property for as long as the tenancy lasts, but he shouldn't have to pay for the property itself. That's your responsibility.

                    • Incognito []
                      29 March 2021 at 10:27 pm

                      Logically then, the interest component should be tax deductible but the principal component should not.

                    • mikesh …
                      29 March 2021 at 11:05 pm

                      Logically then, the interest component should be tax deductible but the principal component should not.

                      No. Both components are personal. Akin to consumption spending.

                    • RedLogix …
                      29 March 2021 at 11:06 pm

                      @Incognito

                      That's exactly how it works at present, only the interest component of the mortgage is deductable as an expense. This is true for all businesses as far as I’m aware.

                      Setting aside the impact on rental businesses, the reason why so many people have been taken aback on this move is that treating interest as a deductable cost has been a basic principle of accounting and taxation since forever.

                      Different businesses have different financial behaviour, consider the difference between a supermarket and a software contractor for example. Well it happens that residential rentals are characterised by low turnover and high capital intensity, which means that changes to tax rules around how capital is treated – in this sector – have an outsized effect.

                    • RedLogix …
                      29 March 2021 at 11:12 pm

                      Both components are personal. Akin to consumption spending.

                      Absolutely wrong.

                      The principle is the component of the repayment that is of benefit to the owner because it reduces the debt and increases their equity.

                      The interest component is the cost the bank is charging you for lending you the money. Only the bank benefits from it.

                      The two are quite different.

                    • mikesh …
                      30 March 2021 at 8:49 am

                      The principle is the component of the repayment that is of benefit to the owner because it reduces the debt and increases their equity.

                      The interest component is the cost the bank is charging you for lending you the money. Only the bank benefits from it.

                      The two are quite different.

                      If the ownership of the house is personal then the costs associated with acquiring it are also personal.

                    • Incognito []
                      30 March 2021 at 9:01 am

                      If the ownership of the house is personal then the costs associated with acquiring it are also personal.

                      Huh?

                      Owning a car rental company, a taxi company, or a timber mill, for example, is also “personal” so the cost of setting these up (AKA investment) is “personal” too?

                  • Drowsy M. Kram …
                    28 March 2021 at 11:45 pm

                    None of our tenants will be in a position to move into home ownership – and they're going to be hit hard.

                    The experience will school your (former) tenants about trust and risk.

                  • Drowsy M. Kram …
                    28 March 2021 at 11:56 pm

                    In me or the government?

                    RL, I could only guess – best to ask your tenants. They may continue to trust you (and any future landlords) despite being “hit hard.”

                    Your decision is one reason I stopped renting asap – it’s too risky, imho.

                    • RedLogix …
                      29 March 2021 at 12:00 am

                      Well at least half have been with us for over a decade now and seem to be more than happy to trust the service we've been providing up until now.

                      I'm sure most of them read the news and will be more than capable of drawing their own conclusions when we give them notice.

                  • Drowsy M. Kram …
                    29 March 2021 at 12:16 am

                    Good to know at least half your tenants seemed happy customers.

                    Given that they will all be "hit hard" by your business decision, they may consider matters of trust and risk more carefully in future.

                    Still, “beggars can’t be chosers“, right?

                    https://www.rentinginsydney.com/post/how-to-be-a-better-landlord

                    • RedLogix …
                      29 March 2021 at 12:27 am

                      I cannot continue to run the business at a cash flow loss. I either raise rents or sell.

                      If you were one of my tenants, which would you prefer?

                  • Drowsy M. Kram …
                    29 March 2021 at 12:33 am

                    That’s a business decision for landlords, not tenants – tenants must accept significant risks when they sign rental agreements. Those risks are some of the reasons I was keen on an early exit from the rental market.

                    • RedLogix …
                      29 March 2021 at 12:40 am

                      You express concern for the risk tenants are taking, yet you evade a simple question I've asked on their behalf.

                    • mikesh …
                      30 March 2021 at 10:41 am

                      Right there you missed it – the landlord purchased the unit from someone else. That person then went on to do something else with that money presumably of greater value to them than holding the property was.

                      In renting it out there is nothing that you have added to to the property, and which you are asking your tenant to pay for.

                      And at the same time the landlords does two things their tenants can not or do not want to do – put in their own equity and assume the liability of borrowing from the bank. The landlord takes on the risk that the tenant cannot do – and the tenant pays rent for this service.

                      None of this involves the production of some new tangible thing that you might ask your tenant to pay for.

                      Another way of looking at it – the bank charges me interest for the service of lending me money, and in turn the landlord charges rent for the service of lending a tenant the house.

                      If a barber cuts my hair he performs a service. Interest is sterile it produces nothing.

                      Again by only looking at the narrowly literal act of 'buying the fish' you miss everything else that is hidden behind it.

                      I don't need to know what lies behind it. I'm purchasing a product.

                      A community's income is not the money that changes hands, but the tangible products and services that it produces (and which usually convert to cash when sold). The charging of rent and interest, while not necessarily usurous, nevertheless do not constitute income, notwthstanding how these practices are usually viewed.

                    • RedLogix …
                      30 March 2021 at 11:22 am

                      The charging of rent and interest, while not necessarily usurous, nevertheless do not constitute income, notwthstanding how these practices are usually viewed.

                      If interest could not be charged then no-one would ever give anyone credit. Nor would anyone ever ‘lend’ you a house to live in.

                      I don't need to know what lies behind it. I'm purchasing a product.

                      But absent everything behind the product – it would not exist. Behind that fish lie hundreds, if not thousands, of small rental transactions. Just consider the fishing vessel alone – it's almost certainly been purchased using borrowed money and the cost of that has to be covered by the sale of the fish you buy.

                      In buying that fish you are in effect 'renting' a tiny part of the boat and crew needed to catch it. We don't usually look at it like this because a fishing boat catches millions of fish – but imagine if in principle it only ever caught just the one that you bought. The price of that singular fish would have to be millions of dollars and you'd certainly notice the 'rent' you paid for the use of that boat.

                      Well this is what applies when you rent a house – unlike a fishing boat that will catch millions of fish for millions of people, a house can only be used by one occupant at a time. And because of the capital intensity of housing the 'rent' paid for this capital dominates the picture.

                    • mikesh …
                      30 March 2021 at 3:23 pm

                      If interest could not be charged then no-one would ever give anyone credit. Nor would anyone ever ‘lend’ you a house to live in.

                      So. How is that relevant. I'm not saying that interest shouldn't be charged. I'm merely saying that it is not productive, but that production is not its purpose.

                      But absent everything behind the product – it would not exist. Behind that fish lie hundreds, if not thousands, of small rental transactions. Just consider the fishing vessel alone – it's almost certainly been purchased using borrowed money and the cost of that has to be covered by the sale of the fish you buy.

                      I assume the fish concerned is a red herring! The discussion we've been having is about the residential renting industry, not the fishing industry. When purchasing a fish I couldn't possibly get my head around all that stuff you say lies behind it, so why would I bother.

                      Let’s just look at one industry at a time.

                  • Drowsy M. Kram …
                    29 March 2021 at 12:56 am

                    I cannot continue to run the business at a cash flow loss. I either raise rents or sell.

                    If you were one of my tenants, which would you prefer?

                    Genuinely don't know much about your tenants, although I’ll take your word for it when you say they will be "hit hard" by your business decision – sucks to be them.

                    If I was (God forbid) one of your tenants and could afford to pay more rent, then I’d ‘prefer' a rent increase. If I couldn't afford to pay more rent, then my 'preference' would be immaterial.

                    Your “simple question” is very revealing – so glad I’m not beholden to a landlord.

                    • RedLogix …
                      29 March 2021 at 1:11 am

                      Exactly – not so easy is it?

                      I'm not asking you to make my decisions for me, they're my responsibility and the consequences land on me. I'm not asking for sympathy, merely understanding that govt policy changes do have an impact – and not always the ones we intend.

                  • Drowsy M. Kram …
                    29 March 2021 at 1:19 am

                    Exactly – not so easy is it?

                    It was fairly easy, tbh – took me all of 20 minutes.

                    I'm not asking you to make my decisions for me, they're my responsibility and the consequences land on me.

                    And not only on you, as your "hit hard" comment makes clear.

                  • Incognito …
                    29 March 2021 at 7:34 am

                    The uncertainty is mostly emotional, i.e. irrational, because people were taken by surprise and without any consultation, which is unusual here in NZ. Once people have worked through the actual figures and calmed down somewhat, they’ll probably realise the real implications in four years’ time. Of course, some politicians, people and groups with vested interests, and the media (!) will try keep the emotional hype as high for as long as possible and milk it for all it’s worth. This Government is and has committed and they’ll do anything to minimise any political fall-out.

                  • mikesh …
                    29 March 2021 at 9:00 am

                    This is why I think people shouldn't be borrowing to buy rental properties. I don't think interest should be deductible since it's a personal cost of the landlord's rather than a 'business' cost. And as Shamobeel Iaqub pointed out on Sunday's Q+A, there is an enormous quantative difference between interest paid in a rental mortgage and that paid by a normal business. This makes a property rental business uneconomic unless the landlord charges an egregiously high rental. You may argue that if a renter were to buy a house he would have those mortgage costs anyway, but a 'family' homeowner will eventually own the house he lives in outright, while a renter never will.

                    Even if interest is deductible rents are still likely to be higher than they should be.

                    • Craig Hall …
                      29 March 2021 at 5:34 pm

                      There's definitely a strong argument that the residential rental market, such as it is, is not representative of normal markets or business, and leverage is one of the big points.

                    • mikesh …
                      29 March 2021 at 11:17 pm

                      There's definitely a strong argument that the residential rental market, such as it is, is not representative of normal markets or business, and leverage is one of the big points.

                      The main difference is that: whereas the normal markets are productive markets – markets in which tangible goods and services are produced. The rental market, on the other hand, is a 'ticket clipping' market from which no new products are forthcoming. Existing assets are simply shuffled around.

                      I was not using the term 'ticket clipping' pejoratively, but I would suggest that it requires a different way of thinking.

                    • RedLogix …
                      30 March 2021 at 12:26 am

                      The rental market, on the other hand, is a 'ticket clipping' market from which no new products are forthcoming.

                      Nonsense. The concept of 'new product' is just something you made up. Consider every time you drive over a bridge, enter a shopping mall, ride a bus, rent a car, use virtually any public utility, borrow a library book you are making use of an existing product or service for a period.

                      Let me be more specific – you go into a supermarket and buy some fish. Yes the fish is 'new', but virtually everything else about it is not, from the fishing boat that caught it, the refrigerated trucks that shifted it, the numerous public utilities such as the roads, electricity, and water infrastructure, the building the supermarket is in, it’s parking lot, and so on. Then there is the social infrastructure such as the educated people who could do all the tasks effectively, the rules and commerce laws that made it all work securely and predictably. All of these were a necessary part of delivering you the 'fish' – and arguably you both paid for benefited from each one of them in the act of buying it.

                      In essence every singular economic activity has a vast array of hidden 'rental' actions in behind it. The idea that only 'new things' are the only legitimate economic activity is a silly fantasy.

                    • mikesh …
                      30 March 2021 at 9:15 am

                      Nonsense. The concept of 'new product' is just something you made up. Consider every time you drive over a bridge, enter a shopping mall, ride a bus, rent a car, use virtually any public utility, borrow a library book you are making use of an existing product or service for a period.

                      When I use those services I am not paying for some new product I am simply re-imbursing the owner for some of the costs apportionable to my use of the product. When I rent a car for example: wear and tear, insurance, etc.. When I catch a bus I'm contributing to the driver's wage, the cost of diesel, depreciation, etc..

                      When I rent a property I pay, which are passed on as part of the rent, costs like the insurance and rates, maintenance,etc. The landlord produces nothing that did not previously exist – something which he probably purchased second hand from someone else i.e he didn't even produce it himself; he is merely 'ticket clipping'.

                    • Incognito []
                      30 March 2021 at 9:29 am

                      The owner of a car rental company didn’t produce the car(s) himself either; he is merely ‘ticket clipping’.

                    • mikesh …
                      30 March 2021 at 9:45 am

                      PS: the fact that certain things may be going on unnoticed in other parts of the economy doesn't change what is happening in the rental market.

                    • RedLogix …
                      30 March 2021 at 10:11 am

                      The landlord produces nothing that did not previously exist – something which he probably purchased second hand from someone else

                      Right there you missed it – the landlord purchased the unit from someone else. That person then went on to do something else with that money presumably of greater value to them than holding the property was.

                      And at the same time the landlords does two things their tenants can not or do not want to do – put in their own equity and assume the liability of borrowing from the bank. The landlord takes on the risk that the tenant cannot do – and the tenant pays rent for this service.

                      Another way of looking at it – the bank charges me interest for the service of lending me money, and in turn the landlord charges rent for the service of lending a tenant the house.

                      Again by only looking at the narrowly literal act of 'buying the fish' you miss everything else that is hidden behind it.

                  • mikesh …
                    30 March 2021 at 10:16 am

                    Owning a car rental company, a taxi company, or a timber mill, for example, is also “personal” so the cost of setting these up (AKA investment) is “personal” too?

                    No. Only the cost of borrowing.

                    • RedLogix …
                      30 March 2021 at 10:42 am

                      Do you understand how a standard amortized table mortgage works?

                      In essence every payment over the term of the mortgage (usually between 15 – 30 yrs) consists of two components, a 'principle part' that incrementally repays the sum borrowed and reduces the debt over the term to zero. And an interest part that is the bank's charge for lending you the outstanding principle.

                      The latter is the 'cost of borrowing' that until now has been universally treated a deductable business expense.

                      Just to be clear – the principle part was never a tax deductible expense, it's always separated out on the balance sheet as a 'capital movement'.

                    • mikesh …
                      30 March 2021 at 4:13 pm

                      “Do you understand how a standard amortized table mortgage works?”

                      Yes.

                      Do you know how the tax system works?

                      Income tax is levied on the revenue that we receive. However, the IRD allows us to deduct, from that revenue, any expenses that contribute to the gaining of that revenue, though it's difficult see how a non productive expense like interest can actually so contribute. However, it's a little more complicated than that. The Income Tax Act says (I don't remember the clause number) that "an expense is deductible if it is incurred for the purpose of gaining taxable income".

                      This gives rise to a question: is the purpose of borrowing the gaining of taxable income; or is the purpose the raising of capital?

                      I would say the latter because borrowing is not always necessary, whereas the investment of capital is always necessary.

                      There is an analogy in workers' bus fares which may illustrate what I am trying to get at. The IRD stipulates that the bus fares (or other means of transport) that the worker spends money on order to get to and from work are not deductible. Apparently the worker is not earning taxable income while he is sitting around on a bus, despite the fact that the clear purpose of doing so is to get himself to work and earn such income. Apparently, ultimate purpose doesn't matter.

                      I would have said that borrowing to raise capital is equivalent to the worker's "sitting around on a bus".

              • KJT …
                29 March 2021 at 6:43 am

                If your business is too highly geared it is your fault, not the customers. You are using your customers to buy the house for you. You wouldn't get loans for a normal business, if the outgoings were so close to the costs. It is only the banks expectations that you will, in fact, make a large profit in the end from capital gains, that they base their lending on. That so many can borrow beyond the rentals earnings, as a going concern, is a consequence of steeply rising prices. And a prime cause of the whole problem. The same thing has happened with farmland.

                • RedLogix …
                  29 March 2021 at 11:35 am

                  If you read my comment carefully you would know we were never more than 60% leveraged. That's fairly conservative and it's way less now.

                  Another person who thinks it's all an easy gravvy train when they've never had any skin in the game.

        • Jester 9.1.1.3
          28 March 2021 at 10:03 pm

          Exactly. Well said Red.

      • Chris 9.1.2
        29 March 2021 at 11:43 am

        In the House Ardern batted away the nats' accusations of going back on her promise by quoting a series of remarks from nats emphatically declaring the world away difference between a BLT and CGT. It makes you wonder what Labour's position was back then on the difference that sparked such a sharp response form the nats.

        • Stuart Munro 9.1.2.1
          29 March 2021 at 2:49 pm

          such a sharp response – hate to say it but they're no the sharpest pencils in the draw, not even close. So no-one is looking to them for intellectual leadership in interpreting government actions. The Gnats are coming down firmly on the side of the speculators – that's their constituency – but it can't help but shrink their support. Time was a few Gnats understood such things, and kept them electable. Not anymore it seems.

          The CGT is long overdue – we should have had one decades ago. When the OECD (scarcely a repository of leftist thought) repeatedly suggests one year in year out, governments that can actually do the math, and are not utter flailing incompetents or self-serving sacs of fat, are going to move in that direction.

          • Nic the NZer 9.1.2.1.1
            29 March 2021 at 3:13 pm

            Can you elaborate on why the brightline test is not a CGT by another name?

            • Stuart Munro 9.1.2.1.1.1
              29 March 2021 at 3:18 pm

              Because it is not affecting all the other myriad forms of capital gain throughout the economy. The measure is restricted to real estate, and it seems, to housing.

              Likely that is because the undesirable volatility in housing prices has not been replicated across the wider economy (it probably has in farm prices, but that is a door the government has chosen not to open).

              • Nic the NZer …
                29 March 2021 at 3:30 pm

                Well I don't understand the argument for such a tax then. Is it a pure revenue gathering rationale, because the bolstering of government coffers has never lead to spending on more public goods (quite the opposite).

                If its price controls then it plainly doesn't work where it does apply (on investment property).

                To my mind the main discussion point seemed to be that CGT supporters thought it was an untried policy for house price control (though which hasn't worked elsewhere) and this policy was a soft way of breaking it to Labour supporters that their favourite tax was not a solution to property prices having already been in place under another name.

                • Stuart Munro …
                  29 March 2021 at 4:28 pm

                  Think of it as a sin tax – the government is concerned about speculation, and wants to deter it. Being on the end of a neoliberal advice chain means tax is the first tool they reach for – were they a monarchy they'd act more directly and limit the number of houses one could own.

                  CGT does work elsewhere, but it is the lack of one that has caused unnecessary inflation here. Investments in NZ housing enjoyed a comparative advantage relating, not to market conditions, but the lack of a CGT. Being a small market it was readily distorted by this unwonted cash flow.

                  What happens to a housing dream deferred?

                  Does it dry up, like a raisin in the sun?

                  Or fester like a sore— And then run?

                  Does it stink like rotten meat?

                  Or crust and sugar over—

                  like a syrupy sweet?

                  Maybe it just sags, like a heavy load.

                  Or does it explode?

                  The government would prefer it did not explode.

                  • Nic the NZer …
                    29 March 2021 at 4:39 pm

                    So after relocating the goal posts totally, of which assets in NZ are subject to the BLT, to suite your belief that CGTs are both the obvious solution and will succeed… You also decided to treat us to a reading of your favourite Vogon poet.

                    • Stuart Munro …
                      29 March 2021 at 6:26 pm

                      Hardly moving the goalposts – the freemarketers asserted repeatedly over the last few decades that it was all good – that everything worked for the public benefit. With numerous graphic examples of market failure, and housing chief among them, the government has returned to its job – after a lengthy absence – of putting the public interest ahead of investor wants.

                      Had the investors operated carefully, and not practically cornered the market, the government would not have felt obliged to act.

                      But yes, a CGT was long overdue, it was obvious even back in 2000. Why would you imagine NZ was immune to issues that impelled practically every other country to introduce a CGT? Do you have a rationale for that besides fictions about it not working elsewhere?

                    • Nic the NZer []
                      29 March 2021 at 6:40 pm

                      You yourself said that the difference between the BLT and a CGT was that the BLT only applies to property.

                      NZ has had a BLT for some time.

                      And now you appear to be saying that the lack of a CGT on property is the reason for that market failure.

                      I mean just because you can't remember where you put the goalposts this doesn't mean they haven't been moved.

                    • Nic the NZer []
                      29 March 2021 at 6:49 pm

                      I should also highlight your saying lots of other countries have had CGTs of some form and plenty of those (specifically Australia, Canada, the USA and the UK) also have or have had burst large property bubbles.

                      And that basically follows from your own claim of widespread CGTs, FFS!

                    • Stuart Munro …
                      29 March 2021 at 7:09 pm

                      And now you appear to be saying that the lack of a CGT on property is the reason for that market failure.

                      By no means – the reason for market failure is the incontinent greed of property investors becoming too widespread. A CGT is one of many possible forms of deterrence for that greed, and it is widespread because it works to some degree.

                      I mean just because you can't remember where you put the goalposts this doesn't mean they haven't been moved.

                      What nonsense – I have never pretended that we should not have a CGT – it is the simplest available method to focus investment to productive ends, instead of tax avoidance. Your evident dislike for it is neither here nor there. A massive blowout in property prices right in the middle of an ongoing crisis necessitates a government response. I suppose you interpreted Ardern as promising no such action? The promise was really to Winston, and it was not about residential property anyway, but all the other capital rorts whose recipients dunned him to lobby on their behalf.

                    • Nic the NZer []
                      29 March 2021 at 7:58 pm

                      So far I find your description between a CGT and BLT just evasive and unconvincing. The reason I asked that question was to see if there was some convincing reason for the continuing demands for a govt to have CGT policy which I was missing.

                      So in order to head off the struggle session you are trying to start I should point out I don't particularly care personally if NZ has one or not, and it doesn't really impact me if we do/did.

                      With that out the way the question seems to be why don't we already have a CGT called the BLT and applying only to residential property. Again it seems the govts way of breaking it to its supporters that NZ has and has actually had for some time a CGT.

                      So the question is at that point why should we have any faith that CGTs are a serious price correction policy when the only asset class in NZ having a CGT is also has the sky rocketing prices. Of course if you ran that as a controlled experiment you should probably infer CGTs cause sky rocketing prices.

                      But instead apparently now I am to believe its the wrong class of investors we have in NZ whose greed exceeds the abilities of policy to regulate but apparently your policy advice is still sound and the way to go. (I am also aware of similar stories of rapacious owners in other jurisdictions so to me this doesn't even qualify as a meaningful claim about NZs landlord class).

                      But if you want to have a serious role in pushing for a CGT (rather than just being a cheer leader for whatever govt announcement comes through) I think the discussion ought to explain why the BLT regime has not worked (has it?) and so what a CGT needs to do better to work (or discuss what the goal is rather than more or less hand waving at the property market).

                    • Stuart Munro …
                      30 March 2021 at 10:10 am

                      So the question is at that point why should we have any faith that CGTs are a serious price correction policy when the only asset class in NZ having a CGT is also has the sky rocketing prices.

                      I really don't know how you can utter such tripe. NZ's lack of a CGT makes us an anomaly among comparable economies, and has attracted investment to exploit what is a loophole by the standards of those economies. Introducing a CGT would have stopped that proportion of realestate inflation, and reduced the deadweight cost it imposes on our greater economy, which is significant and growing.

                      I suppose you imagine that your opposition to CGTs is somehow plausible. It isn't. But neither are they a miraculous solution to the rampant speculation that has made our real estate sector so dysfunctional – the straw man you are trying to make of it.

                      "Oh – a CGT didn't immediately cure property inflation," you cry "they mustn't work!"

                      They work to a degree, and together with a raft of other policies may bring the market to heel – if hyper property inflation doesn't wreck the whole economy first.

                    • Nic the NZer []
                      30 March 2021 at 10:51 am

                      This appears to be an amazing example of the Dunning Kruger effect.

                      "NZ's lack of a CGT makes us an anomaly among comparable economies"

                      So here in the comment NZ does not have a CGT. And this after saying the difference between a CGT and BLT is that the BLT only applies (as pointed out applies CGTax) to housing (a position which you have not yet altered).

                      "Oh – a CGT didn't immediately cure property inflation," you cry "they mustn't work!"

                      And yet further, quoting me or rather quoting yourself putting words in my mouth, in the past tense NZ has a CGT already and it didn't immediately cure property inflation (which is rampant).

                      The BLT is a Schrodingers CGT?

                    • Stuart Munro …
                      30 March 2021 at 11:03 am

                      Your entire contribution to this thread has been in bad faith.

                      I should also highlight your saying lots of other countries have had CGTs of some form and plenty of those (specifically Australia, Canada, the USA and the UK) also have or have had burst large property bubbles.

                      This is you making the fatuous argument that CGTs are not worthy of consideration because they do not miraculously resolve all the drivers of real estate inflation.

                      Own it.

                    • Nic the NZer []
                      30 March 2021 at 11:12 am

                      Absolutely I do own that, I know of no cases where CGTs have lived up to the rhetoric of being a major price regulator (including in NZ).

                    • Stuart Munro …
                      30 March 2021 at 4:29 pm

                      NZ economist solipsism. They imagine being Johnny-out-of-step marks them as geniuses – world institutions meanwhile, are not in awe.

                • Craig Hall …
                  29 March 2021 at 5:40 pm

                  Agree that CGT won't stop house price increases and I personally would prefer land or wealth tax. The principal reasons I've seen put forward amount to virtue-signalling since they amount to complaints about the inconsistent tax treatment of income from work vs income from flipping houses rather than any serious impact on house prices. That said, if the issue is people buying second houses, then the BLT specifically targets that in a way a general CGT wouldn't.

                  • greywarshark …
                    30 March 2021 at 11:53 am

                    Stuart Munro makes an important point that seems to have been glossed over: That other countries have CGT which they consider is some encumbrance to property buyers, and by NZ choosing not to have one, we attract extra attention from speculative buyers who find our free-for-all ultimate-fighting approach in the housing arena, good sport.

                    I think we should stop being good sports about this housing kerfuffle and get higher standards in the arena. Perhaps we should copy sporting rules and regulations for government, as they seem to have some, and our governments and political administrations all seem to be lacking in them.

                    • Craig Hall …
                      30 March 2021 at 1:33 pm

                      If the plan is to specifically target owners of second and subsequent houses, taxing the capital gain is one option among many – stamp tax/duty and land tax are both specific options.

                    • Stuart Munro …
                      30 March 2021 at 2:14 pm

                      If one looks at capital gains from a macro perspective, they are invariably the province of wealthy and/or corporate owners. It was sometime around the implementation of Rogergnomics, and likely influenced by the activities of (is he still a Sir?) Ron Brierly, that NZ businesses turned from what might be broadly termed a production mentality, to a capital mentality. Although most obvious in areas like property, more than half of agricultural earnings are now capital.

                      Because we lack a CGT, this change has resulted in a shift of tax burdens from the wealthy and corporate, to working people, or, as governments strove to reduce services to a low tax flow, the failure to fund important services and infrastructure upon which ordinary New Zealanders relied.

                      This was compounded by legislative evasion by foreign buyers motivated by the lack of a CGT, and by quasi criminal expatriations of capital from China in ways that the regime forbade. None of these drivers of NZ real estate inflation benefitted NZ at all – they added massive deadweight costs to the cost of living in the form of housing costs.

                      A CGT is one way to slightly rebalance the impact of these freeloaders, so that rising infrastructure and healthcare and related costs are shared with those that create them.

                      If social justice through level taxation is not the object however, a simple law capping property ownership at, say, five houses might have achieved the end of stymying runaway speculative activity with less fallout. It would have allowed modest property based retirement provisions, or bach ownership and all the complications of breakups or inherited properties, but disallowed immodest ones.

              • mikesh …
                30 March 2021 at 9:29 am

                The fact that the brightline test is not applied to other assets does not mean that it is a capital gains tax. What distinguishes the two is the fact that the BLT is applied only when the asset was purchased specifically for the purpose of resale. A CGT is applied whenever there is a gain due to the the purchase of an asset.

                • Incognito …
                  30 March 2021 at 9:33 am

                  The “T” in BLT does not stand for Tax, it stand for Test. Because IRD uses this weird and difficult concept of intention.

                • Stuart Munro …
                  30 March 2021 at 9:54 am

                  purchased specifically for the purpose of resale

                  One of the reasons a brightline test became desirable, from a taxation perspective, is the frequency with which tax was being evaded on resale of properties. It was almost never being paid, but it was due. The onus of proof of intent had somehow been farmed off onto the tax authorities. The brightline test simplifies that to some extent – but it falls short of course of the social justice ends of a CGT, that people who do not work recieve no unearned taxation advantage over those who do.

                  So it's a modest step in the right direction, but still enables the bulk of shiftless, unproductive investors to avoid contributing their share, and thus motivates the group to prioritize the non-productive, FIRE type investments, which don't contribute, or contribute negatively, to the wider economy. Our productivity gap will not close under these conditions.

  10. Pat 10
    28 March 2021 at 7:41 pm

    Sage advice

    "I would say at this point, I think several people have been extremely ill guided in some of the comments they have made online. Inland Revenue monitors social media, and some of the comments I've seen by property investors, understandably, given the shock and the implications for them, upset about what has happened and probably reacting somewhat intemperately, may come back to haunt them.

    For example, saying that rent doesn't cover the cost of a mortgage and other costs, as one investor said in print, is an open invitation to Inland Revenue to raise questions as to why if that was the case, that person had purchased property. It opens the door for Inland Revenue to then go on and say, “Well, you must have acquired that with a purpose or intent of sale.” Which if that is argued bypasses the bright-line test. It doesn't matter how long you've held it in those in those circumstances, any gain will be taxable."

    https://www.interest.co.nz/opinion/109717/week-tax-more-implications-governments-shock-property-taxation-proposals-and

    “But the overall point should be kept in mind, and this has happened before with the removal of the loss attributing qualifying company regime, tax preferred investments or rules that give a tax advantage will always be scrutinised by government. They are always therefore at risk of being abruptly closed off.

    So, if you built an economic business model around relying on that, you are actually making yourself very vulnerable to a move like this.”

    • RedLogix 10.1
      28 March 2021 at 11:06 pm

      They are always therefore at risk of being abruptly closed off.

      Exactly. There is that word 'risk' again that many people around here don't understand much. All investment into the future has to price this in.

      • Pat 10.1.1
        28 March 2021 at 11:20 pm

        Thats how its supposed to work…..thats why the de facto removal of risk in the property market created the bubble we have today….the risk was removed.

        Now they realise it wasnt removed , simply increased and delayed.

  11. Ad 11
    29 March 2021 at 5:55 am

    We are about to find out how reliant the New Zealand economy is on the decade-long growth in wealth of a small set of property owners.

    I think gradual capital flight is likely since the New Zealand economy doesn't have enough mature investment sectors to keep them here.

    Capital flight may be wonderful revenge for the neo-Marxists and the morons who cry out to 'turn Labour left', but won't be great for the rest of us who have to deal with our small and ever-more brittle economy.

    At some point this government is going to have to generate an economic plan that's more useful than "print money and tax property investors".

  12. Gosman 12
    29 March 2021 at 6:14 am

    The key thing is NOTHING substantive changed between the time Grant Robertson first made his comments on the Brightline test and when he changed his position. The housing market was overheated and unaffordable back then just as it is now just slightly less so. That would tend to suggest he should not have made such a commitment at the time and can be held to account for the flip-flop.

    • Incognito 12.1
      29 March 2021 at 8:21 am

      Your wilful ignorance has been noted. Using capitals only makes it more obvious that you’re plucking your views from somewhere down below.

    • lprent 12.2
      29 March 2021 at 8:45 am

      The key thing is NOTHING substantive changed…

      Bullshit. Most of last year there was a plateauing of housing prices. That was forecast and expected to continues during the post-lockdown recession. Neither happened. Instead the pace of housing price rises kept escalating.

      Now I am aware that you like sticking your head in the sand and ignoring anything when it is profitable to you. After all you only have to look at your comments in high rates of migration over the years to see that tendency.

      However I expect a government to use the tools at hand to mitigate unsustainable bubbles. They might be useful for some individuals, but they are bad for the economy. The bright-line test is inadequate. But coupled with other measures and the increased computer capacity at inland revenue, I’m pretty sure it will help stem this bubble.

      • Gosman 12.2.1
        29 March 2021 at 8:52 am

        I agree governments should look at all tools at their disposal and should not rule anything out so Grant Robertson should not have done that. Also he made that statement in an interview just before last years election. By that time it was clear that the housing market was on the rise again. I know this because it is something that was campaigned on by political parties like ACT which I was part of. ACT made the lack of affordability of housing one of the key campaign issues for the party. I believe The Greens also did something similar (but from a different policy perspective obviously) There was no indication that it was being brought under control by the date of the election.

        • lprent 12.2.1.1
          29 March 2021 at 9:03 am

          But wasn't the statement made in July or August last year at the start of the first election campaign? When the housing volumes were low and it was mostly the upper price brackets of houses changing hands? It pushed the median increases up – but not that on the lower ones.

          It wasn't until the summer started to hit in September in the usual house buying season that it was clear that there was a general rise in house prices.

          I notice that so far David Seymour and National seem to be a bit vague about times. Isn't this just another example of them lying by omission?

          ie doing a a Whaleoil. They're taking their much later responses and applying it without context to much earlier statements.

          Like Whaleoil, I'm inclined to disbelieve almost everything that they say simply because they specialise so much in being dishonest. Many people will do exactly the same. I guess that is why outside of some strident media – this particular meme isn’t gettinga lot of conversation.

          Of course they could fill in the details to prove otherwise. But I guess that is hard for such moral people.

          • Gosman 12.2.1.1.1
            29 March 2021 at 9:51 am

            Again, it doesn't matter WHEN he made the statement last year. The market had started ticking up in terms of year on year increase well BEFORE he made his comments. It was clear that an increase in the rate of growth in house prices of around 3 percent per year in December 2019 to close to 8% by July (which it basically maintained through to September) was indicative of the housing market becoming overheated once again.

          • Gosman 12.2.1.1.2
            29 March 2021 at 12:36 pm

            He made the comments in relation to a direct question to him on the topic on NewstalkZB on September 9th 2020. By September the housing market reate of increase was climbing towards 9% per year. Grant Robertson had no reason not to be aware of that.

      • Gosman 12.2.2
        29 March 2021 at 8:57 am

        And here is a link to an article with a graph to highlight that the rapid increase in house prices was quite evident by the time Grant Robertson made his ill judged comment about not increasing the brightline test.

        Where’s the plateauing of house prices last year Lprent? I see nothing but a steady rise.

        https://www.bloomberg.com/news/articles/2021-01-05/new-zealand-posts-fastest-house-price-growth-since-mid-2017

        • lprent 12.2.2.1
          29 March 2021 at 9:09 am
          1. A price index is only as good as its volumes.
          1. Your own graph shows a small uptick from flat in July to a small uptick at the end of August.

          FFS: can't you read graphs?

          I guess that I can put this down to another case of lying by omission. eh?

          • Gosman 12.2.2.1.1
            29 March 2021 at 9:22 am

            There was no plateauing of house prices last year. The period you are discussing is where the price RISE (not price) was flat. The increase on a yearly basis in July was still close to 8%. An 8% increase in an already overheated market is indicative of an issue that needs addressing.

            Your argument would be like stating if the Inflation rate stayed at 50% on a yearly basis for a couple of quarters we have stable prices.

            • ghostwhowalksnz 12.2.2.1.1.1
              29 March 2021 at 11:03 am

              There was very low volumes of listings last year and the reason was homeowners themselves expected their place might be hard to sell and they not get what they expected.

              Of course without the banks getting the money to pump into housing no one would be bidding higher prices. Some of that has come from a surge in saving and paying off credit cards

              The Reserve Bank is using its powers of credit creation to supply the banking sector as well

              • Gosman …
                29 March 2021 at 12:38 pm

                See my comment 11.2.1.1.2 above.

                Grant Robertson made his commitment on September 9th 2020. At that stage the rise in housing prices had moved from under 8% to over 9% per year.

                • ghostwhowalksnz …
                  29 March 2021 at 1:23 pm

                  And were aware of the precise detail here or had to look it up.

                  Public sentiment and knowledge often lags definitive data.

                  A lot of big name economists had egg on their face over economic predictions last year, not because they arent smart but because their personal biases were wrong.

                  Its a full time job for someone to point out to people whos day job it is to know where they were wrong.

                  Famously your idol John Key promised no new taxes specifically no GST increase and changed 'mindset' after the election.

                  He even denied saying Wellington was dying. When it was an off the cuff remark he believed and did say but had to deny it anyway

                  • Gosman …
                    29 March 2021 at 1:35 pm

                    I don't know why you think John Key is an idol of mine. I have criticised him a number of times on this very blog.

            • lprent 12.2.2.1.1.2
              29 March 2021 at 6:26 pm

              An 8% rise compared to about 15% in Jan and about 20% odd rise in Feb that prompted this reaction?

              As far as I can see what you're accusing him on is not being able to foreseen that future and also accusing him of acting on a n unforeseen future.

              I go back to the original point I made. Governments are there to govern. They try not to react like headless chickens too early, or to find themselves bound too tightly when the circumstances change (and then run around like headless chickens again).

              That role is left up to you and David Seymour in the headless chicken parties in opposition.

  13. dv 13
    29 March 2021 at 7:50 am

    One factor that has not seemed to be mentioned in this discussion is the tax is phased in over 5? years.

    • Sabine 13.1
      29 March 2021 at 8:02 am

      details. details.

    • lprent 13.2
      29 March 2021 at 8:33 am

      4 years. If you aren’t speculating, then buying housing is a long-term investment.

      4 years is a pretty short time to try to cram the number of sales of properties currently rented into (if you wanted to sell).

      I typically get either 3 or 5 year fixed term mortgages – and there are costs involved in breaking those early. Fortunately I’m due to roll in June. Hopefully I can break out my Kiwisaver by then. Otherwise I’ll get a short term mortgage to give time to do so. I suspect that the short term mortgages rates will rise before then.

      It really isn’t much time.

      • Sabine 13.2.1
        29 March 2021 at 8:55 am

        This is true, but it will run into the next election cycle. Maybe invest in popcorn futures?

        • lprent 13.2.1.1
          29 March 2021 at 7:05 pm

          🙂
          It is going to be interesting to see what happens. Problem is that super low interest rates accompanied a shortage of supply (which wasn't helped by the pandemic shutdowns), and a influx of kiwis returning has meant that out nett immigration has been maintained at a high level.

          The rolling level is at ~60k up to end October 2020 – see that last graph / table in the stats analysis at the end of last year.

          https://www.stats.govt.nz/news/more-departures-than-arrivals-since-march

          If you look at the kiwi arrivals, that is most of the monthly figures, and many of them are house hunting.

  14. Nic the NZer 14
    29 March 2021 at 8:57 am

    The brittle nature of the economy is quite an interesting problem. The issue seems to be just how the govt describes giving away an income to the right people. They were easily able to justify it when lockdowns were being enforced but now that there largely over circumstances of the person needing an income arise and so we are as if missing a mechanism to determine who is worthy of getting freebies and who is rorting or lazy. Even paying people to stay home a few days after a covid test seems beyond imagination, though if it avoids one Auckland lockdown its paid for itself.

    • Nic the NZer 14.1
      29 March 2021 at 11:41 am

      This was originally a reply to Ad talking about brittleness of the economy. That comment may show up on open mike eventually I expect.

  15. tsmithfield 15
    29 March 2021 at 9:06 am

    Without getting into the merits or otherwise of this specific issue, I think it is right for politicians to change their position on previous statements when changing conditions demand it.

    However, they would be better to couch their preceding statements in a way that gives them more wiggle-room to avoid accusations of breaking promises in the future.

    That would be to simply couch what they say with the preface: "So long as conditions don't change…." or something similar.

  16. Pat 16
    29 March 2021 at 10:02 am

    This is a reply to Redlogix, Iprent and Incognito (and anyone else whos interested) that started yesterday @ 28 March 2021 at 5:42 pm.

    As Incognito has noted a lot of our economy has been driven by rising house prices (and the associated debt) and is the reason why ALL politicians have been reluctant to do anything more than talk about a housing crisis.

    Like all things this can be good in moderation and the wider community can benefit through the 'wealth effect' and additional spending power it provides to support employment and provide access to capital for SMEs that otherwise may not be there….but we are way past moderation and what has driven it into bubble territory (unsupported by fundamentals) is the expectation of ever increasing prices and no downside risk.

    There is always downside risk, even if we choose not to see it. The Government expected that with the hit on the real economy that house prices would fall and they could do nothing, deal with covid and the problem would solve itself….they were wrong and they have had to move to prevent the bubble inflating further and faster and bursting (on their watch) with all the economic fall out that will create….and they needed to move fast.

    Tax policy is fast and easy (in comparison) to the alternatives….and also easily reversed should they need to be….and it can be effective.

    Even if your primary concern is the economic wellbeing of the country then it should be realised that a property bubble is the worst possible threat to an economy that is largely built on the selling, maintaining and servicing of a debt provided asset class….nevermind that it is a basic human need that is being driven out of reach of the typical kiwi resident.

    This package has the potential to deflate that bubble and lessen (or at least delay) the risk of a crash and that is a good for everybody…even property investors.

    Of course it also has the possibility of triggering an uncontrolled negative feedback

    • lprent 16.1
      29 March 2021 at 7:21 pm

      I entirely agree with all of that. However it is almost irrelevant.

      The problem is that the taxation of interest is a bit of a blunt instrument which will cause some perverse effects. It is good in that it provides a strong incentive to disinvestment in residential rental property.

      In the long term that will benefit the economy as a whole – but only after enough new residential property has been built. At present that is roughly about 80k new residences to simply take up the existing backlog. It does nothing to deal with ongoing inward migration.

      The problem is that in the near term that is going to cause a whole pile of long-term investors in rental housing to shift their investments to commercial property rather than residential rental. It offers a powerful incentive for people with capital to buy up rentals because the rents are going to rise. It is just a merry go around.

      It doesn't get any more residential properties being built. All it does is push more people into motels because they won’t be able to afford more expensive rentals, even if one was available.

      On the other hand, because of the crap housing, immigration and economic policies over the last 20 years – that was going to happen anyway.

      It will probably cause me shift my apartment to either commercial usage for myself, or to organise with my partner to remove all for the interest on the property and leverage up her property that we're both living in. That is a bit of a perverse effect. Hell we may even feel comfortable with only having one residence rather than having a breakup bolthole.

      It may even cause us to finally get a civil union after 13+ years living together.

      • Pat 16.1.1
        29 March 2021 at 7:44 pm

        Disagree…you are basing your scenario on (at least) two false assumptions.

        Firstly there is not a housing shortage in NZ….there is a shortage of available housing causing an affordability crisis.

        Secondly, the population pressures have eased considerably with the closed boarders. Meanwhile we have been building at 40 year high rates that is adding stock.

        The package provides incentives to both increase available housing through the release of previously unavailable stock and promotes investor construction ahead of buying existing stock.

        The public housing stock is increasing (albeit at too slow a rate) and if accelerated as indicated in the package could reach ratios not seen since the 1990s (its peak) in a relatively short period, but even before it reaches that total it will provide rental rate relief.

        But most of all, the change of expectation is what will drive prices ahead of everything else…it is what has driven them up in the face of reality and a change of sentiment works equally well in the opposite direction.

  17. Jenny how to get there 17
    29 March 2021 at 10:02 am

    When the situation changes, (or worsens), you should change your mind.

    The real questions that should be addressed is not Grant Robertson's change of mind, but who benefits and who loses.

    Rather than critise the policy itself, the naysayers are nit picking.

    Because let's face it, they don't want to address the housing crisis itself, or the measures that Grant Robertson is taking, (or might take), to address it.
    So called, 'Mom and Dad investors', (many of whome are overextended), and the banks who hold their mortgages, as well as the big institutional investors, are happy with things just the way they are.

    This is why they talk about a nebulous, 'loss of confidence' a subjective state of mind, rather than any objective criticism.

    Or concentrate on trying to hold Grant Roberson to a position that does not meet the needs of the time.

    These people live in dread of even the slightest measure which might result in a "cooling" of the housing market. Which is their code word for falling house prices and rents.

    The losers from an overheated housing market are renters and first home buyers, who would welcome a fall in house prices and rents.

    Congratulations to Grant Roberston for changing his mind, and not just looking to the interests of the big institutions and investors, and those middle class people who have bought into the housing market, but also those badly impacted by the housing crisis.

    Hopefully, and this is the fear of his detractors, Grant Roberson will take even further measures to address the housing crisis and ‘cool’ the market.

    "When events change, I change my mind. What do you do?"
    John Maynard Keynes
    https://quoteinvestigator.com/2011/07/22/keynes-change-mind/

    • Jenny how to get there 17.1
      29 March 2021 at 4:55 pm

      Woohoo, Horray,

      <b>Rent caps 'almost inevitable', property manager says</b>

      Miriam Bell15:51, Mar 29 2021

      “…… Landlords will try and aggressively push rents to levels that will be beyond sustainable for many renters and the Government will be forced to act.”

      David Faulkner, Property Management Consultant, Real-iQ

      https://www.stuff.co.nz/life-style/homed/renting/124687179/rent-caps-almost-inevitable-property-manager-says.

      If Grant Robertson wants to deliver relief to first home buyes and renters, his next move to cool the overheated housing market is inevitable.
      (Not 'almost inevitable').
      When property consultants are saying it, for Robertson to not take this next logical step, would be to deliver social injustice to renters and first home buyers, representing a massive backdown in the face of landlord and investor hostility.

      Who will blink first?

  18. Adrian 18
    29 March 2021 at 1:29 pm

    When Jack Tame challenged Grant on the disparity between deductibility of interest payments for running a business as opposed to owning a renter, GR replied that typically interest costs on most businesses were about 5% of costs but on a leveraged rental property could be up to 90% therefore this was an unfair disparity and it was his job to try to achieve a level playing field. Unspoken was the feeling no doubt that greedy fuckers shouldn’t be allowed to make huge capital gains off subsidised tax relief. Good on yer Grant, go hard and go early, now for an empty house banking tax.

    • mikesh 18.1
      29 March 2021 at 8:26 pm

      Shamobeel Iaqub said much the same thing. But both I think were responding to claims by landlords’ representatives that landlords were being singled out for unfair treatment if other businesses were to be allowed to continue deducting interest for tax purposes.

  19. mikesh 19
    29 March 2021 at 6:55 pm

    Upon reflection, it seems to me that removing the depreciation entitlement in respect of rental properties was counterproductive. In the first place depreciation, being more to do with the house, rather than the business, would/should not have been passed on to the tenant as part of the rent. Secondly, being a non-cash item, having it deductible would have helped the landlord's cash flow position. When one adds these considerations to the fact that the so called 'excess depreciation' should really have been treated as capital gain rather than taxed for no good reason, removal of the depreciation allowance seems to have been a bad move all round. Where a property was worth, say, $700,000, with the house being worth, say $400,000, and the land $300,000, depreciation (on the house) at 2.5% would have been $10,000 and the landlord's tax saving, $3,300 pa.

    What would have been good for the landlord may also have benefitted the tenant through reduced rent.

  20. Mat Simpson 20
    29 March 2021 at 7:35 pm

    ' Robertson has misled the country "

    Well Grant can join the list going back to the Key- English – Joyce administration and Douglas / Lange in 84 , Muldoon over Erebus in 1979 and Bolger , Birch and Richardson in 1990 to mention a few.

    The corporate media and its wealthy supporters who are always on cue to voice their displeasure and venom when ever a threat to the established order is unmasked.

    Just ask Jeremy Corban and his supporters.

    That is one of the most impregnable barriers to get even a timid progressive agenda implemented.

    Massive civil unrest will be needed but without any violence to force change but i fear we are well past that point as the market has neutered any opposition to its authority.

  21. zee 21
    29 March 2021 at 9:16 pm

    Housing market activity has been more resilient than expected in the Budget Update, supported by pent-up demand, involuntary savings during Alert Levels 4 and 3 and looser monetary conditions. However, various competing forces make the outlook for house prices particularly uncertain.