Luxon on rents – another National economic idiot

Written By: - Date published: 2:06 pm, March 14th, 2024 - 30 comments
Categories: capitalism, Economy, housing, Social issues - Tags: , , ,

I read the statement by our current PM Christopher Luxon about what landlords will do with his plan to reduce their costs from interest rates. I was incredulous that this lummox had ever paid attention during even a basic economics course. Landlords aren’t going to pass any cost reductions on to tenants in rent values. They always charge new tenants the rental rates that the market can bear. Luxon needs to read some of the analysis from Treasury, Reserve Bank, and Housing or any economist who has studied what guides rental rates in this country.

Listening to Luxon is like being timewarped and having to again listen to Muldoon explaining his view about economics being all about simple cost accounting. Luxon appears under-briefed or living in some fantasy land unrelated to reality.

For the past 30 years, New Zealand has seen more and more people moving into the country. However, there hasn’t been enough housing or other necessary services for everyone. This problem has been caused by the decisions and laws made by the governments over the years. They are responsible for how many people move into the country, and they haven’t invested enough in public housing. They also wrongly believed that private companies would solve these issues without the government’s help.

In particular the government led by Prime Minister John Key didn’t do much to fix these problems, especially during and after the tough economic times from 2007 to 2010. We have been living with that governments deficiencies ever since.

Because there has been a shortage of accommodation, now not only in Auckland but throughout most of the urban and provincial centres, the rent prices are almost entirely based on how much tenants can afford to pay for accommodation – that is what rental market rates are. This isn’t exactly hard to find – even Luxon could just look at a Stats infographic.

What individuals and families can afford is almost entirely based on household incomes. But also limited by the interrelated lack of ability to escape tenancy by buying property for household occupation as house and land prices have spiralled upwards.

Household incomes are constrained by the profits of businesses and employers and how much they can pay while still making a profit. Purchasing land and housing is constrained by the ability to afford a mortgage. Which with the rising prices of properties and the higher interest rates is increasingly harder to do unless family wealth is capable of acting as the bank of Mum and Dad.

Ask any landlord including Christopher Luxon with his numerous paid off investment properties. He and other landlords don’t set rental prices based on their their levels of cost. They set them according the local prices per room and will only lower them if they are unable to find tenants at those rent rates.

Reducing landlord costs only gives them more profits. It seldom even causes new property to be created for rental. Almost all owners of residential investment properties will buy existing properties, They seldom commission new residential property to be built. This is almost inevitably left to people wanting to build a new home or historically to the state housing sector.

There is absolutely no market reason for landlords to set rents based on costs. In New Zealand for at least the last 20 years they have queues of people wanting to rent their properties. There is a nett shortage of accommodation compared to population and most people cannot afford to buy or build housing with their current household incomes with current land and property prices.

As the August 2023 Treasury / Housing / Reserve Bank report on rentals states in its introduction, rental prices and economic behaviour related to it are better indicator of market supply and demand for housing than any measure (my bold).

New Zealand rents have received growing attention as the proportion of people who rent has been increasing since the early 1990s. This paper aims to provide an initial framework to improve our understanding of the factors that impact housing rentals in New Zealand. This analysis is useful for several reasons. Firstly, rents provide a better signal of the balance of supply and demand for dwellings than house prices do. This is because rents do not reflect expectation for future gains as house prices do. Secondly, providing a better understanding of rent drivers can lead to better government policy as renters typically pay a larger proportion of their incomes on housing costs than owner occupiers and so they are more vulnerable to large movements in housing costs. Thirdly, forecasting rents can also improve the accuracy of house price forecasts, as they are one of the factors that influence house prices. Finally, the framework helps us to test theories of how land and housing markets operate.

Housing Technical Working Group: “What Drives Rents in New Zealand? National and Regional Analysis

In the results section there are a number of simple economic factors drawn.

All else equal, an increase in nominal wages leads directly into a 1-to-1 ratio increase in rents, as shown in all columns of Table 1. The correlation is stronger contemporaneously, but we also find that lagged wage inflation contributes to rental inflation.

In terms of relative supply and demand, a 1 percent increase in people per dwelling leads to a 1.5 per cent increase in rents (Table 1). There is some limited evidence suggesting that the higher the increase in the supply/demand gap, the stronger the wage-rent relationship, due to competition for rental properties allowing landlords to capitalize on renters’ wage gains.

Across all model specifications in Table 1, the unemployment rate is negatively correlated with rental inflation, i.e an increase in unemployment rate would lead to a decrease in rental inflation. There are two possible explanations for this. Firstly, better job security can encourage people to form new and smaller households, which in turn, increases the demand for rental properties. For example, young adults may be more inclined to leave the family home when unemployment is low. Secondly, a strong labour market and positive economic outlook would ensure tenants’ current and future ability to pay, allowing landlords to raise rents.

All else equal, an increase in population is positively correlated with rent inflation, while an increase in dwellings is negatively correlated with rental inflation.

Another finding is that the sensitivity of rent inflation to mortgage interest rates is positive. However, the sensitivity is quite small and is not always statistically significant across model specifications. There are several possible explanations for the sensitivity of rent inflation to mortgage rates. For example, first home buyers may delay buying due to rising mortgage unaffordability, increasing demand for rental property. Higher financing costs and restricted land markets may limit the supply response to increased demand for rentals when interest rates rise, putting further pressure on rent inflation. There may also be feedback loops in the banking sector, which can limit the supply response of rental properties to lower interest rates. As supply begins to increase relative to demand this will increase vacancy rates and reduce yields for property investors. This may lessen banks’ appetite to lend for further rental property development.

Across all specifications in table 1, the impact of general inflation beyond that already captured by the nominal wage coefficient, measured by CPI less rents, is positive but not statistically and economically significant.

Housing Technical Working Group: “What Drives Rents in New Zealand? National and Regional Analysis

This is exactly what you’d expect from any market analysis that indicated a mismatch between population and housing. Landlords respond to the ability of tenants to pay rents. It has little to do with their costs until it gets to the point that tenants are unable to pay enough for landlords to make any profit, either on rents vs costs or via capital gains.

In the New Zealand market with its chronic long-term shortage of housing relative to population and ever increasing house prices, even lacking a profit from rents doesn’t cause much of change in landlord behaviour. Many if not most rental properties are also investment properties for the owners. They can (and often do) farm their properties for un-taxed capital gains while claiming the rental losses across all of their income- resulting in a reduced tax rate.

This government doesn’t intend to tax capital gains nor increase costs to landlords by making interest non-tax-deductible. They also appear to have no coherent plans for significantly increasing housing stocks (past wanting ratepayers and councils to pay developers infrastructure) to wind back the deficit between nett inwards migration and housing stock.

So effectively and despite Christopher Luxon’s damn stupid opinion, all they are doing is allowing landlords to take increased profit from market rentals. It’d be highly unlikely that there will be any significiant reduction in market based rents. Meanwhile the governments planned lack of any effective action on housing and infrastructure will ensure that any reductions in global interest rates will rapidly trigger a property price rises.

I guess that is exactly like you’d expect from the parliamentary parties who are full of MPs who are landlords and the political parties and MPs that take large donations from property interests.

This is part of what causes the observations about “Key facts “Key Facts of Rents in New Zealand” section, and the associated demand for rental places.

The share of New Zealand households who pay rent has increased significantly during the past three decades, rising from about 23 percent in 1991 to 32 percent in 2018 (Stats NZ, 2020). The associated decline in home ownership has been particularly acute for young adults, with the proportion of New Zealanders aged 25 to 34 who are owner-occupiers declining from about 65 percent in 1988 to 35 percent in 2018 (Bentley, 2021). The number of households in rented dwellings increased from about 290,000 in 1996 to 530,000 in 2018.

The usually resident population in New Zealand increased by over 1 million people during the study period, from an estimated 4.0 million in June 2003 to 5.1 million in June 2022, at an average growth rate of 1.3% per year. Over the same period, the number of dwellings also increased by 1.3% per year, by 500,000 to 2 million. However, these long-run growth rates hide periods of mismatch between population and dwelling growth (Fig. 2). Variation over time in New Zealand’s population growth rate is driven primarily by changes in net external migration. Notably, the population was growing at a faster rate than dwellings during the period 2015–20, increasing the number of people per dwelling to a high of 2.64 as at June 2020. Border restrictions over the following two years curtailed population growth, whilst dwelling growth continued, reducing people per dwelling to 2.56 as at June 2022. This is similar to the 2.58 people per dwelling as at June 2003, at the beginning of our study period.

Housing Technical Working Group: “What Drives Rents in New Zealand? National and Regional Analysis

Basically the pandemic caused a hiatus in population growth, but all that did was to reduce density levels in housing stock. During this period, rentals continued to increase as the population spread out further in newly available housing (including repurposed tourist accommodation). Resumption of high rates of nett inwards migration caused a rapid rise in market rental rates over 2022-2023.

In the absence of significiant increases of available housing compared to population growth, landlords and property owners will take whatever profit is available, and still take any capital gains profit as well. Market economies do not engender charities in times of shortage. They engender price gougers from those holding scarce resources.

Meanwhile Christopher Luxon clearly thinks like a economically stupid cost accountant. Another lazy framers of the economy as a business – when it clearly is not. He is absolutely guaranteed to to screw up the economy like the last couple of them (Robert Muldoon and John Key).

They either do cost cutting of infrastructure (our urban infrastructure) while increasing population to boost short-term business growth or add uneconomic infrastructure to boost growth to carry forward as assets that carry debt but limited return on investment (Think Big and Roads of significance to National) and often both at the same time. All the while they sprout lazy pious and confused nonsense that is ineffectual whilst trying to kick the inevitable problems into the future. Christopher Luxon and his inept cronies will be damned by future generations that they have impoverished.

The best general solution would probably be to pass legislation that required the MPs and their families and trusts must divest from all investment properties before being allowed in parliament. Because to me it looks like National, NZ First and Act are operating policies designed to swell the bank balances of their MPs, the families of MPs and their donors.


I have a BSc and a MBA, both with large chunks of maths, economics and statistics. I have worked in the private sector, either in management or as a creator of export IP, for my working life. I have been involved in politics in one form or another for the past 40 years. I am unsympathetic to fools who ‘reckon’.

30 comments on “Luxon on rents – another National economic idiot ”

  1. A new study from the London School of Economics says 50 years of such tax cuts have only helped one group — the rich.”

    But here's Luxon saying renters are "very grateful" the Government is reintroducing interest deductibility for landlords… what a lying scumbag

    • roblogic 1.1

      It's true, honest! The magical trickle-down fairy says so.

    • newsense 1.2

      It’s almost like someone has told don’t worry get out there it’s part of politics.

      Unlike being a middle manager somewhere in Canada, being remembered as New Zealand’s Liz Truss will stick. Being remembered as someone who just told the worst and most economically illiterate lies will stick. Being remembered as the worst PM since …Lange? Muldoon? is something that will stick. This is his BS, not his party’s or advisors. It will stick to him and for the rest of his life in NZ.

      Small misdirects are one thing, but just gaslighting everyone and saying day is night will soon find an emperor with no clothes.

  2. Is there a word to describe Seymour's prevarications and patronising? Supercilious? Glib? Bullshit artist?

    Here is Seymour lecturing Lisa Owen, in true Rogernome style, all theoretical economic gobbledygook that attempts to justify a counterproductive tax policy that will make people worse off (RNZ; Transcript)

    LO: This government says the change back will simplify the tax code. And Associate Finance Minister David Seymour says it will mean cheaper rent. So I asked him. How much cheaper?

    DS: Unfortunately, nobody can tell because it's not the only variable that affects rents. There's the number of rental properties being built. There is the amount of people immigrating. There's general inflation to do with monetary policy, the performance of the economy. All of those things will have an influence. However, the amount of tax being taken out, that will be around about $800 million each year and that is money that will be divided between landlords and renters alike.

    LO: So you can give absolutely no guarantees by giving a tax break to landlords that it will filter down to renters?

    DS: Well, actually we can guarantee that. Well, any tax, when you put a tax on a transaction, is partially paid by the producer and partially paid by the consumer. That's your economics 101, literally. I used to teach it. [🙄 ed: wanker alert 🚨] And then you ask, well, how much goes each way? It depends on, if you want to get technical, the elasticity of supply and demand in the marketplace. and that will vary from different parts of the country. It will depend on all those other factors.

    One "factor" that Seymour neglected to mention, is greed, and the power exerted by landlords against their tenants in a 'market' that he and his cronies have deliberately distorted.

    • lprent 2.1

      Not to mention that the demand is completely artificial because the government are the group that controls immigration and residency.

      In my long lifetime I have never seen a year with departures exceeding arrivals.

      What I have seen is that the state periodically stopping building infrastructure – including housing – 2008-2017 being the most recent example.

      David Seymour is just another idiot with their hand holding down one side of the scales for the benefit of themselves of their political donors

      • roblogic 2.1.1

        Do any MPs actually divest themselves of their property assets before implementing policies that inflate house prices?

        Conflicts of interest everywhere

    • satty 2.2

      Without ever studying economics, I find it very hard to believe that an investor doesn't try to optimise the returns / profits on an investment. The purpose of an investment is to generate profit:

      Investment (noun)

      1. the action or process of investing money for profit

      Dictionary: Investment

      • roblogic 2.2.1

        "The purpose of an investment is to generate profit"

        Oh really?? But according to the government, landlords are providing a social good from the kindness of their hearts and are doing it tough 🙄🙄🙄

  3. Kay 3

    I've somehow fluked out renting privately, I've now spent 25 years in the same place. And the perfect position to observe 'the market' in action.

    The first 16 years, 'market' rent when I moved in (less than the core Invalid's benefit), and the rent not raised for 16 years; only dealt with the landlord. House sold- and me with it- rent almost doubled overnight to just under 'market' rate, and almost the same as the core benefit. Been dealing with a property manager ever since, and the ongoing rent increases that now have my rent way above the core benefit. The hard working taxpayer used to give me a partial accommodation supplement- now it's the maximum, plus maximum TAS, just to pay the rent. Does that mean any taxes that my LL/PM pay come back to them via my AS? It's all a giant money-go-round.

    At the same time, the new owners made 500K in capital gains on a drafty old wooden house which isn't even worth that, but apparently the land underneath it is…

    I can fully accept the occasional increase to pass on the skyrocketing insurance and rates. But I do believe that the role of property managers in the rental 'market' have to come under extreme scrutiny. They have everything to gain, and a probably very pursuasive to their clients about the necessity. But how many landlords would raise the rents so frequently and by so much if there wasn't this middleman involved?

    25 years ago it was a renter's market. I was spoiled for choice. Now, along with every other private renter it's absolute terror of losing the rental because homelessness is pretty much guaranteed.

    • lprent 3.1

      Yep. That is how the market reacts to a shortage in supply or a increase in demand.

      I live in a 60 apartment block of (originally) one bedroom 50-60sq m + 2 garage parks. Brought in there in 1998 because I was tired of having to pay to install ISDN lines (about $800 each time I moved) when the landlord wanted to shift in a favourite nephew or to sell the place for a capital gain.

      Has virtually no land per apartment because they are about 50-60sqm and stacked 3 high. So the market unit purchase price only slightly more than doubled. Rates have increased by about 80%. The body corporate has jumped about 5 fold, mostly water, insurance, and the forward build up of maintenance costs as it ages. You would not believe the paint job costs for the whole building.

      Nice place to live in. Originally there were only a 10-15 owner-occupiers like me. and many of those were black sheep trusted out into the complex. A number of whom have now shuffled off this mortal coil.

      Now I'd say that only about 15 are still rented.

      Rents have been pretty clearly related to ability to get tenants at the price point. They have pretty well tripled. But they tend to be plateau and sharp increase followed by plateau. It essentially follows the nett migration rates into Auckland. When accommodation loosens up a bit, like early 2022 before the immigration spike or during the GFC, you can see apartments lying vacant for a few weeks until landlords lower their expectations.

      The rent variation between apartments is only about a sixth lowest to highest values. The high end is where the living space was reduced and a extra bedroom slotted in. The low end are the ones with minimal upgrades. Essentially the renovations only pay for themselves with increased sale prices, and even then probably only half of those made their reno money back.

      My partner brought her own apartment here in 2017 by herself and dragged me upstairs to help pay for the mortgage. My old one operated as a airbnb for a while because I didn't know what to do with it (I wasn't on my partners title). Then got rented out at a market rate. I sold in 2022 when a tenant left abruptly. Too much nuisance when I had work to deal with. Paid off my partners mortgage last year and went on to her title.

      I did suggest a more traditional approach last year but was again rebuffed. After all we have only been living together for 16 years. 🙂

    • weka 3.2

      that really really sucks. It's also an excellent descriptor of the housing crisis and NZ over that time period. Once were egalitarian (ish)

  4. tsmithfield 4

    Lprent, I agree with you that interest rate reductions won't result in savings being past directly through to tenants. And I agree that landlords will charge what the market can bear.

    But, that doesn't mean rent rises won't reduce or at least be slowed due to a combination of those factors.

    If landlords are making more yield through rents, then renting out properties will become more attractive to landlords. Therefore, house owners who, for whatever reason, have surplus housing, will likely be more motivated to rent out their surplus housing if they see it as a more profitable and less risky option.

    Therefore, if reinstating interest deductibility results in making more housing available, then the increased amount of housing should have an effect on market conditions, and therefore may create an environment that is more favourable to tenants than would have been the case if interest deductibility was not reinstated.

    • roblogic 4.1

      Luxon is holding one finger in the air and hoping that his financial genius will result in more houses being built, but what is more likely is that the ownership class will have more ready cash to outbid first home buyers, making inequality worse.

    • SPC 4.2

      Allowing landlords to claim mortgage cost deduction against rent income encourages borrowing to buy more existing property – which makes places upward demand on this finite resource.

      Thus landlords participate in mutually advantageous speculation – and with no CG tax

      That makes it less affordable to those who do not yet own property.

      To National there seems to have been a coincidental increase in new builds since landlords began to lose the right to claim mortgage interest as a cost on their existing property – for Labour it was a policy design to encourage investment in new builds.

    • lprent 4.3

      Therefore, house owners who, for whatever reason, have surplus housing, will likely be more motivated to rent out their surplus housing if they see it as a more profitable and less risky option.

      It hasn't been noticeable in the past in Auckland which probably has the most by number.

      I had a look at it a while ago when I had a 'spare'. What you have to remember is that most of the fallow houses are mostly or completely paid off. You're mostly looking at paying the rates and smallish maintenance fees (in my case the body corporate).

      Generally what happens is that unused housing with a mortgage gets outfitted as airbnb (what I initially did). That means there were no constraints on what I could do with it. It made better money that renting at a higher daily cost. I just paid someone to do it until they didn't want to. Then I rented it.

      Renting is always awkward. Time wasting even with a property manager. I really just thought of leaving it fallow (and using it as a study) while I decided what to do about it. The remaining mortgage wasn't much.. Had a good run with the first tenants who were there for two years. It was a furnished flat (the gear from the airbnb). Second ones wanted a lot of the furniture changed, did tat, and then they left 4 months into their years lease for overseas. Which why I sold my spare to an owner occupier.

      People with a 'spare' often just leave it fallow or stock it with the odd relative. There is considerable risk in renting for the people who have fallow housing. You have to have a lease, limited reasons to shift tenants, and it is usually irritating and costly procedure that is a nuisance.

      A lot hold it for capital gain or emergencies or relatives. Some is here as essentially holiday / student homes for family (especially from the pacific). Tenants interfere with both of those.

      Besides yo seldom lose much money unless you don't organise basic security and maintenance.

      The remainder are deceased/elderly estate deals, typically where the existijg owner hasn’t the heart or competence to to sell, or the estate hasn't been declared or the estate is in contention for some reason. That typically remains fallow until declared. For a start you often have to get legal bills and time to be able to rent it.

      Fallow housing usually remains fallow if it is paid off (and most are).

      In Auckland I have never seen much of it here go into renting. I have lived in fallow homes with relatives and possibly undeclared pepper corn rentals to them.

      It doesn’t cost much much to be fallow. It usually ‘costs’ way more to formally rent it.

      • tsmithfield 4.3.1

        Hi LPrent,

        I am not sure we disagree too much. My argument was more theoretical than practical.

        I think we both would agree that market conditions is the factor that determines rents rather than landlord costs. Except that if landlord costs are so high that the net yield is viewed as insufficient, then landlords will be less likely to rent property, or will become incredibly choosy about who they rent to, especially if there is a surplus of tenants looking for houses.

        Fundamentally, the main issue I see is that there just isn't enough houses, especially given the high immigration rate we have at the moment. So, I think this factor far outshines any small effect from interest rate deductibility rules.

        But, it becomes a bit of a catch 22. Because, immigrants are a vital source of labour for work that many kiwis don't want to do. We host Filipino students who do a farming course here, and get work on local farms simply because farmers can't attract kiwi workers.

    • SPC 4.4

      Therefore, house owners who, for whatever reason, have surplus housing, will likely be more motivated to rent out their surplus housing if they see it as a more profitable and less risky option.

      It would not be more profitable to pay the mortgage, without any rent income.

      It is only less risk to property damage impacting on CG. It indicates someone who owns for untaxed CG. They can use it for Air B n B and their own utility.

      Very few would have had their properties untenanted because of the Labour policy – it was being phased in and had only reached a portion of its intended impact.

    • KJT 4.5

      I see a whole flight of pink pigs here.

      Don't worry. If the Coalition of economic incoherence sees any sign of house prices or rents decreasing, they will, like Key, open the immigration tap some more to ensure they stay high.

      Got to look after the rentiers.

      Already seeing headlines about “house prices recover” as If that is a good thing. As land scalpers re enter the market expecting the tax rebates followed by untaxed capital gains, to resume.

      If nothing else, this Government has shown they are experts at publically pretending to do one thing, while their policies are having the opposite effect.

    • bwaghorn 4.6

      , that doesn't mean rent rises won't reduce or at least be slowed due to a combination of those factors.

      Ye but, watch house prices soar again, labpur didn't remove tax deductibility to punish landlords they did to try and shift investors away from housing.

      • lprent 4.6.1

        Lots of headlines repeating. Essentially the house prices are ….

        The housing market seems to be moving sideways but at least picked up last month after a very slow January, economists say.

        Of course if you remember what last January was like – I do (I drowned a car). This year everyone actually went on holiday. I'm not surprised that the sales were 'slow'.

        Have to laugh at this attempt at statistical stultification…

        “However, the broader trend is that the market still appears to be treading water,” Westpac senior economist Michael Gordon said.

        “House sales rose by 14 per cent in seasonally-adjusted terms in February,” he added after the REINZ data was released today.

        Compared to what? A slow Jan?

        “The level of sales is now back to around where they were in mid-2023.”

        When sales were also shite. And then we have the next paragraph

        A surge of new listings was recorded but on balance, the stock of unsold homes was rising.

        In other words we are still seeing more houses coming on show in the market, but they really aren't selling fast – because that was the same report from virtually every month since about – mid-2023?

        “House prices eked out a modest gain in February, as sales lifted to still‑subdued levels, and days to sell extended by two,” ANZ economists said today.

        “All up, it’s a bit of a mixed bag, and suggests the market is trending sideways.”

        Yep. Looking at the existing trends I'm not going to be surprised if it keeps doing this all year.

        The underlying killer is interest rates. The RB isn't expected to drop OCR rates until inflation is under control – which is at 3% or possibly 2%. It is still currently around 4-5% annualised. Which is why the interest rates are still creeping upwards.

        If you want to borrow, mortgages are around 6.5-7.5% depending on type and term. so if you borrow fixed at 7.39% fixed for 2 years… Umm borrowing $570k of $950k (assuming a really cheap Auckland house at 40% deposit) that would give repayments of $1818 per fortnight based on a little under 30 years.

        That is a big hole in anyone's budgeting. Including for a residential investor buyers who'd want to get most of that from rent.

        REINZ chief executive Jen Baird said a combination of high listing numbers, elevated stock and shifts in the median sale price were contributing to increased activity.

        “There was a substantial rise in listings nationally, indicating heightened activity in the housing market.

        Ah yes – but they aren't selling nearly as fast as they are arriving for sale. So what we are seeing are more people wanting to sell (and many probably desperate to sell because they are getting killed by the end of the their old fixed rate from 2022) and not finding buyers who can buy at current prices and interest rates.

        End of the year before we start seeing the mounting stockpile of properties up for sale starting to reduce. That is my bet.

        REINZ said inventory levels nationwide increased year-on-year by 8.1 per cent, from 29,083 to 31,424 properties.

        The national median sale price rose 3.1 per cent from $766,000 to $790,000 year-on-year.

        ..
        REINZ said month-on-month listings increased 60.4 per cent from 7347 to 11,788.

        The media have a disconcerting habit of puffing housing market. Just look at how everything increased.

        /sarc

  5. SPC 5

    The government has yet to tax windfall profits, and here it is reducing cost on landlords knowing they will not reduce rents and so it will all be windfall profit.

    The term is rentier oligarchy.

  6. SPC 6

    The argument used by Luxon and Seymour is the same – on this they lie in synch, which as Justice Mahon would say a conspiracy to present a litany of lies.

    That lowering tax on landlord rent income, would result on them investing in new builds.

    But why would they do this, when that might balance supply and demand and moderate the growth in property values? These people sit on assets that grow in wealth (all untaxed) the longer a shortage continues – and the government reduced the bright line test back down to 2 years.

    ACT and National are owned by the rentier oligarchy class (farmers, the carbon smokestack industry and employers – and via NZF certain business interests).

    But as Randolph Churchill once said, the few can still govern despite extension of the franchise because the middle class property owners (private schools, health insurance) will always take the side of the landed gentry against the working class who rent.

    One only has to look at the "populism" the right stoops to to pull that off.

    • lprent 6.1

      Exactly. The primary micro-economic reason to rent is to make a loss (by having a large mortgage and considerable leverage). Then ideally claim the tax loss back against other income. Removing the deduction makes that easier.

      That allows continual financial leverage to increase your property portfolio with purchases of more property while to build a capital gain down the timeline. This is clearly the model followed by many of the larger landlord-owners. It is a relatively low risk was to store wealth and to accumulate it – it is way less risky than investing in companies. Also way more lucrative than investing in safer bonds or term deposits.

      Otherwise renting if you have paid off a 'spare' property is mostly a matter of masochism unless you get someone to manage it for you. It is probably more profitable to renovate and upgrade (without tenants) and then sell for capital gain.

      All of this doesn't require much actual skill. It is mostly sheer persistence and having the initial stake to start the leverage.

      It is also dead boring and a largely brain-dead activity. A very suitable profession for aristo parasites in society.

  7. Tony Veitch 7

    Sorry Iprent, can't resist!

    I "reckon" the CoC will say, if rents don't rise as quickly as they have in the past, that their policy has worked!

    But there's no question, rents will still rise, that is a given (unless they precipitate us into a full blown depression – which is also possible!)

    • SPC 7.1

      If rents increase at the same pace – it would have been more.

      If the increase is accelerating – it would have been more.

      Dress up, get sponsored to work for rich people and pretend competence.

  8. Mike the Lefty 8

    The following will happen shortly.

    We will begin to see various news stories about landlords that have been ripped off, their houses trashed, fittings stolen and rent unpaid by bad tenants.

    Not that it hasn't happened, it happens, and it has always happened.

    But the purpose of it is political, it is to provide a red herring to the question of whether landlords who can access the interest rebate will now pass it on to their tenants.

    It will be turned into a story about landlords badly needing the new rebate just to make ends meet.

  9. newsense 9

    Omg and he’s so smug.

    How smug is he?

    He’s so smug that if you juiced the smugness from Peter Costello and Paul Keating you wouldn’t fill Luxon’s little toe.

    In a video in which he’s justifying a cost of an extra $800 as if it’s a rounding error (in light of school lunches, police salaries, 6% cuts, sympathy for journalists etc etc, let alone it being a handout to landlords whose asset value is being inflated by government policies without any taxation), in this video he stands on his reputation from somewhere, which surely is about as shakey as a house on sand, and calls the interviewer ‘economically illiterate.’

    I, boss and CEO, know more than you and you got no idea. Except he’s a balding bovver boy at the start of a government, so unlikely to get the Liz Truss treatment from his party. But it seems more and more likely he will get chewed up and spat out at some point.

  10. newsense 10

    *$800 million

  11. Chris 11

    Well, he certainly kept his word to not let his Christian values influence how he'll do the job.

  12. AB 12

    He's not very bright or he's fibbing. Possibly both. I think he's waging a shameless class war and fibbing about it.

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