Ring Fencing Matters

[artemis]

Just read the article above. NIMBYs are a problem, but the developer has to have been joking when he said Five families will benefit from being able to walk their children to school, reducing pressure on the roads.

In what world could having five families where there was previously one will reduce pressure on the roads.

Developer was probably responding to the school traffic issue, which looms very large in the neighbours' specific objections. But the development is really close to the school and most unlikely that the children would be driven the few metres. That is even if there are primary children living in the new places. Neighbours are clutching at straws becasue they don't want a 3 storey high modern development anywhere near their picturesque leafy suburb.

[flyernzl]

My mole tells me that the intent of the Labour policy is to treat every property as a stand-alone tax unit.
So if you have two rental properties, one postive and one negative cash flow you would be expected to pay income tax on the profitable one but not be able to deduct the losses from the other.

Not sur how this would work if you buy a tin of paint and then use some on each house. Some creative accounting to be required there.

[Anthonyacat]

That sounds like a lot of work. Expect accounting fees to go up too - which of course, you'll have to raise your rents further for.

[prometheia]

Doesn't this merely bring property inline with businesses? A business has it's losses ring-fenced.

[Rosco]

Doesn't this merely bring property inline with businesses? A business has it's losses ring-fenced.

Why do you say that? As with property it depends on the structure, and often business losses offset other income

Ross

[PC]

Does this mean we no longer need to run our properties as a business?
If I'm to be more of a cowboy - will need to buy a horse.

[d2ba]

You'd have to think at some point housing unaffordability in Auckland is going to translate into votes.
Whether its 2017 or 2021 (who knows?) but at some point its going to impact the election outcome.

[Lego_Squared]

By definition, you're a Speculator if you're running cash losses and relying on the price appreciation of a scarce asset to provide you with future returns.

Actual investors need not fear.

[Davo36]

The reality is that it is not just Councils. Its also the 'not in my back yard' crowd:

"Neighbours up in arms over five homes on single Auckland section"

http://www.nzherald.co.nz/property/n...ectid=11854629

Yeah true that. People will have to get used to more intensification.

[Davo36]

My mole tells me that the intent of the Labour policy is to treat every property as a stand-alone tax unit.
So if you have two rental properties, one postive and one negative cash flow you would be expected to pay income tax on the profitable one but not be able to deduct the losses from the other.

Not sur how this would work if you buy a tin of paint and then use some on each house. Some creative accounting to be required there.

Enough of your confusing mumbo jumbo rich dude! Just cough up, the renters need new iPhones!

[Jeffa]

From my experience no matter what politicians do, the market will take care of itself ..a recent example is the 40% deposit for investors yes it has slowed the market down however has any landlords on this forum increased rent recently with out to much hassle ?it's because there are less rentals in the current market ...because there is less investors with 40% deposit. .if you want to improve housing affordability look to Christchurch an over supply of housing (for now any way )a flat market and declining rents...get rid of negative gearing?we all know who pays for that wether we like it or not. .I wish politicians would butt out because they are only going to make the rich, richer and the poor, pooorer ..landlords have been around since biblical times and there not going away because a certain politcal party wants attention.

[Davo36]

You should read the comments over at interest.co.nz.

All basically laying into the 'landlord cartel', can't wait for more costs to be heaped on house investors because it's unproductive investment blah blah blah: http://www.interest.co.nz/property/8...sms-rents-will

[Anthonyacat]

Doesn't this merely bring property inline with businesses? A business has it's losses ring-fenced.

All depends on structure - a lot of people run a business in their own name, there's no ring fencing. Or running two or three businesses in the same group of companies, losses from one can offset profits from another. Or running a business in a trust, along with fixed interest investments, etc... Or heck, just using an LTC - they're not just for property.

By definition, you're a Speculator if you're running cash losses and relying on the price appreciation of a scarce asset to provide you with future returns.

Actual investors need not fear.

While I agree with your definition, there are a lot of 'actual investors' who for the first few years are running cash losses. They don't rely on the price appreciation for returns, but the paying down of the mortgage over time reducing costs and making a profitable asset.

Yes, the ringfenced losses would eventually be utilised against future income, but why should they lose out on the tax refunds for several years in the interim?

[Nick G]

In the short term it will quieten the market just like every change..... In the long term, the market will absorb it and truck on just like every change.

Remember when removing depreciation was supposed to be the "property killer".

We might see people with a lot of built up losses buying an orchard or some other cashflow business just to zero out all their taxes.

Can a wise person explain what would happen if ring-fencing of negative gear properties was introduced?
I can't see it increasing the supply of new houses.
Would it cause house prices to drop? I have some doubts about that.
Would it push rents up? This seems more likely.
Is it aimed at discouraging long term investors or the quick-flick developers?
I'm hoping Tony Alexander will give his thoughts in his next newsletter.

[tim360]

In the short term it will quieten the market just like every change..... In the long term, the market will absorb it and truck on just like every change.

Remember when removing depreciation was supposed to be the "property killer".

We might see people with a lot of built up losses buying an orchard or some other cashflow business just to zero out all their taxes.

Totally agree, they removed negative gearing in Aus in the 80's. Rents didn't skyrocket then, instead they were influenced by whatever the local market conditions were around, be that oversupply of rentals or under supply.

https://www.theguardian.com/business/grogonomics/2015/mar/19/negative-gearing-a-legal-tax-rort-for-rich-investors-that-reduces-housing-affordability

Many countries abolished it years ago, their property markets seem to keep doing what property markets do.