Property Tax Would Impact On Values And Cash-Flow

Property Tax Would Impact On Values And Cash-Flow New Zealand Property Institute Says

Proposals to tax owner- occupiers of houses will have an impact on home values and homeowners’ cash flow, the New Zealand Property Institute said today.

This follows the release of the McLeod committee's interim report on taxation.

Property Institute President, Anthony Robertson, said today, " As a starting point, this is a good report. It looks at taxes across the board and should be read by every New Zealander. It’s important that the whole report is considered and not just parts that engender a knee jerk reaction.

“This reports does challenge assumptions about New Zealanders traditional investment decisions. This can only be positive. This proposal, if adopted, would require a major shift in the thinking of most New Zealanders who’s main cherished goals and ambitions in life include that of owning their own home and paying off their mortgage. While intellectually, this might be considered a nationally desirable economically outcome, it will require major re education of most New Zealanders.

It is important that New Zealanders realise there is a broader investment market available to them and indeed a broader property investment market outside just residential investment. A healthier broad based investment market is good for all.

“In New Zealand we have an owner-occupier housing stock of some $125 billion and a culture very much geared towards home ownership. Any change to the taxation regime on housing, or other property, will impact on values and peoples cash income.

The review paper example suggests an addition increment cost of home ownership of around $1500 per annum for the average homeowner. It remains to be seen how this increment would impact value across the residential housing estate. Historical precedent suggests tax initiatives do impact values at least in the short-term e.g. 1987 introduction of GST.

“This may impact differently on different sectors of society, depending on their circumstances. For example some people may be asset rich, in terms of housing. but cash strapped.

“The property sector would be cautious about change from the status quo. Any change would need to the thoroughly thought through,” Mr Robertson concluded.

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