Private property issue #76 - What each political party is offering property investors

Here’s your election update with what each political party is offering property investors.

On Tuesday, Ed and I hosted our monthly webinar. It was an election special. And we covered party policies that impact property investors.

Here’s a summary of the 4 main policies.

Remember – I’m not here to tell you who to vote for.

You’ll decide that based on lots of policies. Health, education, transport … and more.

This newsletter lets you know what the property-based policies are. It’s not here to tell you which box to tick on election day.

Policy #1 – Interest deductibility

Labour, the Greens, and Te Pāti Māori will leave interest deductibility as is.

Property investors won’t be able to claim interest as a tax deduction.

So most property investors will pay more tax.

But, National said it’ll reverse this. That means most property investors will pay less tax.

But, while National want to phase these changes in. ACT wants to cancel it straight away.

Policy #2 – Bright-line test / capital gains tax

Labour wants to leave the bright-line test at 10 years. But they have ruled out a Capital Gains Tax (CGT).

That’s the same for the Greens and Te Pāti Māori. There’s nothing about a CGT or changing the bright-line in their policies.

National wants to cut back the bright-line to 2 years. And that would apply to properties you already own.

Even if you bought your property when the bright-line was 10 years.

ACT wants to do away with it entirely. No bright-line.

Though, of course, even under ACT, traders and flippers still need to pay tax.

Interesting that no party (currently in parliament) want to introduce a CGT this term.

Will this impact the property market?

I think so.

A lot of people have been sitting on the sidelines. Caught between a rock (painful cash flow) and a hard place (can’t sell without being taxed).

I often hear: "As soon as I'm out of the bright-line I'm getting rid of this property!"

So, if the bright-line test comes off, you'll initially see a flood of sales.

But then, it probably won't have that much impact over the long term.

Most investors want to hold onto their properties for the long term anyway.

Policy #3 – New Rental rules

This is where we see the largest changes between the left-leaning parties.

The Greens want to introduce:

1. A maximum rent increase of 3% (linked from tenant to tenant).
2. A rental warrant of fitness

The 2nd change is different to Healthy Homes. A rental WOF puts the onus on the property investor to show their houses comply.

That’s like car owners who have to stick a WOF sticker on their windshield, proving it’s roadworthy.

With Healthy Homes, the onus is on the tenant to complain.

Te Pāti Māori want to have a vacant house tax. If your house hasn’t had a tenant in the past 6 months, you have to pay 33% of the property value.

National and ACT want to overturn Labour's changes to the Residential Tenancies Act.

So, they want to bring back:

• No-cause terminations (the 90 days rule)
• Fixed terms (so they won’t automatically switch to a periodic tenancy).

Policy #4 – Wealth tax

Labour, National and ACT have all said “no” to a wealth tax.

Both left-leaning parties, Greens and Te Pāti Māori, want one.

Greens are looking at a tax of 2.5% of any wealth above $2 million.

If you’re single and have $3 million of wealth, you’d pay 2.5% on $1 million. So you have to pay the IRD an extra $25,000 a year.

There are differences based on whether you’re single, in a couple or have a trust. But that’s the crux of it.

For Te Pāti Māori, they have a sliding scale:

• 2% for net wealth over $2 million.
• 4% for net wealth over $5 million.
• 8% for net wealth over $10 million.

These wealth taxes grab the headlines. But in my view, they’re unlikely to come in.

A majority of the bigger parties have already ruled the policy out.

Who should I vote for?

I’m not going to tell you who to vote for.

Some parties do have policies that are better for property investors. That’s clear.

But voting for a party is about the direction of the whole country. Ultimately, you’ll decide based on all the policies.

I'm only covering the different policies that affect property investors.

If you’d like to learn more about some of these policies discussed, check out our full webinar.