The most frustrating thing about this is that Kiwi’s will still invest in property for long term wealth creation, they’ll just have less money when they retire.

Instead of house prices rising 7% on average, they’ll likely grow at a slower pace going forward due to a decrease in demand from investors. So growth could slow to 5% or 6% per annum longer term. While it’s still worth investing in residential property, especially when you take leverage into account which pushes your return up into the teens, the difference of 1-2% lower growth over a 10-20 year time period makes a huge difference to what your property ends up being worth when you retire i.e. your property will be a lot less than before the new taxes were introduced.

Perhaps a small number of first homes buyers will be able to buy thanks to the new regulations, but it’s coming at a huge cost to renters and investors.

And don’t forget, first home buyers want house prices to rise too, once they are in the market. Thanks to lower price rise they too will have less money when they retire.

The end result is that productive people will pay more tax and have less money to spend when they retire. Who benefits when retirees have less money? No-one. It just means there will be more people who need government support when they’re old. Sad.

John Kenel
CEO
Assured Property

Read the full article here: Oneroof.co.nz

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