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Tax Changes will have limited impact on property

Tax Changes will have limited impact on Property Market

Budget tax revisions designed to take distortions out of the rental property market have been welcomed by the Real Estate Institute of New Zealand (REINZ) but they are not expected to have a significant long term effect on house prices or rents.

‘REINZ supports the government’s moves to make the taxation system fairer and close the loopholes that enabled some people and businesses in all sectors to rort the system,’ says Real Estate Institute of New Zealand (REINZ) National President Peter McDonald.

‘But the previous taxation regime was just one of many factors residential property investors took into account and these changes will only have an impact for some of them,’ he said. ‘Because the Government clearly signalled its intentions we have already seen property investors particularly concerned about the loss of the tax breaks exiting the market yet median residential dwelling price have continued to rise.’

“What people can afford to pay for their accommodation determines the market value of rental properties, not artificial tax deductions which could only be exploited by some investors because of their particular personal circumstances.

‘A more significant reason why people invest in residential rental property is the security compared with other investments, so while tax considerations are part of the equation, like it is with all investments, it is not normally a deal breaker,’ he said.

“Now that the details of the promised tax changes are known other property investors will replace those who were primarily attracted by the tax breaks,” Mr McDonald said.


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