In my column last month, I wrote about the good news on capital gains tax (CGT). There was one aspect of the announcement that was concerning, however. It was that media reports stated that the Government still wants to target speculators and land bankers.

Rental property providers are often incorrectly lumped in with speculators, and some people are still calling for some form of a CGT just on rental property.

We were concerned that Government might choose to target rental property with either a CGT or another extension to the bright-line test.

This would be totally unacceptable, so we called a meeting with the Minister of Housing, Phil Twyford, to seek clarification.

It was very pleasing to hear directly from the Minister that neither a CGT just on rental property or an extension of the Bright Line Test would occur.

In reality this was the only reasonable decision to be made. Even Tax Working Group chair, Michael Cullen said that rental property was an essential part of the economy and did not believe that it should be targeted for additional taxation.

Hopefully this will be the start of more rational thinking on the housing market and particularly the role of rental providers.

A Change In Thinking

The housing market is a very complex economic and political issue because it involves everyone at some level or another. There have been some extremely misleading comments and perspectives on housing that have turned many New Zealanders against our industry and we must continue to counter this as much as we can. Letters to the editor and local politicians can be very helpful in presenting our views.

Many people need to realise that rental property providers are not speculators buying and selling properties. They also need to realise that the property market goes through cycles and implementing long-term solutions to short-term issues is never a good idea. Worse, it usually exacerbates the cycles of the market and creates more problems than it solves.

Some of the industry changes that have been or are going to be introduced are not that bad. Providing a healthy home for our customers is not unreasonable. While the NZPIF disagrees with topping up insulation levels and heat pumps in most rentals, this simply becomes a compliance cost that we have to accept. Rental properties with insulation to the current standard and a heat pump will not be affected. Hopefully the rent they attract will already factor in these extra features, meaning that rental prices may rise for those that do have to upgrade their rental properties.

Some changes, like ring-fencing of tax losses, again will not affect everyone. While they will make it harder for new entrants to invest in property, this is likely to reduce supply of rental property and increase rental prices, which will actually help those who are not affected by ring-fencing.

As always anticipated, we are now coming out of the growth phase of the property cycle. This combined with well intentioned but misguided industry changes will probably see the number of new property investors fall. It always seems to happen. However, this can also provide benefits and opportunities to many who take a long-term view of property.

Many people need us to provide rental property so the economy can continue to be productive. In order to be able to do this, we need good information and potentially, to adjust our strategies, plus look at our expenses and rental prices. We are an essential industry that a third of the population use for accommodation. Although it may cost them more, we need to continue providing this essential service to our customers.