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The Average Property Investor Is Set To Lose $1000 A Year And It Won’t Stop There

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Brian Dalley
Brian Dalley

It has been reported that due to depreciation been done away with on the improvement portion of investment property (takes effect on 1 April 2011 next year) some are set to lose as much as $1000 a year and some are saying it won’t stop there.

As first homebuyers cannot afford to purchase homes due to lenders being unwilling to accommodate them this will lead to property values falling as much as 5% to 10% within the next six to nine months as investors bail out.

Kieran Trass – Hybrid Group, is that convinced the property market is going to take a hit he made the commitment on Campbell Live that if it doesn’t he will be prepared to walk the length of the country. Kieran, I hope you have a good pair of walking shoes as John said he would save a copy of that commitment in the archives.

As to lenders not being accommodating when it comes to first home buyers with less than 20% deposit, that statement is so out of date and so untrue. Westpac for one, has increased staff numbers in an attempt to try and keep up with the surge of applications

It is still too early to tell how this will affect tenants as rents are largely determined by the strength of the economy and the number of people looking for accommodation, however it hasn’t deterred people from commenting.

The New Zealand Property Investors Federation (NZPIF) are saying rents could increase by 4.5 percent to 6 percent whist the Treasury’s estimate over three to four years say it could be much lower at 1.5 percent.

There is no doubt in my mind that rents will increase, as will other products and services as GST increases to 15 percent.

As far as residential housing is concerned, the budget will have a neutral effect on individual owner-occupiers as capital gains, or a specific property tax “has not been introduced”. This is also positive for investors.

Finance Minister Bill English and Revenue Minister Peter Dunne said the moves would help rebalance the economy toward productive investment and reduce the incentive for people to buy rental property purely for tax reasons.

Investors, in fact all of us, need to take a step back and read the writing on the wall, DEBT REDUCTION IS THE WAY FORWARD.

Auckland Chamber of Commerce chief executive Michael Barnett said the changes in the tax treatment of investment property invited a move towards productive investment and I agree with him, but do we need to look further afield than residential property investment? I don’t think so.

Simply keep away from negative gearing (interest only loans) pay down debt and work within a budget like any successful business should.

Sure, by doing so you will end up paying taxes but you only pay taxes in this country if you make money and isn’t that the point.

If you have a number of properties and multiply the average loss of $1000 per property several times it may be daunting but the solution is not rocket science.

Each day I am talking with seasoned investors, new and potential investors, first home buyers and I can assure you the mood is generally positive and uplifting.

Yes the market is likely to remain subdued for a while.

Will a property tsunami hit our shores due to the 2010 budget? I very much doubt that as we have faced worse and still look in good shape.

REINZ Monthly Housing Price Index - New Zealand

January 2005 $265,000
January 2006 $300,000
January 2007 $327,000
January 2008 $340,000
January 2009 $325,000
January 2010 $350,000

If you want to sit on the fence for the next six to nine months waiting for Kieran Trass to pass by, that is completely up to you.

Brian Dalley is a former NZMBA Mortgage Broker, Property Investor, and Real Estate Agent with over 15 years experience in the industry.  You can read more of his views and opinions on his website 

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