Property regulation - New Zealand style

Much has been written about the efforts by the Hong Kong government to control increases in the prices of Hong Kong residential property prices - punitive stamp duty rates and more restricted access to mortgage finance.

Other countries have adopted similar measures, including China, Singapore and New Zealand. Given the sate of the New Zealand economy you would have thought that they would be doing everything possible to encourage investment. Sadly not - not only does New Zealand have a set of tenancy laws which are drafted and administered on the principle that landlords are evil parasites and tenants their innocent victims, not only do rates demands (local property taxes) march inexorably upwards each year at rates far beyond either inflation or rental increases but they have now decided that landlords should not be able to claim depreciation on their buildings. Given the already dismal yields, you either have to take a very long term view or conclude that your money is better off invested elsewhere. All this on top of an increase in GST which bumps up my expenses with no corresponding increase in income.

I've concluded that it is very difficult to justify further investment in New Zealand real estate and that investing in shares is a better proposition (much like Hong Kong at the moment, although for different reasons). Given how few companies that I would be interested in are listed in New Zealand, it is more likely that the money will end up in Australia....effectively New Zealand government policy has pushed my money offshore.

And in case you were wondering what set off this rant - I have just done my New Zealand tax return for 2011/2012 and found that due to the elimination of building depreciation my tax bill has gone up by 126 percent.

Quite frankly, it would almost be rational to sell up and move on but the properties still appeal as a long term store of value that will at least throw off enough after tax income to cover some of the costs of time spent in New Zealand each year. Put differently, the one positive from all of this is that the same policies which are squeezing the landlords are also discouraging new investment in a city which has a growing population.