Is Property Still a Good Investment?

Read More

Property Investment

Tax changes for investment property came into force on 1 April this year, forcing many existing investors to review the ownership structures for their investments and the viability of retaining their properties. In a nutshell, the effect of the changes is that investors will no longer be able to claim depreciation on their buildings, and fewer investors will be able to claim losses against personal income. The backdrop to these changes is a depressed property market with little prospect of significant increases in property prices for some time to come. The question many are now asking is whether investing in property is still a good idea.

One of the most prevalent mistakes made by investors in all types of investment assets is to base investment decisions on tax benefits. As they say, ‘there are only two certainties in life: death and taxes’. To that should be added a third certainty, and that is, ‘tax rules change’. Sound investments are those that stack up in their own right, rather than because they have tax benefits. Many investors made the mistake of purchasing properties in the expectation that future capital gain would offset losses and that the tax benefits would help their cash flow in the short term. This was not a sound long term strategy. The impact of the new legislation is that those investments which were soundly based will continue to be so, and those which relied on the benefits of tax losses are unlikely to stack up.

Investors without good cash flow will no doubt sell off properties over the next two years. The result is likely to be higher rents, fewer investors (but with deeper pockets) and more soundly based investment portfolios. In the long term, the increased stability will be a good thing for both landlords and tenants.

Related Articles

Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.