Housing has been a big topic for the election

Although the slowing market is reducing its importance, housing has been a big topic for the election with different parties having different policies on helping first home buyers into the market.

Demand side policies are to crack down on speculators so they are not in competition with first home buyers. However there appears to be confusion over who speculators actually are.

A speculator, or trader, is someone who buys and sells property. A property investor buys property to provide it as a home for tenants. They are quite different.

Ring fencing is a demand side policy that has taken a back seat to capital gains tax. It makes it considerably harder to provide new rental properties as it is a tax on rental property that doesn't affect speculators in any way.

Ring fencing means that any losses a rental property makes in the first few years of ownership cannot be used to offset tax on any other income the owner earns. The public has been told that the ability to claim losses gives rental property providers an unfair advantage over people looking to buy their first home, but that isn't true.

Many people have the view that reducing the number of rental property owners will also help first home buyers. Previous Labour leader, Andrew Little, said that this is what Labour wanted. The belief is that if a rental property owner sells their property to a first home owner, then you have a drop in rental property supply that is matched by a drop in tenant demand. But this isn't quite correct.

Census data shows that just over half the population lives in rental accommodation, which only accounts for one third of all properties in New Zealand. So the number of occupants per rental property is 3.9 compared to 2.1 for owner occupied properties.

This means that, on average, whenever a rental property is sold to a home owner, there are 1.8 tenants left behind that still need a home.

If one in five rental properties were sold to owner occupiers because it had become too hard for investors to provide rental property, then we would actually need an extra 41,500 new rental properties to house those tenants left behind.

There are no easy answers in housing.

ENDS

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