New Zealand's Socalist Experiment
Ever wonder what it would of been like if Bill Shorten won in 2019 and phased out Negative Gearing? Wonder no more, look at our NZ neighbours
From 1 October 2021, interest cannot be claimed for residential property acquired on or after 27 March 2021.
For properties acquired before 27 March 2021, the ability to deduct interest is being phased out between 1 October 2021 and 31 March 2025.
Interest deductions for any new loans drawn down on or after 27 March 2021 won't be allowed from 1 October 2021 onwards.
If your rental property is financed by a loan in foreign currency, any interest is non-deductible from 1 October 2021 unless it is refinanced with a New Zealand dollar loan.
Will this give first home buyers the upper hand over investors and increase the amount of owner occupiers? Or will it just increase the divide of the haves and have nots? How is that, despite what the media would have you believe, "negative gearing" is not a tool of the rich but a mere aid to the working class trying to get a leg up to plan a self funded retirement, whilst at the same time, providing a rental home.
Once you remove negative gearing, you make it harder for working class ordinary folk to buy an investment property. Not everyone is comfortable with owning shares or investing in super with ever changing rules and increasing withdrawal age. So I suppose it's back to term deposits now that they're paying a bit of interest.
And where does this leave the rental market? Stock will definitely become constrained. Almost no new rental properties will be coming from the private sector. The $1.4b funding boost to Auckland housing announced in April is surely just the start for what is needed long term if the interest rules aren't repealed.
Good luck to our Kiwi neighbours with their socialist experiment. I'll definitely be watching with curiosity.