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Negative Gearing

Yesterday’s press release from Labour spoke about their 5 year plan to remove “negative gearing” from investors to give first home buyers and owner-occupiers a better ability to get into the property market. Read the full article here.

What is “negative gearing”?

If you buy a house that makes more money than it costs (i.e. the rental income covers the expenses), then you can say it’s ‘positively geared’. Good job, your mortgage is paying itself off.

However, if the rent doesn’t cover the costs, then you can claim that loss on tax (negative gearing).

 

So, what needs to change?

For there to be an impact on first home buyers, what needs to change instead is LVR restrictions. These restrictions need to be removed for first home buyers in order to give them an equal chance to compete with today’s property market.

The feeling is that, in Christchurch at least, the property market has plateaued.  Market levels have normalised and there is no longer a need for the LVR restrictions to be imposed. Not just for first home buyers, in fact for any buyers.

 

 

 

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