Landlords will be only ones to benefit from tax cuts

Auckland investor Ross Clent said people would have to expect any tax cut they got would be wiped out by rent increases.

As part of its recommendations, the Tax Working Group recommended tweaking the bottom tax brackets, which would leave many people about $500 a year better off.

But Clent said that ignored the fact that many investors would want to get out of the market, pushing rents up.

He said a capital gains tax would drive him to sell all but three of his eight rental properties and start trading instead. That would take five long-term homes out of the rental pool.

While that trading would still attract tax, the returns on investment would happen much more quickly. There would also be less administration with no tenants involved.

Other investors would probably do the same, he said, selling half their portfolios and using the free money to buy and sell when the environment was right.

‘‘The only person who’ll get that [tax cut] is me because I’ll put rents up,’’ he said. ‘‘Anyone who gets that tax cut is going to have it wiped out by a $10-a-week rent increase.’’

He has been investing in rental property for more than 20 years and at one point had 14 properties before they sold three to clear debt on the others.

‘‘To get to that was a lot of sacrifice. It’s not something that falls into your lap, by any means.’’

He said, at one point, he was topping up properties by $500 or $600 a week to service the mortgages. But over time rent increases meant that the properties no longer had a shortfall.

‘‘What happens when someone sells a rental? One of two things: Another investor buys it, or a person or family [wanting] to live in it buys it. If another investor buys it, nothing really changes. However if a first-home buyer, or buyer returning from overseas buys it, it takes another rental property away from being able to house a family.

‘‘So where does the person or family come from before they buy this home? It could be they had another home and are upsizing or downsizing, or they could have been renting. These situations again will not change anything, as it hasn’t taken another property out of the available houses to rent. However if they have been living with their parents or in a flatting type situation, this will affect the overall houses available.’’

Onekawa said she purchased houses that were not of interest to most homeowners.