We pulled 6 gems from the torrent of property news this week to keep you abreast of the most important insights affecting investors. 7-13 December 2019
Vacant Land Tax Scuppered
First it was the proposed Capital Gains Tax to get the big NO and now it’s the Vacant Land Tax. Finance Minister Grant Robertson had referred the Tax Working Group’s proposal for a vacant land tax (one of its 10 “high priority” recommendations) to the Productivity Commission to consider.
Sanity prevailed when the Productivity Commission correctly predicted it would prove to be a tax on new housing and would have harmful effects.
Fed Holds Rate
The U.S. held interest rates steady and Fed Chair Jerome Powell said a significant, persistent inflation rise would be needed to hike rates.
The Fed said labour markets remained strong, unemployment was low, economic activity had been rising at a moderate rate, and it expects moderate economic growth and low unemployment through next year’s presidential election.
“The bar to a rate hike remains higher than the bar to lowering rates further, but overall you are looking at a Fed that is fairly confident about where the economy is headed and expects inflation to remain under pressure for a prolonged period of time,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.
Rents Increase at Triple Inflation
The Consumers Price Index (CPI) for the year to September 2019, the most recent data, is +1.5%. Yesterday StatsNZ released its latest rental price indexes, which showed rents for November 2019 were +4.5% compared to November 2018. That’s triple the rate of inflation.
<rant>If the Government really wanted to protect tenants it would make life easy for property investors to provide rental accommodation. More supply means lower rents. Instead it virtue signals and plays to its constituents by waging war on landlords. The outcome was utterly predictable to anyone with a jot of commercial nous. Not so obvious to career politicians and ex-presidents of socialist youth movements.</rant>
Government Announces $15B Spend-Up
The Government released its Budget Policy Statement 2020 conjointly with the Half Year Economic and Fiscal Update 2019 on 11 December 2019. (See next item.) The big news was that spending on infrastructure will increase to its highest level in more than 20 years.
The biggest chunk will be spent on roads and rail, including projects initiated by National and subsequently kiboshed by the current Government. However, Finance Minister Grant Robertson won’t say which projects will be funded until next year. Call me a cynic but we all know what else is happening next year.
<rant>The money will be spent over 5 years, and won’t really start kicking in until 2021, after next year’s election. It’s a great way to give the appearance of doing something without actually having done anything. And we all know what happens to election promises. All they’ll have to do is blame their alliance with the anti-car Greens for cancelling all the promised roading projects.</rant>
Treasury Forecasts $12B Higher Crown Debt Than Previously Budgeted
Treasury’s Half Year Economic and Fiscal Update (HYEFU) released on Wednesday showed net Crown debt is forecast to be $12B higher between 2019 and 2023 than budgeted just 7 months ago in the Government’s May 2019 budget. Treasury expects net Crown debt to total $344.6B over this time. That’s where all your taxes go folks, to fund the spend-up.
Should Landlord Obligations Include Pastoral Care For Tenants?
There is growing pressure for landlords to provide some sort of pastoral care to tenants. Peter Lewis analyses landlord obligations, both moral & social…