A lot can change in 200 issues. But then, some things remain unchanged. Back in 2004 I first published my book Property Tax: A New Zealand Investor’s Guide. I thought for this historic issue it would be interesting to reflect on the chapters from my book and see what has changed and what has not.

In the book I looked at the question of why invest in New Zealand? We now have a situation where investment in residential property is not available to foreigners. Just one of many initiatives that was politically motivated to address the ever-increasing cost of housing and testament to the desirability of our property. I listed reasons to invest that included:

No capital gains tax. This remains the case but what a debate it created when it became firm Labour policy. We do have the five-year bright-line test that effectively imposes a capital gains tax, where residential investment property is disposed of within five years.

No stamp duties on residential or commercial transactions. This is still the case, but one wonders whether this might again be considered as a revenue raising option in the wake of Covid-19.

Still no death duties. But we have had them, with duty rates as high as 49%. We also have a bubble of baby boomers carrying assets forward that have become blazed about asset protection. A re-introduction of death duties could potentially catch many out. Would government be brave enough to do it as an alternative to raising taxes on the workforce?

No limits on tax losses being offset against other income. This one is gone with the introduction of loss ring-fencing for the 2020 year. Even the call to delay this as a Covid-19 relief measure - given the impact on rentals - has gone unheeded. This, and the removal of depreciation on buildings, were both examples of the property sector being targeted with punitive tax legislation that is not applied to any other investment
sector.

No land taxes. No change here, but some investors will recall a time when we paid a 2% annual land tax on the government value of the land component of investment property. Could we see it again?

Structuring has also undergone significant change with the creation and then the scrapping of the much loved LAQC regime. This was replaced with the look-through company that still allowed losses to flow through to shareholders. The introduction of loss ring-fencing though, now renders this advantage to the structure redundant, but it remains a useful restructure tool.

Limited partnerships also became a thing, but have not found widespread favour amongst small investors.

Changes are also afoot for Trusts with a new Trustee Act heralding a regime of much wider disclosure to eligible beneficiaries.

Speculation in property and compliance with tax payable on speculative gains became a major IRD focus. The tainting rules were re-written and strengthened; the bright-line rules were introduced then extended from two to five years; residential land withholding tax was also introduced to ensure offshore speculators could not disappear into the mist; compliance enforcement also ramped up with the creation of the IRD property compliance division.

The rise and rise of Airbnb has also seen many more investors consider holiday homes and casual letting as a valid investment option. This heralded the introduction of the mixed-use asset rules that sought to dampen deductibility for available but vacant properties.

We have seen property yields halve, principally as a function of property price increase. Interest rates have slowly diminished to record lows, but finance remains harder to secure as a result of loan-to-value ratio restrictions and strict interest stress-testing measures.

Despite significant changes New Zealanders remain enthusiastic property investors. The tangible nature of rental cash flows; the ability to add value; and the growth in the value of property have served to keep residential property firmly in a sweet spot with Kiwis. The resilience of property has been a constant over the 200 editions of this magazine. I for one remain confident that the future will remain bright for investors focused on the basics of investing - in good property assets for yields, and in places that will attract population growth. In New Zealand, we are blessed with many such places.