By Glenn Morris
With all the media comments out there the property market is taking a hit. Buyers are becoming wary, banks twitchy, tenants stroppy, and people like me who make money out of growth, frustrated. The following edited comment came in from one of my many Hong Kong clients this week.
It seems to me that there is a groundswell of bad feeling targeted at people who own more than one property in New Zealand, i.e. ‘the investors’. It is discouraging to see that element in New Zealand scorn others for their initiative, commitment and sacrifice in building wealth, when most of the time the rationale is to simply provide a measure of comfort and security for later life.
We love New Zealand, but it is really hard to view our country as a place that ‘rewards hardworking New Zealanders’ as our politicians love to claim, when you look at how many times each earned dollar gets taxed there. Hong Kong certainly has its pitfalls, but I’ve got to say it’s nice to be able to budget for an annual tax bill that is calculated on a progressive scale and is capped at 16%. It’s nice to buy goods and services and not have another 12.5% whacked on in the form of GST. And it’s nice to earn a decent wage and not have to worry about whether we can pay for new tyres for our car or for our daughter to start music lessons. We appreciate having an administration that returns money to taxpayers when the coffers show a hefty surplus, and likewise to be handed a one-off tax deduction worth thousands of Kiwi dollars during a severe economic downturn. It seems to me to be a fair system, one that truly rewards hard work.
Property has been good to us as a means to build wealth. But like many Kiwis, our story is one of application and effort and none of it has come easily. We both come from large, lower income families. We both paid our own way through university. We both started saving for our own home as soon as we started working. Our first home was very much that, a first home. We worked our hearts out tidying the place up, then saw the light and left for Japan to pay it off. In Japan we worked full time and supplemented that income by teaching private English lessons in the evenings and weekends. We sent money home every month to build our equity. Three years later our time was up. It was good to be back in New Zealand. Despite all that New Zealand promised, one year on it couldn’t give two decent, reasonably well educated and qualified people a worthwhile job in the town that they had hoped to live in. But Hong Kong would welcome us. Why is that? Why is it that one of New Zealand’s best exports is human talent? We think it is because New Zealand is a low income, high tax society that is why. Isn’t this what the Tax Working Group should be addressing?
A land tax, RFRR, higher GST, removal of depreciation on buildings or the facility to ring fence losses will not change the game. More people (and money) will move offshore if additional taxes get introduced. And so further erode the tax base.
It seems like a case of the more things change, the more they stay the same to me. Save for one thing that is – New Zealanders may well be about to lose the best wealth building vehicle the country has to offer.
So folks I hope you get the idea from what I have pulled together. What more can one say about it all. I know nothing, understand even less, and yet I prosper. Some people will be winners out of any tax change and some will be losers. If your path to success is built on a paper pyramid be careful of hot things next door or next week. Make your portfolio fit to take the knocks that experts will throw at you. Provide a good service that both rich and poor people will appreciate and value.
Glenn Morris is the owner of Nelson property management company, “Glenn’s Vacancies”, managing residential and commercial investments. He is the current secretary of the Nelson Property Investors Association. He was active in the review of the RTA and is a well-known figure in the property investment community. He has a reputation for effectively managing “difficult tenancies.”
