I think this is definitely two wrongs trying to make a right, the first wrong being a lack of CGT. The fact that industrial properties are also going to be caught by this is pretty bad – industrial properties are often quite bespoke, built around plant, machinery and processes that will depreciate.

Ultimately I don’t think houses generally really appreciate in value – it is mainly the land appreciating. Tighter building regulations etc may have led to increased construction costs which will lead to appreciation, but I think a lot of that is ‘one offs’.

The really funny thing is that relative to other western countries, NZ probably has some of the most poorly constructed, rapidly depreciating housing stock around, yet we are now out on our own in not recognising depreciation.

“so you’re saying we should treat earnings from all asset classes the same? ”

Yar.

“But previously I have heard you argue against a CGT”

I have argued for and against depending on the “frame”. Namely, I would say we should/shouldn’t have a CGT for an asset class depending on whether an effective CGT was in place for other asset classes.

My personal view is most clear in this post:

http://www.tvhe.co.nz/2009/08/14/crampton-on-capital-gains-tax/

Ultimately, economist supporting the idea of a CGT aren’t necessarily doing so because they think there are equity gains from doing so. They are interested in income tax being applied more generally, in order to align the relative price of different investments to their fundamentals.

My only view here is, if we decide we should tax rates of return – lets do it consistently for all asset classes. If we want to treat an asset class differently, we should have to say why.

“Even if it was due to stupidity I don’t see why we should treat it differently than other asset classes ”

so you’re saying we should treat earnings from all asset classes the same? i.e. in this case the earnings are in the form of a capital gain. But previuosly I have heard you argue against a CGT. so what are you actually suggesting would be “fair”?

How do I really feel? A little tired, and a bit hungry.

For commentary on how I really feel about the Budget there is a great service called Infometrics Financial Commentary: http://www.infometrics.co.nz/menu.asp?id=65

It costs some sum of money per annumn and it provides analysis and exchange rate and interest rate forecasts – party times.

“I think the average leveraged property investor in NZ is not in it for yield; they are all about the capital gain. The rental “loss” they incur was known before the fact (i.e. it was not due to unforeseen circumstances) and is accepted as a cost of achieving a capital gain. This makes it different from other losses that can be used to claim WFF imo.”

It is still an income loss. Even if it was due to stupidity I don’t see why we should treat it differently than other asset classes 😉

I think the average leveraged property investor in NZ is not in it for yield; they are all about the capital gain. The rental “loss” they incur was known before the fact (i.e. it was not due to unforeseen circumstances) and is accepted as a cost of achieving a capital gain. This makes it different from other losses that can be used to claim WFF imo.