As per estimates, we have approximately 620,000 rental properties in New Zealand and the average rent is $350. If we pay about 30% tax, Government will generate $3.85 Billion in income, one wonders what plans does government have about this additional income.

The changes “will significantly reduce the financial incentives to invest in housing” and have “a chilling effect on investor demand,” says Satish Ranchhod, senior economist at Westpac, Auckland. “Today’s announcements indicate significant downside risk for house prices and economic activity more generally.”

The New Zealand dollar dropped after the announcement and bought 71.20 U.S. cents in Wellington, down by 50 cents from earlier rate. Swap rates and bond yields also declined as traders speculated the central bank will be able to keep interest rates at a record low for longer. The package is the latest salvo in Ardern’s assault on the booming property market, which is undermining her efforts to reduce inequality.

In the real world, a more likely outcome would be a more moderate rent increase and a willingness to pay slightly less now for the house – meaning the market price would then be more influenced by owner-occupiers' readiness to pay.

For less highly geared investors with healthy cashflow, the impacts would be more modest.

The heat was likely to come out of house price growth much more quickly now. Another Westpac economist Michael Gordon said after Tuesday's announcement: "We estimate that house prices could settle around 10 per cent lower over the long term. However, there could be much greater effects in the short term as some investors exit the market."

Lower house prices would have knock-on effects for general economic activity, spending and inflation, Gordon said

Andrew King, NZ Property Investors Federation president, and Sharon Cullwick, Federation executive officer, were both taken aback by the Government decision to eliminate interest tax deductions.

"What...! so every other business in New Zealand can still claim tax deductions, but not landlords?" King asked. "You're joking! This is just bizarre, it's crazy."

The sums involved could be tens of millions of dollars, King said, and that would now be lost to landlords, already struggling under Residential Tenancies Act changes from last month which swung the power in tenants' favour.

King said: "We all know one of the major downsides for investors in property is that the rent doesn't cover the costs of running many places. In New Zealand, it is cheaper to rent than to buy a house.

This change will make it almost impossible for people to provide new rental accommodation. This means the only people able to buy rental properties in the future will be those with almost all the cash to pay for the property."

Asked why this would be such a big problem when mortgage interest rates are at all-time lows, King said: "Paying the interest on mortgages for landlords is a huge issue."

In summary, these new rules are to “Generate more money for the government in lieu of tax”, in the shadows of “Property Market”. The government does not have any vision. They do not want to make people learn, to how to earn and become independent. They are only helping people to make them lazier which they have always done. -Siva Killari, is an Auckland based entrepreneur, investor, developer, and a community leader.

Government’s desperate measures going nowhere!