The Government has announced the practice of negative gearing on investment properties will end in 2019.
Investors can currently offset losses so that they pay tax against a smaller income, but the Government says negative gearing is simply a subsidy for property speculators, and from next year it will be gone.
"It's distortionary in the property market. We want to make sure first home buyers have a fair go," Finance Minister Grant Roberson said.
It's distortionary because investors can offset losses against their income to reduce their tax.
The Property Institute's not happy.
"[We're] extremely disappointed because the rationale behind it is essentially about envy and punishment of landlords," CEO Ashley Church said.
Negative gearing works like this: if an investor buys a property and pays $40,000 in mortgage payments and expenses, but only earns $30,000 in rent, they can deduct their $10,000 loss off their taxable income and pay less tax.
Someone earning $80,000 would only pay tax on $70,000.
National says scrapping it will hurt more than just speculators.
"We have to be careful we're not scaring off Mum and Dad property investors, just middle New Zealand trying to invest a bit," leader Simon Bridges said.
The Property Institute says targeting landlords when housing stocks are already low makes no sense.
"All this is going to do is scare property investors - particularly first-time property investors - out of the property market, which will reduce the number of rental properties available," Mr Church said.
The institute says it will drive up rents - but some experts back the Government decision.
Financial author Mary Holm told Newshub negative gearing has made property a "ridiculously good investment" for those who can afford it, and that's not really fair.
Newshub.
