Question

One idea that has been put forward for addressing the Auckland housing market problems is that landlords should not be able to offset their losses on any particular property against their income from other sources, including other properties, when calculating their tax liability. (a) How will this improve financial stability? (b) What are the drawbacks of this measure?

Answer 1

Land lords not able to offset their losses on any particular property against their income from other sources.

a. Financial Stability ?

b. Drawbacks of this measure ?

Why this step has been taken in the first place ?

-continued efforts to solve the housing catastrophe. People owning multiple properties with less source income has led the shoot of the housing demand and so as price.

-Less source income and tenants led to losses from the property owners, as the housing property price increased multiple fold when compared with the primary source of income of the property owners.

-Taking such a step will add more pressure on the multiple property owners to keep least property to their portfolio. Slow down the growth of real estate sector focus on reselling of the property from the multiple property owners.

(a.Financial Stability)

-Reselling will allow the money flow again in the market. When the money stats flowing there is income created. So according to basic law of economics when the income is created then the economy will attend stability hence will tend to financial stability.

-Property holder will be better of reducing the loan and being able to clear off the existing loan.

(b.Drawback)

-The problem could be decreasing the growth of one sector i.e. real estate means less revenue generation and will tends towards unemployment.

-Government can use this as a opportunity of getting more skilled laborers in the unemployed segment and wide spread this equally to other sectors e.g. health care, defense, etc.

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