Holding on in a time of change
Investors have been seriously impacted by reduced returns on their properties as costs rise, tax deductions fall, compliance requirements increase, effective P/E ratios rise and now capital gains diminish as a result of lower likely house price growth and the imposition of a high capital gains tax on short-held property.
In light of the many changes over the past year many investors are on pause. They have pulled back from buying while they assess the effect of the changes and, in particular, the Government removing their ability to offset their mortgage interest expenses against their rental income.
For Nick Gentle from iFind Property the vexing new tax deductibility rules being phased in over four years for existing properties is going to mean, when they are fully introduced, he has to find another $50,000 a year.
While his portfolio can withstand it, to pay the extra tax he would need to generate $80,000 of other income a year and just putting rents up is not going to cover it.