Call to reduce property tax breaks

Steven Goodey, who like one in every six households owns investment properties, says it is a no brainer.

"The government allows you to depreciate the property and take a loss on that property on paper then transfer that loss to your personal income, so if you have a high personal income or pay a lot of tax on your day job you can use the property investment to transfer that tax and get a refund at the end of the year."

And while investors are feathering their futures, it is now harder for young Kiwis to get a home.

"Twenty or 30 years down the track the people older than us are going to own everything and we're going to own nothing," first home buyer Daniel Cook says.

Now outgoing head of the Consumer's Institute, David Russell, says income tax breaks on rentals need to be addressed.

"The smart landlords have found ways around the tax system. Many of them are paying no tax at all and are doing very, very nicely. The government has to look at the tax structure and specifically at the property investors to make sure that a bit more equity is introduced into the social fabric of New Zealand society."

Currently, there is a capital gains tax on investment properties owned for less than two years, but it is rarely imposed and the government is unlikely to make it apply to all rentals.

Housing Minister David Carter says Australia instigated that, but it has not cooled off the property market. "I don't think it's the panacea."

A spokesman for the Minister of Finance says the tax structure around housing is currently under discussion and the government wants the Inland Revenue Department to crack down on those selling within two years of buying.