Parties urged to reconsider for the good of NZ towns and cities
The Property Council is urging Labour and National to reconsider the policies to remove depreciation for non-residential buildings, saying depreciation was “critical for the future health of New Zealand’s build environment.”
“The proposed policies to remove depreciation are a raid on long-term maintenance funds for New Zealand’s buildings, running the risk of rundown or even derelict buildings across the country,” said Leonie Freeman (pictured above), Property Council New Zealand CEO.
“If depreciation is removed, property owners tell us they will have to reprioritise expenditure, which when added to rising costs such as insurance, mortgage and property rate rises, will certainly cause rent rises for businesses placing more cost pressures on businesses.”
Freeman said the policies will come with a price tag of half a billion dollars for the property sector and will add another challenge to a sector that was already facing multiple challenges, including high interest rates, inflation, and reduced construction pipeline.
Removing access to depreciation will make it harder to maintain and upgrade buildings and bring consequential impacts, which Freeman said both Labour and National have failed to see.
“Removing depreciation will have flow-on effects of ageing buildings, a reduction of new projects in the development pipeline, and increased costs to businesses who occupy buildings,” she said. “Without commercial and industrial buildings having access to depreciation, there is a significant risk to forward investment. Put simply, less development in the pipeline.”
Property Council members have reported cases where they forked out more than half of a building’s value for seismic strengthening upgrades.
“The last thing we want to see is deprivation of investment in our buildings such as important seismic strengthening upgrades,” Freeman said.
Inland Revenue figures provided economic evidence that commercial and industrial buildings do depreciate in value.
“Our members are concerned this will cause the New Zealand commercial property sector to lose its competitive edge from an investor standpoint against other developed countries, in which property owners are able to depreciate their buildings,” Freeman said. “It is disappointing that both Labour and National have gone for a quick cash injection, rather than thinking through the consequences of removing depreciation.”
In a media release, the Property Council leader urged both political parties to do the right thing for the future of New Zealand’s towns and cities.
“Access to depreciation allows for investment in the long-term maintenance and safety of our buildings,” Freeman said. “For New Zealand to have a sustainable and resilient built environment, it is critical that depreciation remains.”
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