a dividend policy, page-12

You buy a rental property.
You use 100% leverage.
You rent it, but interest cost is greater than rent.
Also you claim write-offs, like depreciation and improvements on the house.
You take the losses and offset it against your income and get the PAYE paid on that income refunded.

Then some smart folks work out that the more houses you buy, the more tax you can avoid.
So everyone with high income buys loads of houses. They get massive tax refunds.
The houses increase in value because of increased demand. No CGT in NZ, so the investors make huge gains and also pay less tax as well.

The house market goes ballistic. Young house buyers are priced out of the market.
Other house owners, seeing their value go up, go down to greedy fat pig bank and withdraw $50K against the mortgage and blow it on holidays and toys and stuff. Household indebtedness soars.
Increasing house prices cause inflation and RBNZ has to put up interest rates.
Even higher interest rates = more tax losses = even more demand for residential housing as renters.

Then, along comes a financial crisis (any crisis will do) in USA, where most of the banks source their money from. Interest rates soar. Cost of funding increases.
Mortgages in NZ that were 7%, now become 9.5%. Extra $225 per week in repayments for average family.
Commodities boom means higher oil and food prices. Extra $100-150 a week spending for those as well.

Households cannot afford to pay these items any more. Massive decrease in consumerism.
People cannot pay their mortgages and go into default.
House prices plunge.

MASSIVE RECESSION. Finance companies fail all over the shop due to falling property prices and stupid investors. All because of stupid tax policy on NZ housing.

If they stop property losses being offset against personal income, then the demand for residental housing will decrease. Houses will be more affordable again. People may then look to invest their money in productive assets and not houses. This policy needs to change.

Hope that helps.

PS I have no house and no debts. I saw this coming 18 months ago. Ho ho ho.............