Once upon a time, not too long ago in a land in which this blog was written, the idealist and partly hopeful 20-something wished upon and expected to materialise the ¼ acre dream. Since then, the cities compacted and traffic to these cities increased to the point that distance from point A to point B that was once measured in minutes now started to be measured in hours to reach these cities.

The principles of land economics remained the same, the value of your property was and still is in general, inversely proportional to the distance to the closest city centre.(1) I imagine this will remain the case until the Jetson craft become a realty or someone manages to capture the science of quantum mechanics and we are able to transport people moleculey from one place to the other without turning into a half man/half fly.(2)  If that doesn’t make sense to you then that movie was before your time and it is for you that this blog was inspired.

Fast forward to the 90’s and the ¼ acre started to transform from a goal to a distant dream. Not only had prices started creeping out beyond the post teen’s reach but it became uneconomical to live too far away from the city due to both the time and cost to reach the workplace in time to keep the boss at bay.

Back in th’day

The government in NZ (Shipley-Bolger – National Party) encouraged the pro-active Kiwi to invest in rental properties, not only so they could sell it and look after themselves in their retirement, but to increase the rental stock supply which would theoretically meet the demand and help keep rental prices down.

Depreciation rates on improvements/chattels were tested and argued by interested parties until the Inland Revenue Department finally relented and new regulations were published.

 The property investors who knew how to play were breaking the allowable 4% depreciation rate into two, Improvement and chattels. Chattels were items such as internal walls that were not load bearing, letterbox, electrical reticulation, plumbing pipes and the like.(3) It was argued that residential property investors were the same as commercial investors and these chattels will need to be replaced for the tenant over time. Instead of writing off the depreciation of the building at a flat 4%, investors were writing off the building at up to 50% for some of the chattels.

Property investors would typically hold their properties under an LAQC (Loss attributing Qualifying Company) which meant that any loss that the investment property had, could be transferred over to your personal income. Note here that it wasn’t hard in the 90’s to find a cash-flow positive property, they were everywhere, even in the main centres, definitely all over the place in the suburbs. However, these profits would quickly become a loss, at least on paper, which was fantastic as you put away the extra cash after paying the mortgage and paid little, if any tax.

It got even better as if you had several investment properties, the loss would add up and be written off your self-employed income (if you were self employed) and you would end up paying little or no tax in the place of your employment.

Those in the know will put their virtual hand up here and say ‘hang on, what about depreciation claw back’?

However, I would answer that this is easily overcome by property investors engaging a valuer and providing him/her with the Sale & Purchase Agreement on the sale of the property. The valuation would separate the land and improvement values. The rules of thumb with the separation of the land and improvement value is to use the same ratio as you find in the publicly available Government Valuation for the property. This is also subjective and many valuers could be talked into moving this ratio up or down to equal the book value (written down value). When this happens, the IRD cannot claw back any gain on sale. If the worse case scenario occurs and you have to pay back the depreciation, then you have had the use of that money interest free for a period of time and you had also reduced your taxable income so paid less tax. The short story here, is to always depreciate.

Post 2000

Just after this decade, in the early 2000’s, the world started going a bit money crazy. In America, property investors were looking for new ways to finance property to get a return. Keen to follow and keep up with the game, I personally enrolled in a $10k course in Arizona called the ‘John Burley bootcamp’. Here I learnt property investment strategies such as mortgage wraps (4), lease options and sandwich lease options, all of which had a common thread of helping people clasp onto the low rung of the property ladder, where they otherwise were not able to do so. If you think of the classic ‘rent-to-buy’ idea, then you are not far in understanding what these property finance options were all about.

This worked great for many investors for a while, they were quite common in the USA and Australia, less so in New Zealand. But alas, this too would come to a grinding halt as the one thing that the options had in common was they all took the mortgagee option control off the bank. If the mortgage didn’t get paid by the tenant/buyer and the owner in turn did not pay the mortgage, the bank was in trouble. The tenants were not regulated under the Residential Tenancies Act and on a mortgagee sale, they could caveat the property and tell the bank that they weren’t going anywhere.

It was around this time that the US stepped it up a level and the banks realised that the real money in real estate was not so much in investing deposit money, but selling debt (selling mortgages). The banks would put together hundreds of mortgages and sell them off as a package to an investment firm. The investment firm would in turn break this package down and sell ‘tranches’ to investors, kind of like selling shares in a company and the Investment company would provide a certain yield on the amount that you paid for your investment. With the tail end of the investment stating they were ‘mortgage-backed’ securities (5), they were assumed safe investments.

This worked wonderfully and banks started stepping up the incentivising of mortgage brokers to go out and get more mortgage’s. Because human nature is at it is, brokers started providing mortgage applications that weren’t exactly ‘kosha’ and the banks turned a blind eye.

The dodgy mortgages been sold to investment companies were packaged up with some very good ones, which made it a prime investment. The investment itself would be called something like ‘Prime Securities’ which sounds pretty good and something I would look at investing in. The rating agencies would give it an A++ rating as if they didn’t then the investment banker would go down the road to the other rating agency and pay them to get an A++ rating.

The champagne bottles popped and the cocaine parties rumbled on for years, before this too became a train crash in 2008. Known as the sub-prime mortgage period, the result created the Global Financial Crash. Those days are over however tranches are still being sold on mortgages world-wide.

Meanwhile, in 2023, with these old and new ideas rising then crashing, the basic purchasing of a residential property for renting, goes on. Some have made a lot of money, some have crashed and burned, however the tortoise-like no-frills property investor that utilises the buy-and-hold method of investing, has prevailed.

The quarter acre

Post covid, property prices have increased worldwide and inflation from quantitative easing has increased interest rates all around the planet. Young adults in their mid-20’s are wanting to buy their piece of paradise however they are finding that what their parents were able to do is not possible anymore.

With inflation at 5-7% and wages lagging behind this figure (6), the chances of saving to buy a property in the city they work in has become an impossibility.

The reason for writing this blog was due to a published term that I read somewhere, a term that created a possible future in my mind, a re-emerging of a class system, feudal lords reigning, plebs everywhere. That term is ‘Build-to-rent’ which was the subject of a previous blog.


High-rise development apartments under the term of ‘Build to Rent’  are currently financially incentivised by the NZ government by way of tax breaks, to house multiuple tenants.  Some of these developments are being syndicated and sold to wholesale investors.

A left-leaning person would be much more comfortable if each tenant had to pay a deposit (say $15,000) before they are allowed to be a resident in the property. The ownership units should also only be available to the residents. The result would be a mass rent to buy scheme and the tenants would finally get on the property ladder.

So, you may ask if syndication would work in NZ. Would someone be willing to share the ownership with a company or people they don’t know? If the demand for the government offered equity share (7) by Kianga-Ora is anything to go by, then the answer is a resounding YES!

If you are uncomfortable with sharing a property with the Government and good luck applying now as they have just closed applications due the phenomenal demand, then you may want to join the NZ Property Syndication Association.(8) (

New Government

It will be interesting to see what policies emerge from this new coalition government, as it relates to housing more people while also giving them a chance to get on the property ladder. That will be the subject for another blog.