Listed commercial property will be hurt by proposed tax changes, both in terms of returns for current investors and the ability to attract overseas money.
The country's largest listed commercial landlord AMP NZ Office Trust (ANZO) has expressed concerns over the impact of two recommendations included in the recent report by the Tax Working Group, including the removal of building depreciation and the introduction of a land tax.
It says if either proposal was adopted it would have a negative impact on the near-term stability of earnings and investor distributions for ANZO and other listed and unlisted commercial property entities.
ANZO itself predicts its earnings "would be reduced by approximately 8% to 10% in a worst-case scenario," where the depreciation allowance was fully abolished, ANZO chairman Craig Stobo says.
There is also potential impact from the proposed land tax, as the most likely outcome is that this will be passed through to building occupiers, many of whom do not have the ability to absorb new costs in the current economic environment, Stobo says.
He says older investors, who favour the steady returns from listed property trusts, would be particularly hard hit.
"Listed property is an investment which is particularly popular with older investors, who are already finding it tough in this economic environment and depend on regular income from their investments," he said.
The moves will also dent New Zealand's ability to attract capital from overseas investors.
"New Zealand's relative competitive position on the global stage and ability to attract capital from overseas investors will also be diminished by any new taxes that are imposed."
Shares of ANZO have slipped 5% since the Tax Working Group report was released on January 20. In the past month, the NZSE Property Group Index has fallen 3.5%, making it the third-worst sector on the exchange, ahead of telecommunications and mining.