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Bright line capital gains tax

June 15th, 2015 by Cyndy Pratt

Rene McLean beside a typical Manurewa home that he regularly values.

Further Government tinkering in the Auckland property market is unlikely to have the desired effect of slowing things down.

That’s the view of senior south and east Auckland valuer Rene McLean.

Here’s what Rene has to say about what effects he thinks the new capital gains tax will have:

“The two-year “bright line” capital gains tax scheduled to come into force on 1 October means non-resident property owners will be holding onto their property, thus reducing supply even more which is likely to create even higher prices.

“In the short term there could be an increase of sales before this date as speculators sell in the (possibly misguided) hope they will avoid tax and investors try to get in before the 30% rule.

“There is still a lot of chatter about non-residents buying property in New Zealand and so there should be. It is absurd that non-residents (whatever country they may be from) can still buy property and make tax free money of it while many first home buyers were forced to come up with 20% deposits. I suspect many non-residents will hold on longer than 2 years. Why not hold for 10 or even 20 years where gains of over 10,000% (yes that IS 5 zeros) are possible for development land?

“Yet again there is talk of a property bubble. How tiresome. In every property boom prices go up and they seem expensive. Generally prices double from the slump to the boom, the current boom for Auckland sale prices has only increased in median price 75% so far from the 2008 slump. Why do so many people seem mystified by the current property market which is simply following very closely the 10 year pattern of the 1997 peak and 1998 slump, 2007 peak and 2008 slump… Filling in the sequence is primary school maths.

“Winter often sees good price growth in a boom market with less stock on the market but genuine buyers are still there. Sellers misguidedly think summer is a better time to sell  but it will see them competing with a greater number of sellers!

“Floating interest rates have recently fallen which has devalued our dollar making NZ even more attractive to overseas investors, and reducing the interest cost for some, particularly those embarking on new building. Investors should be considering the impact of the 1 October requirements for banks to require 30% equity on investment properties. That makes this a good time to have your investments valued, proving to the bank you are within that threshold. Banks appear to be already implementing the equity requirements to some degree.” - Rene McLean 

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