"The NZ Property Investors Federation is comfortable with the Prime Minister’s announcement of a capital gains tax on property sold within two years," says Andrew King, Executive Officer of the NZ Property Investors" Federation.
"This announcement is aimed at property traders, or speculators as some people like to call them, not rental property owners. As we have been saying for years, people trading property have always had to pay tax on their profits and this move will help to clarify this. This should finally put to rest all the unfounded comments from people who say that property has a tax advantage."
Some people may be unfairly affected however. For example the changes could have a negative impact on some rental property owners. While a property sold as a relationship property settlement will not be affected, eventualities such as the owner contracting a terminal illness and needing to sell will not be covered. Although the tax will only apply to some of their capital gain, this would appear to be unfair given that the tax wouldn't apply if the same individual had bought and sold shares or a business.
It is unclear if the move will have any effect on house prices. Many New Zealanders believe that speculation in the property market is rife but there is no data to back up this belief. If property trading is rife and the cause of house price growth as many suspect, then this announcement should reduce property prices. If speculation isn't a significant contributor to house price increases then the announcement will have absolutely no effect on property prices.
Although little is known about the level of activity of foreign buyers in the market, the new requirements for non-resident buyers appear reasonable. Ensuring non-resident buyers have a New Zealand IRD number is a step towards clarifying the number of non-resident property buyers in the New Zealand market.