The shock announcement by Prime Minister John Key on Sunday sent the property pundits into overdrive this week. Yes, capital gains tax will be applied to people who buy residential properties — other than the family home — and sell them within two years.
In broad terms, from October 1, if you buy a property and sell it for more than you paid for it within two years, you will pay tax on the profit (there are some exemptions though).
One assumes that if investors sell a property for less than they paid for it then it becomes a tax deductible loss. However, at the time of writing, the fine detail is not available as the legislation for this new tax will not come before Parliament until August.
A tax on property was floated by the Labour Party during the last General Election, and is something John Key had criticised.
On April 13 he was on National Radio saying there would be no new taxes for property investors. The following month on May 17, it was all change. One wonders what the overall long-term benefit of this new tax will be for the country and property buyers.
Will we see a spike in prices as investors rush to beat the October deadline, and will Auckland real estate prices cool under the new rule?
Could it be a revenue gathering exercise to help the Government achieve its surplus, or a favour to China to track down people spiriting cash out of the country? Not even Finance Minister Bill English appears to know if it will help home buyers, admitting to the Herald it is “unclear” what change the new tax will have.
Plenty of people are heading to the country for a change of pace and a new lifestyle.
There were 1940 sales of lifestyle properties in the three months to April 2015, slightly upon the 1707 sales during the same period last year.
The Real Estate Institute’s Brian Peacocke says the trend shows the lifestyle property market is increasing in South Auckland, with sales in the $1 million to $3 million range.
In last week’s podcast I mentioned the Reserve Bank will likely wait until October to lower the OCR from its current 3.5 per cent — instead of making the cut on June 11.
While bank economists remain split on when the reduction will come, at least some are now cooling on it being cut next month.
For those looking to fix their mortgage, I hear there are still plenty of deals to be done, particularly if you are prepared to play one lender off against the other to see how much cash they will throw at you. Happy hunting.Follow