Loss of capital gains tax brings security

The government’s decision not to seek any form of capital gains tax and the Prime Minister’s commitment not to re-examine the imposition of such a tax is extremely positive news for the housing market and investors alike.

It’s a powerful stimulus to “certainty” – a vital commodity when considering a large loan, which for most people is the biggest financial decision of their lives. This probably hides the shadow of a tax on capital gains on housing that will be taxed in the future for at least a generation.

Although there was no suggestion that a capital gains tax would apply to owner-occupied dwellings, the uncertainty surrounding the potential tax affected the value of all properties in New Zealand. We know that this has been a very divisive issue in New Zealand.

Too many people have wondered whether the imposition of such a tax would lead to a significant drop in real estate prices. Our view is that the uncertainty contributed to caution and allowed us to develop an attitude of “let us wait”.

It’s now behind the market and we can all move on

There are still concerns and speculations about the evolution of real estate prices. At the moment, some of the most relevant are whether we will track Australia’s volatility, the strains on trading bank lending created by a potential increase in Reserve Bank reserve limits, and the slowdown in growth. Economic Growth.

Although the government’s decision does not eliminate all concerns about the future direction of real estate prices, it certainly responded to what had become the elephant in the room.

These concerns are part of the normal background noise with which we all learned to live.

With human nature dictating that sellers want the best possible price for their property while buyers want to pay the lowest possible price, making progress in Auckland currently requires “realism” from both parties. Those with unrealistic expectations do not sell or buy.

The Auckland market is currently a buyer’s market. While prices have either stalled or dropped by a few percentage points over the past two years, they have not fallen back much. In many other urban centers, prices continue to rise primarily, but the price cycle is slowly coming to an end and is expected to soon turn into the dark conditions that Auckland had adopted at the end of 2017. When talking about the Auckland property, the size, diversity and cosmopolitan nature of the urban area are not often taken into account. These are not unique but multiple markets that can be confronted with different price signals at the same time.

If you sell and buy in the same market, you have to recover what you win or lose at one end of the deal. This is why the tax made so many people nervous. If you only buy, you will probably own it for about seven years. If you paid close to the market price then you could have run into difficulties within the next 5 years.

With the threat of a capital gains tax now buried, the best thing that could happen to the housing market is to put aside speculation about what will probably happen to real estate prices and live with the reality what we have before us.