The Government will be collecting more taxes after new rules were announced, but there's no silver lining for struggling first home buyers.
People trying to enter the housing market will get no reprieve from new property tax rules, an economist says.
The Government announced that from October capital gains on residential properties bought and sold within two years will be taxed. The tax will not apply to family homes, death estates or properties sold as part of a relationship settlement.
New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said it’ll stop a small amount of property investment, but it’s not likely to have much impact for first home buyers.
“For existing young people who are forced to rent because housing is so unaffordable, this is not going to give them immediate reprieve.”
The policy responses are “band aids” to clarify the current regulations while the underlying problems like housing supply are dealt with, Eaqub said.
“If anything, one of the big things that we’ve been talking about for a number of years is we need to improve the rental conditions in New Zealand so that people who are now essentially coerced into renting, even though they would like to buy a house but can’t, give them something that improves their quality of life”
However, he said the measures were a step in the right direction.
“Until now it was very much a story about how property and property investors were untouchable, they were above the fray, but that’s no longer the case,” he said.
He said addressing tax rules, banks’ bias towards mortgage lending, and Auckland’s housing supply are the main priorities.
Prime Minister John Key told Radio New Zealand’s Morning Report there is no housing crisis, but said the situation is not ideal. “House prices in Auckland are rising too rapidly, we accept that … A more gradual rise would be better.”
Key said it is not a capital gains tax but a way of strengthened existing rules.
"This is just simply saying, the current law is you have to pay on intent; we're taking away the presumption that you can argue within a two year period, buying or selling a property, other than your family home, that actually what you're really doing was looking to make a gain - it's quite a different sort of thing."
The Government expected to make about $420 million more in revenue as a result.