Barely a day goes by without a headline about a rental shortage or the high prices of rental properties somewhere in New
Zealand. With the proposed changes to Capital Gains Tax (CGT) due to be announced tomorrow, the Real Estate Institute of
New Zealand (REINZ) is warning that there could be significant impacts for the real estate industry with investors
looking to sell their investment properties ahead of any legislation being implemented to avoid paying tax on any
capital gains.
At a time when we’re already facing a rental shortage and high rental prices, CGT is only set to exacerbate the rental
shortage.
Bindi Norwell, Chief Executive at REINZ says: “From speaking to property managers and real estate agents around the
country, feedback we’re hearing time and time again, is that if CGT is applied to investment properties then a number of
investors will just call it quits and sell their investment properties ahead of CGT being implemented.
“With CGT coming at the end of a long list of legislative changes landlords have faced over the last 12-18 months
including insulation, healthy homes, ring fencing, methamphetamine and the ban on letting fees, it’s little wonder many
are looking to exit the industry,” says Norwell.
“If investors sell, the shortage of rental properties will increase, pushing up rents. With rental prices in Auckland
and Wellington increasing by 8% and 20% respectively over the last 3 years, rental prices are likely to be pushed even
higher making it even tougher for renters,” continues Norwell.
“If CGT is going to be implemented then it needs to be done in a way that minimises complications and reduces any
significant impact on a single industry,” points out Norwell.
Another issue highlighted in the interim report at the end of 2018 is the “valuation day approach” which recommends that
GCT be payable on any gain made after April 2021.
“The ‘valuation day approach’ raises a number of questions for the real estate industry including what is an acceptable
form of valuation, whether real estate agents are able to conduct an appraisal, or if an independent valuer be
required?” points out Norwell.
“It’s unlikely that there are currently enough valuers in New Zealand to complete valuations and this is likely to be
extremely complicated, time consuming and costly for landlords or business owners,” she concludes.