CGT would see investors abandon property managers

Century 21 New Zealand

Wednesday, 27 March 2019

A Capital Gains Tax (CGT) on residential property investors will do nothing to help the country’s housing supply. Instead it would probably only push up rents, as well as push out many professional property managers, says one New Zealand real estate boss.

“The Government has rightly said it will keep farmers and small business owners top of mind, but it also needs to carefully consider property investors who are crucial to the country as well,” says Ryan Mitchell, National Manager of Century 21 New Zealand.

Ahead of the Government formally reporting back on the Tax Working Group’s report next month, there has been much speculation by the property industry that a CGT would lead to current investors selling up and potential ones opting against buying a rental. Future supply would then struggle to keep up with forecast demand, and possibly even lead to overcrowding.

“When you have fewer rentals coming on stream that of course will push up rents. At the same time, when you have the likes of retirees opting to upgrade their own CGT-exempt home instead, then those capital investments just add to the future sale prices of family homes,” he says.

Mr Mitchell is also concerned that a CGT on property investors could lead to fewer contracting the services of a property manager which in turn could see the disappearance of a level of professionalism and responsiveness for many tenants.

“Most property investors are running their rentals on pretty tight margins, with the prospect of a future capital gain a key driver for many. If a CGT is applied, sadly some will either drop their property management service all together or not engage one in the first place, simply to help maximise their earnings now.”

He says, rightly or wrongly, other possible government policy changes are set to add further pressure on landlords.

“A CGT scheme may well be revenue neutral for the Government, but sadly it won’t be for tenants. The property industry universally agrees that rents would only become more expensive, and that’s bad news for the rapidly growing number of Kiwis in rental properties.”

He says whether a CGT is going to apply to residential property investors arguably remains the biggest question mark as the Government now considers the report.

“I just hope our landlords aren’t seen as an easy target. Most do a great job and work well with their tenants. Given the ongoing housing supply issues, New Zealand needs more rental stock than ever before. I call on property investors to also be top of mind for the Government in the coming days and weeks,” says Ryan Mitchell.

www.century21.co.nz

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