KEY POINTS:
Here is an earlier selection of Your Views:
Margaret Oh
I am a New Zealander living in Malaysia for the past 40 years. Malaysia has recently done away with the Capital Gains Tax on property as they feel the need is no longer there. Previously it was on a sliding scale: disposal within two years after the date of acquisition was taxed at 40 per cent, after 3 years it was 30 per cent dropping to 5 per cent by the 7th year. An individual is given a once-in-a-lifetime exemption on any chargeable gain from the disposal of his private residence. Whilst "one pill does not cure all ill's", Capital Gains Tax certainly worked here.
John (Auckland)
There have been eloquent arguments for nearly all of the taxes we suffer now. All we ever seem to get for them is a lesser share of our income, more bloated government and social services forever in decline. We don't need new taxes. We should be getting rid of old ones.
Konrad Junkers
Yes, let's have Capital Gains Tax on house sales, and let's also have Capital Loss Refunds (from Inland Revenue) when our property prices fall and we little people have to struggle through.
Erica
I reckon that a capital gain tax should be imposed.
Damian Jacobs
I don't want to say this but the young New Zealander will never get the chance to own their own home as the prices of homes have shot too far ahead of incomes. Incomes have not been raised accordingly, overseas investors have pushed up inflation and the Government have done very little to help low-income kiwis into their first home. I think its disgusting how our own country won't help its own people out (in this situation, owing a home), and its one of various reasons why a lot of New Zealanders are flying across the ditch. There is a lot more to offer on the other side of the Tasman.
Andrew
Capital gains tax for residential properties, after a person's first property of course, is a brilliant idea. It would put residential house investments on par with other investments. It would discourage people who negatively gear their finances to buy a rental, get the tenants to pay most of the mortgage through rent, and use the capital gain as their investment return. This common practice is one of the main reasons house prices have shot up and people can't afford to own a home. A capital gains tax would discourage this, stabilising the price and longer-term would allow more families to have a home of their own.
John
Yes definitely. There should definitely be capital gains tax for investment property, ie. for sale of property other than first home. The Reserve Bank is doing the right thing by recommending it but obviously the Government is trying to be populist and by not imposing capital gains tax is apparently proving that it on the side of the real estate industry and the buck-making investors. Instead of earning revenue through rates which is high now because of speculation, the Government should earn through capital gains tax. The property tax is high because of higher valuation of properties and higher valuation is because of increasing property transactions. This will automatically decline when capital gains tax is imposed. Why should all pay higher rates, let those who make money through investment property pay tax on their gains as it is more just and fair to all than the way it is now.
James
For the person who said: "The Government is to be blamed for this condition. Had the Government put the OCR high way back then this high price rise would had been less" - the Government does not set the OCR. The Reserve Bank is independent of the Government and decides itself what the OCR will be. I also have to laugh at the Property Investors Association being quoted as an authority on capital gains taxes. These people make money out of speculating on property and driving up the prices of ordinary Kiwis' homes - of course they're opposed to the Government ending this rort.
JR (Wellington)
A capital gains tax will increase the weekly rental charges for those who are currently renting, as owners provide for a provision to meet this additional tax. Seems to me the only winner is the Government and the loser is the person who is renting - apparently the same person this odd proposal is meant to help. Very, very strange!
Saina (Auckland)
A capital gains tax on people/companies/trusts who own more than 3-4 residential properties is a good start.
Robert Sweet
Capital gains taxes do not reduce the price of property because they inhibit sales, reducing supply. The last time NZ had a similar tax (in the 1970's) there was such a marked increase in the price of houses that the tax was repealed! Also a CGT would take a long time to have any effect. The obvious answer is a limit on the tax deductibility of rental losses combined with removal of the 39 per cent tax rate which by itself has had an enormous effect on the value of houses by encouraging tax sheltering. These would have an immediate anti-inflationary effect.
Alex
I don't think a capital tax is necessary, But tax treatment of rental losses should be changed because it is unfair to low-income people. Following is an example:
One of my friends bought a house for rent recently. All the cast of $460,000 he borrowed from bank. He paid 8.5 per cent interest to bank. He rent out the house and get rent of $420 a week. He pays $39100 interest to bank year and only gets $21840 rent. It seems he will lose $17260 but actual not.He told me that because he lost $17260 in rent he will get tax refund more than $6000 a year (his salary is $60k a year. And the house price has been raised with more than 10 per cent year. In this case, as long as house price rise 2.5 per cent year, he will not lose money. If house price rise 10 per cent a year, then he will benefit $46000 from the price rise. And his asset will rise $46000 +$ 6000(tax refund) -17260(rent loses) =$34740. Actually, he spent nothing.Because of tax refund, he actually pays tax rate for his salary less than 15 per cent.( (14670-6000)/60000=14.45 per cent).
BJ I find it comical that people who have no recollection of having been in the tax bracket just above 60K are so adamant that the incentives to get out of it are so mythical. Cullen complains that there are few Kiwis in that bracket compared with other countries. I have some warm mocassins for him to have a bit of a stroll in. They take advantage of his tax break for the rental property and knock themselves out of the bracket... or leave the country... but you don't get a decent wage by being unskilled and he complains about the "brain drain" in his next breath. The only thing mythical is that there is a substantive difference between labour and national. Both are black holes of credibility.
Sanjiv-Auckland
I think NZ economy is related to house prices. If govt. puts any tax on house sell or capital gain tax then house price will go down and same way the economy will move down. That nobody want. So I think govt. must think twice before imposing any type of tax.
Dirk De Lu(Christchurch)
Home ownership is no longer affordable for many working people. Taxing gains on investment property can help to limit the booming housing market. Investors are already feeling the pinch as rents cannot keep up with property values. Adding a tax on the capital gain can further dampen their willingness to over pay for property. The family home can be exempted. The US already has a workable scheme to do so. In the US investors intelligently diversify holdings across shares and property. New Zealand currently penalizes share investments both via the reduction in grey market countries and by insisting that investors hold shares for long periods lest they be treated as frequent traders and taxed at income tax rates. Kiwi investors need to diversify beyond property. Would be Kiwi homeowners need the opportunity to buy their own homes. The capital gains tax on investment property is long overdue.
David
I think it is a good idea to tax rental properties capital gains, but only on speculative purchases i.e houses sold within a defined period e.g within three years of purchase.
Pete
While I agree that that there should be a capital gains tax for sale of real estate property, a general capital tax will not work in a country like NZ because of the already high tax rates. Introducing a capital tax gain would mean that investors will think twice about investing commodities, stock markets and non-'real estate property' items.
Sam
Do not accept the idea that government put capital gains tax as this will put more fire on property market and increase house prices. The government is to be blamed for this condition. Had the government put the OCR high way back then this high price rise would had been less. Putting OCR high towards the end of property cycle is not going to scare the investors as investors are getting educated this days.
Bruce
The IRD says that there is no tax advantages from investing in property over others types of investments. Yet we have taxes on gains from the financial markets and nothing on property. Instead of imposing yet another tax, why not remove the tax on gains from the financial markets to even up the playing field?!
National don't support it and nor do I, I think you'd find the property
market would rapidly cool if other alternatives were available.
Shut Out (Wellington)
The Housing boom is nothing but a massive PONZI scheme that shows no signs to me of crashing anytime soon. So instead of adding a capital gains tax on housing - which will only push up rents further - why don't they instead make it attractive to invest elsewhere by removing tax on financial investments. Why don't they look at removing tax on things like super schemes and bank deposit rates to provide incentive to invest elsewhere?
Dean (Builder)
I know of anecdotal evidence where home builders and other contractors have large backlogs. They see no let up for demand. My brickie has so much work on that he said there is no slow down in the housing market. He believes the new migrants, in particular from Britain with loads of cash, are buying and building new houses. I know of some suburbs where 50 per cent are overseas born and have bough a high price real estate way beyond the average New Zealaner's dream. They are also buying rental properties and renting them out to us poor New Zealanders. It is about time Kiwis say enough is enough.
Bruce (Tuakau)
Three hundred and fifty thousand dollars is not a house price: it's greed. Houses - people seem to have forgotten - were not invented as investments but as places to provide secure shelter for humans to live. The borer-ridden, uninsulated, unheatable house I rent has been sold twice in a month with a $45,000 increase in four weeks. It's no wonder that the common element in NZ's "Rich List" was "Property Development".
Albert
"Experts do go wrong". Experts & economists have predicted for the last 3-4 yrs that house prices are going to fall. However, none tell said when and by how much. After 3-4 yrs, the same ones are still telling the same story while prices have gone up by 50-100 per cent (depending on location). Other than employment levels, other factors to consider: 1) Material costs - it has gone up by 20-30 per cent overall in the last 3-4 yrs, that means materials alone have increased an average 180m2 house by about $20k. 2) Increased costs to building consent & subdivision. 3) Interest cost - 3-4yrs ago, it would take the council a few weeks to give consent, today, more than 6 months. So, if a builder borrowed $100k to a build a house, at 10 per cent p.a., this translates to $5k for half a yr. 4)Increasing labour costs. 5) Kiwis going across the Tasman being replaced by richer migrants (not all are rich though)? Look at the immigration website, about half of the migrants come from countries where houses are more costlier than NZ. Please don't blame migrants, the Govt invited the migrants, but have not catered for the increased housing needs. I can quite safely say that items 1-4 above have increased construction costs of a 180m2 home by 30 per cent, ie. from 4yrs ago. furthermore, land cost have gone up as well. By the way, ever wondered how many of these 'experts & economists' sold their house 4 yrs ago?
J Rock
It makes me laugh when people ask for the opinion of real estate agents. Of course, they are gonna say the housing market will continue to stay strong! I have heard from a good source that house prices have continued to fall through out the current month also.
Clever Investor
If the housing market was not going to crash then why am I and many other large residential investors cashing up over the next 3 months? The money will go in the bank and until the prices reach a level that I am happy to purchase again. Snooze you lose!
RD
Mortgage rates up 2 per cent on previous figures must be starting to hurt. That's an extra 500 dollars per month on a 300,000 dollar mortgage, plus water, gas and electricity, rates, food, petrol rises, - its all got to have an effect. So yes, house prices are on the brink of dropping, suspended only through people's inflated confidence. Bursting, bursting, bursting.
Jill
I no longer understand the market so I cannot say if it will go up or down. It only looks like a pyramid scheme, that if and when it fails will hit the last player. The same like the tulip market
Cliff Barnes
TIMMMMBERRRRRR! Enough said
Sven (Auckland)
Yes, it is severely overpriced by any measure you choose to apply. When the unsupported capital gains slow down, you are left with a poorly performing investment. Rents these days give you about the same return as a bank account, if you are lucky. So, now that the price gains have stopped, it will start going negative in a big way, as investors realise they have a dog on their hands.
James
Of course the market is going to slump. Like any overheated bubble the only things driving NZ's ludicrous house prices are cheap credit and unjustified optimism. Credit is getting more expensive and it can only be hoped that NZers start exercising a bit of intelligence. Yields of 3-4 per cent do not make sense when credit costs 9-10 per cent. Affordability has never been so bad. Despite the spin from agents, banks and brokers, there is not a chronic shortage of property. Certainly not if the overstretched investors crowding out the market realise they are not going to get big enough capital gains to compensate for pitiful yields. Every indicator says this is the biggest bubble in our history. House prices do fall, and we are headed for the biggest one yet - and about time to.
Ern
Market will grow
Arron
Good to see that "Auckland home owner" is absolutely convinced that housing prices can never fall. History has proven them wrong before, both in NZ and many overseas markets. Let them bury their head in the sand and ignore the fact that all of the speculative booms in modern history have ended in sackcloth and ashes. And this is the mother of all the speculative booms that we have seen in this country.
Andrew Atkin
It depends whether or not people with investment properties think it will slump. If they do, and they are financially rational, then they will sell - what's the point of holding onto an asset with lame (rental) return if there are no more capital gains to win? Likewise, if investors think the market has finally flattened, then they should be a big hurry to sell - in turn it could crash, maybe dramatically.
Craig (Glen Eden)
And about time too. Hopefully we'll see a decline in prices back to more reasonable levels that people can actually afford. And hopefully we'll see some investors actually lose money and scare other investors off which will further depress prices.
Delboy, Auckland
Oh no, the median price falls $2000 in one month and all of a sudden the world is crashing in on us. I suspect more lower priced houses were sold last month, there certainly seem to be far fewer high-end houses on the market lately. Must be a slow news day at the Herald. Still, beats reading about Paris in Prison
Steve (Takapuna)
Yes, I believe so. The property price in Auckland will fall further in the future. Here we have encountered a huge bubble in property market in recent years, and it will be broken.
Daniel (Auckland)
Prices still going up. Sales volume up last two months. While it may slow down over winter, as it usually does, the market is still going strong. May was for many in the industry the busiest and best months for some time. That was across the market from properties under $300,000 to over a million dollar. Real Estate Agencies seem to be short of listings too. There are still or again multiple offers on properties for sale.Slow down maybe& going down I don't think so.
Barry
House affordability is already a big problem. With increased in interest rates, I think prices will start to drop sooner rather than later. It's good to hear that prices are coming down as it is getting out of control or is this the first sign of the bubble bursting?
Tony
We should respect and admire nature.As in nature there are four seasons. Spring -Summer-Autumn-Winter.So I ask you O-wise one where are we right now? Everything moves in cycles so why worry-B Happy.Unless you're a speculator or a risk taker then good luck to you.If you have one then it does not affect you but if you have many then maybe start worrying.That's life mate.
Arron
The crash will come, but maybe not for a little while yet. An investment is only fundamentally worth the cash flows it can generate at an appropriate discount rate. If you compare residential property returns, and factor in the hassle of dealing with tenants, keeping the place maintained etc, then property is a crap investment (without the abnormal capital gains enjoyed over the past few years). The market is being propped up by foreign investors and net immigration, but when a recession comes it will fall like a pack of cards. Already you need the equivalent of two average incomes just to make interest payments on an average Auckland mortgage and hardly any locals can afford that.
I know of several pretty savvy people who have sold their homes recently, pocketed the huge capital gain, and are now living a great life renting, waiting to pounce again with the cash in the bank when the market comes tumbling down. If I was one of the idiots who are 100 per cent geared into residential property I would not be able to sleep at night until the place was sold.
Larry B (Takapuna)
Sometimes we don't know what to think! One week ago there was an article in the Herald quoting Barfoot and Thompson saying prices have gone up. I guess the wind direction was different on that day.
Auckland Properties Price continue to Rise - NZ Herald:
"Barfoot & Thompson sold 1100 properties last month for an average price of $557,546, up 4.7 per cent on April and 16.3 per cent higher than a year earlier." Jun 7th.
Vipul
There will be a slump for investors paying for overpriced properties. Property price in areas such as Botany and Dannemora have sky rocketed in the last couple of years. Those areas are overpriced and will see a slump in the new future.
John
The housing market in NZ has been more of a speculative market where genuine first home buyers have been suffering for lack of funds to buy their first home. It has been a free-for-all for sellers, investment property buyers, the real estate industry and for any one wanting to invest and reap returns in the short term. There has been no control by the government either on buyers or sellers. Almost anyone from anywhere can buy property here. They don't need to be citizens or residents or nationals of NZ. Sellers don't need to pay capital gains tax, hence they are free to buy and sell property and make a fast buck. The real estate industry is very happy and glad because they are minting money in the process. The government is also very happy and pleased because it is getting more by way of rates or property tax. Hence all except the genuine first home buyer are happy, pleased and greedy for more. There is total speculation in the housing market and it is about time that controls and regulations are put in place to ensure fairness and justice to citizens and residents of NZ who would like to buy their first property at a speculation-free price.
Auckland Home Owner
The market won't crash. We are simply seeing a slow down of growth rather than a decline in prices. We keep being told that the property market has fallen. Wrong! The market keeps on growing but at a slower rate.
Company Director (North Shore, Auckland)
My family and I have been involved in the housing industry for over 20 years. From owning construction companies, a building supply company, drain laying company, painting companies, property rental and property developing companies some we still own today. I predicated 18mths ago that interest rates would go up, there would be more and more morgagee sales, people would loose jobs from no fault of their own and yes the housing market would eventually fall and that does not mean level out.
Brickhouse
Traditionally, house prices rise. We have a stable economy, stable government and a house-owning culture. The Market traditionally goes up and down. If you look at the national house prices over the last 20 years you can easily see the troughs. However prices have on average have risen. If you look over the past 5 years the pattern is the same. Over the next 5 years we will see house prices rise with a few dips along the way. Perhaps prices may fall over the next few months. But as summer approaches they will start to rise. More houses will sell which is simply seasonal. The economy will have a new leaf of life. The boating industry is likely to pick up and the construction industry will gather momentum and increase significantly over the next 4 years providing we win the 2 Cups. Immigration is also on the rise. This will soon start to push up prices though mainly in Auckland. Hamilton is another area that will continue to blossom. We will see new areas develop, especially in the Coromandel, the top of the South Island and the far north. Gisborne is an area that will increase in value. So don't be fooled high price houses are here to stay.
Hard Working Real Estate Agent, (West Auckland)
I am one of the honest and hard working real estate agents in the industry and I know for a fact that the housing market is still hot. Houses are still selling in a matter of days and because we are all short of listings so this is driving the prices up. Putting interest rates up is only making it harder for people to buy their first home and make the weekly payments of $500 and upwards hard for the average family to afford. Also why doesn't the media conduct an interview on the honest and hardworking real estate agents out their and find out how hard we really do work and show that we are not all liars and out to scam people?? The latest tv programs do not show the true side of the industry only a small percentage.