Capital Gains Tax on investment property

Just read an entry on Rod Drury's blog proposing discussion on Capital Gains Tax on investment property.

I agree that New Zealanders need to be motivated to look at business opportunities more. In the medium to long term Kiwi Saver will help here - employees savings and business/tax dollars channeled into providers more likely to invest in business than property.

With regards to capital gains tax on property, why add another tax to increase the governments already overflowing coffers? Across the board capital gains tax just lowers the property playing field a notch - and would cripple those taking on the highest risk ... the Government needs mum and dad property investors to help provide rental accommodation. With interest rates over 9% alot of investors will already be feeling the pinch. Given the price pressure and buyer competition on entry level housing, how about incentives for property developers to build more at the market entry level to fuel supply rather than making it trickier or even not possible to develop?

How about Housing New Zealand upping their ante e.g. by selling their million dollar homes and using the leverage to provide a bunch more lower end properties?

As a point of reference, Malaysia has recently dropped capital gains tax on property, and has policies in place for developers to include low cost housing whenever developing new properties. Obviously New Zealand and Malaysia are very different animals, but its interesting seeing a country going the other direction with capital gains tax on property!

What are New Zealanders afraid of ... inflation ... or growth!?

Watch out NZ property developers

There are a couple of proposals on the table currently related to property development that any serious property investors/developers should be following closely.

The first is the "Associated Persons" IRD proposal, submissions close tomorrow 11th May, so get your skates on. You can find the discussion paper here.

Basically the associated persons rule related to tainting is proposed to be relaxed and this would seriously affect property developers etc. ability to invest in property without attracting capital gains - something the rest of the New Zealand population can do legitimately. Gilligan Rowe and Associates (GRA) are actively pursuing this one, so if you want more info let them know. Alternatively drop me a line. You might even source a sample submission. I foresee strong opposition to this one.

The second is the Wellington City Council's (WCC) proposal on"Infill Housing". Basically WCC is planning to introduce more stringent requirements on the splitting up and corresponding site coverage/height etc. rules when subdividing an existing property, due to the concern that some developments are going beyond reasonability with height and space. I can see arguments both ways for this one, so make sure to act now to make sure your voice is heard.

Given the current heat in the property market and enormous pressure on property prices, based on my understanding of fundamentals, both of these initiatives will apply more pressure. Moreover why is our taxpayers money being consumed on initiatives to increase the income tax specifically related to property, when we're running a too many billion dollar and growing surplus? Oh well, I guess that surplus has to go somewhere... I'd love the government to take my spare tax dollars and build some decent broadband infrastructure.