Two-year residential property tax rule

 

Core Logic has provided some interesting figures in response to the governments new to-year tax rule for property investors (see last week’s Property Plus).

“There is a definite difference in hold period between Auckland and the rest of the country though – almost a third of Auckland sales are held for less than 5 years…it’s quite clear there are signs of speculation in the Auckland market – when breaking the hold period into yearly buckets we see Auckland peak at less than 1 year while for the rest of the country it’s most likely properties are sold within 7-8 years. So the new measures from both the Reserve Bank and Government certainly seem like sensible approaches to try and address Auckland’s rapid growth, mostly driven by Investors.”

They estimate the tax collected could be in the order of $70m a year, although this is hard to quantify because it excludes deductible expenses like renovation costs and some will already be paying tax on the gains because they fall into the trader category.

It is also likely that property investors will avoid the tax by not selling within the two years or they will live in the property they intend to resell and attempt to argue the own-home exemption.

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