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NZ Following Vic Taxes

Market Insights
8 years ago
2 minutes

Following Victoria’s recent hint at a tax increase for foreigners investing in Victorian real estate, it seems that the stance is reflected not only in Australia, but in New Zealand too.

Today, a capital gains tax on all residential properties was announced in New Zealand, if it is sold within two years.

Prime Minister of New Zealand, John Key, announced it yesterday morning as a part of the Budget package.

An exemption is made if the investor is using the property as a main home, is part of a deceased estate or inherited or if its transferred as part of a relationship settlement.

Much like Victoria, changes to foreign investment has caused massive controversy amongst both the public and Parliament.

Labour leader, Andrew Little, that these moves were weak considering the effect. 

"For years the Prime Minister has denied there is a crisis, refused to admit foreign investors are pushing up house prices and said there is no need to dampen down housing demand. Today John Key has been forced to eat his words."

"This is not only an admission there is a housing crisis, it is an admission that the intention test in the current law is not working.”

These moves are seemingly tinkering on the problem, rather than directly assessing them.

"The Prime Minister is creating a massive loop hole with his new 'bright line' test which will exempt speculators who hold onto their properties for longer than two years," Mr Little said.

"A Capital Gains Tax...doesn't stop the property price bubble because it never has anywhere else where it operates. You’ve go to address those measures…”

New Zealand, whilst not facing as large a foreign investment boom as Melbourne, Sydney or Brisbane, had still received a lot of foreign attention - however whilst these taxes may deter some buyers from investing in these developments, for the majority, these taxes will ricochet of an investment pool collectively worth billions of dollars.

 

Has Victoria’s recent taxes made other states and countries reconsider? We will have to wait and see.