Capital Gains Tax in New Zealand?

Capital Gains Tax

One of the main reasons people favour capital gains tax is to curb inflation. Yet many of these counties that have capital gains tax have still been hit with inflation. A recent poll of 1030 people found 52.3% believed a capital gains tax on investment properties would help control rising house prices.

It could free up more homes for first home buyers as investors may choose to invest their money elsewhere. The reverse effect being, as the capital gains tax takes effect upon the sale of that property, investors may be inclined to hold that investment longer or use it as a tax right off.

BNZ chief economist Tony Alexander said the impact of the LVR restrictions on house prices "will be relatively limited" but a capital gains tax would not work either. The National party is not for implementing a capital gains tax, the Labour Party and the Greens have both said they would be. 

However, Professor Robert Wade from the London School of Economics thinks it is outrageous NZ has no capital gains tax and is quoted as saying '' think quite outrageous that in New Zealand there's no capital gains tax… But of course if you have a situation where economic policy is being made by the top 1% for the top 1%, then the last thing you're going to get is political movement towards a capital gains tax,” - Source.

I personally feel the LVR restrictions have quietened inflation to some degree. People are still paying the same prices for homes and homes are selling just as fast as they were however we have seen quite a drop in potential purchasers (those that don't have the help of mum and dad or a home they can leverage against, the ones that are borrowing beyond their means). 

There is still a shortage of new homes coming onto the market so with that said, I don't feel capital gains tax would 'fix' that underlying issue. The focus still needs to be on building new, affordable homes. 


Shannon CorbettComment