NZ Labour Government targets the property speculators

By Leith van Onselen

I noted in the lead-up to the New Zealand General Election, held on 23 September 2017, that Labour had an excellent housing platform that addresses both supply and demand distortions via negative gearing reform, banning foreign buyers of existing homes, tighter capital gains taxes, removal of urban growth boundaries, plus bond financing for infrastructure. Its plan to reduce immigration by around a third is also sound, and would help to relieve chronic housing and infrastructure pressures, especially around Auckland.

Back in November, New Prime Minister Jacinda Ardern gave her ‘speech from the throne’, which confirmed that the Government would pursue its housing reforms in-full. And in December, new housing minister, Phil Twyford confirmed the timeline for these reforms in a speech to the Salvation Army.

Included in Twyford’s speech was the promise that Labour would push “the bright line test out to five years so if a speculator sells a rental property within five years they will pay income tax on the capital gain”, thus effectively imposing a capital gains tax to most housing investors.

Yesterday, Revenue Minister within the Labour Government, Stuart Nash, confirmed the ‘bright-line’ test on residential property sales will be extended from two years to five years in legislation currently making its way through Parliament, and should be in force by March. From

“The extension of the previous government’s bright-line test will help dampen property speculation and make homes more affordable,” Nash says.

“The previous government required income tax to be paid on any gains from residential property sold within two years of acquisition, with some exceptions.

“The extension means that profits from residential investment properties which are bought and sold within five years will generally be taxable.

Nash says the changes will ensure that residential property speculators pay income tax on their gains “and makes property speculation less attractive”.

“We need investment which grows the economy and creates jobs, not the sort of investment which distorts the residential housing market. This measure will bring fairness back into the tax system.

“Reducing speculative demand will also help improve housing affordability for owner-occupiers.”

Nash says current exemptions from the bright line test will remain. This includes the exemption for the main home of owner-occupiers of residential property.

The extension to the bright-line test will apply to residential investment properties purchased from the date on which the bill receives the Royal Assent, which is expected in March.

While the proof of the pudding will be in the eating, Labour is at least attempting housing reform, which is a huge improvement on the former National Government’s do-nothing approach.

[email protected]

Unconventional Economist


  1. House prices took a dive in most parts of the country in January but prices were particularly soft in Auckland |

    Median house prices dropped significantly in most parts of the country in January, according to the latest figures from the Real Estate Institute of New Zealand.

    The national median selling price for all residential properties sold in January was $520,000, down from $550,000 in December.

    That was the lowest it has been since July last year, but remains above the January 2017 median of $485,000. … read more via hyperlink above …

    Government advertises for head of new Kiwibuild Unit to kick off plans for 100,000 new homes over the next decade |

    The coalition is pressing on with plans to increase the ‘bright line’ test for residential property sales to cover a five year period; law changes expected to take effect in March |

    Housing – New Zealand Labour Party

    … extract …

    Remove barriers that are stopping Auckland growing up and out

    Labour will remove the Auckland urban growth boundary and free up density controls. This will give Auckland more options to grow, as well as stopping landbankers profiteering and holding up development. New developments, both in Auckland and the rest of New Zealand, will be funded through innovative infrastructure bonds.

  2. When is NZ Labor going to abolish the Auckland growth boundary and introduce the infrastructure bond financing mechanism they promised. Until monopoly rents are taken out of the land market and adequate infrastructure financing enabled everything else is fiddling while Rome burns.

  3. … On a lighter note …

    … Entertaining and enlightening political repartee … Labours Phil Twyford bringing out the best in National leadership aspirant Judith Collins …

    Phil Twyford backs ‘right-wing, red meat’ Judith Collins | Newshub

    … extract …

    … A high-profile Labour MP wants Judith Collins to lead a “hard, right-wing, red meat National Party” that has the “courage of its convictions”.

    Phil Twyford told The AM Show on Friday – perhaps facetiously – the “problem with the modern National Party is they don’t stand for anything”.

    “What did John Key ever achieve? Can anyone remember anything that he did? If Judith is the leader, [she] will bring back hard free market policy, locking up the crims and throwing away the key.”

    He compared her to hardline British Tory Prime Minister Margaret Thatcher, leading to howls of protest.

    “How can people even put me in the same league? I’m so much softer,” Ms Collins said of her hero. … view and read more via hyperlink above …

    … Check out the GONE GONE GOING SECTION …

  4. Five times as many ‘ghost homes’ in New Zealand as Airbnb listings, says Airbnb |

    Brent Thomas·

    OPINION: American journalist HL Mencken famously said that “for every complex problem there is an answer that is clear, simple, and wrong”.

    So it seems today in the complex debate around housing affordability in New Zealand. Some people are now claiming the housing affordability crisis is the fault of home sharing generally, and Airbnb specifically. … read more via hyperlink above …

    • Brent Thomas is Airbnb’s head of public policy in Australia and New Zealand.

  5. Middle-income millennials priced out of homes market … Istitute of Fiscal Studies Report … Financial Times

    Ownership among young adults has ‘collapsed’, says IFS report … read more via hyperlink above …

    … and …

    Shortage of affordable houses continues, warns BNM (Malaysia Central Bank) | Free Malaysia Today

    KUALA LUMPUR: Malaysia faces a shortage of affordable houses for the masses, Bank Negara Malaysia (BNM) warned today.

    In a report, it also disclosed data showing houses in the country were “seriously unaffordable” in 2016 by international standards.

    The central bank outlined five strategies to overcome the issue. … read more via hyperlink above …

    Unsold homes in Malaysia rise to decade high in 2017 – … Reuters

    KUALA LUMPUR, Feb 14 (Reuters) – Unsold residential properties in Malaysia rose to their highest in a decade last year as lofty prices and a lack of affordable housing dampened purchases, the country’s central bank said. … read more via hyperlink above …

  6. UNITED STATES: “There Is An Acute Crisis Coming”: Apartment Developer | Zero Hedge

    On Friday, the housing market received a strong bullish jolt from the latest starts and permits data, which however showed that while traditional single-family units barely budged, there was another sharp spike higher in multi-family, i.e. rental unit construction. … read more via hyperlink above …