Hard hit by capital gains
A high percentage of Auckland houses are resold after less than five years of ownership, new research says.
The study carried out by property information company CoreLogic reports that 15 per cent of Auckland’s 31,000 residential sales in 2014 had been held for less than two years, and one-third owned for less than five years.
Had they been sold after October this year, they might have faced tax under the Government’s new capital gains tax for houses changing hands within two years.
However, nearly two-thirds of last year’s quick-fire sales would probably have been exempt as family homes. A much lower 9.7 per cent – or 8400 – of the 86,000 homes sold nationally last year were held for two years or less.
‘‘Tax revenue from those 8400 New Zealand homes is estimated at about $70 million each year so its impact will not be inconsequential, particularly in Auckland,’’ Century 21 New Zealand national manager Geoff Barnett says.
But CoreLogic’s senior research analyst Nick Goodall says the actual tax take is likely to be less than that.
This is because it includes those who would have willingly classified themselves as speculators, and also the cost of renovations.
‘‘For example if you bought an investment property for $500,000 and spent $50,000 renovating the bathroom and kitchen, then sold it a year later for $600,000 you’d only be liable for capital gains tax on the $50,000 profit,’’ Goodall says.
Further data supplied by Goodall correlates the 2014 sales to the old council territories of Auckland city, Manukau, North Shore and Waitakere. It shows 31 per cent of houses in Auckland city are resold in less than five years.
When the sales within the first 10 years of ownership are analysed, Manukau has the largest percentage of houses being sold within the first year, with 20 per cent of houses being sold in this time.
The most common resale period for the other territorial authorities in the first 10 years is between years one and two, whereas the rest of the country’s peak years are seven and eight.
Barnett says these figures show that the new tax will make a greater difference in Auckland as speculation is more pronounced.
Bayley’s Real Estate research analyst Goran Ujdur says residential property investors will likely look to circumnavigate the new tax requirements. Ujdur says investors could hold on to their assets a little longer so they fall outside of the tax window. He says those that will get caught within that timeframe are forced sellers.