Hard hit by cap­i­tal gains

Central Leader - - NEWS - By TOM CARNEGIE and CATHERINE HAR­RIS

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.

Re­search by CoreLogic shows the new prop­erty gains tax may af­fect a high per­cent­age of Auck­land house sales.

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