Govt changes cap­i­tal gain terms on Ki­wiBuild homes

The New Zealand Herald - - News - Ja­son Walls

The Govern­ment has backed down on a key de­tail of its Ki­wiBuild pol­icy.

But Min­is­ter of Hous­ing Phil Twyford has de­fended the Govern­ment’s de­ci­sion, say­ing it “strikes the right bal­ance”.

When Labour launched its Ki­wiBuild pol­icy in 2016, one of the con­di­tions of sell­ing a Ki­wiBuild home was any cap­i­tal gain made on the prop­erty, sold within five years, would be handed over to the Govern­ment.

For ex­am­ple, if a Ki­wiBuild home was bought for $550,000 and sold for $600,000 within five years then the $50,000 cap­i­tal gain would have to be re­turned to the Govern­ment.

But yes­ter­day Twyford said the Govern­ment had changed the rules. Now, in­stead of hand­ing over the whole cap­i­tal gain after sell­ing a Ki­wiBuild home, a seller would only have to give the Govern­ment back 30 per cent.

And Twyford has re­duced the min­i­mum sell­ing time sell­ers would be pe­nalised for un­load­ing a Ki­wiBuild home from five years, to three.

“To re­quire the owner [to] for­feit the en­tire cap­i­tal gain would be un­fair in our view and would likely mean they would strug­gle to then go on and buy an­other home,” he said. “The Govern­ment chose the 30 per cent fig­ure be­cause Ki­wiBuild homes are not sub­sidised — they are sold for the mar­ket price of homes.”

He said this “strikes the right bal­ance.”

He added that the orig­i­nal Ki­wiBuild pol­icy was de­vel­oped at a time when the hous­ing mar­ket was over­heat­ing.

“[The pol­icy was de­vel­oped] at a time when we had seen over­heated hous­ing mar­kets de­liv­er­ing 10 per cent, 15 per cent some­times 25 per cent annual cap­i­tal gains.”

But Twyford said un­der this Govern­ment’s poli­cies, the hous­ing mar­ket in Auck­land has sta­bilised.

“House prices have gone up 1 per cent in the last year. So the sce­nario of peo­ple mak­ing big, wind­fall gains is ex­tremely un­likely to even­tu­ate.”

Twyford was at pains to point out a Ki­wiBuild buyer was “con­trac­tu­ally pro­hib­ited” from sell­ing that home for three years after pur­chase with­out the ex­press per­mis­sion of the Ki­wiBuild Unit.

If some­one at­tempted to sell a Ki­wiBuild home within that three-year pe­riod, of­fi­cials could en­force rules to stop the seller from do­ing so.

But that still leaves a 70 per cent cap­i­tal gain a seller could pocket.

Asked if this was not still a high enough in­cen­tive to break the rules, he said he did not think so as the gains in house prices have sta­bilised over the past year.

A seller would only have to give the Govern­ment back 30 per cent of any cap­i­tal gain if the house was sold within three years.

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