Market Insights March

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NZ records highest average resale profit in 20 years

In the last three months of 2018, our property market was working out hard, and NZ homeowners were looking good! Most properties — 96.3% — resold for an average profit of $195,000 — up $10,000 on the previous quarter. CoreLogic’s quarterly Pain & Gain series has been comparing latest sale with previous sale prices for twenty years, and average profit has never been this high. Median national loss, on the other hand, was $25,000. These measures point to a market in reasonably good shape.

CoreLogic’s Nick Goodall says high profits resulted from people holding properties longer — 7.6 years’ average — and, extended price rises. Wellington has came out on top, while Auckland managed to move above a 5% average loss for the first time since mid-2013. Broadly, the lower North Island held strong, while West Coast and Canterbury softened. CoreLogic’s data also showed 96.6% of houses resold for a profit, versus 89.8% of apartments. Loss making properties were owned for an average 2.8 years — the shortest duration since 2010!

If your clients are hoping to benefit from this upswing, I’ll help them secure finance. Or, I can look at their existing loans to see if there’s a more competitive deal. Let me know.

Source: https://www.corelogic.co.nz/news/homeowners-pocket-median-resale-profit#.XIitfigzaUk

To Capital Gains Tax or not to Capital Gains Tax? That is the question

A tax working group has recommended the government introduce capital gains tax (CGT) from 2021; meaning profit from selling an investment property— not the family home— will be taxed. Are you thinking investors will flee the market to avoid paying or that there’ll be too many houses, not enough demand and prices will crash…

Um, not necessarily… It depends who you listen to. Some believe, since CGT isn’t retrospective, investors won’t run for the door. But, if they stay put, CGT won’t get to star as the grand elixir for lowering property prices. Why then?

The tax working group expects "small upward pressure on rents and downward pressure on house prices". The government will respond formally in April, but its finance spokeswoman, Amy Adams, has claimed the number of homes affected by CGT won’t be high enough to move the market much. In other countries, like Australia, CGT hasn’t had a significant impact. Except… at lowering entry level prices. Will New Zealand’s long-suffering first home desirers finally get a leg up?

I’m aiming to keep you across any developments in this area but if you, or your clients, want to learn more about what CGT could mean, please get in touch.