The Reserve Bank and the government are both trying to take the heat out of the Auckland housing market.
- Require residential property investors in the Auckland Council area using bank loans to have a deposit of at least 30 percent.
- Increase the existing speed limit for high LVR borrowing outside of Auckland from 10 to 15 percent, to reflect the more subdued housing market conditions outside of Auckland.
- Retain the existing 10 percent speed limit for loans to owner-occupiers in Auckland at LVRs of greater than 80 percent.
The government is taking extra steps to bolster the tax rules on property transaction.
FInance Minister Bill English and Revenue Minister Todd McLay say the Government is taking extra steps to bolster the tax rules on property transactions – including those by overseas buyers – and to help Inland Revenue enforce them.
The tax measures are also expected to take some of the heat out of Auckland’s housing market and sit alongside the Reserve Bank’s latest moves to address associated financial stability issues, Mr English says.
“Taken together, they will help Inland Revenue enforce existing tax rules, provide it with extra resources and ensure that property investors pay their fair share of tax – whether they’re from New Zealand or overseas.”
The Budget this week will confirm that, from 1 October this year, the following will be required when any property is bought or sold:
- All non-residents and New Zealanders buying and selling any property other than their main home must provide a New Zealand IRD number as part of the usual land transfer process with Land Information New Zealand.
- In addition, all non-resident buyers and sellers must provide their tax identification number from their home country, along with current identification requirements such as a passport.
- And to ensure that our full anti-money laundering rules apply to non-residents before they buy a property, non-residents must have a New Zealand bank account before they can get a New Zealand IRD number.
- In addition, a new “bright line” test will be introduced for non-residents and New Zealanders buying residential property, to supplement Inland Revenue’s current “intentions” test. Under this new test, gains from residential property sold within two years of purchase will be taxed, unless the property is the seller’s main home, inherited from a deceased estate or transferred as part of a relationship property settlement.
“Tax rules are complex and affect people in different ways, so we will consult on these measures before they take effect on 1 October,” Mr English says.
The “bright line” test will then apply to properties bought on or after 1 October.
To further ensure overseas property buyers meet both existing tax requirements and those of the new test, the Government will investigate introducing a withholding tax for non-residents selling residential property.
Officials will consult on these details with a view to this withholding tax being introduced around the middle of 2016.
Mr English reiterated owner-occupiers of residential property will not be affected by the new measures when they sell their main home, or if property is inherited from a deceased estate or transferred as part of a relationship property settlement.
“It’s important to reiterate that these changes will not apply to New Zealanders’ main home, although existing tax rules will still apply in addition to these new measures,” Mr English says.
“It’s equally important that people buying residential property for gains meet their tax obligations, whether they are from New Zealand or overseas.
“The combination of collecting IRD numbers and introducing this new bright-line test will help ensure that non-residents pay their fair share of tax in New Zealand.” . . .
These measures should go someway to dampening the demand side of the pressure on Auckland property prices.
More needs to be done to increase the supply of houses.
This could be done by building more houses and by people moving from Auckland to other areas.
Immigration Minister Michael Woodhouse is considering incetivising immigrants to settle in the regions:
The Government is set to give skilled migrants, investors and those planning to bring businesses to New Zealand extra points if they settle outside of Auckland.
Skilled migrants and those applying to live in New Zealand under entrepreneur visas already gain 10 points in the immigration points system if they say they intend to settle outside of Auckland. That could soon get a boost.
“Those entrepreneurs, those innovators who could make a contribution to regional development, it is possible for us to bump up the points settings to incentivise that,” says Mr Woodhouse. . .
It’s not just immigrants who could make a contribution to regional development.
If some of those bemoaning property prices in their home city opened their eyes to opportunities outside Auckland they could move out of Auckland.
They would get a house for much less than they could hope to pay in the city, find how much easier life is when there are fewer people clogging the roads and in improving their lives would free up houses in Auckland for those who can’t or won’t move.