The government has failed to curb rising property prices with the new Brightline & Interest Deductibility rules. I believe in what I have previously said in another blog -  ‘property sale prices will continue to rise for some time yet’. In spring and summer, I predict it will cascade into vendors trying to get house sales through the door at these current rising price levels and gain those higher prices. 

At Proppy.co.nz we sold two houses last week that we had previously sold in 2020. Both houses made staggering price gains within less than 12 months. The latest changes (Brightline & interest deductibility) are having no effect in my opinion to rising house prices.

“We want to sell but there is nothing for us to buy!”. This is a common saying we are hearing from possible vendors. People are holding properties for longer than they would normally sell and consequently it is accelerating the lack of stock. What does this bring – it brings FOMO (Fear Of Missing Out).

FOMO is back everyone! And why wouldn’t it be, its basic economics. Supply is not keeping up with demand, and with the thought of interest rates likely to rise in the not to distant future it only accelerates people thoughts of getting in quickly thus driving prices higher again.

You are seeing major trading banks getting into a tailspin - offering free legal fees, cash backs, and lowering their shorter interest rates to entice more volume onto their balance sheets. Its all about getting their market share. It’s not what the government wants them to do, but good on them, why wouldn’t they do this. They are a business at the end of the day, and the consumer is also winning with some of these enticements. But where New Zealanders are not winning is house prices continue to rise. Completely at odds on what the governments intentions are.

This brings me back to the epic fail of the Brightline and Interest Deductibility housing tax rules being which introduced earlier this year. Ok yes they may have an effect at some stage in the housing cycle but the interest deductibility rules are staggered through to 31st of March 2025 so actually the full effect will not be known until after then but I would suggest that given the levels of ‘investors’ that don’t have large levels of lending in this country these new requirements will not be hurting too many people – so I would say it’s 2/10 pass mark.

The latest governments ‘Brightline test’ or what I call “Capital Gains Tax” again is not hitting the mark not for the moment. Moving it out will certainly capture some more people selling their rental properties but how many of these are actually are being sold right now? We have already had this regime for two years, and then extended to five, and now ten.

The IRD have introduced the bright-line test for properties acquired between following;  

-   on or after 27 March 2021, and sold within the 10-year bright-line period

-   between 29 March 2018 and 26 March 2021, and sold within the 5-year bright-line period.

- between 1 October 2015 and 28 March 2018, and sold within the 2-year bright-line period.

So, you can see its actually not going to have a major impact on many people. The new ten-year rule will possibly influence people buying investment property right now but that’s really a small subsection of the overall NZ property market.

I am sorry to say it did not work under the then Finance Minister Bill English, it didn’t work under Grant Robertson’s control, and the latest round of tinkering by Grant I don’t believe it’s really going to work either. Another 2/10 pass mark.

Therefore, it is a failure to curb property prices rising.

I would suggest hunkering down for the rest of the winter, go skiing or grab a hot water bottle and watch a series on Netflix or complete your renovations around your property get your place looking great.

Then wait for further FOMO in spring and summer to really kick into gear, and as always, the great team at Proppy.co.nz will be here to help you.

Cheers,

Tyson

Managing Director, proppy.co.nz