Matt Ball: Property Investors Federation Advocacy Director on the people selling their properties ahead of the election due to capital gains tax fears

An expert believes some property investors are selling up ahead of the election. 

Data from property analysts Cotality NZ shows the proportion of properties resold for a gross profit has fallen to its lowest level in almost 14 years. 

The median length of time people are holding on to properties that sold for a profit hit record numbers, at almost 10 and a half years. 

Property Investors Federation Advocacy Director Matt Ball told Ryan Bridge there are fears of being taxed on inflation. 

He says some people are worried about the election and getting out ahead of time, while others are sitting tight and watching nervously. 

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Episode Transcript

Speaker 1 (00:00):
Let's look at Labour's capital gains tax in light of
this new cotality data. It shows us that thirteen percent
of house houses in New Zealand sold for a loss.
This is the worst profitability that's inverted Commas since twenty twelve.
You might need to hold on to your investment property
for an entire decade to make anything back. Matt Bull,
Property Investors Federation Advocacy manager with me this morning.

Speaker 2 (00:21):
Matt, Good morning, morning Ryan, thanks for having me on.

Speaker 1 (00:25):
Good to have you here. So yeah, look, no surprise
that it is getting harder to sell and when you
do sell you might be taking a loss. What has
this got to do with the capital gains?

Speaker 2 (00:36):
Okay, so the data here is pretty good, but it
doesn't tell the whole picture. Totality data looks at a
sale ten years ago and then a sale today and
compares the two and you get the nominal profit or loss.
It doesn't take into account the cost of owning the property,
your upgrade costs, and all of that sort of thing.
But most importantly, it doesn't take into account inflation, and

(00:57):
inflation over the last ten years is about thirty nine percent,
So it's probably worth putting some numbers on this. And
actually I've got an example right in my neighborhood. Some
neighbors who bought a property in twenty fifteen for six
hundred and fifty five thousand dollars thanks to inflation, selling
now they need to make nine hundred and eleven thousand
dollars to make a profit. Now their asking price is

(01:20):
eight hundred and thirty five thousand, So they're going to
make a nominal profit, but in real terms, they're not
making anything. Now where that comes in for labour's capital
gains tax is labor is going to be taxing inflation,
and that means you make a paper profit, but you
are going to be taxed as if that was real income,
really rubbing salt into the.

Speaker 1 (01:42):
Wound, except that their tax doesn't come in until what
twenty twenty seven, right, any increase in value post twenty
twenty seven.

Speaker 2 (01:51):
Yeah, But that's not the point, Ryan, See. The point
is from that point onwards, it doesn't matter whether you
actually make an actual profit or not. You're going to
be tax on inflation. Yes, but I said those tax
comes in we look back in ten years time, this
is the picture we're going to see.

Speaker 1 (02:06):
I understand what you're saying, but I think that, you know,
to be fair to them, you can as an investor
make a decision around that, you know what I mean.
You can say, all right, well, I know these guys
are coming in. Well, these guys might be coming in
and they will be doing this from twenty twenty seven.
Therefore I'll organ my eyes my fears around basically getting

(02:26):
out of property potentially.

Speaker 2 (02:29):
Well, that's one option. I mean. The other option is
that labor makes an allowance for inflation, and that would
make the tax fair and I think people would understand that.
But yeah, you're right. The other option is that people
adjust their affairs accordingly. And I'm afraid, Ryan, I think
this would put a wrecking ball through the rental market.
People will just stop investing in rental properties because of

(02:49):
that worry that they're going to be taxed on inflation.

Speaker 1 (02:52):
Have you heard of anyone lately who's been trying to
sell their rental property? How is it out there?

Speaker 2 (02:58):
It is tough, And yes, I'm here people all the
time who are selling mental properties. Some of them are
worried about the election and are actually getting out ahead
of the game. Others are just sitting tight and watching
a bit nervously, so yeah, definitely subdued in some parts
of the country. As always, it's better than others. So
if you're in Auckland or Wellington, things are pretty tough

(03:21):
and if you're in parts of the country like down South,
things are a bit better.

Speaker 1 (03:26):
Matt. Thank you. Always going to Chat Matt Ball Property
Investors Federation for.

Speaker 2 (03:30):
More from earlier edition with Ryan Bridge.

Speaker 1 (03:32):
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