New Zealand property tax rules expected to change

Country: New Zealand

16 November 2009

Some New Zealand property tax rules look set to be altered in order to generate more money for the state and rebalance the economy, ANZ economists said today.

ANZ’s weekly Market Focus newsletter said that while the price of property in New Zealand had improved in recent months, comments made by the Reserve Bank last week suggested that there was a good chance that some policies surrounding the New Zealand property market, such as tax, would be changed in order to help prop up the country’s economy.

Reserve Bank Governor Alan Bollard has long advocated that investors buying property in New Zealand should not receive any tax benefits, and reiterated this point to reporters last week.

“Because when it is [advantages in terms tax treatment], that draws extra funds into the housing sector, and the effect of that has been strong demand for mortgages, strong demand for external funding, pressure on the exchange rate, and pressure on the traded sector,” Doctor Bollard commented.

“We don't think that's a good thing. We think it's quite important that people do understand that link between demand for mortgages, beyond what we're saving, and pressure on the exchange rate.

“We believe an appropriate tax change could help reduce that pressure.”

ANZ economists said that a tightening up of the tax rules was almost inevitable.

An extract from the newsletter said. “The Prime Minister ruled out a capital gains tax, but we struggle to see how the government can afford to continue giving a tax rebate on New Zealand’s biggest investment class, namely residential property.”

See Also: ANZ, Marc Da-Silva, New Zealand

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