David Hargreaves looks at the apparent absence of any upsurge in the housing market following the torpedoing of any Capital Gains Tax - and assesses the prospects ahead

"Apparent absence of any uplift"

This is not what REA-TTP predicted would happen.

This is further proof Spruikers are indeed lacking the much need foresight to make sound predictions...

FHB's need to sit tight, watch their savings grow, enjoy the security and watch this all hype gradually unravel.

Spruikers wrong again.

David, I don't believe the axing of the CGT will start an upswing in house sales or values but less than 2 months since the surprising news is not enough time to come to any conclusion yet. It takes much longer for people to digest the news, make a decision to buy, look for a house 30 days? put an offer in, settle 30 - 60 days later, then another month for that sale to be recorded and published.

There is no panacea for the missing millions/billions in false liquidity that was propping up the whole house of cards. The Morphine hit of lower rates will be administered to ease the pain but this patient will struggle to survive regardless.

The marginal buyer controls all things, the flow on effects when they disappear can be enormous.

Sales in Rodney according to Barfoots yesterday, down 43% on last May.
If that is a relief rally then I am recalling the dead parrot sketch.
CGT was relevant, potentially, only to "investors" post 2021.
Given that prices are in all probability going nowhere/down in interim, they would have had no profit to tax and anyway, had 2 years to sell and avoid it.
Really, this is , as David says, excuse modelling.
Prices will fall further because top end buyers and on-mortgage purchasing been hit hard by overseas buyer ban and anti-money laundering. This has led to 42% fall in sales, for instance, above $1.2m in Albany ward, in first 4 months of 2019 compared to 2018. Only 16-18% in lower brackets down to 600k mark. Money supply sorely neglected by analysts of prices in Auckland. As Joe Wilkes says, marginal buyer gone AWOL

How come is hard to digest that housing market is in donward trend - how much only time will tell and though worrysome in short term specially for speculators who all bough in 2016 and afterwards for fast money. Just saw another property in Howick which will go for mid 800s to may be 900 (CV of $1020000) but when checking the history for a friend who was interested realized that has been purchased in 2016 for Mid 900s (When the CV would have been in $600000) so visiting that open home is a waste of time as vendor will not be able to sell unless takes a hit - BIG HIT (RE Agent needs a listing and as long as vendor is ready to pay for marketing - they have nothing to lose except the time - which now they have in abundance :)

For long term investors. itwill be an opprotuinity to enter (Only if have long term goals) and is perfectly normal in ecenomy cycle (nothing is one way street) but still some way to go so one should wait and watch (Now waiting will not harm).

Construction is not at very high levels. NZ's big problem is that, due to earthquakes in Christchurch and idiotic Auckland Council, construction of new housing has been at low levels for a decade.

The Auckland problem is so bad that the current catastrophic decline of NSW and Victoria construction sectors means those places have now plummeted to the levels of Auckland. Auckland has been so bad at building housing that this construction peak is about 20% less than last boom when adjusted for population change.

I would imagine the imminent end of negative gearing, or ring-fencing losses to be more accurate, will have an effect, too. So many landlords rely on a tax break to make their 'investment' work, at the expense of those who do not get the benefit of untaxed capital gain. What a rort, and it's about time it was ended.

David your singling out CGT as the only factor which then should cause the opposite affect. Things aren't linear or myopic with a single cause and affect but its a complex system with a big factor being CONFIDENCE.
CGT was just one of many issues that has caused confidence to be lost, the fact our govt has come out just about every second week with another tax idea to burden people with is a huge weight on confidence.
What was the result of Cullens report was summed up in we also have 100 different potential taxes to also put in place.

Good article, confirming what we all knew, even though some won't admit it (TTP) but the proposed CGT never had any impact on the market!!!

In a falling market like Akld is now, commentators and spruikers will look for any excuse......

Certainly the government running a giant surplus and getting even more via a Kiwisaver tax windfall won't help sustain aggregate demand or the feel good factor.
How about writing off a chunk of outstanding student loans and a tax credit to those who have paid them off? Government needs to reduce private indebtedness. It could easily do this via a spreadsheet entry. Student loan forgiveness is becoming quite a big policy proposal in the US. Increasingly it is recognised that student loans impede family formation and the kind of middle class spending that our economies used to rely on to keep chugging along. Especially as post GFC a degree doesn't get a lot of people where they were promised. False advertising on the part of tertiary institutions.

"a silent majority of Kiwis were more sanguine about the prospect."

Perhaps not. Unlike the French for example, Kiwis are traditionally silent and prefer to make their feelings known at election time in the polling booth.

As opposed to Boomers who had all their education paid for...

My mum had her first property in Auckland at 19 whilst a student at uni working in a shoe shop part time. Imagine that today just pure fantasy

David, the sad fact about our zeitgeist is that "hysteria being generated by politicians, some media and some business lobby groups was, ahem, a bit overdone" applies practically everywhere in the MSM. Let's count a few current examples of hysteria:

• Housing in Awkland and a few other areas (Queenstown, Tauranga)
• Climate 'Emergency' - great for the click-baiters, but not so hot (sorry) for the mental health of impressionable teens who now claim to be 'terrified of their future' to the point where offing themselves seems like a Great Idea
• Species Extinction, and this in a land that has seen the destruction of most South Island East Coast forests by early Maori between the 13th and 16th centuries, and don't even ask what happened to our megafauna - moa, Haast's Eagle and so on
• AOC and her '12 years until We Fry' shtick and the Green Nude Eel 'solution' - but then that's US Politics, which has always had its share of lunacy

This was all summed up neatly in the late 1950's - referenced here:

The Historian Norman Cohn, in his 1957 book, The Pursuit of the Millennium: Revolutionary Millenarians and Mystical Anarchists of the Middle Ages, found that Millenarian movements always picture salvation as:

• Collective, in the sense that it is to be enjoyed by the faithful as a collectivity.
• Terrestrial, in the sense that it is to be realized on this earth and not in some other-worldly heaven.
• Imminent, in the sense that it is to come both soon and suddenly.
• Total, in the sense that it is utterly to transform life on earth, so that the new dispensation will be no mere improvement on the present but perfection itself.
• Miraculous, in the sense that it is to be accomplished by, or with the help of, supernatural agencies.

It might have been expected that millenarian thinking would disappear with the Enlightenment and the Age of Reason. But Cohn found that these ideas and the manias they inspired reemerged in the twentieth century’s secular totalitarian and revolutionary movements.

In what could be a description of the Green New Deal (USA), Cohn argued that these movements felt themselves to be engaged in a struggle of unique importance, “different in kind from all other struggles known to history, a cataclysm from which the world is to emerge totally transformed and redeemed…this is the essence of the recurrent phenomenon of revolutionary millenarianism.”

What this all boils down to is that we have simply gotta hunker down and wait for the irrationality and madness to pass - as pass it will. But, and this is the kicker - not before it has done an awful lotta damage - wasted lives, misallocated resources, and large dollops of completely avoidable misery.

Hey ho....

a silent majority of Kiwis were more sanguine about the prospect.

I would think that Labour discovered that the "silent majority" had very strong views about the prospect hence the dropping of if like the proverbial hot potato!

Just the prospect of a CGT has left the punters shell shocked. It will take a while to regain the previous level of confidence.

Retired Poppy. I have read your comments ad-nauseum over the last 12 months, and am sure you just dont understand property cycles and the consistency of these, or your just taking the piss. The time to buy is now while the market is flat. Not next year. Mid next year the property market will start growing only people like you wont see it. Mid 2021 people will look back on growth figures and see that is when the market started to grow.