The housing market softened in the middle of the year, with investor activity particularly subdued, according to ANZ New Zealand's latest Property Focus report.
The report notes sales volumes declined and prices edged lower through the middle of the year.
"Investors in particular appeared to have pulled back this year," the report said.
"For investors, the upcoming election will be front of mind, given the Labour Party has committed to introduce a Capital Gains Tax on residential property other than the family home if elected," ANZ's economists said.
"The Labour Party is also yet to confirm its position on reintroducing limitations on investors including interest expenses when calculating their tax obligations, which is an important concern for mortgaged investors," they said.
The report also noted that the potential of a party favouring a land tax, the Opportunity Party, entering parliament "may also be exercising investors' imaginations."
ANZ NZ is the country's biggest home lender, with exposure of almost $119 billion as of March 31.
ANZ's economists also noted some sellers have "hit the pause button," reducing the number of listings on the market.
"However, new listings haven't eased back as much as sales volumes, giving buyers more choice and tilting the market marginally further in favour of buyers, making slight declines in house prices more likely," they said.
ANZ's economists are sticking with their previous forecast of an overall 2% decline in house prices this year, followed by a small rise next year.
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6 Comments
I don't think it's a tax thing, it just doesn't stack up any more. The rental yeild doesn't work out great due to rising expenses like rates and insurances, rising interest rares, and the high initial price of the house. And a capital gain isn't looking likely either.
Investors interest is dead. A real possibility they will actually have to pay tax for the first time in ages.
Going to be a very interesting election.
may also be exercising investors' imaginations.
May also also be exorcising investors' intestines
I’d say a lot of boomers don’t even know what their yields are. The gravy train of endless capital growth has made them sloppy and arrogant in regards to their financial status. They wouldn’t know what hit them if they needed to start out again on a level playing field
If they have mortgage free rentals as many will, the yield will likely still be favourable. The question is, how long will they hold onto them. Will they seek to pass them on to their children, or sell down over time to free up capital and supplement lifestyle, private health procedures etc.
Many investors still have ring-fenced tax losses. While these were gradually being eroded by the previous Labour Government's tax changes, many have begun accumulating again and, in some cases, provide a useful offset against income from mortgage-free or lowly geared investment properties.
If Labour is re-elected and reintroduces those tax changes alongside a Capital Gains Tax, I suspect many investors won't rush for the exits. Instead, they will have time to consider their options. Some may restructure their affairs, use equity to help their children purchase properties as first-home buyers, or adopt other strategies to retain those assets within the family. Others may choose to sell in an orderly manner, making use of their ring-fenced tax losses along the way.
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