New Zealand’s Ardern Labour Government yesterday announced sweeping property tax reforms targeted at investors, namely:
- extending the term of the Bright Line Test for taxing capital gains on investment property from five years to 10 years; and
- fully removing the tax deductibility of mortgage interest payments on residential investment properties.
The reforms came out of nowhere and will apply to all purchases from this weekend. Moreover, the rules will be extended to all investment properties from 1 October 2021, phased in over the following four years.
Westpac has released research projecting that the removal of interest deductibility for investors may trigger house price falls of more than 10% in short term, and around 10% in longer term as they sell to owner-occupiers:
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