As the year draws to a close, we’ve got a good understanding on likely changes to the property market and certainly which buyer groups are under the new
Government’s property spotlight. In short, property speculators and foreign buyers are the focus.
The Government has been clever in using the Overseas Investment Act to restrict foreign citizens buying existing property, but there’s no official measure
of foreign buyer activity – so the actual potential impact of this is an unknown. We have heard however that foreign buyer activity has already diminished
due to our banks not accepting foreign income to satisfy income criteria on mortgages, so my expectation is for pretty minimal overall impact. Maybe
chalk this one up to a savvy, popular political move as opposed to one with major market impact.
So it’s the focus on property speculators that’s really interesting. This group will be targeted with a two-fold approach: tax changes and improvements
to the rental market.
Tax changes for property speculators
None of the tax policy changes are fully confirmed yet but I expect the Brightline test to get an extension from 2 years to 5 years. To quickly recap,
that test ensures any profits made from an investment property sale within 2 years of purchase are taxed. The initial introduction didn’t have much
impact and I’d expect any extension to have a similarly low level impact.
The other likely tax change is to remove investors’ ability to negatively gear their properties (that is, they can’t claim back taxes for rental losses).
Anecdotally we’re hearing this could have more of an impact than initially thought. Especially when you factor in that capital gains have significantly
reduced lately, thus reducing the potential...
