Tax will be easier to collect from non-residents buying then on-selling a New Zealand property within two years and residential listings will rise sharply, bank economists says.
The ASB's Jane Turner has this morning released a commentary on the Government's surprise pre-Budget tax announcement yesterday on residential property purchases, ushering in a tougher capital gains tax if people sell within two years of purchase.
"In our view, the most significant implication of the announcement is requiring foreign investors to register with the IRD and opening an NZ bank account. This will make it easier to collect tax owing from foreign investors who made capital gains investing in the NZ property market," Turner said.
"It will also bring more visibility to the extent of foreign investment in NZ's property market. Currently NZ lacks good quality data on the purchase of homes by NZ investors and foreign investors. As a result, it is actually fairly difficult to gauge how effective these new rules will be. However, going forward, NZ policy makers will be more informed on the impact any new rules and requirements will have," she said.
The move follows widespread disquiet about New Zealand's lack of information on non-resident investors, as well as the effect they are having on the market, particularly in Auckland where first-home buyers have been struggling for years.
Chinese investors are one group which have drawn concern, again particularly in Auckland.
ANZ economists Cameron Bagrie and Philip Borkin noted yesterday's changes combined with last week's Reserve Bank's landlord crackdown and said predicted a rise in the number of residential listings to beat October 1 changes.
"Uncertainty surrounds the precise impact - there are a number of moving parts. But we suspect the impact will be stark given the extent of house price movement of late. We believe sentiment could turn on a dime. We will be paying particularly close attention to the number of property listings over the coming months which could rise sharply as sellers try to beat the 1 October introduction of the new measures.
"Importantly, this shift in housing market performance will be occurring when other challenges such as dairying are intensifying and inflation is low. The risk profile facing the economic outlook continues to shift. As such, the new measures reinforce our view that the OCR is heading lower, and sooner as opposed to later. We retain our expectation that the RBNZ will cut in both June and July. We also retain a bearish slant towards the New Zealand dollar," they said.