Tax Could Cut Housing Cost in NZ

June 19, 2018 Taxation in New Zealand

property taxWELLINGTON – Taxes could result in significant decreases to New Zealand’s cost of houses, however, it would be accompanied by increases to the cost of renting.

New Zealand’s Westpac bank released the results of new modelling on June 19th, showing the potential impact that several property taxes will have on the cost of housing in the country.

The modelling was provided to the Tax Working Group, a government established working group tasked with examining the feasibility of a wide set of tax reforms for New Zealand.

Housing is a hot topic in New Zealand, as the cost of renting or purchasing housing has grown significantly over the last several years, seriously harming housing affordability across the country.

The bank’s researchers examined the potential impact of a capital gains tax on property prices, and found that they may eventually reduce purchase prices by 10.9 percent, while raising rental costs by 5.5 percent, and ultimately increasing homeownership rates.

Similarly, ring-fencing rental property losses could result in a drop in house price of up to 6 percent, and marginal increases to rental costs and homeownership rates.

Property taxes at 0.5 percent would lead to a 10.5 percent drop in house costs, a rise in home ownership, and a 5.2 percent increase in rental cost.

Land taxes would see a similar result, with an increase in ownership rates, a 9.5 percent drop in house costs, and a 4.8 hike in rental costs.

Less likely taxes were also examined with a property being taxed at a deemed rate of return of 5 percent resulting in a 19.5 percent drop in house costs and a 9.6 percent rise in rental costs.