The CGT Revenue Myth & Future Interest Rate Cuts

Topic #1:  NZ Herald 19th of November- Capital gains tax wouldn’t have raised much in recent years - Cotality

Topic #2: RNZ 20th of November - The difference in investing strategies between over-60s and under-30s

Topic #3: Oneroof 19th of November- Homeowners could get up to $15,000 as ANZ boosts its cashback to 1.5%

Topic #4: TradeMe 20th of November - What new Auckland Council housing intensification proposals (PC 120) mean for you

Topic #5: NZ Adviser 20th of November - Final OCR cut expected, door left open for more

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Transcript

 Hi everyone. I'm Debbie Roberts, owner and financial adviser at Property Apprentice. Join us today for the week in review, where I talk about current events for the everyday investor and home buyer. Our topics for this week, first up from the  📍 New Zealand Herald on the 19th of November. Capital gains tax wouldn't have raised much in recent years-

Cotality.  📍 Second topic from RNZ on the 20th of November. The difference in investing strategies between over sixties and under thirties. Topic number three. From  📍 Oneroof on the 19th of November, homeowners could get up to $15,000 as a NZ boosts its cash back to 1.5%. Topic number four, from  📍 TradeMe on the 20th of November:

What new Auckland Councils Housing Intensification Proposals, (PC120) mean for you. And fifth topic for this  📍 Week in Review from New Zealand adviser on the 20th of November. Final OCR cut, expected door left open for more. 

So first up for this week, in review from the New Zealand Herald on the 19th of November, capital gains tax wouldn't have raised much in recent years from Cotality.

Cotality Chief property economist Kelvin Davidson said that the market's currently broadly flat, finding an equilibrium with improving affordability and stable prices. However, the Labour Party's proposal for a 28% capital gains tax on residential investment and commercial property applying from 2027, raises important questions.

Davidson noted that for the tax to collect meaningful revenue, property values would paradoxically need to continue rising. He also warned that a capital gains tax wouldn't stop prices from rising, citing the experience of other countries with similar taxes. Davidson suggested that the policy could reduce the expected return from property investment, potentially resulting in fewer investors in the market.

While investors could temporarily avoid the tax by not selling, he said this couldn't last forever. Unless, obviously if property investors pay their mortgages off before they retire, although the tax might slightly push up rents, Davidson argued that it could also create opportunities for current renters to buy as the houses wouldn't disappear from the market.

The market is currently showing signs of cautious optimism. Sales volumes were up 6% in October, marking the 28th rise in the past 30 months, and new listings also increased. First home buyers remain highly active accounting for a record 29% of purchases in October. That's a record number for first home buyers.

Investors have also lifted their activity to 25% of transactions. Davidson suggested that the predictability of stable prices and slightly lower mortgage rates is reassuring buyers. Looking ahead, he expects prices to rise next year driven by mortgage rate falls, whose full impact is yet to be felt. He anticipates a gradual lift in sales activity and values

next year provided employment holds up due to improving affordability and fixed loans shifting onto cheaper rates. 

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Second topic for this weekend. Review from RNZ on the 20th of November. The difference in investing strategies between over sixties and under thirties. Investor confidence is showing improvement rising to a net positive rate of 10% in the third quarter.

That's up nine percentage points from the previous quarter. ASB Senior economist, Chris Tennent-Brown, noted that while markets have recovered from earlier volatility, the flat housing market and lower term deposit rates continue to temper the mood leading to cautious optimism. The survey revealed a clear split in investment strategies based on age perceptions of a home, as the best returning investment have dropped to their lowest point since 2015, driven primarily by younger investors. With the under thirties,

this demographic is focused on other investments, particularly the share market, where confidence jumped significantly to 21% and KiwiSaver, which has surpassed rental property and term deposits and perceived return. For them, property is seen as the less viable path, likely because they're still trying to enter the market. For over sixties:

this group, whose wealth is often tied up in property, remains upbeat about housing despite being downbeat about term deposits. Auckland recorded the highest investor confidence at over 16% while the lower North Island was the least optimistic at 3%. Global political instability or uncertainty remains the top concern for 90% of investors.

However, despite these external concerns, 53% of investors are now choosing not to make any changes to their portfolios, reflecting that investors are becoming more accustomed to uncertainty and choosing to stay the course. So my thoughts on this as an investment adviser are that both share market investing and the property market, they're both long-term investment strategies.

Property, in my opinion, is the best way to get ahead financially because of the benefit of being able to leverage, you know, using a deposit and then borrowing from a bank for the rest of the purchase price, which means that any capital growth you get over the long term is on the entire value of the property, not just the amount of cash that you put in with a term deposit or with share market investing as a comparison.

So, yeah, I think there's definitely a place, I think it's a shame that, so many first home buyers are starting to feel shut out of the market when, you know, like I just said, the previous article showed that this is historic highs for the number of first home buyers in the market at the moment. So, you know, it's a good time to be a first time buyer.

It's not easy, but it's never been easy. 

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Topic number three. From Oneroof on the 19th of November, homeowners could get up to $15,000 as ANZ boosts its cash back offers to 1.5%. New Zealand's largest bank ANZ has launched one of its biggest cash back offers seen in years competing with many of the other banks that have been offering cashback offers.

But this makes a real competitive push for market share. ANZ's offering a special cash contribution of up to 1.5% of the loan value to new home loan customers who've got at least 20% equity. In other words, they're borrowing up to 80%. This deal, which is available until December 16th this year, so 2025, is 50% more than what most other main banks are currently offering.

Mortgage advisers expect this aggressive offer to be highly tempting to borrowers with GV Financial Services director, Gareth Veale, noting that a customer with a $1 million debt could receive $15,000 just for switching banks. Veale added that the size of the payment means mortgage holders would still have substantial money left over even after covering break fees.

Given the intensity of the competition, Veale predicted that other main banks will likely follow ANZ's lead and either match or compete with the offer. ANZ stated that the cashback is intended to give customers extra support upfront and help cover the cost of moving, refinancing, or other expenses.

Float mortgages financial adviser Geoff Christopher, said that the offer highlights the current level of competition, but cautioned that cashbacks carry drawbacks such as the need to repay the money if the customer switches banks too soon. Generally, within three years of receiving any cash back deal. He added that the offer makes the most sense for borrowers who are either floating due to refix before December 16th, or who are currently in the process of finalizing finance for a property purchase.

Cotality chief Economist Kelvin Davidson explained that banks are using cashback deals to poach customers who are currently riding the interest rate wave down on shorter term fixes or floating rates. He concluded that banks know that cash in hand is always an attractive proposition, particularly when many borrowers are in a position to switch.

Mortgage adviser Rodney King acknowledged the offer might not suit everyone due to its limited duration, but believes it will be helpful for those that are actively putting in offers on properties. My thoughts on this, I just would like to add that, you know, as attractive as that cashback deal sounds, it doesn't mean that it's right for everybody

when you take into account the cost of refinancing, paying break fees, all of that sort of stuff, sometimes you might be better off to stick with your current terms. And you know, fingers crossed when interest rates come up for re re-fixing in the next few months, you might be able to still take advantage of some cashback deals on offer.

Because as this article said, the banks are all competing with each other at the moment, so the timeframe on this one's very tight. And also just leading up to Christmas, which compounds the stress as well for everyone but I would expect that there'll be some more cash back deals next year as banks compete with each other.

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Topic number four, from Trade Me on the 20th of November. What new Auckland Council Housing Intensification Proposals (PC120) What they mean for you? Auckland Councils introduced a new planning proposal, Plan Change 120 or PC 120 to intensify housing development by focusing on urban centers and key transport links.

This change was necessitated by the council's decision to withdraw the former plan change 78 or PC 78 and its medium density residential standards, that's MDRS, after the government granted permission to address concerns about building and flood prone zones, which were highlighted during the 2023 Auckland floods.

PC 120 is designed to meet the government's requirement for substantial new housing capacity by shifting development towards areas with high demand and public transport access, rather than allowing scattershot developments across the city. The new plan focuses on 66 walkable catchments around shops, jobs, and transport links, high rise towers, 10 to 15 stories more intensive, high-rise buildings, up to 15 stories per 50 metres.

are planned for busy transport hubs and city rail links train stations, including New Market Manukau ,Takapuna , Maungawhau ,Mt. Eden, Kingsland, and Morningside. Terrace housing and apartments up to six stories and buildings, up to six stories. 22 meters are proposed to, are proposed for residential sites within a 200 meter walking distance of key bus routes, frequent transit network corridors, and 23 local centers.

For town centers, the terraced housing and apartment buildings or the THAB zone is proposed to extend roughly 400 meters from the edge of 34 town centers, which also will enable six story buildings. Auckland Council's Director of Policy Planning and Governance, Megan Tyler, stated that the council has met the government's capacity requirements by concentrating housing choices

near jobs and services we demand is highest. The proposal has generated concerns among Auckland residents, particularly regarding infrastructure and property values. Two homeowners in Mount Eden and Kingsland expressed worry about high-rise buildings affecting their property values, light access and privacy, with one noting that being overlooked could lead to a 20% loss of equity.

Auckland University Senior Architecture lecturer Bill McKay however, said that building density near existing infrastructure is generally easier and cheaper to fix than developing brand new infrastructure in greenfield suburban developments. He noted that increased population density near town centers will also help make local shops more sustainable.

McKay believes that many areas up zone to mixed housing urban will likely see better planned two to three story buildings compared to the former "scattershot "MDRS. Auckland residents have until December 19th to submit their feedback on PC 120. And my recommendation to you is if you are concerned, then absolutely make a submission.

If you don't make a submission, you can't complain about it. 

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Topic number five, from New Zealand Adviser on the 20th of November. Final OCR cut, expected door left open for more. The Reserve Bank of New Zealand, the RBNZ is widely expected to cut the official cash rate or the OCR by 25 basis points. That's.

0.25% down to 2.25% next week. But economists say that the key focus will be whether the RB NZ signals that further cuts are possible in 2026. This decision will be the final one for outgoing Governor Christian Hawkesby. Both ASB and Kiwibank expect the 25 basis point cut. ASB's view from chief Economist Nick Tuffley Forecasts at the 25 basis point cut but expects the Reserve Bank to signal that it will ease further if needed

keeping the door open for cuts in 2026.  Tuffley noted that the RBNZ's forecasts and commentary will aim to keep wholesale interest rates stable. Kiwibank's view from the Kiwibank Chief economist Jared Kerr. He argues that the economy still needs more support. He noted that although the RBNZ has delivered 300 basis points of easing, the policy only moved from restrictive to stimulatory after the 50 basis point cut in October.

Kerr contends that the recovery stalled and the delay has cost the economy putting the Reserve Bank of New Zealand in a position of needing to do even more. Both banks anticipate the RBNZ will lower its OCR forecast track, which ASB expects to bottom out between 2.1 and 2.2%. Kiwibank raises the possibility of a bolder 50 basis point

cut down to 2% with this next announcement to clear the decks for the incoming governor and provide the economy with a necessary shock treatment. Kerr points to the Reserve Bank's forward guidance at the last meeting, which use the plural word reductions, signaling openness to further cuts. ASB warned that failure to signal openness to further easing would risk a rebound in wholesale interest rates, undermining monetary policy effectiveness just as a large number of people are re-fixing their mortgages, a dovish tone could send the two year swap rate back to its recent lows.

Mortgage adviser Connor Ward says overall sentiment is cautiously optimistic. Clients are enjoying the reduction in rates but remain weary due to the speed of previous rate escalations. Ward observed that most clients are currently leaning towards shorter term rates because the longer term rates have seen little movement and shorter term rates continue to drop.

My thoughts on this are the five year rates below 5% are looking very attractive at the moment. So you know, you do need to remember, unless you're thinking of selling the property or refinancing to another bank, those five year rates are looking pretty attractive so it's definitely worth considering and you might wanna split your mortgage.

So definitely talk to a mortgage adviser and get their input on your particular individual situation. Don't take this as being individual financial advice. The market is moving fast. The next few weeks are critical for your financial future. The time is right to be buying good investment properties or getting your foot on the property ladder for the first time.

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 Thanks for listening. 

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