So what if Labour decides to go ahead with its capital gains tax?
What happens to the equity of the remaining middle class?
What happens to the equity of those who were brought in under KiwiBuild?
We will get the final recommendations from Dr Cullen’s tax review in March 2019. Here’s the interim report.
Let me cut to the chase for you: there will probably be a capital gains tax in the final recommendation on the sale of houses that are not the first home.
Expect that news to hit house prices near you.
Let’s look over the Tasman, to the economy whose banks and wider economy dominate our own.
Prices in Sydney and Melbourne fell again in October to be 8.2% and 4.9% down from their respective peaks in August and November 2017.
Like, first world problems right? And so the froth came off after a decade, right? Suck it up right?
Except, as a deeply unequal country, this is the last means available for any couple to get ahead and out of whatever rat race they are in to the next stage of their lives. Viva La Treadmill.
Analysts at UBS said this week that the Australian housing credit squeeze was spreading into owner-occupier lending, and further tightening would be almost inevitable after stricter debt-to-income requirements are implemented following the Australian Royal Commission into banking.
The next Australian Federal election is in May 2019, and with a likely Labor victory there we are going to see a lot of changes to negative gearing and capital gains tax breaks. That’s just 6 months away.
Now, our own Labour-led government promised not to bring in any such capital gains measures until after a fresh mandate from the 2020 election. So from March with Cullen’s final report to May we have a couple of months to prepare and adjust.
We are at 3.8% unemployed – about as close to capacity as we are going to get.
We have an economy that is booming.
We have housing demand that continues to outstrip supply, even with huge government intervention.
We have more sectors coming into play that are beginning to push out the drag of dairy on our economy.
We have a government that is throwing huge and increasing direct transfers in welfare and economic development and transport and other payments like the world was about to end.
We have very few banking problems compared to Australia.
We have no sign of a change of government.
We also have huge numbers of apartments being built and bought in Auckland, and a really low number of mortgagee sales nationally.
Also we do not see a Reserve Bank preparing to enforce a hard cap on lending with a debt-to-income ratio.
So far, so not Australia.
But Australia will always matter to us more than any other economy. This housing bubble will not last forever, and bubble it is since we are an outlier. Will we stay stable or will we start going down in 2019?
Anyone hoping to make their next life move based on the equity of their existing home should be watching carefully for trends in the housing market between Sydney, Melbourne, and Auckland. Within the real estate flux of those three cities lie the future of New Zealand middle class equity.