On October 1st, new regulations came into effect regarding the buying and selling of investment properties in Auckland.
Unless the property is the investor’s primary residence (i.e. their family home), all investors must now provide their IRD number when buying and selling properties. This means that overseas investors now need to apply for a New Zealand IRD number in order to legally buy and sell New Zealand property. They also must have a functional New Zealand bank account which must have the ability to make both deposits and withdrawals, and the account holder’s identity must be verified in accordance with New Zealand law.
The “bright line” test was also introduced on October 1st. This requires income tax to be paid on any capital gain from the sale of residential investment properties bought or sold within two years (unless the property has been the person’s main residence, in which case it is exempt).
These two measures can be added to the LVR Ratio restrictions already in play as part of the Government’s ‘balancing act’ to temper the Auckland property market. It is too soon to say whether that balancing act will succeed. However the small budget surplus announced by the Government last week, together with predictions of even lower interest rates, a possible reduction in income tax and continuing high migration, could overturn any effects of the regulations the Government has introduced.