Kiwibuild owners can make capital gains… tax free

Kiwibuild is really getting silly now. It started as a programme to provide first homes to people who were ‘locked out’ of home ownership. Then, when it arrived, it was a programme for first home buyers, but only for the wealthier ones… most of whom (like the upwardly mobile couple in the photo above), given time, could almost certainly have got into the housing market anyway.

The government’s attitude towards property speculators has always been vitriolic. No one is allowed to make a profit out of property. Not ever. No way.

Well that idea seems to have gone into oblivion as well.

Newshub reports: quote.

Newshub can reveal KiwiBuild has just become a much better investment.

The Housing Minister has quietly softened up the penalties applied to buyers who flip their home.

Documents obtained by Newshub show owners will no longer have to give up all capital gain they make on the house if they sell it within three years.

When Labour announced the policy in 2016, its plan to stop buyers reaping windfall gains was they must not on-sell their home for five years – or else they had to hand all the money they made to the Government.

That’s now changed to if buyers sell within three years, they must give up 30 percent of their profit.

“We really tried to strike the right balance here,” Mr Twyford says.

“We don’t want people cashing in on a potential windfall gain – but on the other hand, these houses are not subsided. People are paying for them with their own hard-earned cash.” end quote.

Sooo… let me get this straight. Someone who has bought a rental property in Auckland has to pay tax if they sell the property within 5 years… even though investment property is generally recognised as not attracting any form of capital gains tax because the purpose of the purchase was investment?

And the family bach, if sold, will attract capital gains tax even if it has been used by the family for generations?

But someone buying a Kiwibuild property at a discounted price – and it is discounted, even if the government is not actually subsidising it per se – can sell within the agreed 3 year period, and can keep most of the profit because they weren’t speculators?

So the government has just created a whole new type of speculator?

The government had already done this, of course, because a first-time buyer only has to hold on to their subsidised house for 3 years and then they can sell it for whatever price they want. Remember, this is already less than the 5 years required by the Bright Line Test if you don’t live in the house yourself. There is already talk of Kiwibuild properties in Auckland being worth more than the purchase price, even though nobody has actually moved in yet.

So what is stopping speculators from buying Kiwibuild houses, in the names of their children or whatever, and selling them on for a significant profit after… not even 3 years now?

Nothing is stopping this. Nothing. quote.

Mr Seymour’s not impressed.

“Hock it off after three years, keep 70 percent of the gain. This has always been a flaw in their policy.”

There is big money to be made. Based on the last three years, the average price of a home in Papakura has risen from $569,000 to nearly $700,000, meaning house owners could have made $130,000 in the last three years.

That means even after the 30 percent penalty applied by the Government, they’d still pocket more than $90,000.

Mr Twyford says we’ll have to “wait and see” if 30 percent is really much of a penalty when there are those windfall gains to be made.

“The entire windfall gain would’ve been a bit draconian,” he says. end quote.

No. It wouldn’t. The rules around selling a Kiwibuild house should be non-negotiable. If a family is not intending to live in it for at least 3 years – and quite frankly, it should be longer than that – then penalties should be applied. After all, if the entire Kiwibuild programme is costing taxpayers something like $2 billion, surely they do not want to be underwriting property speculators? That is what will happen, now that Twyford has opened the door to penalties being reduced.

This entire policy is a joke. Twyford has already recognised that it is not working at all. After the lack of interest in Kiwibuild properties in Queenstown and Wanaka, he is now acknowledging that the whole scheme is falling apart. He simply cannot face the ignominy of the failure of the project, which is a flagship policy for Labour so he has to keep it afloat, no matter what it takes.

Once again, it shows why the Coalition of Losers are known by that title. The could not organise their way out of a paper bag. We are all paying for this. Every single taxpayer is paying for this.

And Labour, with their deep-seated hatred of landlords, has created a whole new category of property speculators. The irony of the whole thing is astounding.

 


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Accountant. Boring. Loves tax. Needs to get out more. Loves the environment, but hates the Greens. Has been called a dinosaur. Wears it with pride.

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