Is your property a long-term investment?

We'll probably be hearing a lot about the 2015 budget for a while yet. With commentators scrambling to put their two cents in, there's plenty to think about – and it's just one of the reasons that residential property investment is such a dynamic choice. So what's the latest research saying? CoreLogic New Zealand has delved a little deeper into the property speculation waters, with some interesting results.

When Minister of Finance Bill English announced a tax on any gain made on an investment property that is sold within two years of purchase, there were equal measures of concern and congratulations. Would these measures take some heat out of Auckland's market? Speculators have been blamed for adding fuel to the house price fire in recent years and this tax seems to be a way to quieten them down slightly. 

"The combination of collecting IRD numbers and introducing this new bright-line test will help ensure that non-residents pay their fair share of tax in New Zealand," Mr English said of the tax in a May 17 statement.

CoreLogic research seems to show that this could have an impact on a fair few investors, but most of them are centred in the City of Sails. After looking at all residential sales made in 2014, Senior Research Analyst Nick Goodall found that almost a third of homes in Auckland are held for less than five years – and 15 per cent were only owned for two years.

Compare this to the hold period for the rest of the country and some trends emerge. According to Mr Goodall, elsewhere in the country it's most likely properties are sold within 7-8 years, with only 10 per cent held for under two years. 

"So the new measures from both the Reserve Bank and Government certainly seem like sensible approaches to try and address Auckland's rapid growth, mostly driven by Investors," Mr Goodall said in a May 25 release. 

We'll have to wait and see whether the taxes have much effect, but it's a fair reminder to have a careful think about your own investment path. If you're planning on make residential property investment your roadmap to a comfortable retirement or other financial goal, it's a good idea to keep aware of all the developments happening in the country's taxation system. 

Here's to your financial independence!

Daniel Carney
Authorised Financial Adviser / Investment Property Expert

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