Putting aside the political motivations and the revenue goals behind Labour’s proposed capital gains tax, it’s worth taking an objective look at what this actually means for everyday New Zealanders — homeowners, retirees, and investors alike.
Because when we say “property investors,” it often brings to mind large-scale landlords with portfolios of ten or twenty homes. But the truth is, in New Zealand, the vast majority of “investors” are ordinary people who’ve worked hard to buy just one additional property — often as a retirement buffer, a future nest egg, or something to pass on to their kids.
For those people, this policy represents more than a tax shift — it’s a change in how we think about reward for long-term effort, savings, and financial planning. So rather than arguing party lines, let’s unpack how this proposal could reshape the property landscape for both everyday homeowners and investors of all sizes, and what we can learn from countries that have walked this path before.
Labour’s policy proposes a 28 % tax rate on realised gains from investment properties (excluding the primary home and farms).
Key details:
Rate: 28 % flat, in line with NZ’s company tax rate.
Trigger: applies when the property is sold, not annually.
Exemptions: family home, KiwiSaver funds, and active small-business assets.
Implementation window: no earlier than 1 July 2027, pending legislation.
Revenue use: to fund Labour’s “free GP visits for all Kiwis” healthcare programme.
🎯 Goal: shift the tax balance slightly toward capital income, reduce speculative flipping, and improve fiscal stability.
New Zealand already has a partial version of a CGT through the bright-line test, which taxes gains on residential property sold within two years of purchase (as of July 2024 under National).
| Bright-Line Test | Capital Gains Tax | |
|---|---|---|
| Scope | Residential property sold ≤ 2 years | Investment property (sale any time) |
| Rate | Marginal income tax rate | 28 % flat rate |
| Family Home | Exempt | Exempt |
| Purpose | Deter short-term flipping | Tax long-term capital profits |
Essentially, the bright-line test is a time-based rule, while a CGT applies universally on profits from non-owner-occupied assets.
If you own and live in your home, you will remain exempt under Labour’s proposal.
But changes that affect investors tend to create indirect ripple effects through the market:
Reduced competition: with fewer investor bidders, mid-tier homes may see slower price growth.
Greater affordability: for upsizers and downsizers alike, a cooler market may help bridge price gaps between properties.
Steadier growth: markets with less speculation often see lower volatility over time.
📊 Example: Australia’s 1985 CGT (also exempting the family home) caused a temporary dip in transaction volume, but prices stabilised within two years and continued to grow steadily.
This policy most directly affects investors and multi-property owners.
Short term (0–12 months):
Potential increase in listings as some investors seek to realise gains before enactment.
Medium term (1–3 years):
Shift toward yield-based investing instead of capital appreciation.
Higher interest in new builds that qualify for deductions or partial exemptions.
Portfolio refinancing to balance tax liability and debt levels.
Long term (3–5 years):
Rental market stabilises; investors focus on cash flow and quality tenants.
Less flipping, more hold-to-rent behaviour.
💬 CoreLogic’s Kelvin Davidson recently noted that capital gains taxes “tend to cool markets at the margin but rarely lead to price crashes on their own.”
| Country | Year | Outcome | Lesson for NZ |
|---|---|---|---|
| 🇦🇺 Australia | 1985 | Owner-occupiers unaffected; investor market stabilised | Exemptions & simplicity work best |
| 🇨🇦 Canada | 1972 | Short dip in sales, recovery within 2 years | Clear communication minimises panic |
| 🇬🇧 UK | 1965 | Gradual acceptance; policy normalised | Transparency matters |
| 🇸🇪 Sweden | 1991 | Complex rules reduced sales activity | Keep the system simple |
| 🇿🇦 South Africa | 2001 | Stable revenue source for government | Start narrow, expand gradually |
Across these countries, markets tended to adapt quickly once the rules were clear and predictable.
1️⃣ Short term:
Investor activity pauses; some offloading of older rentals.
Owner-occupier demand holds steady amid lower competition.
2️⃣ Medium term:
Capital values flatten slightly (2–3 % annual growth vs historic 5–7 %).
Shift toward “buy-and-hold” investing and build-to-rent developments.
3️⃣ Long term:
Market rebalances to favour occupiers and long-term investors.
CGT normalised within 5 years as part of NZ’s tax ecosystem.
🏦 REINZ and Infometrics analysts agree that the impact will likely be “modest and transitional — the market will adjust and carry on.”
For most Auckland downsizers, the key takeaway is reassurance: your family home remains exempt, and the policy mainly targets investment activity.
However, if you own rental or holiday properties, you’ll want to:
Talk with your financial advisor about sale timing and ownership structure.
Review how this might interact with your retirement plans or trust arrangements.
Stay informed as the policy develops — it may influence when to sell vs hold.
🏡 If you’re planning to sell your Auckland home to downsize this year, you’re unlikely to be affected by CGT — but understanding the policy helps you make smarter, long-term decisions.