Property Investors Say Labour’s Capital Gains Tax ‘Targets’ Them Unfairly

Property investors across New Zealand are accusing Labour of unfairly targeting them with its newly announced capital gains tax, which applies only to residential and commercial investment properties — not other asset classes such as farms, shares, or art.

The policy, unveiled on Tuesday after an early leak, exempts family homes (including lifestyle blocks), farms, KiwiSaver funds, shares, business assets, inheritances, gifts, cars, boats, and collectibles. Critics say that makes it discriminatory and politically driven rather than economically fair.

Rotorua investor Nick Gentle, who runs a large online community for landlords, said the move was more about ideology than sound tax policy. “Every time a particular group is targeted it is ideologically based. It’s not about raising revenue because if it was, the tax would be applied to all capital gains, whether it’s from rental housing, farms or shares,” he said. “Instead it is about creating a divisive ‘us and them’ situation involving people who own property of a certain type.”

Gentle argued that such a tax wouldn’t cool the housing market, pointing to Australia’s experience. “Australia has had a capital gains tax since 1986, but house prices have still risen steeply,” he said. He believes a universal tax on all asset classes would be fairer and simpler, while noting that many investors would still stay in property regardless.

Auckland landlord Peter Lewis, who has been investing for more than three decades, agreed that the tax should be applied across the board. “Why just pick on investment properties? Why not art, or classic cars? People say it is easier to tax property but that’s not a good reason for doing it,” he said.

Lewis expressed concern about retirees who rely on property sales to fund their retirement. “Traditionally, people might invest in a couple of rental properties over the long term and then sell up to help fund their retirement. Taxing the gains reduces the end sale price, and will leave people less well off in their retirement.”

Investor and mentor Nichole Lewis warned the policy could lead to a shortage of rental properties. “Last time Labour made changes to investor tax rules, investors stopped buying. Many are still nervous those policies could return, and are just sitting back on their portfolio, or have gone into other assets,” she said. “We will always need a certain supply of rental properties. If investors don’t [provide them], who will?”

She also warned that high-net-worth individuals could move their money — or themselves — overseas. “If there is a capital gains tax, people will continue to invest in property, as they do in Australia, but the lack of one is attractive. Would New Zealand continue to attract overseas investors in commercial property? Possibly not.”

Former Auckland Property Investors Association president David Whitburn said Labour’s plan lacked clarity. “What does including commercial property mean for people who operate a business out of their home? Does it mean the home is a commercial property?”

Whitburn suggested extending the bright-line test to 10 years instead of introducing a new tax. “The bright line test disincentivises speculators but doesn’t discourage long-term investors providing rental housing,” he said. He also raised concerns that taxing investment property gains could make it harder for small businesses to borrow, since many use property to secure loans.

Hawke’s Bay investor and author Graeme Fowler, however, downplayed the impact. “A good long-term investor will buy rentals with a small deposit and have the tenant pay off the rest. If the property is structured properly, a capital gains tax shouldn’t be a big issue,” he said. Fowler questioned whether Labour would also refund a portion of losses if investors sold for less than they paid.

While opinions differ on how much impact the tax will have, most agree that Labour’s targeted approach risks discouraging investment in new housing — and could ultimately reduce the supply of much-needed rental properties.