There has been a lot of press about Capital Gains Tax in the news lately, with opinions from both sides of the equation.  Will it lead to the end of the private sector as we know it or a new social utopia? - in fairness probably neither.
So why is the government proposing a Capital Gains Tax?
Supporters of the legislation will say that a Capital Gains Tax (CGT) is a necessary rebalancing of the way we tax wealth and income. They will also point to experts like Westpac’s Chief Economist, Dominick Stephen who believes that in the long run the introduction of the new Tax would improve New Zealand’s economy and increase all of our living standards, as we rebalance investment into other areas of the economy.

Why should I be concerned?
Of course like all arguments there are two sides to the story. Those against the introduction of a CGT will argue that it is a tax on people investments for the future and will skew property investors into pouring money into a larger family home that won’t be eligible for the tax. There is also the potential that this measure will ultimately raise rents as fewer people will invest in property. This may cause a dip in the house market (which again could be a good thing or bad thing - depending where you sit).

If you’re worried about how Capital Gains Tax will affect your property investments, take solace in this:
Firstly it’s been recommended that the Tax be income natural, so in theory at lest, you should see a Tax cut somewhere else. Of course this may or may not end up being the case. Secondly, this is by no means a done deal, we still don’t know what the current government is going to do, or if it will even be in a position to implement its new policy given it will need the support of other parties. Lastly, the gains you will have gotten over the last 5 years are locked in, it’s been recommended that CGT starts in 2021 with valuations being taken from that time.

What about Wellington?
The Wellington property market itself is doing significantly better than other areas of New Zealand, and the implementation of previous policy changes has had little effect on house prices. Wellington hit a new high in November for the third month in a row. There are plenty of reasons not to sell up in Wellington right now - not least of which is that CGT would only ever be implemented after the next election, in 2021.
According to the head of the Trade Me property market, Nigel Jeffries, Wellington has not yet displayed the same slowdown in growth as Auckland. Unlike Auckland, it would also not suffer from a “congestion tax”. With a lack of flat land making building difficult in Wellington, paired with council “red tape” and exorbitant material prices, demand for properties is likely to continue to outmatch supply, causing house prices to continue to rise.
To sum up:
How and if the CGT will be implemented is still unknown, some investors will welcome it and some won’t. However the Wellington property market itself is looking healthy and stable with an upward lean in house prices - so the future is still looking bright.