Property investors: We’re being singled out by Labour’s capital gains tax proposal

Friday, 31 October 2025

Extending the bright line test would be a better way to tax investment property, David Whitburn says.

Labour’s new capital gains tax policy would not be a problem if it was applied to gains on all assets, such as farms, shares and art, property investors say.

But it doesn’t. Instead the policy, which was announced on Tuesday after being leaked to media over the weekend, simply taxes capital gains on residential and commercial investment properties.

The family home ‒ including lifestyle blocks ‒ are exempt. As are farms. As are KiwiSaver funds, shares, business assets, inheritances, gifts, and assets such as cars, boats, art, and furniture.

It’s not the first time a capital gains tax policy on property investors has been mooted, nor is it the first time property investors have been hit with tougher tax rules than others.

On those previous occasions the policy has been staunchly opposed, so The Post talked to some veteran property investors to get their views on the latest move on the capital gains front.

Here’s what they had to say.

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Rotorua-based investor Nick Gentle, who runs a Facebook group for property investors, does not believe that Labour’s policy is about funding doctors’ visits or addressing wealth inequity.

“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.

“Instead it is about creating a divisive ‘us and them’ situation involving people who own property of a certain type. So rich farm owners are exempt but small scale mum and dad investors are not.”

A capital gains tax did not stop house prices going up as the market tended to absorb the tax, as has happened in Australia, he said.

Australia has had a capital gains tax since 1986, but has seen steep price increases in recent years.

“That is why if you are going to introduce a capital gains tax, why not just have it on everything and the market will sort it out?” Gentle said.

“There’ll always be some people aggrieved because they can’t get as much on the sale of an asset as they want, but it would be fairer.”

He did not think it would stop people investing in property because it was possible for people to borrow against their house, and build a portfolio on that.

That still held true even if someone had to pay a capital gains tax 20 years in the future, he said.

“The new build segment of the market might suffer as the investor model tends to rely on people carrying a loss for some time before breaking even.

“If people have to give up a third of the end gain, how many are going to be willing to fund new housing in the mid-term to cover it?”

Capital gains taxes should be applied to all assets and investments, Nick Gentle says.

But Gentle said he was less concerned about a capital gains tax than the fact that Labour leader Chris Hipkins would not definitively rule out a wealth tax, or the return of the interest deductibility policy.

Auckland landlord Peter Lewis has been investing in rental properties for more than 30 years. He was not opposed to a capital gains tax per se but, like Gentle, he believed that if one was introduced it should be applied to all assets.

“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.”

There was a lack of clarity around aspects of Labour’s policy, he said.

“What does including commercial property mean for people who operate a business out of their home, for example. Does it mean the home is a commercial property, and would it be subject to the tax as such?”

His biggest concern was the impact a capital gains tax would have on many people’s funding plans for their old age, he said.

“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.”

Lewis said looking at other countries with capital gains taxes suggested they did not put people off investing in property.

Taxing capital gains on investment properties will impact on people’s retirement savings, Peter Lewis says.

“But if there is a change of government, there could be a rush of investors wanting to sell before 2027 when the tax would be introduced.

“That could flood the market a bit and push prices down for the short-term. Any gains in the following few years won’t be that much, but there’ll be more impact in 10 to 20 years' time as prices increase.”

For investor and mentor Nichole Lewis, there were a range of risks that would come with a capital gains tax on investment properties.

Besides the negative effect it would have on people trying to save for their retirement, it could lead existing investors to stop adding to the rental stock, or move to assets where gains are not taxed, she said.

“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.”

That trend would continue, and was likely to have a significant impact on the rental market when the country actually needed more rental properties, she said.

“I’m not sure where Labour thinks rental properties will come from. We will always need a certain supply of rental properties. That’s not going to change, and someone needs to provide them. If investors don’t, who will?”

Labour’s capital gains tax is likely to have an impact on the residential rental market, Nichole Lewis says.

Another risk was that people at the high-end of the market, in the $4 million-plus range, would simply leave New Zealand, and take the incomes and business they generated with them, she said.

“That’s something to be careful about, especially if the Greens’ wealth tax comes into play too, as we need business creation in this country, and people rely on those types of people to create work.

“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. So would New Zealand continue to attract overseas investors in commercial property? Possibly not.”

Commercial and residential investor David Whitburn is a former Auckland Property Investors Association president. He is not convinced a capital gains tax in the form proposed by Labour was the best way to go.

It would have been better to extend the bright line test - which taxes profits on properties not classified as the seller’s main home that are resold within two years - back to 10 years, he said.

“The bright line test disincentivises people wanting to speculate, but doesn’t disincentivise long-term investment from people who want to provide much-needed rental properties.

“There are other possible property tax options too, such as a land tax on foreign buyers, which is something many other countries do.”

Labour’s policy came with a whole lot of questions about what it would mean in a variety of situations, he said.

“What about properties in family trusts? What if someone has a big house and borders in most of the rooms, or a granny flat they want to put on Airbnb - does that make it a commercial property? And what about houses that people operate businesses out of?”

More detail was needed, but he was worried the policy would lead to people choosing not to put their money into rental properties.

Serious property investors should not be put off by a capital gains tax, Graeme Fowler says.

That would put the onus on government to provide more rental housing, he said. “It’s a big cost, and given current budgetary constraints what will happen?

“Another unintended consequence is the potential impact on small business owners, many of whom use an investment property to secure their business against.”

It could make it tougher to get finance because there were tax liabilities when a small business is secured against a property and if capital gains were involved it became more difficult, he said.

“That was identified as a risk in the last Tax Working Group’s white paper. If businesses’ borrowing potential is more limited that impacts on employment.”

But Hawke’s Bay-based investor and coach Graeme Fowler, who is the author of 20 Rental Properties in One Year, said a capital gains tax would not affect serious investors that much if Labour did bring one in.

Whether the bright line test was extended to 10 years again, or a broader capital gains tax was applied, investors would not think too much about it when initially buying a property, he said.

“A good long term investor will buy rentals with a small deposit (say 20%) and have the tenant pay off the other 80% of the value (a loan).

“It should be set up so that cash flow from rent covers the mortgage plus rates and insurance. This is ideal, and should mean the investor still has income every week as well as owning the property.”

If an investor had to pay, for example, 28% of the potential gain from what it was purchased for to what it sold for, that should not be a big issue, Fowler said.

“Many investors have sold for a loss, sometimes a substantial loss if bought and sold in the last few years. If an investor has sold for a loss, does Labour plan to give them 28% of the loss back?”

Ultimately, if an investor bought well, and structured their investment properly, a capital gains tax should not be a problem, he said.