Farm sales are dropping, according to data released by the Real Estate Institute of New Zealand (REINZ).
Under the Tax Working Group’s proposal, which may come into effect after 1 April 2021, land that is larger than 4,500m2 is not subject to the family home Capital Gains Tax (CGT) exemption.
“Indicating the potential size of the problem, in the last 12 months, REINZ data has shown that 92% of lifestyle blocks sold across the country were larger than 4,500m2,” says Bindi Norwell, chief executive at REINZ.
“If this is indicative of a normal year’s sales, then going forward, a similar portion of the market is likely to have to pay CGT on the portion of their land that is greater than 4,500m2.”
Norwell says it’s a case of “the devil being in the detail” of the report. She says REINZ doesn’t believe many members of the community are aware of the impact the CGT could have on their lifestyle block home.
“Should the recommendations make it past the 2020 election, what this means is that we could see a significant number of lifestyle blocks coming up for sale in the next few years as people look to avoid having to pay CGT on their property,” says Norwell.
“We have repeatedly said that any changes in legislation should avoid being too punitive on one sector of the market, and we will certainly be making a submission to this effect on behalf of those living on lifestyle blocks.”