Letting Fees Ban
In late March 2018 the Residential Tenancies (Prohibiting Letting Fees) Amendment Bill was introduced by Housing Minister Phil Twyford, and the bill has since passed its first reading. As the name suggests, the bill proposes a ban on landlords or property managers charging letting fees to tenants.
A letting fee has historically covered the array of services provided by a property manager in obtaining new tenants. This may include conducting open homes, verifying potential tenants and preparing the necessary tenancy documents. A standard letting fee usually equates to one week’s rent plus GST per tenancy.
To date reaction to the proposed letting fee ban has been mixed. One school of thought suggests that the ban will reduce the up-front costs payable by tenants, while it is also recognised that property managers perform a valuable service.
A concern held by some commentators is that the cost will simply be passed onto tenants in the form of increased rental. The New Zealand Property Investors Federation has further expressed concern that the ban may lead to a reduction in the number of tenancies on the market at a time where supply is already low in some areas.
A select committee has been appointed to review the proposed ban, and the committee has asked for submissions from the public before 23 May 2018.
We will keep you updated on future developments.
Five years in, two years out - Bright line Test extension now applies.
What does this legislation apply to?
This legislation applies to ALL vendors who sell their residential property within 5 years (irrelevant of the intention at the time of purchase). For sale and purchase agreements signed after 29 March 2018, this will mean that if a vendor sells within 5 years of owning a residential property, and the property is not their main home, then they will be taxed on any gain made on the sale.
For those sale agreements that are already in place, i.e. signed before 29 March 2018, but settlement is yet to occur, then the previous timeframe applies (i.e. a vendor sells within 2 years of owning a residential property (that is not their main home) then they will be taxed on any gain made on the sale).
Another note to remember is like under the current time frame, any vendor selling may only use the main home exemption twice within the 5 year period.
What does this mean for you?
The main questions you should be asking yourselves are:
- How long have you owned the property for?
- Is this your main home?
- If taxation is a concern, have you sought advice from your accountant and/or legal advisor?
Once these matters are established, you will have a better understanding of capital gains tax. During the course of the sale transaction, your sales person will also discuss potential taxation with you, but it would be hugely beneficial to you clients if you are made aware of the new legislation and requirements that will be needed. We see this as especially important for you as the date of disposal is the date of the agreement for sale and purchase between the vendor and the purchaser, not the date the property is transferred. Once the agreement is signed within the 5-year time frame, you may be up for a tax that you weren’t expecting.
We suggest if your are concerned by potential tax implications of a sale, you take accounting and/or legal advice prior to entry into any agreement for sale and purchase to avoid potential nasty surprises from the Inland Revenue.
Property prices keep climbing in the provinces
Property prices outside New Zealand’s three biggest centres continued its charge in April, up 6.4 per cent on last year to a new record of $505,650, according to the latest Trade Me Property Price Index.
Head of Trade Me Property Nigel Jeffries said March was no fluke. “We’re seeing a significant shift for the regions outside Auckland, Wellington and Christchurch, asking prices are shooting up while the cities are pausing for breath.
“The majority of the jump is being driven by the halo regions around Auckland with record average asking prices in the Bay of Plenty (up 4.6 per cent on last year to $615,100) and Waikato (up 5.9 per cent to $550,400). Elsewhere, Taranaki has also pushed prices up and jumped 9.6 per cent to a record $422,100.
“They’re not going to catch Auckland by any means, but they are surging along as these regions become a more attractive work/life balance option, provide investment opportunities or long-haul commuter suburbs for parts of Auckland.”