As we gear up for the second half of 2024, the positive transformation of New Zealand's real estate landscape is set to continue, with changes to the bright-line property rule slated to come into effect from July 1st. We’re here to break down what this means and why it’s cause for optimism.

The bright-line test was introduced as a way of assessing whether or not tax was to be paid on any profit made from the sale of a residential property. This consisted of imposing holding periods, where the bright-line rule was applied for property bought and sold within a specified timeframe.

Introduced in 2015, the bright-line period was originally set at two years. This was extended to five years for properties purchased after 29 March 2018, and extended again to 10 years for certain properties purchased after 27 March 2021.

In a significant move, the bright-line property rule will be reduced back to the initial period of two years for properties sold after 1st July 2024. This means for property sold after 1st July, any profit made will only be taxable if the property has been owned for less than two years (unless exceptions apply). This change is designed to stimulate the housing market by reducing the tax burden on short-term property investments.

This reduction of the bright-line period also aligns more closely with the original intent of the legislation, which is to deter very rapid speculative buying and selling. Generally speaking, the bright-line rule applies to investment properties and not your main home. You can find out more about exclusions and changes HERE.

So, why is this change being heralded as a positive development? With the bright line period reduced back to two years, those looking to sell their property sooner can do so without facing the tax implications that previously deterred them. The shorter holding period may also make it easier to respond to life changes or investment opportunities.

For those considering entering the property market, these changes may serve as an added incentive. With the prospect of a shorter bright line, the perceived barriers to property investment are lowered, making real estate an even more attractive prospect for potential buyers.

Moreover, the revised rule injects a renewed sense of confidence into the property market. By incentivising shorter holding periods, it encourages greater fluidity and activity within the sector. This, in turn, can stimulate demand, leading to a more dynamic and vibrant housing market.

At EVES, we pride ourselves on being at the forefront of industry developments. Whether you're buying, selling, or simply curious about the current market activity, we're here to help. Get in touch with us today to discuss how we can assist you in achieving your real estate goals!

| DISCLAIMER With any legislative change, it's important to stay informed and seek legal advice to fully understand the implications for your individual circumstances. This information has been sourced from the below platforms and we take no liability for the accuracy of the information. Property sellers and buyers are advised to conduct their own due diligence investigation and to the maximum extent permitted by law, EVES Realty Ltd and its contractors/employees do not accept any responsbility for the accuracy of the information contained herein. |

Sources: https://www.ird.govt.nz/bright-line-changes?gad_source=1&gclid=CjwKCAjw5v2wBhBrEiwAXDDoJURKLbGDpSGQBpx-bPD7PV3PEcxmBaR81hJtQ4rEpnkvwKhpG_0sXxoCS7UQAvD_BwE https://www.raineycollins.co.nz/your-resources/articles/4-3-24-changes-to-the-brightline-test-to-come-into-effect-on-1-july-2024