Labour's CGT: A Punt on Rising House Prices
A capital gains tax to pay for three free GP visits per year. Could this be the election-deciding moment?
Labour’s taken a punt that property values will rise forever and generate new tax revenues – while also hoping that house prices won’t rise so that young people can afford to own their homes.
Leaked in advance, the NZ Labour Party has announced the big policy that everyone already knew about: they’ll campaign on a new capital gains tax (CGT). This tax would apply to residential rental properties (not the family home) and to commercial properties – for capital gains made after July 2027. And if an asset is sold for less than it was purchased, then CGT won’t apply, but the capital loss can be carried forward to offset any future gains.
Such a CGT has broad (but not majority) support according to a RNZ-Reid Research poll: 42.6% in favour, 26.6% opposed, 25.8% don’t know. It’s that undecided 25.8% about whom Labour should be most concerned.
According to the same poll, fewer than half of Labourites (47.6%) supported the CGT policy, while 70.7% of Green voters supported it. But the Green Party itself has slammed Labour’s CGT as they say it’s too weak and they’d prefer a wealth tax. Does Labour think this policy could steal some votes from the Greens?
Predictably, the property-aligned National Party has slammed the proposal, with finance minister Nicola Willis calling it “a terrible idea”. Labour’s GCT policy may be favoured by a plurality of New Zealanders at the moment, but it’s a large and easy target for the opposing parties, National and ACT.
It’s impossible (indeed, it would be foolish) for Politics Happens to forecast the residential and commercial property markets from mid-2027 on. What we do know is that property price growth to September was flat – and much lower than predicted by experts at the start of the year. Market forecasts are hazardous. So one wonders just how much capital gain will occur in future, especially if asset-rich boomers sell (in order to cash up for retirement) more than they buy. Immigration is also a factor.
The proposed CGT is meant to be a disincentive to investment (or speculation) in residential properties. If successful, then, it could limit investor demand and hence may keep price growth soft – which in turn would limit the volume of capital gains liable for the tax. The policy could thus become a victim of its own success. Nonetheless, Labour is boldly (or rashly) forecasting that its CGT can bring in annual revenues that will rise as high as $1.35b by 2030 (or $700 million pa averaged over the first four years).
Who’s speculating on property prices then? Landlords or Labour or both?
This CGT would have been more effectively applied ages ago while the property market was really booming.
Anyway, Labour is offering voters a deal: support the CGT and, in return, get three free GP visits per year – if you agree to hold a new “Medicard”. The card would track a person’s entitlements to and usage of healthcare services, not unlike how the community services card works for welfare beneficiaries.
Many people on low and middle incomes (who don’t own rental properties) will accept this proposition. GP visits are a tangible benefit – or voter inducement. Other sensible uses for the projected CGT revenues, such as reducing public debt, sound too remote to voters.
Even if you support the CGT, don’t expect it to move the dial much, if at all, in polling – let alone at Election 2026. Voters have already “priced in” Labour’s CGT – as it’s been their worst-kept secret ever.
Moreover, if Labour makes the CGT into its keynote election policy, then it’s a billboard-sized target for opponents. It may not be a bad or unpopular idea, but it’s been weakened by serial political mismanagement.