Changes to the Bright-Line Test
What is the Bright-Line property rule?
If you sell a residential property within a set period of time after acquiring it, you may have to pay income tax on any gain on the sale, unless an exclusion or rollover relief applies. This also applies to New Zealand tax residents who sell overseas residential properties*.
Changes are coming into effect on or after 1 July 2024. From this date, the bright-line property rule will only apply if the property is sold within two years of acquiring it.
Up until 1 July 2024 the bright-line property rule encourages property owners to hold on to their property for longer. Currently, these time periods are between five and ten years depending on the property type (new build or other). See link below for more information.
What does this mean for first home buyers?
Increased market opportunities: With the bright-line property rule time period amendment now reducing from five-ten years to two years coming into effect, some homeowners who perhaps initially planned to hold on to their properties for longer may now opt to sell properties. This could potentially increase the availability of homes on the market. More properties on the market could provide first home buyers more options to choose from, reducing competition for certain types of properties.
More competition may mean stabilisation in the short term: The possibility of more properties hitting the market due to shorter investment cycles might lead to a stabilisation in home prices in the short term, potentially benefiting first home buyers due to less price driven competition.
An opportunity to ‘just start’: The new reduced time period creates a potential opportunity to ‘get on the property ladder’ if first home buyers are willing to purchase a home that delivers on some, but not all of their wish list. By simply getting started, first home buyers can consider a short-term investment and look to move into their ideal home within a new shorter time period in the future without the impact of the bright-line property rules.
Partnering with a Mortgage Adviser
As the bright-line property rule shifts, we’re anticipating a more competitive market, with investors potentially seeking quicker turnarounds on their property ventures. This change means first home buyers may find themselves navigating against more seasoned investors.
This is when partnering with an experienced adviser such as Connect Me Mortgages can help. Our team is committed to understanding your unique circumstances and leveraging our expertise to craft an offer that not only meets your needs but also appeals to sellers in a possibly crowded market. With Connect Me, you’re not just making an offer; you’re making a strategic move towards securing your future home, backed by professionals who are committed to seeing you succeed.
Reach out today.