New LVR limits and a possible capital gains tax

First up is the Reserve Bank's proposal to ease its loan-to-value ratio (LVR) restrictions from December 1st, subject to consultation.

Kelvin explains what's changing: "Currently 20% of lending to owner-occupiers can be done at <20% deposit and 5% to investors at <30%."

From December, those "speed limits" (the share of new lending banks can do) would rise to 25% for owner-occupiers and 10% for investors. The actual deposit requirements themselves aren't changing.

So, what's the likely impact? "This may not mean much for owner-occupiers," Kelvin notes, "given that even the current speed limits aren’t really binding – just 13% of lending was done at low deposit in September."

However, he sees a clearer benefit elsewhere. "Some low-deposit FHBs may see a few more pre-approvals become available," he adds. "And investors could also benefit – the current speed limit is pretty tight, so a relaxation should help a few more of them enter with a low deposit."

The second, more contentious, item is Labour's proposal for a 28% capital gains tax for property investors, potentially from 1st July 2027.

Kelvin highlights several key factors to keep in mind. "Obviously Labour would actually have to win the election first, and of course CGT can be ‘dodged’ (for a while) by simply not selling."

He also notes that a CGT doesn't necessarily stop prices from rising. "It’s also worth noting that in other countries with CGT already – e.g. US, Canada, UK, Australia – house prices still rise. In fact, without house price growth, no tax would be collected."

Instead, Kelvin suggests this signals a different objective. "This does feel like another small step along a (inevitable?) path towards property investment delivering lower returns in future than in the past," he says.

Even if a CGT doesn't raise much tax, Labour might have another goal: "If it helped push up home ownership rates, Labour would probably still take that as a win."