Recent data released by Statistics New Zealand reveal a surprising number of real estate businesses that ceased operations in the country between 2014 and 2015.
According to NZ Herald, Statistics NZ study shows that as much as 15,000 businesses in the real estate market closed down in the past two years, including landlords, commercial and residential companies.
Industry experts though could not pinpoint the exact reason behind this significant enterprise deaths. For one, Colleen Milne, chief executive of the Real Estate Institute of New Zealand, said that there is actually an increase in the number of registered agents during the same period. In addition, the record comes before the government's introduction of tax based on capital gains.
"I don't know what's behind that. It doesn't seem to make sense," said Iain Blakeley, a tax partner with professional services firm EY, according to NZ Herald.
One possible cause, according to Blakely, is that small-scale business owners might have abandoned properties that are not generating generous tax advantages anymore. Another possibility is the changes in Loss Attributing Qualifying Companies (LAQCs) that were implemented in 2013. LAQCs allowed real estate operations losses to be deducted from incomes, as NZ Herald report said.
"This could explain part of it at least. People would then just transfer properties from companies into their personal name as there's pretty much the same tax benefit now when you own them personally," Blakeley said.
In other news, other regions in the country, aside from Auckland, are driving the real estate market growth, with house prices rising by 1.2 percent in December at $465,000 compared to the previous month, and by 3.3 percent compared to the same period in 2014.
"Regional markets, particularly Northland, Waikato/Bay of Plenty, Hawkes Bay and Central Otago Lakes are now setting the pace for the New Zealand real estate market, with Auckland, in a relative sense, now in the middle of the pack," according to Milne, as reported by Stuff.co.nz.