Sell this summer or next?

Question from David updated on 30th October 2013:

We have four properties at present, three rentals with yields of 6.5% to 8.5%. We have our own newly acquired home also. We are quite stretched financially with our new personal home investment and are paying interest only across the board. Our plan was to sell one of our high maintenance capital growth rental properties which we have owned for more than 10 years, is in our own name and was initially a family home so we don't expect to pay capital gains tax (CGT) on selling. Our main question is that we are wondering whether to sell this summer (2013/2014) or next summer (2014/2015). We had thought to sell 2014/2015, as we would hope that prices may increase by then (house is in Nelson), but with the new LVR restrictions we are wondering if this will still happen, and if it is even worth holding an extra year. House is in $330,000 arena. Do you think even with the new restrictions prices will still climb significantly outside of Auckland? And could there be any potential for CGT to alter and be a risk for us? Appreciated thanks.

Our expert Kris Pedersen responded:

Hi David, I think prices in many areas will continue to increase but further down the cycle than Auckland. The LVR changes have had some impact as it sounds like open homes have had less activity. Note however that it will be interesting as I myself have sat down with circa 30 different funders in the last couple of weeks to ascertain work around so I expect to see a growing non-bank market provide more options meaning that activity is likely to pick up again. I do think the changes may still have an impact by the time you would be looking to list this summer so take that into consideration. In regards to capital gains tax, this will almost definitely come in when Labour Party next win the election so it is a case of whether they win in 2014 or 2017. My thought would be that they would announce the changes in the 2015 budget if they won the 2014 election so you should be alright Thanks, Kris

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies.

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