What a Labour–Greens coalition means for property investors

The 2026 election, scheduled for 7 November, has turned property taxation into the defining policy battleground. Labour has proposed a 28% capital gains tax (CGT) on investment property sales.

The Greens earlier this month released a $32 billion tax package that includes reversing interest deductibility, restoring a 10-year bright-line test, a 2.5% annual wealth tax on net assets above $10 million, and a 33% inheritance tax on estates over $1 million.

National and ACT have ruled out any new property taxes and will campaign on keeping the current settings.

Most commentary has focused on Labour’s CGT in isolation. But governments in New Zealand don’t govern alone and policy settings that eventually emerge from an election depend on who forms a coalition, what each partner demands, and which policies survive negotiation.

Scenario one: Labour wins, governs with a slim coalition

Chris Hipkins has been explicit: the CGT is Labour’s tax policy, and he will not support a wealth tax, an inheritance tax, or changes to interest deductibility as part of a coalition arrangement. “I have made it very clear that our tax policy is as far as we go,” Hipkins told the Herald last year.

The Greens, for their part, have signalled openness to negotiation: “Obviously, everything is on the table”.  But they stopped short of committing to drop their headline policies.

In this scenario, the practical outcome for investors is the CGT as proposed: a 28% tax on net gains from the sale of investment residential and commercial property, applying to gains made after 1 July 2027. Critically, gains accrued before July 2027 are not taxed – investors would have their properties valued at that date, and only future gains are captured.

The NZ Property Investors Federation has flagged a structural problem with the design: the tax applies to nominal gains without any inflation adjustment. Over the last five years, house prices rose roughly 10% in nominal terms while inflation ran at 25%. A property investor in that position would face tax on a nominal gain that represents a real loss.

Australia’s CGT – which Labour’s policy is sometimes compared to – allows a 50% discount for assets held for more than 12 months, precisely to account for this. Labour’s version has no equivalent provision.

For most long-term investors, the practical impact is modest if they hold – CGT only triggers on sale. The greater risk is what it does to market liquidity. Investors with large, unrealised gains may defer selling indefinitely to avoid crystallising a tax liability, reducing stock available to the market and potentially pushing up rents as supply tightens.

Scenario two: Labour–Greens coalition with meaningful concessions

Coalition negotiations rarely deliver one party’s policy unchanged. The Greens need concessions to justify entering government, and Labour needs their support to govern. The question is which Green policies are tradeable and which are non-negotiable.

Interest deductibility is where investors should focus. The Greens have explicitly proposed reversing the current government’s changes, removing deductibility for landlords on residential investment properties. National restored full interest deductibility in April 2025 after years of phased restrictions. If the Greens successfully negotiate its removal, the cash-flow impact on leveraged investors will be immediate and significant, regardless of whether a property was ever sold.

The restoration of the 10-year bright-line test is less certain. Labour’s own CGT would replace the bright-line test entirely. It is difficult to see Labour accepting a 10-year bright-line test with tax at marginal rates of up to 39% alongside its own 28% CGT, since the two measures would overlap awkwardly. More likely, bright-line restoration becomes a bargaining chip the Greens trade away in exchange for something else.

The Greens’ ‘super-rich tax’ – 2.5% annually on net assets above $10 million – applies to property, shares, and other assets, with the family home exempt. Hipkins has ruled out a wealth tax. But coalition negotiations sometimes produce outcomes that look different from what either party said was off the table. An investor with a portfolio exceeding $10 million in net value should take independent tax advice now, regardless of how the polls track.

The inheritance tax (33% on estates over $1 million, excluding family homes and farms) is the Greens’ most politically novel proposal in a New Zealand context. It is also the most likely to be traded away. Labour has explicitly said it would not support it. For investors with succession planning considerations – including those transferring portfolios to adult children – the proposal is a useful reminder to review estate structures proactively.

Scenario three: National wins and current settings hold

A National-led coalition victory preserves the current framework: a two-year bright-line test, full interest deductibility, no CGT, and no wealth tax. ACT leader David Seymour has welcomed New Zealand’s comparatively competitive settings, noting the irony that the Greens’ announcement “landed at the exact time Australians are looking to New Zealand as a positive place to invest.”

Australia’s May 2026 federal budget tightened its own CGT regime significantly, replacing the existing 50% discount for assets held for more than 12 months with an inflation-indexed method and a minimum 30% effective tax rate from 1 July 2027.

Infometrics chief forecaster Gareth Kiernan told RNZ that Australian investors were eyeing New Zealand specifically because Australians face no foreign buyer restrictions here, and the exchange rate shift over the past year makes New Zealand property “that much cheaper.”

If National wins and current tax settings persist, that cross-Tasman interest becomes a tangible demand factor, particularly in Auckland and lifestyle markets that Australian buyers have historically preferred. Finance Minister Nicola Willis made the point with characteristic directness in Australian media, borrowing Australia’s own 2006 tourism slogan: “Where the bloody hell are you? Come over.”

Under this scenario, the biggest risk for investors is complacency. New Zealand has debated a CGT through seven separate political cycles since 1973. The direction of travel – toward broader capital taxation – is unlikely to reverse permanently, regardless of who wins in November.

What investors should do

The temptation is to make major portfolio decisions based on election forecasts. That has not historically served investors well. Since Labour first floated a CGT in January 2017, house prices have risen over 40%. Investors who exited on the basis of tax risk in 2019 missed a 32% gain.

That said, some preparation is worthwhile now regardless of the election outcome. Get a current valuation on investment properties. If a CGT passes, the 1 July 2027 date becomes the base for calculating future gains. Having a contemporaneous independent valuation on record will matter.

Document capital improvements carefully. Labour’s CGT allows deductions for money spent on the property during ownership. Records of renovation costs, maintenance, and improvements will directly reduce any future tax liability.

Review portfolio structures. Whether property is held in personal names, trusts, or companies has implications under multiple tax scenarios. A conversation with your accountant now is cheaper than restructuring under time pressure after an election.

Consider your own timeline – if you were planning to sell in the next two to three years anyway, the tax risk calculus changes. If you are a long-term holder focused on rental yield, a CGT barely touches your returns until you exit.

The most important thing to understand about all three scenarios is this: the fundamentals of property investment – buy well, maintain quality, focus on yield, hold for the long term – remain the same under any of them. Tax settings change, but good assets, well managed, tend to outrun the changes.

For questions about how the election policy landscape might affect your portfolio, or to discuss professional property management, call 0800 GOODWINS or visit goodwins.co.nz.

*Published June 2026. This article is for general information only and does not constitute financial or legal advice. Readers should consult a qualified adviser before making investment decisions.