Cotality Reveals Capital Gains Tax Would Yield Minimal Revenue

A recent analysis by property data firm Cotality indicates that a proposed capital gains tax (CGT) would have generated minimal revenue in the past four to five years. The firm’s latest monthly housing report reveals that national median property values remained largely unchanged over the three months leading to October 2023, standing at 17.3 percent below their peak.

Between October 2023 and October 2025, the national median price saw a slight increase from $802,112 to $811,662. In light of these figures, the Labour Party has suggested implementing a 28 percent capital gains tax on residential investment and commercial properties from a valuation day set for 2027.

Kelvin Davidson, chief property economist at Cotality, noted, “The timing of Labour’s proposal is interesting. The market is getting busier, but remains a touch below normal, affordability has improved, and investor participation is on the rise.” He raised important considerations regarding the CGT debate, including whether investors might hold onto properties longer to avoid the tax and the potential revenue it could generate.

Davidson emphasized that for a CGT to collect significant revenue, property values would need to increase. Over the past five years, national median values have only risen by 10 percent since October 2020. He stated, “A capital gains tax would not stop prices rising. Other countries with a CGT still recorded house price rises.”

Investors might temporarily circumvent the tax by refraining from selling their properties, but Davidson believes this approach is not sustainable. He added, “I do think it would reduce the expected return from property investment, which could result in relatively fewer investors in the market.”

Regarding potential impacts, Davidson acknowledged that while some speculate a CGT might push up rents, it could also create opportunities for first-time buyers who might otherwise remain renters. “The houses don’t disappear,” he remarked.

Recent data indicates a 6 percent increase in sales volumes in October, marking the 28th rise in the past 30 months. New listings also saw an uptick, with first-home buyers accounting for 29 percent of purchases during the same month. Davidson noted, “First-time buyers are still getting in in record numbers in terms of market share, but we are also seeing investors out there, so I guess there is a bit for everybody.”

He further elaborated that the current market conditions are characterized by a sense of balance, with prices down by 15-20 percent from previous peaks. Davidson indicated that investors now represent 25 percent of transactions, contributing to a more predictable environment for buyers adapting to stable prices and slightly lower mortgage rates.

“With affordability gradually improving and employment conditions set to strengthen next year, there’s a growing sense of cautious optimism,” he stated, predicting a potential rise in prices for the coming year. “The economy is not exactly racing away, but we are getting a wider range of indicators starting to improve.”

Davidson highlighted how lower mortgage rates could eventually influence house prices, suggesting that the lagged impact of these rates would likely lead to an uptick in both sales activity and property values. “Affordability is at its best level in several years, listings are set to ease lower, and a large share of fixed loans are shifting onto cheaper rates,” he said.

As the year draws to a close, Davidson expressed the need to monitor the final months closely to ascertain whether the steady rise in sales can effectively absorb the expected seasonal increase in new listings. He noted that typically, the effects of falling mortgage rates would have been felt more acutely by this time, reinforcing the need for vigilance in the market.