Return of the Brains Trust
First published in The Profit. Written by Christine Symes.
If there is a silver lining when talking about the global COVID-19 pandemic, it has to be the return to our shores of thousands of highly skilled Kiwis.
For years, New Zealand has been a casualty of what has been termed ‘brain drain’, as highly qualified New Zealanders left in search of opportunities aboard.
Recent figures show that over 50,000 expats have already returned home, with predictions that as many as 500,000 are likely to make their way over the next few years.
What will returning Kiwis encounter on their return to the homeland?
One of the first issues of reverse migration, is likely to be a period in managed isolation and quarantine facilities and the associated cost. Legislation has been passed to enable the Government to recover some of the costs of managed isolation and quarantine facilities for those returning to New Zealand. The COVID-19 Public Health Response and Amendment Bill provides a legal framework to allow the Government to set payment terms, exempt groups of people and waive charges in cases of financial hardship. New Zealand citizens, permanent residents and temporary entry class visa holders are all sharing the costs in varying degrees.
When returning Kiwis finally find freedom on the other side of MIQ, what will the landscape look like?
This population of people are bringing with them advanced skills and networks obtained through their international experiences and New Zealand needs to ensure that these benefits and experiences are shared and captured to enhance the local economy.
While some will have the flexibility to work remotely for international employers, many will be seeking work within the domestic job market. They will benefit from the recently signalled employment law changes which aim to improve employees’ entitlements, increase the minimum wage and sick leave entitlements.
While a considerable number may settle in Auckland, the provinces will benefit too. The purpose of a recent survey carried out by Kiwi Expat Association (KEA) was to better understand offshore Kiwis and their intentions, such as their timeframes to return home, skills, industry experience and wealth, as well as their needs upon return.
The survey indicated that while 32% of returnees intend to reside in Auckland, the remainder are looking to return to the regions, with 22% leaning towards somewhere they may not have lived before.
The big question – what does this mean for our housing market, which is already under the spotlight given recent changes to the Residential Tenancies Act, increasing housing prices and new tax rules in the past year?
While there is continued pressure on the housing market, the effect of the legislative changes announced in March 2021 by the Labour Government are likely to flow through. These changes are intended to make the property market fairer for first home buyers and to take out some of the ‘heat’ from the market. The changes include an extension of the Bright Line Test which sees tax paid on any capital gains made if an investment property is sold within a set period. The extension of the bright-line test from five to ten years will effectively see a longer lock-in period for property investors and is intended to slow down property sales.
Another change was the removal of interest rate deductibility from investor housing. Proposed to begin in October this year, deductibility on mortgage interest will be reduced by 25% increments for existing property investments and will be fully phased out by April 2025. This policy will generate a significant amount of additional tax to be paid by property investors and will weigh on cashflows and potentially impact decision making. While the true effect of these recent changes to is yet to be seen, returning Kiwis can be sure that the Government is focused on improving the supply of housing to the market. This is also the intention with the recent review of the Resource Management Act. While it may not be a smooth home coming for all, many Kiwis will simply be grateful to return to a country which has been largely unaffected by a global pandemic. And for us who are already here, we should see the influx of those returning home as an opportunity for growth and connection.
Christine is a director at Bramwell Bate and provides advice on a range of matters including property, company and commercial, trusts and estates, and Wills and Power of Attorneys.
You can email her at: [email protected]