Housing and capital gains tax

Written By: - Date published: 10:02 am, April 18th, 2015 - 89 comments
Categories: capital gains, economy, housing, national, uncategorized - Tags: , ,

It’s a ludicrous situation when houses are “earning” more than people. Warnings about the (largely Auckland based) property bubble are coming thick and fast now. This week the Reserve Bank waded in with some sensible advice:

Reserve Bank calls on Govt to rethink housing tax

The Reserve Bank has urged the government to take another look at a capital gains tax on investment in housing, allow increased high-density development and cut red tape for planning consents to address an over-heated Auckland property market.

Deputy governor Grant Spencer said in a speech to the Rotorua Chamber of Commerce that housing market imbalances “are presenting an increasing risk to financial and economic stability” in New Zealand, one of the few advanced economies that hasn’t had a major house price correction in the past 45 years.

(The quoted version is as per 1:30 PM Wednesday Apr 15, 2015, but by 5:00 PM it was retitled and edited so that the new / current version makes it all look like Andrew Little’s idea – hmmmmm).

That’s the Reserve Bank calling for a CGT – which happened to be Labour’s policy at the last election (and clearly should be again at the next one, the Greens are well on board). According to an anonymous editorial in The Herald these are…

Blunt words Government can’t ignore

Reserve Bank deputy governor Grant Spencer could hardly have been blunter in taking the Government to task over its response to Auckland’s overheated housing market. Much of what he said was not new, but there was a heightened degree of alarm about a level of house-price inflation which, he said, meant “an eventual market correction is likely to be disruptive to financial stability and the economy”.

Mr Spencer spoke damningly of the Government’s almost exclusive focus on the supply side of the equation. He argued convincingly that much more needs to be done to reduce demand.

So what is National’s response? In his train wreck interview with Mary Kim Hill, Nick Smith tired to claim that the RB advice was unclear (no it wasn’t, see above). Then it was “Be realistic, first-home buyers told” – that’s really going to help. How about “PM says no housing crisis in Auckland; says Govt ‘getting on top of it’ despite MBIE analysis showing measures not improving 20k shortage“. So – as usual, deny dither deny. Leading people to ask “Will John Key’s legacy be a housing meltdown?“. Yes, yes it will.

In amongst all the noise it is up to Don Brash, of all people, to state the obvious:

Property bubble keeping Govt afloat

Former Reserve Bank Governor Don Brash says the Government won’t be looking to bring down house prices too quickly because it would see them voted out of office.

“The one sure thing is if house prices do return to their normal relationship with incomes, the Government’s gone because a whole lot of property owners will be badly hurt by that process. But who knows? We don’t know how it will end, but we do know that we can’t keep on going as we are now.”

Quite.

89 comments on “Housing and capital gains tax”

  1. Sacha 1

    The Treasury boss just gave an interview on The Nation denying that demand-side measures were needed at all, and citing Act’s 2010 productivity commission in support of this ridiculous libertarian nonsense. Govt is getting better advice from the RBNZ it seems, even if they’d rather ignore it

    • ianmac 1.1

      Sacha. Not sure what this means, “denying that demand-side measures were needed at all,… “

      • Colonial Rawshark 1.1.1

        In other words, denying that managing the demand for housing was a necessary step to take in helping to control house prices.

        It’s an impractical, theoretical and dogmatic stance for him to take.

      • Murray Rawshark 1.1.2

        Examples of demand side measures would be:
        1. Allow sales to residents only.
        2. Allow sales only with proof finance was sourced within Aotearoa.
        3. Build enough state houses to give everyone a home.
        4. (Maybe a bit radical) Capital punishment for property speculators.

        These are moves that cut back on demand. Supply side measures are such things as freeing up more land for speculation. I think demand side is the only way to go here. We can cut back on the demand by culling the number of people eligible to buy and by satisfying the demand for affordable housing.

        • ianmac 1.1.2.1

          5. State loans at 3% interest for first home owners?

          • Murray Rawshark 1.1.2.1.1

            That actually could increase the demand if not done carefully. I’m sure there would be a way to do it, though. Along with that measure, you would also need a supply of reasonably priced houses, maybe even apartments. It might even be better for the state to build these, or maybe housing coops could be incentivised.

        • Sacha 1.1.2.2

          When our current system actually *incentivises* demand, reducing it seems like a good move. Unless you’re an ideological dunce with the moral maturity of a teenager.

        • greywarshark 1.1.2.3

          @ MurrayR
          4. Definitely make the punishment fit the crime. Take their capital! Get property speculators asse(t)s by bankrupting them or similar, or just seize their assets as gummint does with other criminals. Get them on tax evasion as the USA did with Al Capone or those high-flying gangsters.

          Our government thieves should spread their net wider and catch those who have so far been on the inside and asset-strip them along with all the others they have defenestrated.

          • Tracey 1.1.2.3.1

            have a lottery. their home goes into a pool from which a first home buyer is drawn. they pay an affordable home price and must live in the home for minimum of 10 years. ????

    • D'Esterre 1.2

      @ Sacha: “The Treasury boss just gave an interview on The Nation denying that demand-side measures were needed at all, and citing Act’s 2010 productivity commission in support of this ridiculous libertarian nonsense.”

      That’s Gabriel Makhlouf , who evidently knows as much about housing bubbles as he knows about education and class sizes: that is, nothing.

  2. newsense 2

    Also it makes it seem as if Treasury is rather too closely aligned with ACT.

  3. tracey 3

    got a barfoots letter in the post. they are absolutely saying foreigners are driving up house prices. the letter is clear they have 500 chinese agents with overseas contacts to get you the highest price. peter thompson is a national supporter… remember those 500 agents are not for all over nz. barfoots is a mainly auckland agency…

    neuter investors and watch those 2 bedroom homes in auckland drop under 600k.

    • Draco T Bastard 3.1

      We, as a nation, absolutely must ban offshore ownership. That, by itself, would go a long way to reigning in the present housing crisis.

      • Colonial Rawshark 3.1.1

        In contrast, what Labour and National have been doing is turning NZ into an economic colony of foreign powers. One slightly faster than the other, admittedly.

        • Murray Rawshark 3.1.1.1

          What have you got against Asians? 😛

          • Colonial Rawshark 3.1.1.1.1

            lol they love you long time!

            • Murray Rawshark 3.1.1.1.1.1

              Diplomatically we’re an American colony and the TPPA, unless we stop it, will entrench this further. Economically, things are a lot more complicated. We’re well on the way to becoming totally dependent on the Chinese economy. This suggests to me that neither of the two ACT parties really have any idea what they’re doing. They either do what they’re told, or opportunistically jump at the latest fashion.

              One of the major movers of the Auckland pyramid scheme is Chinese money but when we raise the issue, the portfolio owning right instantly accuse us of racism. What they really mean is that they’ve linked their ashprushns to China and don’t give two hoots about sovereignty, either political or economic. Just as patriotism is the last refuge of the scoundrel, claiming racism is the first refuge of the property speculator.

              • greywarshark

                MR
                Very acute comment.

                I have heard of numbers flying into Auckland with 1% loans provided by agencies in China so theycan buy property mainly. Auctions attended have shown a good proportion of Chinese or Asians who are there in bigger proportions than would be expected from recorded demographics.

                • Murray Rawshark

                  I even came across a real estate agent in Melbourne who specialises in selling Auckland on the Chinese market. It’s a huge business by Kiwi standards and I bet NAct get a few favours in return. Maybe a resort CEO position here and there for unemployable disgraced MPs? Shanghai CRED is basically a property company.

                • mikesh

                  Presumably the Chinese, and other foreigners, can only purchase houses with NZ dollars, which they would have to purchase from the banks with Yuan. If the banks were stopped from creating money this would become a much more difficult process.

          • Rolf 3.1.1.1.2

            Not anything against Asians, just against the Beehive self serving mafia that allow the couple of billions of Asians to come to little New Zealand and spend their money in competition with us locals, and we loose out because they don’t have to pay the predatory taxes we do.

          • Rolf 3.1.1.1.3

            We are not in trouble if we manage the situation, as the Chinese do. We can buy our own home in China, but they don’t allow us to just come and buy up the place. Tight New Zealand censorship is not going to improve it.

            • mikesh 3.1.1.1.3.1

              I think you can buy a place in China but you have to rent the land from the government, who own it all, at least in the urban areas. And privately owned flats are very expensive so you would probably have to rent the flat from the government as well.

      • Lanthanide 3.1.2

        Yes. And even if by some chance it didn’t actually make a big difference, at least then we would know and could look for the next best policy measure to take.

      • Rolf 3.1.3

        The real problem is not overseas ownership, but absentee ownership, whatever the owner is in New Zealand or not. Limit the number of homes anyone can own, one way or the other. Buying a home just to rent it to use the rent to pay the mortgage is not investment. It is fraud.

    • jenny kirk 3.2

      Please send that Barfoots letter to Andrew Little, Tracy – its useful concrete info to have.

  4. Sable 4

    Why not simple limit foreign investment in property? Oh, that’s right, we have done such a piss poor job of managing the nations economy for the last forty years all we have left is foreign investment.

    Joe average might realize we have no clue and nor do our dim witted mates in Labour. As to the Reserve Bank, reality is its populated by navel gazing intellectuals and we all know how useful they are.

    • Colonial Rawshark 4.1

      Why not simple limit foreign investment in property? Oh, that’s right, we have done such a piss poor job of managing the nations economy for the last forty years all we have left is foreign investment.

      An important truth: NZ property is sold in NZ dollars. We don’t need foreigners to supply us with NZ dollars. Our government can ISSUE NZ dollars whenever it likes.

  5. saveNZ 5

    I’m sick of the idea that a ‘capital gains’ tax will solve the affordability problem. The case in point in the herald today

    Stuart Duncan sold his 1982 fibre-cement home at 116 Oaktree Ave in Browns Bay in November 2013 for $751,000

    Now the new owners have on-sold for $1,205,000 – despite doing little work on the property – giving them a 16-month profit of $454,000 – about $940 a day.

    If this family lived in the property for 16 months and made a profit. Under the capital gains would not have to pay anything because it is their family home!

    If there was a stamp duty they would have to pay something either way and so would the previous owner and the current owner when they subdivide and sell.

    Apparently the huge price increase is due to they gained consent to subdivide.
    Next

    Deputy Governor Grant Spencer urged the Government to take another look at a capital gains tax on property investors to dampen demand, allow higher-density development and cut red tape for planning consents to address the over-heated Auckland market.

    Now how the hell would that dampen demand in this case? The family will pay not capital gains if it is there family home.

    The new owner was likely to demolish the existing dwelling and build two new houses.

    Making it cheaper to subdivide (a common Nat discourse) is fuelling the speculation and not damping demand at all. It is just making it cheaper and easier more profit for the developer.

    The Nats are selling off all the state land with the idea that those buying will be able to subdivide willy nilly and make extra profits. The government in some cases is sitting on land around Auckland for 11 years without building on it. They are the main speculators!

    • Colonial Rawshark 5.1

      Yep. What is needed is a comprehensive programme for affordable housing. A CGT is nothing more than a single tool in what needs to be a full toolbox.

      Both National and Labour are letting us down in the paucity of ideas which are being debated.

    • Visubversaviper 5.2

      I am pleased to see that somebody has worked out that is not the house that has “earned” the $1000 per week. The house is worth bugger all, in fact it is a liability as someone will have to pay for its demolition or removal. The value is in the land, and this has also been increased by the subdivision. The developer would have had costs associated with the subdivision, but this is hapening all over the North Shore. Every site of more than 800m2 in the Residential 4 Zones is attracting interest from developers. They chop up the land, move or demolish the existing dwelling, and build 2 new houses for sale. It is a business so they should be taxed accordingly.

      So, if you want an Auckland property, you have to look at sites that are too small to subdivide and don’t attract so many developers.

      • Lanthanide 5.2.1

        So the developers are increasing the supply of housing. This seems like a good thing, not a bad thing?

        • Herodotus 5.2.1.1

          Who said it was a bad thing, but by being a ” developer” they are in the business of making money from a commercial activity they should pay tax @ 28%. These are not the people who are being challenged.

    • Draco T Bastard 5.3

      I don’t think anybody here (except the RWNJs like fisiani) believes that a CGT is a silver bullet and that there needs to be a range of policy changes that include a CGT.

  6. I’ve just seen a couple of libertarians on Twitter insisting that it’s *not* a demand issue, it’s a supply issue because lack of supply creates “artificial” demand.

    Which is very convenient for those on the right who refuse to acknowledge that there’s anything actually wrong with housing in NZ and Auckland in particular.

    • One Anonymous+Bloke 6.1

      The subtext, of course, is that there’s too much red tape and the solution is deregulation. It’s the same witless drivel they’ve been telling one another for the past thirty years.

  7. Brendon Harre 7

    Housing: Human rights commissioner calls for drastic action

    New Zealand’s human rights watchdog has added its voice to those calling for drastic action to tackle New Zealand’s housing problems.
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11434343

    Fran O’Sullivan: Housing warning should put PM on red alert

    “Failure to heed Reserve Bank’s words on possible crisis plain irresponsible….

    “When the Deputy Governor of the Reserve Bank issues a warning that the speculative boom affecting the Auckland housing market must be arrested in case it sparks a financial crisis, the Government should first sit up and take notice – then act.”
    http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11434452

    John Armstrong: Rock-star economy loiters at rocky road to recession on quest for surplus

    “As for Auckland house prices, well, the warning from the Reserve Bank on Wednesday of a potential downward, disruptive correction in prices could not have been blunter…..

    Key’s response was literally “crisis, what crisis?” But that hellish scenario ought to chill Key and Bill English to the bone.

    But the Reserve Bank has not stopped there. It is strongly urging the Government to give “fresh consideration” to ways and means of shutting property speculators attracted by untaxed capital gains out of the Auckland market…..

    But Little is not in Government. Key is. The latter’s political pragmatism which sees him take the path of least resistance has finally caught him out.”

    • Colonial Rawshark 7.1

      But Little is not in Government. Key is. The latter’s political pragmatism which sees him take the path of least resistance has finally caught him out.”

      Nope – Key will just get the financial markets to engage in a game of pretend and extend. To a certain extent he can choose the timing of when to land this mess on Little’s lap.

      • Scintilla 7.1.1

        The opposition parties need to pile the pressure on for the government to act now. Tell it how it is – choosing to do nothing is gutless. Key is too gutless to take some hard decisions for the good of the country. I’m sure that word will reverberate in the Keyster’s ears.

  8. Colonial Rawshark 8

    Until governments get it into their head that squeezing 1/3 of NZ’s population into 0.3% of the nation’s land area, while simultaneously letting the regions wilt is a bad idea, this madness will continue.

    • Lanthanide 8.1

      Labour had policies going in the right direction for 2014. Or at least were making noise about it, with Cunliffe saying he’d be minister for regional development and also PM.

      • Colonial Rawshark 8.1.1

        I think that some of the signals were there, but I suspect the grim political reality is that taking any actual steps to significantly lower Auckland house prices will be an instant election loser. The 40+ housing owner/property investor crowd will not have it, even if it means that the majority of the younger generation are stuffed. Political parties are welcome to introduce ineffective steps all they want however.

  9. RedBaronCV 9

    And interesting that it is the deputy governor speaking out. Can’t the Governor bring himself to disagree with friends?
    Anyway for WIW stop the migration fueled ponzi scheme that is Auckland housing –

    Most migration goes to auckland so chop it right back and maybe substitute something like canada’s “supergran” visa’s ( grandparents can come for up to 2 years providing that they are in no way dependent on the state. )
    Put in a witholding tax on rents ( like interest – banks could deduct it. ) or other tax measures that hit non citizen owners – you can use the tax credit if you live here but other wise it’s dead money.
    And all this migration is generally taxpayer expensive in terms of transport, new schools , and health care – what are the actual economics of it ?

    • tricledrown 9.1

      Australia makes new immigrants build a new houses in areas where their is a shortage of housing.

    • tricledrown 9.2

      No tax write downs on interest for residential property combined with capital gain on all property.
      Other taxpayers would get a reduction on income taxes to make the tax fair to all taxpayers.
      Taxpayers are getting ripped off by these dodgers who are paying no taxes on their income.
      Time for this rorte to be closed down.
      Everyone has to pay tax on any form of income why should one sector not pay any plus get a credit on interest which the ordinary home owner doesn’t receive.
      If these bludgers paid their taxes and got no refunds the rest of New Zealand would have lower taxes.
      We are subsidising speculation.

      • Craig H 9.2.1

        A big reason property is so popular as investment is because the banks will lend much more as a percentage than on other investments so you can buy a lot more investment than otherwise. That has nothing to do with taxes, but it does tend to lead to higher expenses = lower profits to tax = lower taxes.

    • Craig H 9.3

      We already have parent and grandparent visitor visas for 36 months, and we have retirement visitor visas as well. Both of these require migrants to not be dependent on the state.

      Generally the economics of immigration are slightly positive.

  10. johnm 10

    I don’t have that wide a circle of acquaintances but many have rent to buy capital gain properties.
    1 woman has 6 properties and lives overseas
    Local neighbours have at least two RtB properties
    1 Chap I know has at least 3
    Another has had two large rent to buys built on his large section
    Another woman I know has at least two RtoBs
    Another chap I know has at least 1 RtoB.
    Yet another has just bought one to RtoB

    It’s the kiwi’s way of getting rich

    Who misses out? Our young couples just wanting a home forced into rent servitude for ever. Or paying off huge mortgages on over valued wooden houses. 🙁
    Even Iprent is in the game! As Draco T Bastard has said this is bludging!

    • Foreign waka 10.1

      In many cases this represents the additional income for retirees. This should not surprise us really as those who have no property portfolio will essentially starve slowly unnoticed and found months later mummified (as it is reported in few cases). Every person around their 50′-60’s knows that and will not agree to any tax.

      To blame every immigrant to this country is just plainly a cop out.
      The low level of literacy, abandonment of improving the education of every child, poverty and a low wage economy have not been created by immigrants who are living here, all others would be non residential (and they have to cope with all sort of abuse and its getting worse!). In fact, if it wouldn’t be for them NZ would be economically on a par with Albania.
      But it doesn’t even stop there. There are some who are very apt to taint their own:
      Look at i.e. indigenous people who are contracting their fishing quota to Asian vessels who in turn provide a higher return on the back of slave labor.
      The court just recently clearing $ 3.00 per hour labor as legit because these people are employed by an overseas company. And yet legally they ought to fall under NZ Labor law. Worst still, Kiwis don’t give a hoot – as long as its not them!

      So what are kiwis going to do about better outcomes for their children? Social justice is not just a footnote, kiwis need to look at ways to understand all facets and impacts on society and demand what they want for the future. You have a vote, use it.

  11. saveNZ 11

    What to do?
    The questions are, what is driving the demand for housing?

    There needs to be more controls on immigration investment in this country.
    Ideas to dampen immigration demand could be..
    Property investment is not available as a criteria to gain residency status.
    You have to be a NZ resident to not pay a capital gains tax for 90% of the time you own the asset.
    You much make $50k per year profit and employ 2 NZ citizens or more to enter NZ under the business criteria.
    You can not own NZ property if you are not a NZ resident for 50% of the time.

    • Foreign waka 11.1

      Simple, no matter what nationality, if you own a building site, any improvement has to be completed and signed off by the council within 3 years. If not, penalty applies, increasing with every month/quarter where there is no progress (this will take away any gain on speculation).
      Any commercially traded property (rental and/or business development) should fall under a capital gains tax when sold as it would be a profit on a commercial transaction. Any rental income is income and should be treated as such.

      What on earth is so difficult??????

  12. Karen 12

    I’d like to see two rates of stamp duty applied – say one that kicked in at $500,000 and a higher one at $1 million.

    Much higher standards should be required for all rental properties, for example insulation, and sitting tenants should have the right to stay even if the property is sold.

    Non residents should not be able to buy property in New Zealand.

    I also think the CGT is a good idea and Andrew Little is wrong to shelve it just because it is hard to sell to the electorate. Labour just need to sell it better.

    • saveNZ 12.1

      Personally I want National out next election.

      That means I think Andrew Little should NOT increase property taxes including CGT or a stamp duty (which I think is a good idea). CGT is an election killer which killed them last time. 65% of kiwis own a home and are doing well out of strong sales. Most are trying to buy a 2nd property for their kids as their solution. Yep not fair, but do we want more Nats next election, NO!

      Or put on a capital gains or stamp duty on gains over $5 mill might work as only effects a few people and can be said in 1 sentence as a policy. If it is too complicated, election killer! 1mill is too low, in Auckland a villa without a toilet sold for more on 300m2 section. Hardly luxury living.

      Labour could look at other options though like immigrations, commerce commission etc, that would help and avoid extra taxes.

      The Greens should also look at options like stamp duty, I also think their CGT policy also effected them last election for votes. They have a lot more middle class well to do supporters than they think. Who may be buying the 2nd homes for kids and smart enough to think if you can’t beat them join them on the property market. No one wants to see an immigrant swanning in with 10 mill buying a house after paying no taxes in this country with no tax, while that teacher who struggled to afford a 2nd house in retirement has to pay capital gains tax on it.

      It is often the unfairness of the situations than the taxes that is polarising people on capital gains.

  13. saveNZ 13

    What is stopping more affordable houses being built?
    Ideas,
    Allow ‘granny flats’ back for up to 2 people to live. No resource consents needed if within the same house. Just building consent for kitchen etc.

    Get onto the commerce commission about Vector and Metro water and telecom about their ‘first’ charges and other infrastructure costs totally out of control.

    Make sure the huge vector and metro water and telecom charges are going to upgrade the networks NOT to shareholders and exec pockets. They should have to prove they have done ex amount of upgrading under law. Not keep having power outages and sewage spills while they rake in the fees.

    While they are at it, stop building motorways and start using rail to get people in. Make sure they have park and ride as in the rural areas there is no bus links. Get rail out to the SHA and subdivisions that are being built now. The consent fees of $7000 per dwelling should go straight into the transport coffers, not AK council going around wringing hands and saying they just can’t afford to do anything without more taxes and money someone has to give them. Look at all the new subdivisions and sections – where has the revenue gone?

    Get the commerce commission onto Bunnings, Placemakers, Mitre 10, Fletchers, get some costs how much was wood, gib, nails, etc etc 5 years ago – have they been ramping up the costs cos their profit are certainly healthy! Why do they all charge the same, is it a monopoly?

    Have decent design in the RMA, go for sustainability. No developer wants to build nice apartments if next door someone builds a dog blocking your view and light. You might go out of business real fast.

    Have multi developments. 10% of a subdivision should be under $200k, 20% under $300k etc etc.

    Bring back state housing. Build more, stop selling them off.

    • Karen 13.1

      Some great points there SaveNZ, particularly building more state houses and investigating the cost of building materials. Building is much more expensive here than in Australia, and I can see no reason for it except profiteering by suppliers.

      I’d actually like NZ to develop a prefab house building industry, not just for local supply but also for export.

      • Foreign waka 13.1.1

        Just recently established to help Kiwis, NZ produced:
        http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11396738

        • Karen 13.1.1.1

          Good to see. I think the problem with the small NZ market can be overcome by developing an export market for them. It would be great if manufacture could be in regions were there is not enough work. Also if more state houses are required then why not prefabs?

      • D'Esterre 13.1.2

        @ Karen: “I’d actually like NZ to develop a prefab house building industry, not just for local supply but also for export.”

        We already have A1 Housing, which supplies prefab houses to the entire country, I believe. A range of presentable designs, very competitively priced, insulation, double glazing etc, etc. All that’s required is for people to actually buy them.

  14. saveNZ 14

    Also as there are affordable options in Auckland why are people not buying them?
    Ideas.
    Banks need to start lending on apartments to first home owners if they have a 10% deposit. (At present I think you need 50% deposit for an apartment from some banks so generally only investors or more cashed up people can purchase them)

    More controls on leasehold leases, body corp fees and people profiting from this.
    Banks need to lend with a 20% deposit on properties under 40M2. This size is an option for many first homeowners but they can’t buy because of bank lending rules.

    This is putting the strain on family friendly homes under $400k in Auckland. If first home owners without kids were able to afford apartments then those first home owners with kids might have less competition for those homes which are on sections.

    Also solve transport. People need to be able to live further out but still get into work affordably on rail which carries more people than buses and is faster.

    • dave 14.1

      affordability definition by the imf is 3 times income at $400000 those homes are not affordable the problem is complete disconnect from real incomes the us market collapsed at 5 times income ratio Auckland must on factor of 10 by now house inflation is fine if roughly lined to income growth incomes stopped growing 30 years ago in this country asset prices grew with the expansion of credit

  15. Stickler 15

    Meanwhile, a widowed acquaintance of mine in the Manawatu wants to move from the small town and her lifestyle property that she can no longer maintain, to a place with more amenities from the elderly. But because the town has lost its industry and services, noone wants to buy her house. Property prices have dwindled there. What she could get for her large property would not even buy her a retirement flat in Palmerston North. She’s stuck in a shrinking small town with few amenities. And getting older.

    How about some political Party coming up with a regional development policy that puts some strength back into places outside Auckland? I think we all know what Party that WON’T be: the one-eyed one that keep its “vision” solely fixed on Auckland. Because they’re raking it in on their housing investments.

    Poor bloody regions, under this shower.

  16. National have most likely accepted that they will loose the next election and will think they will leave any tough decisions for the next Govt to fix and also take the blame.
    Also, past National Governments have not been known for having ideas, all they do is sell assets and destroy.
    They are do nothing type Governments.

  17. Rolf 17

    Sorry guys, why not learn from other country’s failures. Look at Sweden, where they have a massive capital gains tax on houses. The seller reasons that if I have to pay that much in tax, I have to add it to my sales price so the buyer pays the tax. The result is that house prices gallops even faster. The right way is to stop “investment” in homes. It is not any investment, it is speculation and fraud. Buy the home and let the tenants pay the mortgage and get rich for nothing. Put high fees, not taxes, on all homes “investors” own instead to discourage the practice, or outlaw it altogether. Some countries actually have laws preventing ownership of homes you don’t live in yourself.

    • David 17.1

      Sweden has a 30% capital gains tax that allows deduction on spending on the property. Not exactly massive given a traded property would be taxed at the income tax rate.

      • Rolf 17.1.1

        30% is massive, add that there are numerous limitations on what you can deduct, and an whole array of various fees, just not called taxes. A one man firm pays typically between 60% to 80% tax, so time to fight taxes in New Zealand now.

  18. Melanie Scott 18

    There was an interesting article in the NZ Herald sometime last year about the wealth status of MPs (mainly based on multiple property ownership). With a few exceptions, most of the characters on their ”rich list” were National MPs. I think that speaks volumes about the attitude of the current government.

  19. J 19

    Yes, the Auckland property market is mental but a CGT will hit everyone across the country. One of the arguments in favour of CGT is that most Western countries have one. Yes, but it hasn’t dampened down their property prices has it? By all means clip the ticket on property transactions but don’t try to dress it up as a measure to dampen property prices.
    In the ten years I have owned rental property [two] I have never been able to viably subdivide – despite both rentals being in central Auckland. For example: in ten years the ‘levy’ for a second water connection from Watercare has jumped from $600 to $2,000 to $7,500 to $9,500 to $12,500. On top of that it has become increasingly impossible to get an exact answer from Council what cost/fees are involved from them.
    The crazy thing is, if I had just plowed ahead at the beginning and done the subdivisions then I would have been home and hosed now, such is the crazy Auckland property market. But once again I find myself frozen, wondering “but what might the market be like in two years time, when my properties are ready to sell – will there be even more levies from Council, and a Capital Gains Tax from Government?”
    Maybe I should just toss out the tenants and put the properties up for auction. I should make loads of money because Asians ARE coming here and gazumping everyone. They think our property is cheap – dirt cheap – and they want to get their money out of China and this is one way to do it. (I’m basing this on the three Chinese property investors I’ve spoken with).
    The best idea I’ve heard to dampen down property speculation is one John Key says is ‘too hard’ and yet other countries seem to manage it. Only allow foreign buyers to buy new builds for investment. By all means they can buy themselves a home to live in, but the other four will have to be new builds. This will increase the housing stock and decrease the demand for existing homes.
    And with a bit of luck all these ‘new builds’ will great competition in the building materials sector and bring prices down. I spoke with a Brisbane developer last week who was visiting Auckland. He was flabbergasted at the cost of building here and figured the building supply duopoly here was creaming it. He can build middle income homes in Brisbane for $1300 a square foot – the same price we pay here for cheap ‘low cost’ housing.

    • saveNZ 19.1

      @J +1

      Totally agree with everything you said.

      As soon as a CGT is announced landlords will panic and sell up.

      Watercare is an absolute rip off.

      The price of building here is flabbergasting. Practically everyone involved in property infrastructure or building materials is creaming it in because they can.

      A case, I went to buy a clothes line from Bunnings and it cost $95. I needed another one 6 months later and it was $160. I couldn’t believe it, and shopped around and then noticed all the stores from Mitre 10, Placemakers, Bunnings etc had put up their prices to the same amount for that item.

      Something is wrong went a simple building product has gone up more than 60% in 6 months.

      It’s not just that, many building products are going up at insane rates.

      Existing property is going up at extraordinary levels because the cost of replacement construction or renovation is going up at insane levels and still costs more than existing stock.

  20. How about we permit only those from countries where New Zealanders can buy property to do so here?

    That would take a lot of heat out of the market fairly quickly I would have thought.

  21. The Chairman 21

    60% of bank lending is on property.

    Moreover, a number of small businesses leverage off their personal homes.

    In fact, New Zealander’s wealth is largely tied to housing.

    Therefore, the objective is to slow the rate of increase in property prices, not destroy its current value.

    Achieving that objective is not a one bullet solution.

    That said, there are a number of measures required:

    On the demand side:

    LVR restrictions on property investors while removing their ability to leverage off equity already held.

    LVR restrictions and removing the ability to leverage off equity can be regionally flexible, allowing them to be put in place in areas of concern.

    LVR restrictions can be set at a floating and progressive rate to reflect the number of homes owned and state of the housing sector.

    LVR restrictions are a tool the Reserve Bank already has in its toolkit.

    Offshore demand:

    Ban offshore investment in property, or at least, in areas of concern.

    On the supply side:

    Government participation (providing the benefit of scale, thus producing a larger number homes in a far quicker time frame while reducing building costs) in the construction of new homes.

    On the tax side:

    Ring fence losses and end deductions on interest.

    Advantages:

    Not only will LVR restrictions on property investors reduce risk (for both the borrower, lender, thus wider economy) it also slows speculation and in turn increases savings. Taking the heat out of the market without introducing a comprehensive CGT, LVT, or stamp duty etc, which are largely ineffective.

    Additionally, as LVR restrictions remove the heat out of the property market, it gives the Reserve Bank scope to lower the OCR, thus taking pressure off the NZ dollar.

    As the heat is removed, and property gains slow to the rate of inflation, the vast tax imbalance diminishes.

  22. indiana 22

    How has the CGT cooled house prices in Sydney or other metropolitan areas in Australia as they have had a CGT for over 15 years? Andrew Little is right when he says that a CGT is viewed as an attack on hard working New Zealanders, especially when people look to pass on their home as a inheritance. People will argue that the beneficiaries do not need to sell their inheritance to be exposed to a CGT – but all that does is impact the supply of homes, which is the real problem. On supply – people just don’t buy the most readily available house – when you’re spending over $500k, you really want to make sure you get what you want, not just what is available.

    • Rolf 22.1

      By long experience everywhere in the world, CGT does not cool house prices, it drives them. The seller has to make more money to pay the tax to get the net profit, so he increases the price.

    • Foreign waka 22.2

      The value is not in the building but the land. And this is where it should be tied to. In other words, a property owner sitting on land in the hope to make a bundle should be “incentivized” to actually do what was intended. This is about resources being shored up at the expense of families not able to have a roof over their heads. To talk about whether these people make $ 5.0 or $ 5000 is a mute point if the fundamental imbalance is not addressed.

      • Brendon Harre 22.2.1

        That is why a land value tax would be the best tax change. We also need to look at what would stop the massive inflation in the urban land rent curve. This curve has highest prices in areas with the most access to amenities -usually the CBD, but also areas with views and or access to water. The curve slopes down to the rural fringe where land is more productively used for non-urban purposes and is priced accordingly. Traditionally better transport systems has been the method for containing inflation in this curve -the horse drawn omnibus, steam trains, electric trams, elevators etc. In Auckland and Christchurch our two biggest cities there is plenty of transport evolutions like Auckland’s northern busway and passenger rail that could be extended out to new housing areas to stop the land rent curve rising.

        • Foreign waka 22.2.1.1

          Absolutely, transport is an important part to give a city, town infrastructure. Unfortunately, it seems to be not in the interest of the people who have the last say in the development of this country. I cannot see how it is justifiable to have such poor network as is not something new. And even if there is a bus service it is in such state that one can count on a break down every 2 months.

    • D'Esterre 22.3

      @ indiana: “How has the CGT cooled house prices in Sydney or other metropolitan areas in Australia as they have had a CGT for over 15 years?”

      Trouble is, we don’t know the counterfactual. What would house prices there be like now, had there been no CGT over the last 15 or so years?

      In any event, no single measure by itself will help to cool the Auckland housing market – as the Reserve Bank has discovered with LVRs applied to first-home buyers. That created a vacuum where first-home buyers had been; and Nature abhors a vacuum and all that. What’s needed is a range of measures applied together. And such measures must be Auckland-specific; no point applying them to the rest of the country, where there isn’t a problem.

      And of course the government will see sense: it’ll devise a set of measures which, applied together, will take the market off the boil. Oh lord! Watch out – was that a pig that just went overhead?

  23. papa tuanuku 23

    Disingenous to use the term Labour / Green CGT. Labour don’t want one. Be truthful in headings.

  24. dave 24

    is nick smith for real when the governor said disruptive correction he means large no of defaults threatening the financial system as Ireland as the usa the disconnect from income is now 8 x the average income with record levels of house hold debt
    nick smith is a total dick as is fucken John key Auckland housing can blow up and take the whole domestic economy with it. if the government doesn’t get off its elitist bullshit ass then they will back the governor into situation where he will have no choice but to jack up the interest rates which will happen sooner or later

    Date Housing Debt ($million) Housing Debt – year on year %
    Jun 2013 183.446 5.3
    Jul 2013 184.099 5.5
    Aug 2013 185.078 5.7
    Sep 2013 185.894 5.8
    Oct 2013 186.830 6.0
    Nov 2013 187.675 5.9
    Dec 2013 188.279 5.9
    Jan 2014 189.144 5.8
    Feb 2014 189.830 5.8
    Mar 2014 190.645 5.6

    total debt
    169.390
    Jun 1998 187.570
    Jun 1999 197.350
    Jun 2000 217.490
    Jun 2001 232.060
    Jun 2002 249.160
    Jun 2003 245.800
    Jun 2004 266.150
    Jun 2005 295.040
    Jun 2006 331.360
    Jun 2007 372.220
    Jun 2008 407.540
    Jun 2009 443.520
    Jun 2010 449.770
    Jun 2011 451.539
    Jun 2012 462.163
    Jun 2013 475.621
    Mar 2014** 493.116
    ** Overseas Corporate at Dec 2013 and LTA budget for Jun 2014

    http://www.forbes.com/sites/jessecolombo/2014/04/17/12-reasons-why-new-zealands-economic-bubble-will-end-in-disaster/

  25. North 25

    Fran’s getting impatient with The-Darling-Boy-Key……

    “Typically, John Key has resorted to yet more excuses for inaction”.

    ” Andrew Little has also backed away from capital gains taxes because they are politically deeply unpopular”. Yeah, thanks to the narcissistic Cafe Society MSM not generallly qualified to talk about anything beyond specials at Countdown.

    “What they should do is show joint leadership. Forget the voters – there’s no election until 2017. Instead just get together, form a political accord on a range of immediate actions, and pass legislation.”

    The keenest word in all of the above is the first one – “Typically……”. Fair question – can the immature, celebrity gloating, selfie-king, former but still in heart leeching parasite banker John Phillip Key be trusted in the joint approach dynamic ?

    Decidedly not in my view. The man has poor character. He is a cynical liar. He is not to be trusted. Why does his dishonesty and twisted selfishness, his turning over New Zealand to his buddies, deserve any quarter ? The correct approach is to work for his ousting. Then we start again as New Zealanders together !

    • dave 25.1

      i remember during the gfc george bush saying we doing great and Rome was burning and that’s all we hear from the dishonest prick key ,one day we will hear about sudden resignation of the god key we will all know hes bolted so he doesn’t get the blame but I think English will shoot through first if hes not already prepared the way

  26. NZJester 26

    ( Leading people to ask “Will John Key’s legacy be a housing meltdown?“. Yes, yes it will.)
    I doubt that will be all of his legacy to NZ. He is slowly giving us a crippling overseas debt and if he signs the TPPA the ability of big overseas corporate companies to block us making protective laws against them by taking us to an international tribunal that is weighted in their favor might be even worse!

  27. david 27

    I think it is now looking like the government is just not wanting to implement anything to deal with the crisis. It is just politics. It has done the analysis and decided its constituency favours the do nothing approach. Many of those struggling with home affordability won’t vote National, and may not even vote at all – and the Nats know this.

    Cynical, cynical, cynical.

  28. Plan B 28

    It is all OK, Gabriel Makhlouf Treasury Secretary says that housing is OK, Immigration is OK, everything is OK. He is paid a lot of money to tell us that everything is OK.

  29. Aaron 29

    Personally I think the first step should be to compile a Land Registry that the IRD can use to target property speculators – and also help identify ownership by foreigners. Hopefully this will enable the IRD to clamp down on speculators and allow an open and factual discussion about foreign ownership and eliminate the race-baiting politics

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    Private prisons are a stain on humanity. Prison operators explicitly profit from human misery, then lobby for longer prisons terms so they can keep on profiting. And in the US, prison companies run not only local and state prisons, but also Donald Trump's immigration concentration camps. Faced with this moral ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Why PPPs are a bad idea
    When National was in power, they were very keen on Public-Private Partnerships (PPPs) - basicly, using private companies to finance public infrastructure as a way of hiding debt from the public. They were keen on using them for everything - roads, schools, hospitals. But as the UK shows, that "service" ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • A Movement That No Longer Moves.
    Moving And Shaking: There was a time when people spoke matter-of-factly about the “labour movement” – a political phenomenon understood to embrace much more than the Labour Party. Included within the term’s definition was the whole trade union movement – many of whose members looked upon the Labour Party as ...
    2 weeks ago
  • NZ ‘left’ politically embracing extreme postmodernism
    by Philip Ferguson Much of the left, even people who formally identify as marxists, have collapsed politically in the face of postmodern gender theory of the sort pioneered by American philosopher Judith Butler. For Butler even biological sex is socially constructed. “If the immutable character of sex is contested, perhaps ...
    RedlineBy Daphna
    2 weeks ago
  • The obvious question
    The media is reporting that the (alleged) Labour party sexual assaulter has resigned from their job at Parliament, which means hopefully he won't be turning up there making people feel unsafe in future. Good. But as with everything about this scandal, it just raises other questions. Most significantly: why the ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • The moment I found out that you found out, I acted swiftly
    By Prime Minister Jacinda Ardern I am every bit as angry as you are. I am every bit as disappointed as you must be. The people with power, oversight and the ability to do something about these processes within the Labour Party should be ashamed. Whoever those people are, I ...
    The CivilianBy admin
    2 weeks ago
  • This is why people hate property developers
    Property developers think there is an "oversupply" of houses in Auckland:High turnover rates and falling prices may be a sign that there are too many new houses going in to some parts of Auckland, commentators say. [...] Property developer David Whitburn said there was a "bit of an oversupply" in ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Australia to Pacific: “Fuck you, you can all drown”
    World leaders are meeting in New York in two weeks for the 2019 Climate Action Summit, where they are expected to announce new and more ambitious targets to stop the world from burning. But the Australian Prime Minister won't be there, despite being in the USA at the time:Scott Morrison ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Implausible ignorance
    Labour Party president Nigel Haworth resigned yesterday over the party's sexual assault scandal. But while that's good news, its unlikely to take away the stench of a coverup. Because according to Paula Bennett in Parliament yesterday, pretty much everyone in the Prime Minister's office was involved as well:I have been ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Labour’s Fatal Flaw.
     Two-Faced? Labour insiders' commitment to the neoliberal status quo puts them at odds with their party’s membership; its trade union affiliates; and a majority of Labour voters, but this only serves to strengthen the perception they have of themselves as a special elite. Among the lesser breeds, they’ll talk up a ...
    2 weeks ago
  • Ten reasons the Tories do NOT want an election
    There has been a lot of talk about Boris Johnson wanting an election, and he has blustered with great gusto about 'chicken' Jeremy Corbyn refusing one, but I think there are many reasons why he is secretly glad he has been refused the opportunity:The Tories are an utter rabble,tearing themselves ...
    2 weeks ago
  • Prorogation Illegal, rule Scottish judges
    Scottish appeal court judges have declared that Boris Johnson’s decision to suspend parliament in the run-up to the October Brexit deadline is unlawful. The three judges, chaired by Lord Carloway, Scotland’s most senior judge, overturned an earlier ruling that the courts did not have the powers to interfere in the prime ...
    2 weeks ago
  • Let me explain what I meant by Everyday New Zealanders
    By Simon Bridges. The following is a press release from the office of Simon Bridges, leader of The National Party. Key ora, New Zealand. Happy Maori Language Week. Look, I’m writing to you today because I want to clear something up. There’s been a lot of kerfuffle around some things ...
    The CivilianBy admin
    2 weeks ago
  • Yes, the SIS is subject to the Public Records Act
    I understand there's some stuff going round about how the SIS "was removed from the list of public offices covered by the Public Records Act in 2017". The context of course being their records derived from US torture, which will be disposed of or sealed. The good news is that ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • An evidence-based discussion of the Canadian fluoride/IQ study
    Dr. Christopher Labos and Jonathan Jarry discuss the recent Canadian fluoride/IQ research. They provide an expert analysis of the paper and its problems. Click on image to go to podcast. The critical debate about the recent ...
    2 weeks ago
  • Climate Change: Australia in denial
    Australia is burning down again, and meanwhile its natural disaster minister is denying climate change:Australia’s minister responsible for drought and natural disasters, David Littleproud, has said that he doesn’t “know if climate change is manmade”. Clarifying earlier comments that the question is “irrelevant” when considering the Coalition government’s response to ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Philippines activist speaking on the Duterte tyranny
    Auckland Philippines Solidarity is excited to host Professor Judy Taguiwalo for a speaking tour of NZ in September. She is a well-known activist in the Philippines and was a political prisoner under the Marcos dictatorship. Professor Taguiwalo briefly served as a Cabinet member under President Duterte but was forced from ...
    RedlineBy Daphna
    2 weeks ago
  • Disgust
    I have no special insights to offer on the Labour sexual assault coverup. All I have is disgust. Disgust that an organisation could fail its people so badly. Disgust that they punished the victims rather than the perpetrator. Disgust that its party hacks are apparently blaming the victims for demanding ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Speak Up for Women calls out Greens’ censorship
    This open letter to the Green Party was penned after an opinion piece by Jill Abigail, a feminist and founding member of the party, was censored by the Greens’ leadership. (Redline has reprinted her article here).The intolerance of the Green Party leaders and their acceptance of the misogyny of gender ...
    RedlineBy Daphna
    2 weeks ago
  • Member’s Day: End of Life Choice, part 3
    Today is a Member's day, and David Seymour's End of Life Choice Bill continues its slow crawl through its committee stage. They're spending the whole day on it today, though the first hour is likely to be spent on voting left over from last time. After that they'll move on ...
    No Right TurnBy Idiot/Savant
    2 weeks ago
  • Flight to Los Angeles turned back after passengers decide they don’t want to go anymore
    An ambitious plan to fly to Los Angeles petered out into a brief sight-seeing trip and a desire to return home and get some sleep before work tomorrow. Air New Zealand has confirmed a flight to Los Angeles last night was turned back about a quarter of the way into ...
    The CivilianBy admin
    2 weeks ago
  • Indigenous Futures: defuturing and futuring – an analytical framework for policy development?
    There appears to be consensus – by omission – that the concept of indigenous futures should be accepted at face value. So I scavenged the internet to see if I could locate an academic descriptor or a framework around how we think about it as a concept, and whether it ...
    EllipsisterBy Ellipsister
    2 weeks ago
  • Cadbury rumoured to be releasing the Pineapple Trump
    Here’s another novelty chocolate to shove in your gob, New Zealand Cadbury could be seeking to make itself great again with a rumoured new release: Pineapple Trumps, a spin on its classic chocolate-encased pineapple treat and do-it-yourself tooth remover. The global confectionery manufacturer and bumbling “before” character in an infomercial, ...
    The CivilianBy admin
    2 weeks ago
  • The coming resource war.
    During my time in the Pentagon I had the privilege of sitting down with military leaders and defence and security officials from a variety of Latin American nations. Sometimes I was present as a subordinate assistant to a senior US defence department official, sometimes as part of a delegation that ...
    KiwipoliticoBy Pablo
    2 weeks ago

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