So now we have a land tax proposed. The horse has well and truly bolted! For the last couple of years, immigrants (from China especially) encouraged their friends to buy houses and to flip them – meaning no tax was paid nor did the overseas buyer have to register for GST as a speculator.
The Government in October began a register requiring IRD numbers for overseas investors. Real overseas buyers aren’t buying in NZ and never were in great numbers. It was just a method to avoid tax and let’s face it, who in China would want to buy a property in NZ unless they had some connection here. Just as New Zealanders don’t buy properties overseas without visiting or knowing a country, it’s the same for Chinese. Land tax is only going to hurt those overseas people who have farms, investment assets and of course holiday homes. It’s not going to fix the problem of why housing, especially in Auckland, is going up so exponentially.
The second song of Government is to create more properties for sale. That is not going to reduce prices. The prices are going up because of Council’s lack of planning in not having infrastructure and the obscene cost of dealing with Council, developing land and ever rising construction costs. (Yeah right we have no inflation in New Zealand!) Having more houses isn’t going to reduce that. One way to reduce house costs is very clear. Deduct GST on sales of homes to first home buyers. Immediately those house prices will drop by 15% or deduct only in areas where government wants people to buy, therefore allowing housing to be more affordable. Mind you that will hurt the governments purse and help the people’s pocket. Land tax and more supply is not the answer.
The answer of course will come when people lose confidence, prices stop going up and there is an economic slowdown and prices then go back down again. However, we’ve reached a new high of house prices as a result of this run and you can rest assured that when it does go down in the future that it will then come back up again and exceed these current levels.
It’s time the government admitted they can’t do anything about it and quite frankly, why should they. It isn’t the government’s problem or issue that our housing economy is booming, and of course they don’t look to tax or grow themselves when broccoli is $5.00 a stem!