Renewed call made for CGT
AUCKLAND: New Zealand’s skyrocketing house prices should be driven down by introducing a capital gains tax (CGT) and stopping rich people borrowing too much money, a new paper by a leading thinktank says.
The dizzying price rises had been a goldmine for baby boomers but threatened to blight the lives of upandcoming generations if the Government failed to act, the Helen Clark Foundation report released yesterday said.
Property investors, however, warned the CGT had already failed to win support, while the use of taxpayer dollars to drive down house prices would be hugely unpopular.
Report author Dr Jenny McArthur, of University College London, said it was property speculators and their debtfuelled buy of housing, who were to blame for the housing crisis.
So long as investors could get untaxed capital gains and access to ever more debt to buy new investment homes, they would continue pouring money into property and driving up prices, she said.
‘‘Without targeted interventions that disrupt this system, prices cannot be brought down to genuinely affordable levels.’’
She said the risks to New Zealand from unchecked price growth were many and serious.
Home ownership rates were now at their lowest levels in 60 years. Among 2540yearolds, it had dropped from 46% in 2001 to 35% in 2013, the report, titled ‘‘Somewhere to Live’’, said.
Housing costs were also now equal to 51% of the average income of the bottom 20% of wage earners, up from 29% in 1988.
This threatened to drive a fault line of discontent through society and have ‘‘severe impacts’’ on family health and education, Dr
McArthur said.
High debt levels could also trigger a recession if too much money went on repayments rather than being spent in the economy, she said.
A CGT could help correct this by disincentivising property investment, while a Governmentset limit on how much debt, high netincome people could borrow would also restrict investors’ ability to buy, Dr McArthur said.
But Property Investors Federation executive director Andrew King pointed to recent Massey Housing Affordability studies to argue house prices were not as unaffordable as made out.
‘‘It’s always been really difficult to buy your first home,’’ he said.
‘‘And if we introduce a capital gains tax on people providing rental properties then we are making rental properties more expensive.’’
Housing Minister Dr Megan Woods and Opposition spokeswoman Judith Collins both ruled out a CGT.
Dr Woods said the Government was stepping up to build new homes.
Its build programme of public and transitional housing had picked up speed and a strong pipeline of affordable Kiwibuild homes was coming through.
Ms Collins said National’s focus would be on reforming planning rules to ensure more homes could be built.
Critics of Dr McArthur’s report also said forcibly driving down house prices could also cause a market crash, costing hundreds of millions of dollars.
But Dr McArthur said the Government could help create a soft landing for house prices by setting up a Government fund to lend at low interest rates to homeowners, who might have trouble making repayments if prices dropped or interest rates jumped. — The New Zealand Herald