Gosh darn it , why can't they see the bleeding obvious , remove the LAQC's ? So much simpler than lumping on a new tax , to fix the problem . This won't necessarily prevent another housing bubble in the future , but it will even up the playing field with other investment options . They wonder why Kiwis have an obsession with residential property , and it's staring them straight in the face : Tax minimisation thru LAQC !

Agree with Roger, get rid of LAQC's. I spoke with a friend last night who is contemplating buying two more rentals only because of the tax break. LAQC's hinder real supply & demand

Actually I think there are some subtle changes which will help prevent bubbles. I think the recent change to setting a minimum requirement for banks to raise locally was a masterstroke by the RBNZ. The fact that the majority of mortgages have been at low long term rates is central to the problem.

My comment was just that I see CGT as a red herring - it has proven unable to prevent bubbles elsewhere so why should it work here? Its just makes no sense.

The argument seems to be that the residential real estate sector crowded out investment in "real" business.

I used to feel that manufacturing was somehow more real than other business but now feel that was based on a subtle version of Marxist analysis that permeated the society in which I live. Unfortunately I have not as yet managed to develop this line of enquiry into a useful analysis, mainly due to lack of intellectual ability on my part.

However, it is clear that listed businesses have failed to compete for funding.

My suggestion to manaufacturing is simply this - stop whining. I agree it makes no sense that I can borrow money to buy a house at a better rate than Fletcher Building (our biggest manufacturer?) can. So raise equity.

Solve the problem.

Have a read of this:
http://www.pundit.co.nz/content/the-dj-bill-english-tax-re-mix
then go out back and start your veg garden, order the chooks for they will supply you with an arsenal of rotten eggs in time for the parade of liars come Nov 2011.

Roger, "real business" is a better investment for any economy than residential property in the sense that "real business" is a muiltiplier of national productivity (and so, in theory, standard of living) while a house is not. You can have a nicer or larger house but that won't make you or others more productive in an economic sense. However you can invest in a business that provides jobs forever (not just when building the house and a limited amount after) and also produces things that in turn make other people or businesses more productive, and the employees in turn can spend and invest the same. There is a postive feedback multiplier effect in there. At least that is the mental picture I have.

marky mark - many may see a bubble but still want to get in because if they think we're only part way up and that they will get out 'at the top' (good luck).

RW: the point is a CGT aims reduce the worst of the bubble...I dont see anything that says this would be the case or not for sure however.

MatH: There is what's best for NZ and its economy and what's bets for an individual investor....I certainly see nothing wrong with an investor doing whats best for them....second guessing an investment for the good of the National economy is impossible and Pollies might love you until you make a loss, then you find you are on your own....

Ppl invest in housing because of the perceived advantages....to me it looks like being a landlord from an income perspective does not pay....its the capital gains that make it worth it, and/or you can take losses from elsewhere or to elsewhere to reduce tax.....

A simple point here I fear:
If GST goes up to 20%, won't that be reflected instantly in the price of property rising by the same amount? A new house will jump by the increase. Vendors will expect the same.

whats the point the banks wont let it happen again in our lifetime .Have we had another sharemarket boom

Of course house prices will rise by 7.5% immediately, Wally! But only as long as the additional purchasing power is there. If you can afford $500k, equity + mortgage, today, that same stake will not allow you to pay $537.5k tommorrow just because the noiminal price has altered. So your real purchasing power will actually buy you a lower standard of living. That, in reality, is where we are off to.

I think the market should dictate asset values as far as possible, with tax structures distorting things as little as possible. I note, however, that governments should work to eliminate market failures (e.g negative externalities such as pollution, and provision of certain public goods - especially defence and law and order) so that prices properly reflect all relevant factors.

I think the government should be truly bold in reforming our tax system and, simultaneously, rethinking the role of the state. At the moment, all efforts seem to just be an exercise in shuffling deck chairs.

The basic philosophy should be to tax 'bads', not 'goods', and to try and keep things as clean and simple as possible. With that in mind, I'd consider:

Ripping through the statute book with the aim of halving the amount of NZ legislation (at least!).

Moving to government creating money in a non debt-based fashion (how long must we continue to enrich global financial elites?).

Implementing a tax on all cross-border financial transactions (Tobin tax).

Eliminating all income tax (including from capital gains). Aside from its negative/perverse incentives and the fact that it is just plain theft, income tax came about through the need to finance wars - look where that got us!

Bringing the Treaty Settlements process to an end - not because it is a bad thing per se, but because it can't go on for ever.

Instituting a broad based GST (exempting only food and medical care) with the initial level to be set at 20% for argument's sake.

Applying a land tax that did not privilege town over country or vice versa. Local authorities would no longer levy rates but could levy user charges for their services (but could not accumulate surpluses), and would have various 'social' obligations imposed by current legislation removed from them.

Reducing, eliminating or raising the threshhold for most tax transfers (especially by scrapping WfF, and by raising the age of entitlement for NZ super and introducing progressively stringent means testing).

Charging user fees (set at full cost of provision, and not allowing the funds gathered to be applied to other government activities i.e. no cross-subsidisation) for use of any public services or assets that bestow a private benefit on users (i.e. non-public goods) e.g. health services (other than certain public health services such as vacinations), roads, rail, land titles, vehicle licenses, passports to name just a few.

Making provison of such services fully contestable (i.e. outsourced private sector provision is entirely permissible but not preferenced).

Introducing a requirement that governments may not run deficits and instead must live within their means.

Requiring that any increase in GST would require some form of parliamentary super majority (to act as a check on expansionist tendencies) and would not be able to breach the balanced budget rule (govt. surpluses are plain theft).

I could go on. The best test of a good plan would be that everybody, from citizens to international banksters, was howling in protest.

The point is its time for NZ to consider radical change - tinkering will get us nowhere.