"that's what the officials are away working on" blah blah blah. "that's more of the problem than we had before" blah blah blah. "In the long run the economy needs to shift away from spending and borrowing on housing" blah blah blah. "we need to look at whether there's any policy mix that might make the right shift" blah blah blah.

I'm told the TAB are offering excellent odds on aliens arriving in space ships that look like pink pigs, before Bill English actually gets round to doing something that could be regarded as more than just talk.

In the fuller version on Stuff, English does talk about the possibility of introducing a CGT. But says that they "would need to be convinced". With most of the Cabinet with their snouts well into the trough of rental housing & other property, darn straight they would take some convincing!

http://www.stuff.co.nz/business/personal-finance/2744772/Early-housing-b...

bill english obviously read my blog this morning, highlighting his thinking out loud about his "open mind" approach to a capital gains tax, and decided to expand on it later.
thanks bill.

now what he told me but didn't tell you-all, is that within the next 3 years there will cetainly be a cap.gains tax of around 12% on any house sale, other than that of your permanent residence.

he also told me that combined with mortgage interest rates of around 10% within the next 18 months and a wallowing economy and unemployment mixed with hyper-inflation ( good more expensive for the uninitiated), most of those lemmings/sheeple who leapt in like fools back in the winter of 2009, would unfortunately have to be casualties of the system....all for the greater good of the country , said bill!

stay out of district 9 also.

rock on elves!

Bill English is saying the right things for the right ears...."must do something...blah blah etc etc. BUT will he really DO Something? YEAH RIGHT...

By the time his "officials" come around to the "something" that needs to be done, the economy would have sufferred an overdose of debt......and gone terminal.....

Remember people the US is going into a "lost decade" ala Japan think we won't go the same way ?? YEAH RIGHT !!

Yes - "policy mix" is such an impressive term. I think at least we have to admit this is a step in the right direction. Admitting a problem exists is the first step, and English does appear to admit that our borrow and spend on housing is not the way to go. Bollard also acknowledges this. Whether they do anything or not is the big question - I have a faint hope, but not expecting anything before the next election.

From NZMEA's oppos at PEC:

Government identifies problem, let's see the solution, say PEC

In commenting today that "there is some evidence at the moment that the recovery could consist of a pickup in housing," Finance Minister Bill English went on to tell reporters that "now that's more of the problem than we had before and it would be a concern particularly if it goes with a high exchange rate that punishes our exporters."

Productive Economy Council spokesman Selwyn Pellett says that while the government is 100% on target in identifying the problem that real wealth creation for the country can only come from exports, the PEC remains unconvinced about its commitment to solving it.

"Real economy jobs and incomes only flow from investment in that sector and until we remove the tax bias on property no government can truly say they are doing all they can to solve the problem," says Pellett. It's also true that a hot housing market here affects the carry trade and drives the NZD up so it has a double effect, says Pellett.

The Productive Economy Council however welcomes Bill English's statements that he is prepared to look at Capital Gains tax even though John Key has described it as an onerous tax.

"Clearly there are divergent opinions within the Government benches but as long as everyone is voting in the national interest we are confident that New Zealand will see the introduction of Capital Gains Tax on secondary property within the next six months," says Pellett.

The country has been slow to wake up to both the damage property speculation has caused our economy and the injustice of the tax treatment. The current tax laws are nothing short of a "poverty tax" where a property speculator can claim the operating shortfalls on a rental against his or her PAYE.

"This means those not engaged in property speculation - 90% of the population - are picking up the extra tax burden required to meet the government's tax revenue targets. Worse, as we are currently in deficit we are actually borrowing to give these deductions causing a double insult to non-speculators as they get to inherit a larger government debt to put money into someone else's investment vehicle," says Pellett.

"It is true that the current tax laws, well policed, have the teeth to deal with this problem but the reality is that the policing is just too difficult when its tax treatment is based purely on intent. Intent is a very big hole to crawl through and no equivalent size tax loophole exists anywhere else in our tax system and it's just good governance to shut it down and make compliance much easier," he says.

"We hope that Bill English and John Key can quickly come to agreement on this issue as we are getting mixed messages, while more and more exporters are hitting the wall. Our dairy sector is in a power of hurt and if we let property speculation drive up both interest rates and the dollar, then we are not managing the economy based on national interest but bowing to the self interest of small but powerful factions," says Pellett.

If English/Key are really concerned, they would be doing more than just mouthing off , like Cullen did for yrs
They dont have to touch GST, capital gains or anything like that
Just re introduce a min Deposit on houses and even new cars or cars over a certain value...Then people will actually be able to claim they OWN a reasonable proportion of there assets...
"Own" today means to be in possession off something someone else owns.
Or put more simply, does one 'own' a post hole borer one hires for the weekend to build a new fence?

Why was the deposit introduced decades ago...to stabilise the markets and increase savings..
Why was it taken off?...because of the latest extreme Fad of the market knows best.
Or to fix something that wasnt bloody broken!

Full circle over a couple generations....again.

Can't help but feel the government wanted the report on the positive housing outlook so that yet again they can table Capital Gains Tax. Other economies have the same tax but has that stopped housing bubbles? - Answer. No. This was the government that won the election on.... wait for it - lower taxes. I can't see them winning that same election had they campaigned on Capital Gains Tax.....

The real issue is that people don't like investing in assets other than housing (shares, bonds, finance companies) because of:
A) the total lack of disclosure
B) The lack of accountability from Directors, Trustees, Auditors
C) The lack of legislation and investor protection.
E) You have to be an accountant to understand the shares, bonds and finance company (statements), whereas anyone can invest in housing.
F) The lack of competitiveness with our closest neighbour (Australian investors get imputation credits, but we don't, Australian Super gets taxed at a lower rate than NZ Super)
G) NZ Investors/Savers, they have seen it all before and they don't need to see it again (1987).

RE: A) How many new of the risks facing Provenco/Cadmus before it went into receivership? Only those who listen to Brian is my guess. (Many NZ companies are too heavily geared)

A side note, part of the reason house prices are going up is because of council costs, but is anyone investigating this rort?

JT: Yes, other countries had housing booms, but not to the same extremes as NZ. Also, & more to the point, they have enormous amounts invested in other schemes - stocks, bank deposits, etc. Mary Holm talked about this on Saturday in the Herald:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1058...

"About three-quarters of New Zealanders' household savings are invested in property - including owner-occupied houses and rental properties. Shares make up less than 3 per cent and the rest is in other financial assets.

"The dominance of property is much stronger here than elsewhere. Out of nine other countries, France is the closest to us, with about two-thirds of household savings in property, according to OECD data.

"Then come Italy, the UK, Australia and Germany, all at about half property. Canada, Japan and the United States have only about one-third of their household savings in property."

That is the most damning aspect of our housing obsession. Hideous, really, & English & Key should burn in Hell for all time if they let it continue - they are both well educated & perceptive, & have no rational excuses for inaction. (political excuses, tho, of course)

Les Rudd: a brillant post, thanks for it, encapsulates the current insanity very concisely. I just hope it is listened to.

Sometimes I feel like screaming - Infometrics 'forecast' house prices would rise, this is not a fact, but the Press and of course, anyone connected with property loves it. A pie chart published recently showed that there is an even mix of opinion as to whether house prices would rise, would fall or stay static - in other words, nobody has the faintest idea. All these predictions are just that and you can feed in any number of probables. There is, however, no doubt that encouragement is needed to dissuade people from pouring money into non-productive residential housing and saddling N.Z. with a huge debt.

I think ring-fencing property expenses so that they can't be deducted from PAYE income of the property investor is the way we will go.

A lot of the problem in the last decade has been people buying more and more houses as there equity grows at 15% per annum, and taking full advantage of this tax deduction on each property. First home buyers didn't fuel the demand side during the boom, its these investors who attempt to accumulate as many properties as possible (see the decreasing home ownership rates in NZ).

Once this factor dies, then we will see prices back to normal levels. The mere fact that prices aren't going up has already had an effect in that people don't have large increases in equity over the last year which they can use to buy one, two, three more properties

Andrewj : They need to raise revenue ? Why not cut their expenditures, instead. Plenty of fat on the " Public Service " bone, to be trimmed off. And how about scrapping the ludicrous " Working For Families " tax rort. There's a billion or 3 there, designed by Cullen, to pull the middle class into the welfare state. Had Key and English biffed that out, they could have kept their election promise and delivered tax re-adjustments to ALL tax-payers, instead of Cullen's sop to the chosen few.

Little report on 'ZB that some new stand alone houses in the UK, measure just 34 m sq. And that the " living " room is 3.0 X 3.5 m...........Bloody hell !!!!!!!!

Yes Andrewj : Sadly, I must concur with your reply. We had the golden opportunity to grow our economy in the boom of 1999-2008.......but the Gumnut of the day just milked it to buy themselves votes in 2002, 2005, and 2008 . What a waste, and a shame.

Ludwig : Agree with that, whole-heartedly. CGT is not the answer. We need to simplify and re-balance the taxes we currently have, rather than adding more of them to the mix.

Now, are you surprised that the Federal Reverse is dipping into the murky waters of " creative accounting " to re-inflate the US economy ? .........Easier than tightening one's belt , working hard , and saving to pay down debt..........Just print more dosh on the trusty old Gestetner !

People send a clear message.

These blogs are read by the polys. I don't care how they stop the speculation killing the economy I just want it stopped. As I have said in the PEC press release above this is a poverty tax and it destroys the broader economy so why give tax breaks?

However while all the common options mentioned below will stop it, some have more benefits than others. I think Ring Fencing losses is great for stopping housing speculation but what about farms. Debt on farms as gone from 10 billion to 43 billion in the last ten years and as a result we are losing our competitive advantage of cost in farming.

So for me if there is one change to cover both then it is Capital Gains Tax. It doesn't hurt those currently strapped into large debt and gives them time to sort out their investments. Ring fencing losses will hurt them on day one and could put excessive pressure on the economy and we don't need that. CGT is actually slow and steady option here and doesn't require legislation on the banks (as tempting as that is right now).

1) Increase the deposits required
2) Increase the bank's capital ratios in time of increasing inflation
3) Ring fence losses from PAYE
4) Introduce capital gains tax on secondary properties
5) Fully police current laws around the intent

Bernard - I know I sound like a broken record, but when are you getting Heatley on here?
the deputy PM has been on a couple of times, surely a lower minister could spare the time?

Selwyn: Losses are via LAQCs are fine if the associated gain is properly taxed on realisation. Significant changes in the taxation profile needs a sharp focus on transitional arrangements. We should avoid punishing those who exploited the tax code legitimately and signal a progressive move to a different regime. That lets people change focus, move the weight of investment towards activity and away from assets.

A balanced, broad tax base with all consumption, gains and earnings carrying their share of the tax load is a clear goal, but there is no immediate rush to get there.

Once signalled investment will follow and the economy will shift focus to the benefit of activity and jobs.

It will make no difference here - they have a CGT and massive stamp duty in Oz but the investors are still going hell for leather:

Australian mortgage values reach record high
4:00AM Tuesday Aug 11, 2009

SYDNEY - The average value of a new mortgage in Australia has risen to its highest level as property investors return to the market, the country's biggest mortgage broker says. The average new mortgage lodged in Australia rose to A$354,137 ($442,813) in July, eclipsing the previous record of A$353,223 in October last year, according to mortgage broker AFG.

"As every week goes by we're seeing growing signs of confidence in the property market," general manager of sales and operations Mark Hewitt said. "Recent reports of house price increases are stimulating the market as a whole and encouraging investors."

The data showed 30 per cent of mortgages were arranged for investors, rising from a low of 24.5 per cent in March, whereas new home buyers made up 19 per cent of the mortgage market in July, a proportion that had fallen from 28 per cent in March.

Spot on Jimmy. Not to mention that immigration into Aus remains high (as opposed to NZ where net migration has risen but immigration remains fairly low) fuelling housing demand.

I wonder how old Chris_J's $3M property portfolio is looking now?

Might have to sell a few properties before the tax comes to fruition aye??

Expat I agree with:

1. Make Kiwisaver compulsory
3. A land and/or property tax, offset with income tax cuts
5. Flat top rate for persons, companies and trusts
6. A 'soft' intervention program? Well we need a new Monetary policy thats for sure.
8. Give the RBNZ the power to adjust the Kiwisaver contribution rate

No 8 would become our new Monetary policy of you lifted contributions in times of high inflation and reduced them in times of recession. It has the added benefit of lifting savings rates, and would help stimulate our financial / investment sector. Who knows we might even end up with a strong Stock Market as a result and start listing our best and brightest companies instead of selling them off.

Hey Expat such ideas seem very Singapore centric, where are you located.

District 9 = $500-800k Wanaka / Lake Tekapo etc batch from 2 years ago. Your gonna feel that one money man!

I dont own a house. It will take me years to build my own out of the dirt (the only way I can avoid being at the mercy of a $600pw+ mortgage for 25 years!). I fully support a CGT on someone selling their 2nd or 3rd home after 1 year for 100k profit on principle alone.

No crap 'reasoning' will change my opinion. Gibber, pay up! Limit money supply? You would like that wouldnt you!

*working this late is never productive.

Surely if the government and the Reserve Bank want interest rates low but property not to explode upwards again, Bollard can increase the trading banks reserve requirements much further or make it particular to mortgages, or at least until the export sector has recovered. It doesn't matter if mortgages are 2%, if you need a 40-50% deposit property isn't going skywards again.

I was wondering too - what is happening with mortgage refinancing for those who had less than a 20% deposit originally. Are the banks requiring them to increase their equity or it only new loans?

Steve K - you are reading my mind!

It seems that the inflation that has happened has not been considered. Farmer / exporter inflation has been running at a rate two or three times higher than the CPI for most of the last two decades. This has not been reflected in exchange rate movements so there is no growth or profitability in these industries.How can these industries catch up with international pricing not moving as well?
A Capital gains tax would be a tax imposed on the inflation that has almost destroyed our tradable industries and it would most likely finish the job.We know there will be no compensation for the present fall in land prices.
Lets have one flat tax at one rate paid by all on all income,a government that only spends the money it has (ie earn two bucks spend two bucks ), and a government that keeps its spending to a maximum of 30% of GDP. Oh and I almost forgot interest rates at the same level as our trading partners
Sadly Mr English has missed the bus and is increasing spending just like his predecessor.Cycleways sports tourism are all recipients of new spending.

Rose C Evans

jordan shoes

Nike Jordan

Cynthia, Well let's review some data from earlier in the week. The Housing Value / GDP in Australia went from 218% to 277% in the last ten years where as it went from 209% to 316% here in the same period.

Mean while the Stock Exchange Value / GDP went from 95% in Australia to 92% over ten years and in New Zealand from 49% to just 24%. This is a combination of huge housing inflation and of course and a very poor performance from our equity markets.

I would suggest the key differences between here and Australia are a combination of 4 things, Capital Gains Tax, Compulsory Superannuation, owning their own banks and strong equity markets. We have some way to go here.

CGT is not a silver bullet and to think it is would be a mistake. We have to have it but it's not the end of the changes that are required to create a productive economy that can compete with the world. We need to change a multitude of things step by step.

Consumption-led recovery based on overseas borrowings via the great foreign intermediaries and a resumption of a good game of housing monopoly, aye?

Sounds like fun!

As much fun as its been since 1840\ Like when wasn't it like that? (other than the Black Budget tax hikes and a few years in 1940s when government ran structural surpluses as official policy while rationing consumer and other 'frivilous non-socialist' imports!)

Martin

Not sure why your dragging me into this, but I pay roughly 45% tax (GST plus income tax) on properties I trade/develop, as for the $12m or so of property that I've built up (not $3m a slight misinterpretation of a previous comment I think) I really have no intention to ever sell so a CGT would make no difference.

Really I'm in agreement that letting prices runaway isn't helpful. As yields fall it makes accumulating properties more difficult and requires a lot more active management of assets.

Capital gains are essentially a side benefit to property businesses. Real income comes from the cashflow - either the rental income or the margin you make by trading or developing (which is based on the purchase price at the time - not any expectation of inflation). I'm not saying that I don't want prices to appreciate (it does help with financing and if you ever want to "cash out") but as I've said on earlier posts they aren't essential to make money out of property.

The huge variation in lending standards that we've experienced over the past 10 years combined with a disconnection between RBNZ interest rate settings and house price inflation, and between RBNZ and retail interest rates have created a volatile housing market swinging violently from boom to bust and an almost dysfunctional home building industry which shifts from full capacity to being absolutely moribund at the whim of some bankers arbitrary lending policies.

Cynthia - careful with stock market measures. One of the points made by a recent Task Force was that NZ's capital markets are woefully underdeveloped. Too many private versus public companies, shallow markets as a direct result. Again, as my previous rant noted, this is a result of perverse incentives (the difficulty of employing people, the preference for personal drawings over growing the business, the active wish to minimise taxable income etc) which are deep-seated, are part of people's mindset, and are thus not easily dislodged.

A sharp dose of reality is generally needed to unfreeze these mindsets, but as other common taters have noted, this is strong medicine indeed. And given the voting majoirty which will kick like hell against any such reality-medicine, not an easy political choice, either.

However the current situation of cliff-diving tax receipts plus rapidly rising welfare rolls, may yet administer the dose required. Probably via a soveriegn debt downgrade. After all, some fraction of said welfare payouts is effectively being borrowed. Not a sustainable thang.

But to return to yer original issue, the $50 billy is a fraction of NZ's potential. It's just not out in the open anywheres. We aren't pathetic in the least. Just keeping it hid.

If there is going to be some effort made to stop New Zealanders speculating in the housing market then the rules will need to be changed to stop non- resident foreigners buying our property. Otherwise once prices start to fall overseas buyers will take advantage of the low NZ dollar and buy up large and we will be back where we started from. Only worse because the profits/rent money will have gone offshore.

I disagree with any attempt to force me to invest my money in a ponzi scheme like Kiwi Saver. It is a scheme designed to make the providers wealthy via fees, and if you actually believe that there will be any real return on your income in 20 years time, more fool you. Take a good liik at the funds offered. How many are up over the past 12 months? The era of buy and hold and invest for the long term is over. We've had the bull market in paper equities - 1980-2000.

Also, why do we look to the Government to solve all of our problems? What happened to our personal responsibility. I for one am sick of hearing "raise more taxes" as a solution to everything. As much as we abused the Labour Govt nanny state, we secretly want Mommy to take care of us as we have lost the ability to live out in the real world.

This quote is not exactly accurate, but fits:
"Citizens and employees are ignorant to the fact that corporations DO NOT PAY taxes; their customers do, through HIGHER prices, and their employees do, through LOWER wages (the government and unions blame the employer when in actuality it is the TAXMAN who keeps their wages down). And if the price is too high, those jobs and businesses move to areas in the world where they are treated better."

If you tax the wealthy who create employment, the wealthy will move to other countries and then who is left? The parasites who feel owed a living? Sadly I feel we have reached critical mass where those recieving handouts out number those people paying and thus can vote themselves what ever they want. Anybody under 40, look to your wallet because us baby boomers have the votes to take all that you will ever earn!

Ahhh come guys ! it could be some thing like

Bill..."ahh golden showers, hope it never ends"

Bolly.." yeah but, some of them stones are startin to hurt"

Martin:

"I disagree with any attempt to force me to invest my money in a ponzi scheme like Kiwi Saver."

What do you propose? The status quo? Those invested in property haven't exactly made a killing over the past 5 years, except for the tax loss - which are funded by myself and the rest of gen x & y who have been priced out of the property market. Agree that KiwiSaver providers make a killing from fees, and KiwiSaver could indeed be improved (remember, however, that 12 months doesnt tell you much about a scheme - and a balanced portfolio of equities over the last 30 years has done just as well as property). But we MUST shift the investment base away from property and into productive assets. Its not about saving for savings sake - its about improving productivity and long term economic growth. We will only have that if we increase investment into productive assets, and until there are less distorted incentives and more alternatives, that wont happen.

"Also, why do we look to the Government to solve all of our problems? What happened to our personal responsibility."

I hear you on this one. But the NZ Govt accounts for about 43% of GDP - what they do matters to our economy. Personal responsibility comes through education and information. NZ ranks second lowest on OECD ranking for financial literacy. Simply put the general public just doesn't know how to save or invest prudently. The government CAN have a real role here, unfortunately they have just wiped out the Adult & Community Education sector through funding cuts. Those in our society who wanted to be better informed and better themselves have now lost out. Unfortunately sorted.org doesnt cut it, and the Retirement Commission is still all about property investment.

Izzy, enough with the ACE funding cuts riff. They were a boon to time-rich retirees, but the redirection of that money has been towards the sharp edge of the issues: the young and the disadvantaged.

There will be an awful lot of quiet redirection of effort and fundings over the next year or three.

After all, at a recent meeting, a Gnat MP illustrated the point neatly by pointing to a current ad in a local giveawy rag.

It was for an ACE course on Trout Fishing.

And do please recall that x% of All Gummint spend at present is being borrowed.

So imagine how you would face yer friendly offshore creditor, and explain just what great productive use you were planning ter make of their hard-earned renminbi.

After all, if Transparency of Spend is good enough re MP's expenses, shurely it's good enough for our creditors as well?

Andrewj Says:
"I feel sorry for Bill what a place to find yourself."

I dont..both him and Key have a huge opportunity to in retrospect when all of this is over, to go into the history books as great leaders...
IF they have the back bone to to do what is needed to be done...
Reading thru the posts above, and we are talking knowledgeable economists to seat of the pants commonsense ppl, from both sides of the theoretical spectrum, a consensus
more or less summed up by Selwyn

1) Increase the deposits required
2) Increase the bank's capital ratios in time of increasing inflation
3) Ring fence losses from PAYE
4) Introduce capital gains tax on secondary properties
5) Fully police current laws around the intent

So English and Key, want to make a name for yourselves in the history books?
Give the RB back the monetary powers they used to have that where introduced to protect our economy and citizens, and where removed in the late '90s and created much of the excessive damage we now have.

Gibber

Wrong.

was the boom in the mid 80s anything like the most recent one RELATIVE TO INFLATION?? Was the price to income level as stretched as now?? I dont think so. And guess what followed?? a 30% bust relative to inflation.

jimmy,
So you accept there was a boom when the old AU CGT structure was in place in the late 1980's?

And now you are arguing about relative sizes?

In 1997 there was the start of the 1997 - 2000 boom. I would suggest you go and look at the date the CGT was changed from the Old Version to the current discounted version. Looks like September 1999 from what I can see. And there had been a house price boom running from early 1997 to September 1999 when the new CGT policy was introduced.

The position I am holding is that a CGT did not stop house price booms in Australia. And it doesn't matter whether it is under the current AU CGT system or the old AU CGT system.

There were at least two booms under the old system

I have no objection to a CGT.

I have an objection to inflation via debasement of the money supply.

The empirical evidence from AU suggests CGT doesn't stop House Price Booms.

Don't let me stop you campaigning for a CGT to prevent house price booms. I'm used to people ignoring empirical evidence if it clashes with their theories.

When government create intelligent policies half of the people currently working in the Real Estate industry would be involved in the manufacturing/ export and other industries - Bill you wouldn't have any worries - not only the country would/ should be financially in a far better position, but also the population.

Why are so many so sure the big fat elephant is going to move its arse off the residential property rort? Jeeez what nation of Homer Simpsons. English has embarked on a programme of convincing the public that this govt has a plan to put right the disfunctional ___ of an economy and it involves selling the idea that there is a plan. It does not involve any real action other than selling the idea. He knows how stupid the population is, having been voted into office. Wake up Homer, it's all a big rort. The only truth out there heading your way at a trillion doillars an hour is a gargantuan increase in the cost of credit.

Joe : Not entirely fair to lump stockbrokers in with fund managers. 'Brokers get an initial commission only ( unless you have shares held on your behalf ). Fund managers clip more often than the horticulturists do in the Botanic Gardens ! Indeed, the average punter would achieve better returns by blindfoldedly picking stocks at random, than active fund managers do eyes wide open. Some skill, huh ! And who is it that is managing the money piling up in Kiwi-Saver accounts ?

jimmy,
IF the business model is to sell to get Capital Gains you might be correct.

But IF the business model is to wait until the valuation has increased so you can pull some equity out as the deposit on the next house, AND you have no intention to see, then a CGT will have no effect.

Go visit the property investors boards and have a look at the models that Property Investors use to take advantage of capital gain and inflation.

Some are traders and already pay tax on their investments as income tax. Others have a buy and hold strategy with an intent to benefit from the inflation / equity / leverage scenario. CGT will have no effect on those people as their intent is not to sell.

All English needs to do is shut down the LAQVs or bring in a capital gains tax.

A concern I have with CGT is that it if it makes property investment less appealing, then theoreticaly at least, fewer rental properties will come on to the market, this will push up rents in the face of growing demand arising from a growing population. Then what this does is push up the value of existing investment properties because they accrue better returns from increasing rent.
In short, I think CGT can be coutner-productive

Politics is always about 'returns to violence inferred or deployed'. Of course, in our middle class respectability we do not want to confront his truth. So we rationalise.

What needs to be understood is that New Zealand, like Britain, is an emerging 'mob-ocracy' in which an ever greater volume of 'bread and circuses' is provided by government - who have spent decades deifying themselves as the solver of all ills and bestower of all sustenance. The trouble is that the game is up - in the west at least. Now, as the ideological 'whipping boy' of our former colonial masters, we have built a British style 'mob-ocracy'. Yet, at its voracious and devouring zenith, we discover that the cupboard is bare in terms of the mob-ocracy's ever greater demands for tribute - plundered from the incomes of productive Kiwis. So what does the establishment do? Explain that the era of bread and circuses is over? Somehow I doubt it!

One suspects that the next chapter in the great book of plunder will be an attempt at delivering the hyperinflation phase. This is the point where no more can be wrung, in existing taxation terms, from the population - so alternatives must be considered. Hyperinflation is attractive because it effectively destroys the existing accumulated debts of governments and debauches the bad paper and toxic instruments sitting on the balance sheets of their masters within the banking system. It also facilities arrangements in which a new lien can be charged against peoples physical property because they can be 'denounced' as having made an 'unfair' capital gain (at the expense of the mob!). Of course, there is no capital gain - merely an 'adjustment' to relative values. This disguised process of theft sees an exponential rise in the number of pieces of paper - describing themselves as Dollars, Pounds, Euros etc - chasing the likes of property and collectables. The beauty is that a further charge can then be rationalised against peoples earned incomes on the basis that they have made an 'unfair capital gain' or 'windfall'.

Of course, many will console themselves that a CGT would only apply to rental properties etc at the point of sale. Yet any taxation has the habit of starting off benign and become exponentially more voracious. Within this all homeowners already face a quasi capital gains tax in the form of rates and hyperinflation would deliver property taxes alone to surreal levels. Never mind, perhaps you could re-mortgage the family home (at stratospheric rates of interest) in order to meet what was once an affordable rates bill. Moreover, if the mob gets angry what next - CGT on the unrealised gains on the family's principal residence. I suggest you do not rule this out.

Friedrich von Hayek, in that seminal masterpiece of twentieth century intellectual thought, warned us in 1944 that we were on the road to fascist serfdom. Writing at the time, as a refugee at The London School of Economics, his ideas must have seemed ludicrous. Today, especially for the Pom, they seem weighed down with prescience. As serfs you own nothing and a capital gains tax - however 'benignly' introduced will be the beginning of the confiscation of private property. If you want to control house prices its simple - go back to sound money!

Gibber,

With yields at historical lows it is hard to believe that most (or at least many) investors are not in it for the capital gain as opposed to income. Whether they intend to sell soon, before retirement or on their death bed makes no difference. If they dont intend to ever enjoy the fruits of their wealth and sell, why would they do it - not for the income surely????

I think battling bureaucracy all the time converts one to libertarianism (not to mention develops grey hair and ulcers). As Mark has had to deal with IRD I'm sure thats been an influence in his political views!

We really need Rodney to cut back all the planning nonsense severely

I am sure many people do not understand that there are pros and cons on the different options trading strategies . It depends on the individual risk appetite and whether you are looking at trading options on the long or short term.