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Gareth Morgan says owning a house is now out of reach for most – and it’s all our own fault. Your view?

Posted in Opinion
"The ¼ acre plot is no longer a realistic option for NZ housing"

By Gareth Morgan and Susan Guthrie*

In recent weeks accountants and property investors were trading blows over the tax treatment of housing.

As well, a survey was published which revealed most New Zealanders now believe owning your own home is out of reach for most.

One of the major causes of that situation is the very thing accountants and property investors were squabbling about.

The tax issues around housing are very simple.

Owning a house is just one way people store their savings.

Bank deposits, company shares and managed funds are other places people stash wealth, and at a fundamental level these options are no different to housing.

All these wealth stores produce a stream of benefits every year – often in the form of cash but not always.

Term deposits produce interest which is a cash benefit, business ownership provides profits and company shares provide dividends which are cash benefits too.

Managed funds typically earn both interest and dividends on behalf of investors.

Tax officials love annual cash flows like interest, profit and dividends. That’s because regular cash flows can be easily measured and traced, and therefore taxed.

Not surprisingly, we have evolved very detailed systems for taxing cash returns like interest, profit and dividends. And wages too for that matter.

It’s a pity our diligence and exactitude at taxing cash benefits hasn’t been paralleled in our understanding that non-cash benefits are just as real and therefore should equally be taxed.

While all stores of wealth produce benefits to their owners, not all produce immediate cashbenefits. Some, like land and listed shares go up and down in value and the owner gets the accumulated net benefit in one cash hit when they sell up – the accumulated net gains are called ‘capital gains’.

Many countries tax these capital gains but New Zealand limits itself to taxing capital gains earned by traders (those who declare they bought the asset with the intention to sell) only. The effectiveness of capital gains taxes is questionable.

Wealth is also stored in the houses atop land. Houses offer benefits in their own right – the value of the shelter they provide.

These buildings might provide owners with cash in the form of rent or it might provide them with benefits ‘in kind’. The value of the shelter provided to owner occupiers is none the less for it being delivered ‘in kind’ – its value is equal to the rent the owner would otherwise have received.

When housing produces a cash benefit in the form of rent it gets taxed just like interest, company profits and dividends. And that’s fair enough as far as it goes.

But the deferred cash benefits due to rising property values are left untaxed. And when houses are owner-occupied none of the benefit (of not having to pay rent) is taxed. So our tax system currently pings the owners of immediate cash-yielding wealth but not the owners of other types of wealth.

The consequences of leaving significant stores of wealth out of the tax net are serious.

People direct their savings to where the tax load is lightest – land and housing.

It’s no accident that New Zealand’s businesses struggle to get equity investors while people queue to buy houses.

Our economic growth suffers accordingly, yet this is a problem we’ve created entirely ourselves – and it’s fixable.

Despite what the detractors say, it is relatively easy to tax all wealth effectively, regardless of whether it produces an immediate cash return, a deferred cash return and/or non-cash benefits.

We can impute an annual return to all wealth based on a reasonable benchmark and tax that (giving recognition for any tax paid on actual annual cash returns).

The average rate of return from government bonds is a conservative benchmark that would do the job.

If stores of wealth like land and housing aren’t producing benefits at least equal to this ‘risk-free rate’ they wouldn’t be held by anyone, so taxing them at this rate is a reasonable approximation of the minimum benefits the owners might be getting. We proposed this type of tax reform in our book The Big Kahuna.

For owner-occupied housing you would only tax the equity people have in their homes, not the mortgage value as well. This is because the mortgage produces interest which is taxable to the investors who ultimately provided the funds for the mortgage.

There will of course be cash-flow consequences for the owners of land and housing that doesn’t produce immediate cash returns – the annual tax based on imputed benefits will have to be funded out of wages or interest or some other cash source.

So what? That’s how council rates are currently paid, and it hasn’t caused a national catastrophe.

For many people the annual tax owing wouldn’t be high, because they own relatively little of their home.

However those with significant equity in housing would be facing a fair tax burden for the first time and will need to think hard about where they invest.

Heaven forbid, they might actually balance their investments, putting their savings into businesses or lending to others, instead of expanding their homes to levels which far exceed their (or anyone else’s) reasonable shelter requirements.

Similarly, any farmers investing for capital gains rather than taxable profits would need to rethink their strategy.

Most importantly it would stop the price of housing becoming so prohibitive for so many New Zealanders.

By sticking their head in the sand over taxing of housing, our tax officials and politicians are ruining New Zealand’s economic base, and into the bargain pushing the cost of a house way beyond more and more people.

All because nobody has the guts to face up the issue because of the precious votes they think they’ll sacrifice.

---------------------------------------------------------------------------------

Gareth Morgan is a businessman, economist, investment manager, motor cycle adventurer, public commentator and philanthropist. This opinion piece was first published on his new blog garethsworld.com and is reprinted here with permission.

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88 Comments

There's definitely a need for

There's definitely a need for a land tax, it's the last bastion of untaxed wealth in this country. Even the tax working group's 2010 report mooted a risk free return on land.
But tax on its own isn't the problem with house prices. A tax on its own will have little impact on house prices.

Mr Gareth Morgan will

Mr Gareth Morgan will continue advocate some form of tax towards property/house/land or maybe even farms until a day he would be elected a PM, or appointed a MP, or become a politician.
 
 
 

Gareth: People direct their

Gareth: People direct their savings to where the tax load is lightest – land and housing.
Bad, bad people. Let's really hurt them.

Said the guy who lives in

Said the guy who lives in millions bucks house above the exclusive Oriental Bay... more credibility if you live in Nae Nae..
Ronald Reagan once said "If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it"  look what it gets American today...

Poor old gareth. Now that cat

Poor old gareth.
Now that cat killing is off the front page he comes up with taxing your home.
Back to front thinking here.
The more borrowings the less tax to pay?
Hands up who wants a deal like this.
 

Morgan is nuts.   His tax

Morgan is nuts.
 
His tax would only affect people who only low yielding assets with little or no debt... ie grandma living in her home of 50 years.
 
High flyers, mortgaged to the hilt would not be touched.  Landlords earning higher than market interest rates would not be touched (virtually all property with rates this low).
 
Think things through Gareth, before coming up with nutty schemes.
 
Funny thing is that my neighbours cat is called Morgan...

His tax would only affect

His tax would only affect people who only low yielding assets with little or no debt... ie grandma living in her home of 50 years.
 
Morgan's veil of a defence for "his" tax already hits the pension dependent elderly. He proposes a double whammy - lets hope I am not expected to cover the costs of my parent's supposedly indiligent ways, beyond the depletion of inheritable capital.
 
There will of course be cash-flow consequences for the owners of land and housing that doesn’t produce immediate cash returns – the annual tax based on imputed benefits will have to be funded out of wages or interest or some other cash source.
 
So what? That’s how council rates are currently paid, and it hasn’t caused a national catastrophe.

Right you are

Right you are Chris-J....Gareth wants to bash granny....he also fails to recognise the FACT that the banks make the decisions here...not the nits in the Beehive....so he has to convince the bank bosses to cut their own throats...fat hope.
Why is Gareth not hammering on about ways to reduce the govt splurge.
 
 
 

I would not dare to argue ,

I would not dare to argue , but all* government revenue in New Zealand ( except that spent on BMWs etc) is spent in our economy so one persons 'excessive government taxation' problem is another persons revenue.
* I have ignored Government interest payments as they are a choice made buy our government to subsidise the financial industry  as they make no other sense.

"...is spent in our

"...is spent in our economy"....not so planB....plenty is blown overseas on top of the loot they give away and call 'aid'. But most is splurged here...and plenty of that is splurged 'buying electoral support'....

I think you are a very clever

I think you are a very clever person who is cleverly ignoring the whole point,
As a country we tax  via doing stuff- working and spending we could just as easily tax via owning stuff eg property or windows. It is just a choice -our tax system has been written for the benifit of owners to the detriment of doers ( now doers and owners can be the same people)
Fundamentally we  believe that property is more important than people and we see the consequences around us everyday.
 

I watched a travel/doco

I watched a travel/doco programme on Cuba last week.  Never having visited a working Communist country I was a little taken a back.
 

  • Houses are cheap (equivalent $US200.00), but you can only buy from and sell to the state.
  • Food is rationed, shelves are fairly bare and the options are basic.  But $US2 is a weeks food bill.
  • Electronic goods are ridiculously expensive, shelves are bare and a 20 year old TV will cost 10 months pay.
  • Everyone earns the same amount of money whether they are a surgeon or a taxi driver - about $US30 per month.
  • Consumerism, celebrity etc etc is evil and banned.
  • And of course as everyone knows the whole country looks like a decaying timewarp of 1955!

 
It all sounds exactly like the type of world Gareth Morgan wants here:
 

  • tax asset owners so they don't own assets
  • force house prices down so that people won't spend money on them (maybe the state should just supply buses, hey Gareth??)
  • give everone the same universal stipend
  • cats are evil and banned

 
 

Well in the interests of NZ

Well in the interests of NZ perhaps we should all put in and send Gareth and a few of his mates on a holiday to a communist country. Having visited a few myself I know what they are like. Haven't ticked Cuba off as yet, maybe I'll escort Gareth myself and if he still doesn't behave himself maybe I could just leave him there.
 
I do know a country or two who enjoy..... a...la.....chicken....meow...meow, maybe they are more appropriate destinations.

I don't think you should

I don't think you should forget that Cuba is under a US trade embargo, which started in 1960. This obviously effects the kinds of trade and goods which are available in Cuba. Who knows what it would look like without this however.
http://en.wikipedia.org/wiki/United_States_embargo_against_Cuba
 
 

Nic - and this is what Castro

Nic - and this is what Castro has said about the State micro-mananging everything in Cuba.
http://www.guardian.co.uk/world/2010/sep/09/fidel-castro-cuba-economic-m...

I have been to Cuba (From NZ

I have been to Cuba (From NZ it took 6 flights because you can't fly through the US). Lovely country and lovely people and on the surface it kind of looks like Communism works, except the only way it works is open up to the tourists and tips, plus Black Market for goods. It is slowly changing - which is amazing to watch - as the kids see the ipods etc on the tourists and want them, and becasue they never grew up in Revolutionist times aren't attached to those ideals.
What was saddest was seeing a farmer out in his field with Oxen plowing the land, and all those "classic" cars which are just former shells of themselves, with Russian motors and black smoke pouring out of them. They practically live in huts (Gareth would approve)

Bobbob thanks for sharing.

Bobbob thanks for sharing. Think I will have to push Cuba up my travel list.
Maybe Gareth doesn't appreciate what NZ as a whole has given him.  For a philanthropist he sure is a mean sod wanting to tax those who can least afford it.
 
 
 

It was the highlight of my

It was the highlight of my trip (Cuba and Peru). Smoked lots of big Cuban Cigars, I travelled around the country rather than just visiting a resort like most Brits do. Also felt really safe as well. It was weird seeing people do meaningless busy work - I guess in the name of everyone working for the $16 a month (Gareth again would approve) ...

P.S. Learn Spanish, it is

P.S. Learn Spanish, it is tricky without, we had a guide who translated but it was still tricky.

Bobbob - I certainly need to

Bobbob - I certainly need to brush up on my Spanish. Learnt from a fella from Buenos Aires  a few years ago and have hardly spoken it since.  I think I'd choke if I smoked a cigar but I'd certainly give it a try.

High flyers would be taxed

High flyers would be taxed wouldn't they on this basis.

Both on the profits generated if the rents are higher than interest, or through their increase in equity through the increasing value of the properties. 

If the properties are neither generating actual equity through positive cash flow or implied equity through valuation increase then it would be a pretty poor investment.
Its basically an wealth tax, the biggest issue of which would be a robust way of calculating it annually.
Presumably the high fliers want to increase their wealth
 

Na. Every $1000 you save at

Na. Every $1000 you save at the bank gives that fellow  over the road $10000 more to outbid you on that nice house in the next street. Tax is a second order issue.
 
The problem is we lend too much to the banks and have a system that rewards them for lending more. This is easy to fix if you actually want to. It's the not wanting to that is the problem, we're much happier paying tribute to our foreign overlords. The current banking system is a relic of the system developed in Britain to pay for the Napoleonic Wars (as is income tax).
 
Come on Gareth, you're a bright chap, give us some new ideas and stop feeding us this well chewed over slop.
 
 

My point is that the capital

My point is that the capital issues are ten times more important than the income issues. I think Gareth is fiddling about with tinkering to the tax system because it is a lot easier to understand than the capital issues. The capital issues are dark and murky but they are the source of our problems. Fiddling about allocating the effects in ways he considers fairer is never going to get anywhere - we will just keep argueing amongst ourselves and never ask the hard questions.
 
The banking system we have inherited was designed to fund the British armed forces against Napoleon. That's my current hypothesis anyway. British troops paid for their food whereas the French troops stole it. The bond market was developed to fund this. Britain was able to wage longer wars because of the bond market. Following the Napoleonic War the banking system was continually adapted to keep money flowing to the centre. It is now how we pay our tribute to the Empire.
 
It works something like this, money is created by the US government spending beyond its means, primarily on warfare. The Federal Reserve aids this process by keeping interest rates low so that the total interest cost to the US treasury does not rise. The increase in money is multiplied up by the banking system internationally and part of it flows to NZ, either as purchases of assets (like farmland) by individuals and businesses or as bank lending for mortgages. The sum total is the current account - this is the heart of our financial problems as a nation and represents our annual tribute to the Empire.
 
We need some crafty dodges to solve the current account deficit so we stop money flowing out. I just don't think tinkering with perceived inequities in our internal tax system can solve our external tax problem.
 
I should add that I think Gareth is a good sort and understands that we need creativity to solve our problems. I just think he has chosen an easy target and most of the ideas have been about for years. The game of monopoly was developed to show the evils of property finance. We have learned to borrow rather than save as this gives us some protection from inflation but at the price of paying tribute (interest) in perpetuity. There is something murky here that needs a bit more light.

Gareth it's not a shortage of

Gareth it's not a shortage of tax that's the problem. If you want people to invest in other areas remove the taxation off other investments.
The Government should not be able to spend any more than PAYE tax take and GST. Get rid of all the hidden taxes, fees, levies etc.  Look at fuel taxes in depth as they are currently based on an unfair system which is not in alignment with other public services such as health and education.
Those people that have settled assets into Trusts should be made to pay for their age-care services like other people who don't have a Trust structure.
 
I know plenty of young people who are getting on the property ladder and without too much effort.  It's all about what you are prepared to do to get your first home.
 
I find it rather unusual that an Investment Manager would advocate such policies as being good and think all this fluff is purely to maintain a media profile. Are you looking for a change in career Gareth?
 
 

Mist - I'm not sure how

Mist - I'm not sure how people are working the system in regards to Trusts. However I know some people are in aged-care facilities and the Government foots the bill and the assets of the Trust stay untouched. Other people who once owned a house but had no Trust structure don't get Government support until funds are depleted.
Seems a bit unfair to me. One estate is staying in tact while the other is eroded.  NZ taxpayers have enough burdon on them suporting the unfunded superannuation scheme without having to wear this extra cost.
I thought the rules had been changed but it appears not or perhaps at least not in all circumstances.

I agree and probably Gareth

I agree and probably Gareth would agree also - move the bulk of the tax burden off taxing via doing- working, spending and onto owning - property or windows if you prefer
Taxing land is inivitable once we realise that taxing work means- offshoring jobs and taxing spending means buying online from offshore websites
our current ways of taxing do not work- if you tax land - you don't have to care who owns it under what sort of structure- all that matters is that the tax is paid. If it is not or cannot be paid then on the death of the owner the tax owing is paid out of the residual. If owned by a company or a trust then the tax is simply paid or the land forfitted or the actual benificiaries have to admit that they own the land and cannot pay the tax and revert back to the taxing being taken when the are dead. No one has to loose there homes while they are alive
 

I wouldn't mind taxing land,

I wouldn't mind taxing land, or a CGT so much, if so much tax payer money wasn't wasted. $1 million to advertise might river power, when it was getting free publicity in the media as well as by share managers, is just one tiny example. It will likely be well oversubsribed anyway, so it will be overcooked.
The problem with introducing new taxes, is that it is just a slippery slope to being more comprehensive. eg. a CGT on proeprty that isn't your family home, which would happen when labout get back in. Overitme I could see this also to include the family home, as the politians will say that this  will make admin easier etc.

Gareth would be inconsistent

Gareth would be inconsistent not to charge capital gains tax on your house too, as well as income tax on the benefit in kind you get by not paying rent.
 
There is a wealth tax in this country already. It is set at a nominal rate of 2% of your equity but usually costs you 3% to 5%, sometimes much more and very rarely any less. Its is called inflation in NewSpeak.

The $1 million spent on

The $1 million spent on advertsing has not been wasted it has help prop up the very needy sharebroking industry .

That isn't what it was

That isn't what it was intended to do. If that is what it is supposed to help with, there would be better ways to promote it, and encourage more businesses to list on it.  I don't think it will make any difference anyway, beucase the majority of shares will be purhcase by people who already know about it, or by institutions and kiwisaver.

"It’s a pity our diligence

"It’s a pity our diligence and exactitude at taxing cash benefits hasn’t been paralleled in our understanding that non-cash benefits are just as real and therefore should equally be taxed."
Hehe... Good one Gareth
Why don't we tax ... hmmmm...   having sex...!!                                                                                  Instead of having sex we could be working...earning taxable benefits..... so why not tax all those non- cash benefits... that having sex is.
yes... we could use our diligence and exactitude to figure out a way to measure and tax ...having sex...
We would need to allow a rebate for pregnancies...  since that will produce a future taxable "unit"... and we do want that..
Hey...  while we are at it...why not tax our "Leisure time"..... 
  I love the way logic can take us to a barren land......
 
 
 
 

your 'sex tax' proposal has

your 'sex tax' proposal has real merit, it would probably require voluntary assesment or hidden cameras - we could ask the Navy to provide expertise in this area
 

"As well, a survey was

"As well, a survey was published which revealed most New Zealanders now believe owning your own home is out of reach for most."
 
??? According to Statistics NZ most New Zealanders already own their home so how is it possible for home ownership to also be "out of reach for most"?
 
Feline genocide and more tax - yay

bob, maybe Gareth was

bob, maybe Gareth was referring to people who do not current own homes. I think that is probably what he was referring to otherwise it would make no sense at all. So probably best that we assume that the most likely meaning is what the writer means otherwise we could be here all day.
I am impressed howvere to the extent to which people try very hard not to understand very straightforward concepts.
 
 

To be fair then, surely if

To be fair then, surely if capital gains are taxable, capital losses should be tax deductible??
If you are going to treat  owning a house as a business.
Surely it would make more sense to have a total wealth tax, highly progressive from say 5,000,000 up maybe %20PA above 10-20 million and so-on.
Would need to be worldwide to prevent capital flight.
And would affect a certain cat loather quite severely

Tell that to the people who

Tell that to the people who lost  their money in finance comapnies, and weren't lucky enough to be eligable for the governments guarantee. Should they have been able to get a refund on their 'losses', and I am not talking about their loss of capital either?

Repairs and maintenace should

Repairs and maintenace should be tax deductible too, and who said buildings don't depreciate?

It was Bill English who

It was Bill English who removed the depreciation allowance ......
 
...... maybe the houses in Dipton West are constructed entirely out of  stainless steel ?

Morning Gummy...yes we know

Morning Gummy...yes we know you are still kicking!...please to explain why worker Kiwi cannot claim depreciation tax deductions on the deterioration his body undergoes as he ages digging ditches but the ditch digging company accountant manages to claim depreciation on the aging machines, trucks, tools, shed, fixtures, ftittings, and heaps more!

.... in point of fact Wolly ,

.... in point of fact Wolly , if someone got a job digging ditches their body would do the opposite of depreciating , if would get stronger and fitter , lose fat ... .... vastly improving itself ...
 
You'd be lucky if the firm's accountant doesn't bill you for on the job aerobics and strength work-outs !

Gareth's logic suggests a

Gareth's logic suggests a Poll Tax would be fair too. Perhaps those with fitter bodies should pay extra for the benefit in kind they enjoy.

According to the 2006 census

According to the 2006 census there were just 2004 residents in NZ who claim to be born in Poland .....
 
...... so I don't think  the grasping & rapacious government of Aotearoa will make much munny from a Poll Tax ..... .....

All that and not one single

All that and not one single mention of what homeownership actually means.
It means people having security of living, they are not subject to the whims of landlords, it means people can put in gardens, paint a room, hang pictures,keep pets,  it means people have a stake in the ground in their community, it means people begin to take more pride in the place where they live. In short what it means is people have a HOME! Home onwenrship is a cornerstone of a decent society in my view.
And THAT is how it needs to be looked at, and I no longer give a hoot how it's done, but we must get back to home ownership being the norm, not the exception.
It's no secret that I believe in getting rid of non-resident foreigners and discouraging people from making money out of the fact that people HAVE to house themselves is all good to me.

Tsk, tsk, been improving the

Tsk, tsk, been improving the home have we? I think I see a Gareth tax increase on the increased hedonic benefits on its way.

Haw haw Gareth, me ol'

Haw haw Gareth, me ol' chap....let them eat cake, say what !!
 
Now don't you go upsetting those great bohemoth's  - the 4 great Australian Banks !  
 
You are treading on dangerous ground and upsetting mwaahh's dividend returns and royalties me ol' son !
 
We must keep these house prices "shooting for the moon" ...keep the peasants in "mortgage misery" for as long as possible ..... well at least till ol' CC here can arrange the finance on that 7 bedroom mansion in the Hamptons, complete with helipad ...bliss !
 
Why !  if a land tax was introduced, how could those clever, little property traders/ investoors trade up ...if we limit them with a land tax, they may think more carefully about taking on more mortgage delight !!  sorry debt ..... to me anyway, the more income from mortgage interest payments, the more in clover I am !  
 
Fractional banking makes the world go round, world go round .....lala la la la la  ha ha ha ha  ....sorry ol' CC here just bursting into song on the Steinway !
 
Enjoy your evening everybody ...must say a damn fine day on the beach at Kaanapali today, on the bewteefull island of Money ...sorry Maui :)
 
Now waiter, where is that Mai Tai with a twist ol' chap ?
 
 
 
 
 
 

Did you mean "Let them eat

Did you mean "Let them eat Cat?" there old sport?

For the record, in principle

For the record, in principle I agree with Gareth. It seems clear that he intends an annual tax in lieu of a CGT; whatever wealth taxes come in should be one or the other, but not both, and  I prefer an annual more modest hit. 
I suspect the government bond level is a little high in terms of tax needs, unless offset by income tax reductions; otherwise the government potentially becomes bigger than desired.
There also will need to be some management of avoidance through trusts; offshore owners; and offshore assets; but most of that is probably achievable, and done by most other countries either in a CGT form, or an annual tax.

"Term deposits produce

"Term deposits produce interest which is a cash benefit"
ANY 'interest' becomes a 'inflation' driver above anything else! Surely you know this Gareth?
Whether a term deposit holder or a bank charging on credit, loans and mortgages......(interest on money from thin air.) 
 

Follow up &

Follow up & Proof:

 

http://www.globalresearch.ca/its-the-interest-stupid-why-bankers-rule-the-world/5311030

  :Our economic growth

 
:Our economic growth suffers accordingly, yet this is a problem we’ve created entirely ourselves – and it’s fixable."
Yes, it is......but you must first remove the political conflict of interest which essentially equats to corruption. Check out how many MP's themselves have fingers in this pie 

 

"All because nobody has the

"All because nobody has the guts to face up the issue because of the precious votes they think they’ll sacrifice."
 
And their own investment portfolios 

Quite right!

Quite right!

I'm a fan of the Big Kahuna -

I'm a fan of the Big Kahuna - but think it was named that for a reason - because as a proposal it addresses issues at both sides of the ledger - tax and welfare. What needs to be done has to be a package solution in my opinion.
 
I have never understood why most Western democracies moved toward an emphasis on taxing labour and profit - as opposed to 'stores' of capital - or maybe I have understood but don't like the implications.
 
And I wish everyone would stop trotting out the grannies when discussing taxing capital assets - be they in land or buildings.  Old folks here in NZ don't have it all that bad. The super is considerably higher than the unemployment benefit, I believe - there is something called a rates rebate for the asset rich income poor home-owning retirees - there's the super Gold Card and I also think folks earning a pension only likely qualify for a Community Services Card - and I think any number of events charge a different rate for pensioners in terms of entry fees.  But most importantly, they likely purchased their first home at a time when one income in the family was sufficient to pay the mortgage.  They didn't need to worry about childcare facilities or fees, there was no such thing as school fees to be paid when raising their children, their university education if they went to uni was free - and so on.  It's no wonder they accumulated the assets they did.  If they become incapable of independent living - generally the State will find and pay for a resthome occupancy.
 
The largest age group living below the poverty line here in NZ are children if I'm not wrong.
 

If houses were cheap to build

If houses were cheap to build we wouldn't have such rampant house price inflation. And hey presto the government picks up 15% gst on new builds so why would they care about a nominal cgt on capital appreciation? Supply and demand will eventually restore order. This isn't occurring because those with a vested interest in the property sector are all too powerful. Ie councils ramping up compliance. Graeme hart and the like having dominance in materials, and a crappy building trade that is neither transparent, or audited by IRD apparently. Cashies anyone?

New Zealand housing : It is

New Zealand housing : It is past time the legal profession woke up - Hugh Pavletich comment
 
Posted on Cantabrians UNITE facebook … top pinned post … Andrew Atkins THE REAL DEAL POSTER …
 
Hugh Pavletich - Ben – as a “properly trained” ( are you ? ) lawyer, you should relish debate and argument . Indeed the points you raised above were answered and it is regrettable to see you are not prepared to engage… and just wimp out.
 
Bear in mind I have been involved with these issues for a very long time. One of the things that has amazed me over the decades, is the concerning inability of the legal practitioners involved with urban land use issues, to ask even the most basic questions.
 
With all due respect, this would suggest to me that there are serious inadequacies in the training of the legal profession.
 
As the Academic Section on the Performance Urban Planning website hopefully illustrates (and elsewhere too), throughout reputable academic circles internationally, Smart Growth has been comprehensively “blown out of the water”.
 
Yet generally the legal profession here STILL seems to be poorly informed on these issues.
 
The major reason for this, I suspect, is because the public bureaucracies and the property industry protectionists, are better resourced financially. Understandably, lawyers will “gravitate” to where the potentially better fee income is and mount spurious arguments to support their client’s “needs”. That is to “mask” the failures of Local Governments where their costs are out of control (the major metos in the main) and their “props”, the industry protectionists hell bent on shutting out the competition.
 
The wider public interest is rarely considered. Note the Hippocratic Oath of the medical profession “Do no harm”.
 
Cantabrians Unite has noted the “wider public interest” performance – or more correctly the lack of it – of the legal profession, through the Christchurch recovery process since 4 September 2010. It has not been a pretty sight.
 
On urban land use issues, Cantabrians Unite has been very clear. We are NOT against any form of development. All forms are fine by us. Our focus is simply (and it is simple Ben) to (a) eliminate artificial land scarcity values and (b) to ensure infrastructure is financed properly. How to do this is set out clearly within Cantabrians Unite Section 4 of CHRISTCHURCH: THE WAY FORWARD …
 
http://www.scoop.co.nz/stories/AK1206/S00251/christchurch-the-way-forward.htm
 
It was the late great Sir Wilson Whineray, former All Black captain and successful businessman (and a humble guy with it) who said when asked – “What are the key ingredients for success and performance “ … responded by saying “The capacity to simplify things … and do the simple things well”.
 
It is well past time legal practitioners involved with urban land use issues learnt that lesson.
 
Following 8 solid years of public discussion and debate on these housing issues in New Zealand, the “foot-draggers” in the legal profession should research the overwhelming and irrefutable evidence out there and START to act in the wider public interest. I for one have had more than enough of the ( “schooled” – not “educated” ) ideological claptrap and loser confuser nonsense.
 
Just “follow the numbers” Ben. Even members of the legal profession should be capable of “comprehending” the numbers on Andrew Atkins superb THE REAL DEAL poster above. Let the numbers speak for themselves !
 
Hugh Pavletich

Pay tax on your equity?

Pay tax on your equity? That's unfair: you would be paying tax on the same thing over and over again, every year.
You're only meant to pay tax on the same money twice: once when you earn it, once when you spend it. Not while it's in your wallet (or house).

You're not paying tax on

You're not paying tax on equity. You're paying tax on a deemed return from your equity.
It's the same way you don't pay tax on your savings, you pay tax on the interest your savings generate.

You must be joking !!!    Tax

You must be joking !!! 
 
Tax only once ???
 
Soon the Goverment and Councils will "Tax Anything That Moves " inorder to finance their own bloated bills and before you know it the slogan will be "Tax Everything Dead or Alive"
I was watching TV last night on the failed sewage project somewhere in NZ. Massive amount has been spent (about $20million I think) but is not working and residents are making a scene about the smell.....The Solution ???  Council Chairperson ( I think Wanganui Mayor said "We can always increase rates (viz Tax the residents more) to pay for the  solution...........
It is already happening in Europe, how long do you think it will take to get here ???
 
In 20 years, houses will become massive liabilities.....even the one you are living in !!! 

My retirement plan is to

My retirement plan is to leverage myself to high heaven, buy 10 rental properties and entrust them all to my twenty cats so I pay no tax.

So those who have sacrificed

So those who have sacrificed and paid off their mortgages would pay more tax due to having higher equity?  Aren't they the people likely to invest in businesses as they have some equity?  If you are taxed on equity doesn't that push people to spend more and not pay down mortgages? 
What is the problem with people owning their homes freehold? Aren't they the people who are less likely to require Government assistance later and provide stable communities.  Why should people in the regions, for instance, have to subsidise the nutty Auckland market and the ever increasing unsustainable loans being granted to desperate home buyers.  There is too much pressure on homeowners already with council rates and insurance increases.  Frankly, taxing unrealised equity "wealth" of homeowners is fruit loop territory and does nothing to address the housing market problems in the main centres.  

We should have a window tax

We should have a window tax instead!

A Land tax would do the job,

A Land tax would do the job, get rid of GST, and PAYE

Tax is a controversial

Tax is a controversial subject and therefore is a favourite topic with those seeking popularity (e.g., journos, opposition politicians and self-advertising financial “consultants”).
The only other group who promote higher taxation is those who cannot earn their own living.

Oil Rich countries with

Oil Rich countries with nothing else going for them often have very low tax rates. But would you really want to live there?
Tax is a means  along with Voting and a whole bunch of other stuff for us to keep governments in check.
The other option is often not nice.
That is why user pays, indirect taxes , GST etc are not good taxes. YOu need taxes you can see, can feel the pain , that way people get engaged in the political process and demand more for their taxes- but we don't really want that do we.

Oh dearie me , Dr Morgan has

Oh dearie me , Dr Morgan has hit a nerve , hasn't he . Let's face it , Kiwis are hooked on housing ! ...... if someone puts up an article about business , there's scant response , a few cynics perhaps , someone predicting a crash , and some bozo gratuitously biffing the word " Feltex " into the mix .... but mention houses , and out they come , slobbering and growling alike rottweillers with a cornered cat  , and Gareth Morgan is just small kahunas , it's Ollie Newland who garners hundreds of responses ,...  popular fellow .......
 
.... But I don't blame youse guys , bless you no .... I blame idiotic government policies , the big 4 Australian banks , and our own real estate agents .... They've got the NZ population addicted on houses .....
 
My remedy is not cold turkey , heavens to Betsy no , but perhaps houses should be treated as other noxious addictive substances , and only come in plain advertising , no coloured pictures of the actual property being sold , but gut-wrenching shots of leaky homes instead , houses destroyed by earthquake , fire , or flood .... and a large caption at the top : " Government Warning : Houses May Become Harmful To Your Wealth ! "

At the moment you could argue

At the moment you could argue that the Govt current tax framework is  a 'war on work- inventing creating, trading and spending'. - Stuff that actually makes the economy function. So yes if there was a war on wealth instead I would say bring it on. But there won't be. So don't worry.

All true that

All true that GBH.....meanwhile the Stocks go skyward,....finding my nerve again, glad of it.
Scarfo told you about Walter..?
I'll look in later this afternoon to see what your up to....hey point me out a mover....I'm in the mood for a shake. 

Hello Count : On me lunch

Hello Count : On me lunch break , doing a TAFE test , gotta cook up some tomato concasse , duxcelle & such .... we're not doing shakes , just food preparations , compound butters  ... sorry ...
 
... yes , Mr Scarfie informed me about Walter ..... I had no idea my old sparring partner was ill , so it must been fairly serious then ? .......
 
One of the good guys our Walter Kunz : Bless him !

Stay well GBH....good luck on

Stay well GBH....good luck on the test thingy.....home ec..? cripes, look out Ramsey.

Brilliant GBH - now I think

Brilliant GBH - now I think Interest.co.nz should put your REMEDY on their home page and every other page of editorial for at least 6 months. In fact they could replace their glossy advertisements with your remedy to keep in sinc.

Back to school Gareth.   Tax,

Back to school Gareth.
 
Tax, any tax, is a withdrawal from the economy and should be avoided if possible. 
 
Tax, higher interest rates and higher LVR ratios all make it harder for Kiwis to buy houses. 
 
Let the market decide the price of houses, there is plenty of housing options available in Auckland for under 400k, peoples expectations need to change. 

I can see rent increases,

I can see rent increases, everywhere...

WTF .... the evergreen

WTF .... the evergreen controversial Gareth Morgan putting a cracker up every Kiwis' arse by articulating his thoughts very convincingly  , eveyrthing from cats to Capital gains tax , and have you ever heard his ideas about aid in Africa ? 
He always has a strong argument , however

New Zelanders are already

New Zelanders are already over taxed. It is crazy to tax New Zealanders trying to save for their retirement thorugh owning a property. It is better to think about taxing property that are owned by foreigners. Lets have a tax on all foreign owned properties. Our tax regime favours foreigners and disadvantages New Zealanders.
 

It is surprising for a

It is surprising for a trained economist to go outside of basic economics to find tax solutions to a very basic economic issue. The beauty about property as an investment is that it is fundamentally driven by demand. The fact is, population grows and people need to be housed. Demand drives prices. The other basic econmics 101 is that New Zealand is supply constrained. We have the RMA, Urban limits, green belts, zoning, rural urban boundaries and now the Unitary plan. We also have a Environment Minister that does not recognise that the supply problem is getting critical and requires at least a 2 year moratarium on changes due to public consultation. We have a panic Housing Minister at odds with the Environment minister and Len Brown. Great, nobody agrees and the problem gets more critical.

Correct me if im wrong, but

Correct me if im wrong, but it sounds like in tackling the housing affordability issue Mr Morgan suggests we start taxing home owners 'Owner-occupied' which will increase the cost of owning your own home and living in it even higher than it already is?
I don't understand why we don't have a heavy tax on those who own more than 1 home. You shouldn't be able to make a fortune by buying more and more land and selling it off at huge profit while many New Zealanders struggle just to find 4 walls and a roof to call their own. Like Gareth says we need to invest more into Kiwi businesses instead of relying on the government to build that up as they will just turn around and sell these assets off when their purse strings get tight.  
If the amount of profit attainable from buying/selling houses was reduced wouldn't this drop demand and therefore ease the pricing pressure? Economics 101.

It's much more simpler than

It's much more simpler than y'all think.  Even though Gareth hasn't thought through all the consequences at least he is attempting to find solutions, something I'm not seeing much of from both central and local govts.
 
From a tax perspective our Income tax legislation is extremely burdonsome and complex with gaps large enough to pilot a supertanker through.  My understanding is that the majority of taxpayers are salary and wage earners who are taxed on gross income.  Given it is an income tax apply the same methodology across the board - all income is taxed with no deductions.
 
From a totally different perspective it is easy to blame the actions of others for rising prices.  Does anyone look at there own actions?  Delve down through all the layers and the ultimate cause is the collective actions of individuals, of everyone wanting more money and wanting more material wealth.  For what, power, status, as a sign of success?  We are taught to idolise financial wealth, celebrate the excessively wealthy and the flock blindly follows the shepherd without questioning where they are being led.