RBNZ's Grant Spencer says the Govt should reconsider potential policy measures to tackle the tax-preferred status of housing investment

RBNZ's Grant Spencer says the Govt should reconsider potential policy measures to tackle the tax-preferred status of housing investment

The Reserve Bank is calling on the Government to reconsider potential policy measures to address the tax-favoured status of housing investment, and wants land bankers tackled and more high density apartments built in Auckland.

In a speech to the Rotorua Chamber of Commerce, Reserve Bank Deputy Governor Grant Spencer said the Reserve Bank was itself assessing other macro-prudential tool options in addition to restrictions on banks' high loan-to-value ratio home loans, including in relation to investor lending, to tackle an overheating housing market.

"However, such tools are not a panacea - their impact is inevitably smaller than the main drivers of the current housing market imbalance," said Spencer.

The hot housing market is highlighted by Auckland house price inflation running at 17% percent per annum and median price-to-income multiples over seven, he said.

"The increasing degree of stretch in prices means that an eventual market correction is increasingly likely to be disruptive to financial stability and the economy."

Sights on investors

Thus, fresh consideration of possible policy measures to address the tax-preferred status of housing was desirable. Spencer is also calling for a review of taxes and other incentives affecting land banking, and an increase in apartment building in Auckland.

“Investors are often setting the marginal market prices that are then applied to the full housing stock within a regional market. Indicators point to an increasing presence of investors in the Auckland market and this trend is no doubt being reinforced by the expectation of high rates of return based on untaxed capital gains," said Spencer.

Reserve Bank governor Graeme Wheeler last month said lending to investors was running at about 35% of residential mortgage lending nationwide, and about 40% in Auckland. Spencer said an increase in investor demand in Auckland can be inferred from various indicators, which he detailed.

"We have seen a continued decline in the rate of home ownership, which reached a record low of 61.5% in 2013; there has been an increase in the share of house sales going to investors since October 2013 - from 33.8% in September 2013 to 37.4% in February 2015; and rental inflation has remained considerably below house price inflation. Average rental yields in Auckland have fallen from 4.6% in 2010 to 3.7% in 2014. Residential investors have continued to expand their interest in housing as rental returns have declined. This points to an excess demand for home ownership over and above the simple excess demand for accommodation," said Spencer.

Spencer also noted that since late 2014 housing market imbalances have "become more accentuated," especially in Auckland where the supply shortage is greatest, and house prices are "particularly stretched," having trebled in value since the start of 2002.

“New Zealand is one of the few advanced economies that has not had a major house price correction in the past 45 years," said Spencer, adding a downward correction in house prices could be prompted by a range of potential shocks, such as rising global interest rates, or a downturn in the global economy and financial markets.

"With 60% of its lending in residential mortgages, the New Zealand banking system could be put under severe pressure in such a downturn. The resulting contraction in credit would amplify the impact to the domestic economy and financial system, making it more difficult to avoid a severe downturn," said Spencer.

“Irrespective of the mix of demand and supply-based factors, the longer the excess demand persists, the further prices will depart from their underlying fundamental determinants, and the greater the potential for a disruptive correction."

Hot, hot, hot

Spencer's speech comes a day after the latest Real Estate Institute of New Zealand monthly sales figures - for March - show fresh national and Auckland median price records, and the strongest sales volumes in any month since May 2007.

In the red hot Auckland market the March median sales price of $720,000 smashed the previous record high by $42,000, or 6.2%. The Auckland median price rose 13% in the year to March, and 11% in the three months to March. And the REINZ Stratified Housing Price Index, which adjusts for some of the variations in the mix that can affect the median price, shows a 20% annual rise in its Auckland Index.

Although the national median price was up $35,000, or 8%, to $475,000 in the March year, when the Auckland effect is stripped out the national median was up just 1.4% year-on-year.

The national Stratified Index, meanwhile, was up 9.5% year-on-year to a record high, and March's 8,803 sales is the highest monthly sales in a March since 2007, and the highest since 9,285 in May 2007. There were 10,989 sales in March 2007.

At $8.8 billion, the value of residential properties sold in March was a new record, smashing the previous high by $590 million, REINZ said.

More apartments, please & tackle land bankers

Although policies to ease supply constraints must be the main priority, they are unlikely to provide quick results, Spencer suggested.

"Considerable scope exists to streamline the multiple approval processes required to complete a residential development. There is also a need to adopt a more integrated approach to the planning and funding of new infrastructure. The proposed Resource Management Act reforms have the potential to significantly improve the planning and resource consenting processes," said Spencer.

“The best prospect for substantially increasing the supply of dwellings over the next one to two years appears to be in apartment development. The Government and the Auckland Council might consider focussing their efforts on simplifying the approvals process and increasing the designated areas for high-density residential development.”

He also said an improved supply of useable land is essential, noting the land component of New Zealand housing costs has grown considerably over the past 20 years, and now accounts for more than 60% of the total cost of a new dwelling in Auckland, and about 50% elsewhere in the country. 

"The Auckland Plan establishes a Rural Urban Boundary that provides scope for urban growth outside of the old Municipal Urban Limit. However, land blocks with disparate ownership and speculative investment in ‘land banking’ continue to tie up large areas of buildable land," said Spencer.

"Other measures to facilitate residential development might include a review of taxes and other incentives affecting land banking. Measures to increase productivity in the construction sector would also help facilitate larger scale and more affordable housing development. Housing is the most tax-preferred form of investment, particularly when it is highly leveraged."

"The relatively high cost impost for apartments is due to a raft of height, area and other planning restrictions that appear to have contributed to the relatively low number of apartment consents in Auckland over recent years. Auckland also has a relatively low proportion of apartments compared to Sydney: 25% versus 39% of total dwellings. While apartment construction has picked up recently, the evidence suggests that more active encouragement of apartment development could be an effective means of easing the housing supply constraint in Auckland," Spencer said.

Practical difficulties in using migration to manage housing cycles

On the demand side, Spencer said there were "practical difficulties" in using migration policies to manage the housing cycle, including that policy can't influence the volume of New Zealanders moving overseas or returning home to this country.

Spencer estimated that more than half of the current record net migrant inflow, more than 55,000 in the year to February boosting the population by more than 1%, have settled in Auckland.

"This is providing a major boost to Auckland’s population, which grew by nearly 34,000 people in the year to June 2014," Spencer said. "Although consent issuance of new dwellings in Auckland has continued to increase, reaching 7,700 in the year to February 2015, this has been insufficient to match the surge in population, let alone cut into Auckland’s housing shortage. We estimate the shortage of houses in Auckland has increased over the past year to between 15,000 and 20,000 houses."

Monetary policy can't be used, but macro-prudential tools can; dollar up

 Monetary policy, via the Official Cash Rate, can't currently be used to dampen housing demand, Spencer added, given CPI inflation at 0.8% during 2014, is below the Reserve Bank’s target range of 1% to 3% on average over the medium term. But, he said, measures should be considered to counter the growth in investor and credit based demand for housing.

ASB chief economist Nick Tuffley said the Reserve Bank was effectively ruling out increasing the Official Cash Rate to combat a financial stability problem when the inflation outlook doesn’t warrant it. The New Zealand dollar had risen to US75.40 cents from US74.90c by mid-afternoon following Spencer's speech.

"The Reserve Bank is stressing that added action beyond the Reserve Bank’s mandates is needed to help reduce the imbalances, and associated risks, in the housing market," Tuffley said. "The Reserve Bank is very much putting the onus on central and local government to take more concerted action.  And those actions would more directly address the fundamental causes, rather than leaving the Reserve Bank dealing with the flow-on symptoms."

"At this point the Reserve Bank does not seem close to taking added prudential action outside of the current LVR restrictions and the looming treatment of residential investor property," Tuffley added. "We don’t see any fresh market implications from the speech."

For his part Spencer said macro-prudential policy is a potential tool to help restrain credit-based demand pressures and improve the resilience of bank balance sheets to a potential housing downturn.

“The introduction of loan-to-value ratio restrictions (LVRs) in October 2013 helped to moderate housing market pressures despite strong net inward migration and the ongoing shortage of housing. The LVR restrictions have also improved the resilience of bank balance sheets. They will be removed or modified as market conditions allow."

“Other macro-prudential options are being assessed, including in relation to investor lending. However, such tools are not a panacea - their impact is inevitably smaller than the main drivers of the current housing market imbalance," said Spencer.

Meanwhile, house prices as multiples of income and rents are already near record highs, and further increases will increase the risk of a sharp price correction once demand and supply align.

"New Zealand’s house price-to-income ratio in 2013 was 30% above its historical average. Only Norway had a higher historical deviation," said Spencer.

The chart below features in Spencer's speech, which is available in full here. And here's an interview he did with Radio NZ on the speech.

Here's Labour's Andrew Little on Spencer's speech

The Reserve Bank’s most scathing critique to date of National’s inability to handle the housing crisis shows the Bank is sick of having to pick up the pieces, Labour Leader Andrew Little says. 

“John Key continues to deny there is a housing crisis – to the shock of anyone trying to buy their first home. That’s why he refuses to do anything.

“Now the Reserve Bank deputy governor Grant Spencer has weighed in, saying ‘housing market imbalances have become more accentuated, especially in Auckland’. That’s Reserve Bank language for, ‘We have a Housing Crisis’.

“He has been scathing of National’s response, saying ‘the shortage of housing is getting worse’. He says the Special Housing Areas have led to few completed homes and the shortage increased over the past year to between 15,000 and 20,000 houses. That gap will take years to plug.

“The Reserve Bank is still gamely trying to stem the flow of problems in the housing market by looking at options to make it riskier for banks to lend to investors lend to than the average family looking to buy a home.

“But as we saw with loan to value mortgage restrictions, Reserve Bank tools can be too blunt and hurt first home buyers and the regions. The Bank is rightly wary of weighing in.

“It’s the Government’s job to fix the housing crisis. That’s what the Reserve Bank is saying today. John Key hasn’t listened to anyone else. Hopefully he will listen to Mr Spencer,” Andrew Little says.


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Yes let's have that major corerection.
That will wipe out all those pesky builders who are trying to develop affordable housing.
Wheeler has never understood that the fact that any action has a reaction and it's usually bad.

... truest words you ever spoke , Mr BigDaddy .... " any action has a reaction and it's usually bad " ...
The Gummster's been contemplating that very thought every waken hour of every day since that fateful moment in a church in Manila when he turned to the blushing bride and said ..  " I do . "
... the " co-erections " ended pronto !!!!

The stone throwing extraordinaire....
Do share with us what you think the RBNZ should be doing. And if the answer is nothing, how does that vary from what the RBNZ have said today? The ball is in Key's court.
And yes, let's have that correction shall we.

By affordable housing do you mean the million dollar plus properties that are being built over on Long Bay and almost exclusively owned by Chinese people?

2 Things Big Olly...was that typo deliberate or are you excited by the thought of a housing wipeout.What builders developing affordable housing, can you provide their details?

..they tell me Chinese buy for the long term, so there goes any restraints on them via  capital gains tax.  They also tell me they are funded from offshore, so there goes any ability to reign them in via credit controls...
so...the outcome of any such measure would only  be to make it harder for locals to get in on the game.  Looks like the committment to sell out continues under Key.

..or you could lock them out of the market unless they have citizenship? Means they have to live and work here for at least a while.

I'd rather see policy aimed at improving the existing housing stock and I think a rental warrant of fitness is the way to go. In that way prices will ease considerably for run down stock as potential investor/owners count the cost of upgrades necessary before such properties can be rented. The policy should apply to existing rentals as well - and a timeframe, say 12 months, to warrantable standard should be set.  For existing landlords unable or unwilling to bring a property up to warrantable standard - the Government could introduce a social lending policy, which would assist existing tenants to purchase the asset but only at a maximum price set by a registered valuer or QS with a formula of discounting from RV/market price to the equivalent of the necessary upgrades needed to make the property of warrantable standard.
It would be a stimulatory policy from both a building labour and goods/supply perspective as well - in addition to the positive effect it would have on reducing the overall health costs/budget.
The warrantable standard should be set quite high - with energy efficiency being a key component.  I know it sounds draconian, but a rent freeze should be put in place at the same time such a policy for warrants of fitness is announced. 
As Chris_J has stated on here many times - the price of existing stock is greatly influenced by the cost to build new - and these are so high that there exists plenty of scope for existing house prices to continue to rise.  Hence I think we really need to look at working better with the existing assets we have.

Rental warrant of fitness? Good grief just think of the unintended consequences. 

Give us a list - I'm interested to hear what you think they might be.

the physcial shortage of houses for people to live in is the main problem with this idea.  
People are living in sheds because rents already too expensive and/or not enough rentals. 
If a place isnt up to standard, they have to sell to a tennent using some special loan? A lot of tennets couldnt get a 500$ hire purchase loan let a lone a home loan due to there risk profiles, you suggest the tax payer bare all costs associated with lending to such a high risk person?
Rents will go even higher, or landlords sell out, less supply of rentals, higher rent again. 
Rent freeze? again, land lords sell to asian buyer to sit on property/leave empty as a store of wealth.
A easy to pass, min requirement could work but its just adding more costs into the system (who inspects them? who pays for this? who bares the costs in the end?)

You could start with the 68,000 HCNZ houses, the government acknowledges they are run down with a lot of deferred maintenance outstanding, and a lot of them (many?) (most?) would not be up to scratch in the dampness and insulation departments
What would you do with them?
Tip the tennants out, reduce the rent, still requires a $billion to bring up to standard, so they stay damp and cold, can't re-let them, so left empty
Government is trying to hand-ball-pass that problem on to the Salvation Army and the Iwi

Of course the Government would be expected to meet the same requirements that the private sector would be - and similarly, if they can't/won't then the same opportunities to purchase should be made available to their tenants. 

I can think of a whole lot of good ones, like landlords running for their lives away from the market and the prices then settling back down to something people can afford to buy and live in the houses

How about a tenants passport.  So when you want to rent a place you produce it to show you have paid rent in the past and been a good tenant.

I agree kate.  Talk to hospital staff about the number of sick kids coming in due to poor housing..usually dampness and heating issues.  We require wof's for a vehicle for same reason - safety-health.  The public sytem i.e  taxpayer is paying for this very expensive treatment -  a subsidy for landlords.   Llords  now have heaps of equity to draw on.  It would be a work boom plus..ChCh revisited.
And if they can't afford it, sell up and let some young people move in and do the upgrdae themsleves. 

How about dont have kids if you cannot look after them?

Thats not the kiwi way.
The kiwi way is WE have the kids and YOU pay for them.
It's a great system.

If you look close enough you will find that it isn't necessarily as you say. Winz and Child support between them claw back the costs of raising kids using child support payments. Check it out, it is in the act. I will post further on this one day. Alimony is also subversively built into the child support act. It is that bad that I believe the act is fraudulent, be interested to see a good lawyer take it on in front of a good judge. Fair enough if you want it, but don't hide it under another name.

.......so a safe car is more important than a safe home? Sounds logical.

Kate, the reality is that many people do not understand about how to keep a house warm, even if everything is provided.  As on farm staff house providers, I have spent considerable time over the years teaching staff the importance of airing a house, opening curtains to let the sun in, how to use a fire and heat transfer pump etc.  We have now got the bathroom fan wired so that if you turn the light on the fan also is turned on - despite explaining the need for using a fan when showering/having a bath staff wouldn't use it.  They won't use heat pumps 'because they use power'.  It hasn't stopped us from double glazing windows,and insulating the houses, but just saying. 
We once stayed in a house in Italy where there were signs inside that said 'Do not open the windows.  If you feel you must, do not open them for more than one 10minute interval and only in early morning.'  It had a completely controlled air system that provided 'fresh' air.  Sometimes I wonder that if you really want to improve housing in NZ if this is the only way to go as there is much ignorance about how you look after a house to be warm and dry anyway.  
It is not uncommon to see some migrant farm staff houses with almost permanently closed curtains and windows - all year - and the family living in only the kitchen and lounge of a 3 bedroom house.  It relates back in some cases to cultural differences.  

Must be cultural differences - as NZers love their sun... or perhaps they're cooking something they shouldn't be in there! But seriously, adequate insulation + double glazing and solving any noticible draughtiness / mould is more than enough to combat the ill-health problems associated with damp/cold houses.  And if you're really worried about them not opening the curtains - remove the curtains :- as I'm certain they'll soon ask for them back in exchange for ensuring they open them during the day :-).  

Or ppl heat the spaces they occupy.  As  a home owner this is what I do and dress appropriatley for the conditions.  I am insulating as I do the house up as I can afford it but since I am an owner it seems no one cares if my house is un-insulated or damp or leaks air, it met the regs when built end of story.  But oh if a tenant was in this house? oh the landlaord can pay for the un-economic upgrades free of charge.
So simple really, if a tenant wants better accomodation they can move far easier than I can.

Agree.  You cannot keep a house free from damp in our climate and for most of our housing stock unless you use energy to do so.   I also fail to understand how ppl will not move out of accomodation if it is inadequate for their needs/wants but expect landlords to do up housing to 2015 standards and keep them that way at the Landlords expense, its un-economic.  ie if a house met the regs when built as an owner occupier that is my limit, why should landlords be  treated differently?  

No I hadn't seen it - thanks for the link. Very interesting - hopefully someone takes a tribunal appeal case through the courts using the 1947 legislation and that will set a precedent for future tribunal rulings.
I think public lobbying is the way to get this warrant of fitness scheme in place. The National Government is really good at changing their minds on these fundamental human rights issues and finally doing the right thing when such pressure is applied. Take zero-hour contracts - only weeks ago they were defended by M Woodhouse, and now the legislation will be changed.
One grassroots lobby organisation that I highly recommend is Action Station - get on their email list and join the movement.  Their successes so far are impressive.

There is only one solution. BUILD, EXPAND and LOWER TAXES so people can service their mortgages.

LOL...  you mean so people can buy more investment properties.

The fact you admit that people can't afford them says it all really.

Lower taxes? So money that should be spent on maintaining/improving NZ instead goes to the Australian banks?

National did that in 2008 and it didnt work, so lets go the opposite way, see how that does, worked for Clinton.

Whilst I think the RBNZ's call for more symmetrical tax treatment of investment properties has its merits in this debate and wider fairness, we know from Australia which is also experiencing this bubble, in Sydney and Melbourne at least, already partially have these capital gains tax measures in place.  So maybe RBNZ should be talking about negative gearing concessions instead.  Even so, I think they are dancing around this issue of migration and offshore investor  demand, ignoring what we all know anecdotally, that offshore cash buyers are driving things - who are outside of monetary and fiscal (tax) control.   Punitive stamp duties and tighter regulation for offshore investors in existing housing stock (like Australia is starting to enforce) seem like a solution to me.  It will mean pain for already geared buyers but better to nip it in the bud now.

True and perhaps the lack of data around foreigners is one reason the RBNZ is staying quiet on the subject. They could at least be calling for better data.
But perhaps the RBNZ has an inkling that if the deal is soured for local speculators (tax changes, more bank capital against investor loans, CGT) their moaning will cause National to look at the foreign buying issue. The recent KPMG report suggests that banks are already crying into their weetbix about being cut out of local sales due to foreign cash transactions.

It's not a lack of data
They already have the data, it's just not available, it's not published
About 12 months ago in response to a number of articles by David Hargreaves demanding better data, John Key dismissed the claims say it was too hard to do, too much cost involved in obtaining the data, not worth the effort in relation to any perceived benefit that might be obtained
Have a look at the data held by QV and LINZ, everything is held, the date purchased, the name of the vendor, the selling price, the name and address of the new owner
They know, and if they don't, it's because they don't want to know, and they certainly don't want you, Joe Public, to know
Ignorance is bliss

Yes, we all know this, but the lack of public data remains.
My point, is that the RBNZ's public message should be for better data, just as they are pushing for other reform - I'm not saying there isn't already enough information available.

I hope you are right but I suspect that big business and government are naturally incentivised for population growth so will be reluctant to adjust gross migration downwards to take the pressure off.   In anycase there seems to some sensitivity amongst the press and government to constraining investment in residential property to offshore buyers from the PRC and all.  As if these governments would be offended in some way but forgetting that these governments impose much greater restriction on offshore investment  than we do.  

 He is telling 17 billion dollars of local deposits to get the hell out of Dodge before an OBR event is triggered.
"With 60% of its lending in residential mortgages, the New Zealand banking system could be put under severe pressure in such a downturn. The resulting contraction in credit would amplify the impact to the domestic economy and financial system, making it more difficult to avoid a severe downturn," said Spencer.
And lets face it the 64 billion of farm debt has to be looking shakey at these payouts.

My take is he's saying first off bring in a CGT FFS. Same effect if what's happening in the UK is any indication.    OBR, yes pretty much, for what would be a banker he sounds awfully strident.

In the UK, the change that is making the difference is making non-domiciled owners subject to CGT (previously it was only charged to UK tax residents). This has seem the hot money exit the country.

RBNZ says it cannot solve the AKL housing crisis because JK said that was no housing cirsis in AKL.

... as the master of house prices and demographics Hugh Pavletich would say ... it ain't that house prices are over the top , its that the land beneath them is totally out of whack ...
We need a land-tax !
... you can't scrimp and save on building costs , materials , red-tape , and hope to have any meaningful effect when speculators can gather a free lunch for themselves by driving up land prices , and collecting a juicy tax-free return ...
We need affordable land .

Remove Auckland Council's monopoly on issuing building permit ! 

the problem is you need to apply for a building permit before it can be granted.  

It is all waffle until the demand is reduced. Thats the governments job. Can they afford to do it without peeing off firstly China and then secondly the National voters of NZ who own a lot of investment houses. On both cases I doubt it. So we steam ahead with 10% rises last month in AKL as we enter the New Paradigm phase of this bubble. The capitulation phase will be exciting.
Joseph Kennedy cashed up when the shoe shine boys were talking about shares. What was the most common discussion you had last week? 

Move the people out of Auckland,theres plenty of houses in the provinces.
Move the jobs and the people will follow.
Just shift the Govt departments out of Auckland for starters.Whats wrong with Hamilton,Napier,Gisborne,Palmerston North,Wanganui,Timaru ,Dunedin etc where they used to be!!!
Then shift the Auckland Council back out to the suburbs and less people will have to travel into town.
I`m sick and tired of listening to people going on about problems in Auckland,just move out and enjoy some life like my family is.

"It wasn't me officer. I didn't do it. It was them over there" says Grant Spencer. Of course it couldn't possibly be anything to do with the RBNZ. They are very clever and sophisticated and completely without blame. Low interest rates never cause mis-allocation of capital, why would they?
Beware purveyors of mis-direction and snake oil.

The Govn of the day controls our economy. Chicken and egg, low rates are to stop the economy imploding (or continue to), something a Govn can do things about, if it chooses to. 

Absolutely. National have lost the plot. What is it with third term governments?

If investors are causing the price rises then how come the suburbs with the least (or zero) investors always tend to have the biggest price rises (like the central suburbs)?
I'd suggest the RBNZ staff tries to obtain resource consent for a financially feasible inner suburb apartment building - would be very educational for them.

Central suburbs are full of investors.  A fair chunk of the expense renovated character houses in Auckland Central are rentals.  All our Auckland rental properties are detached character houses on full sites in the inner suburbs.

That's only because you purchased them decades ago. Investors are not buying up 2M Grey Lynn villas. they are bying in places that have returns (and lower CG)

Given the "the tax-preferred status of housing" I'm curious to know how much tax will be payed on the Callplus $250M sale?:
"Based on this it was estimated Dick walked away with around $155 million and Presley with just under $84 million, although Presley could not comment on the details of the sale."
Presumably if property has a "tax-preferred status" then IRD is about to get a big check for this CG?

Given the "the tax-preferred status of housing"
I see you conveniently left off the last word in the above sentence.....investment
That, I believe, is the point.
Rental investors DO have a tax preferred status when compared to owner occupiers.
They are however,  in many cases, competing for the same resource.

Down at Barfoots auction rooms the Chinese buyers were in an utter feeding frenzy - was also evident on the Your Home house auctions on TV Sun/Mon/Tues where the faces in the crowd were mainly Asian. This government has no idea what is going on out there in the real world. Then tonight on Campbell Live see we are giving away $2b worth of water free to a Chinese company from an aquifer in Heretaunga, Hawkes Bay, all of which will be exported to China. The government could be bottling water and earning billions - why give the water away to a Chinese company. The worlds biggest infant milk powder factory is being constructed by another Chinese company,the list goes on and on. A CGT etc is the least of our worries. In ten years we will look back and remember the National Government that permitted the pillage of our nation. No doubt many of the pollies will end up rewarded for their efforts as directors of these foreign companies when they retire from politics.

If there is enough migration, democracy means that Chinese voters in NZ would gain a large enough proportion of NZ's political influence that China-centric policy ensues.
This would benefit those in positions such as that listed above.  Sadly it seems that there are conflicts of interest within the National Party which seem to be benefitting from the Government's  pro-China position - a pro-China position that seems largely at odds with the views of a majority of the electorate (asset sale referendum etc).

How the hell did that thing with the water happen? We are going to have to just stop that, too bad about the consequences, this just cannot happen.

"tonight on Campbell Live see we are giving away $2b worth of water free to a Chinese company"  CL wont be winning many friends in the Nats with exposes of Johns mates like this

loonacy, so we are  burning fossil fuel to transport water 1000 of kms that only makes sense when its "free" at this end and "expensive" at the other. Mad.

That show is a great example of why people shouldn't (in my opinion) sell by auction, the episode I watched had a buyers hand flying up right till they got it.  I recon they would have gone way higher. 

Maybe what would be palatable is a CGT on net profits on investment properties if sold within two years of acquisition.
The Labour Party tried that in the '70's but it was a fiasco because the tax was set at 90 percent. (!!!)
The result was a wholesale withdrawal of properties off the market and a resultant shortage driving prices even higher.
It might be politically acceptable to levy a moderate tax on resales inside two years set at a level that doesn't dissuade sellers and be retrospective.
it won't do a bit of good to keep prices down but  it will look good, quieten the complaining masses, and just might raise a bit of revenue.

A CGT that took out the speculators and captured the flippers would work well to slow the market without punishing long term investors who make most of the gain due (normally) to a relatively small annual inflation in prices.
Generally the longer an investor owns a property, the more tax they will pay as the rent increases and the mortgage diminishes.  Punishing a long term investor would push up rents and reduce the supply of properties for sale as landlords would opt to continue to earn rents than realise a capital gain and pay the tax.
One option could be to have a sliding scale of CGT dependent only on the length of ownership (excluding inheritance) which is not dependent on the owners marginal tax rate (as income from capital gains is likely lumpy and received maybe only 1 year in 5 for example).  So sell within 1 year pay 20% tax, each subsequent year of ownership it reduces 2%, so at year 11 it is tax free.
A CGT on that basis, plus a stamp duty on foreign investors of say 5% on purchase and say 20% of the net profit on sale together with a reduction in immigration rates would halt the unsustainable rise in Auckland house prices.

Neat, though maybe the drop could be faster, ie I think speculators are only interested in holding for <3 years, so a drop at 4% might be just as effective.  The thing to workout is how long a FHB/genuine home owner owns on average and set the zero year to that, ie a CGT on all houses, pigs might fly of course.

@ chris_J "If there is enough migration, democracy means that Chinese voters in NZ would gain a large enough proportion of NZ's political influence that China-centric policy ensues"
Years and years ago I went to a seminar on future Foreign Policies.  We discussed the new way of invasion not by armed forces but by economic means, and one day we will be another province of the mother land.  It was a joke then but not now!

North Harbour Democratic Progressive Party anyone ?? 
The way Asians are organized and objective they will basically vote as one and their turnout will be at the high 90% level. With the usual low turnout from Kiwis the unemployed, maoris, polynesians, students and generally can't be bothereds will be going "but, but but" post election one day but it will be all over. Colonization by immigration. That worked out well for Fiji.

1. remove foreign buyers (5-10% on demand side?)
2. increase LVR restrictions to 60-70% lending for any property after primary home (make harder for investors to recycle deposits so slows them down)
3. IRD activly use the rules that are already there to tax capital gain on properties for buyers that clearly had no intention of anything else. Its on the tax payers head to prove intent.

Not bad, but I'll bet you your numbers on the foreign buyers side is light, for Auckland, anyway

Seems too simple doesn't it. Unfortunately this govt just buries their head in the sand and hopes it will all go away - really lost any faith that was left with them.

Step 1.
Get control of the politicians, offer trips, business deals, mateship and perks.
Step 2.
Encourage own citazens to migrate to said country, buy anything and everything that is on offer. Slowly undermine local big business (Fonterra).
Step 3.
Use business's now entrenced in colonised country to exportback to mother country any extractable resource, especially food - now a scarce commodity world wide.
Step 4.
Locals revolt due to insane food prices, unemployment and lock out from the new economy run by the new powerbrokers. Local Police support the actions.
Step 5.
Mother Country sends own military force to 'assist' NZ military and supress the riots, appoints unelected caretaker 'Govt'.
Step 6.
Job done.
Back in Hawaii John Key checks his trust fund...