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Our latest opinion poll indicates that a ban on offshore-based house buyers would have support, as would a capital gains tax

Our latest opinion poll indicates that a ban on offshore-based house buyers would have support, as would a capital gains tax
<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The idea of banning offshore-based investors from buying existing New Zealand properties appears to be popular, judging by results from interest.co.nz's latest reader poll.

We recently ran an online poll based on BNZ economist Tony Alexander's radical eight point plan to tackle the rising housing market.

In response to being asked which of the eight suggestions they most favoured, 34% of the 880 readers who responded thought that banning house sales to non-residents was the best idea.

The question of non-NZ-based buyers of existing houses has become a real issue particularly in the sizzling Auckland market, which has seen house price inflation of close to 15% in the past year.

There have been widespread, anecdotal, tales of overseas buyers buying up large, particularly in Auckland, though the BNZ-REINZ housing survey, which has attempted to quantify how much of this activity really is taking place, has indicated it is not currently as widespread as the gossip would have it.

The BNZ's Alexander has, however, warned that overseas-based buying of NZ houses is only likely to increase in future as we form closer trading relationships with Asian countries, particularly China. He says he favours an Australian-style solution whereby overseas-based investors cannot buy existing houses but can buy new houses or have new houses built. Such a solution would have the positive impact of adding to NZ's housing supply and would provide local work.

To this point the Government has not appeared to give any indication it would favour such a move.

The second most-favoured option was the always-contentious issue of implementing a capital gains tax on second properties. Alexander's option also included CGT on farmland and an immediately payable stamp duty for all second-house purchases. The CGT option attracted 28% of survey respondents.

It would appear extremely unlikely this Government would ever implement such a tax, though it is current Labour Party policy.

This means that the top two choices, the banning of offshore-based buyers and the capital gains tax attracted 62% of the vote, making them seemingly popular choices.

Among the rest, were:

  • Rezone all land within 10-20 kilometres of existing city boundaries as residential, 11% (99 votes)
  • Create an SOE whose sole purpose is to undercut existing building materials suppliers, 7% (64 votes)
  • Ban councils from imposing any development fees and allow developers to instal their own infrastructure, 7% (64 votes)
  • Initiate a large builder training programme targeting not just youth but low skilled migrants, 5% (44 votes)
  • Initiate a new large state house building programme relying largely on the to be created new carpenters etc, 5% (40 votes)
  • Impose a tax on all houses owned by Kiwis offshore with the aim of encouraging them to sell them, 4% (31 votes)

Alexander conceded that there was little or no chance of any of these measures being picked up. But interest.co.nz readers seem to certainly think there's some merit in some of the ideas.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

36 Comments

How do you ban them? Won't they still buy houses via a company?

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Doh...we already have a capital gains tax...!

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This is true , gains on assets are already taxed when assets  sold by people such as property traders, builders , developers , share dealers and share speculators

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What a load of bollocks.  When did you last hear of a landlord selling a rental property & having to pay a CGT?  I certainly never have, out of dozens of examples.  I would be interested to see some figures on this, but would doubt that only a very tiny proportion of very stupid landlords ever get caught out. 

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So a 2008 article about a piddling $15m is your best answer then?

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Pathetic!  If that's the best evidence you can provide, its a classic case of the exception that proves the rule!

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You asked the question "When did you last hear of a landlord selling a rental property & having to pay a CGT?"

 

I gave an answer. Why do you think I'm trying to provide evidence of something?

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So the most popular option is to do something based on "widespread, anecdotal, tales" which actual data indicates "is not currently as widespread as the gossip would have it".

 

The second most popular option is do something which has proven completely ineffective when used in other countries.

 

I think I'll bet on house prices continuing to rise until there is a significant demonstrable increase in general intelligence.

 

 

The tragic thing is that polititians will do what is percieved as getting most votes - whether it's a solution to a problem is incidental.

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Anecdotal evidence? You want some hard evidence?

Here's some - right from the horses mouth

 

For a comparative insight into the re-distribution of the world populations. The SBS-World-News-Crew are in South Africa reporting on Nelson Mandela. While there they did a visit to Johannesburg which has a population of 2,000,000 .. the chinese population has now reached 500,000 or just on 25% of the total Jo'burg population .. The SBS crew interviewed some of the recent arrivals who were asked why are they going to Johannesburg and not Australia the interviewee states it was because of the Australian "restrictions" on buying property and "taxation" as definite disincentives

 

You can listen to the broadcast here .. it is good for two more days .. the video is corrupted .. but you can listen to the audio starting at the 15:03 minute mark for 3 minutes

http://www.sbs.com.au/news/video/34572355567/SBS-630-News-22-June-part-2

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You mean here's some more anectodal evidence?

 

A reporter in South Africa hears an anectode from someone about why they chose to immigrate to South Africa instead of Australia.

1) It's an anecdote

2) They didn't have any effect on NZ house prices

 

I'm not saying immigrants aren't affecting house prices - just saying there's no evidence of it been presented and making policy based on assumptions/anecdote is stupid.

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I'm not saying immigrants aren't affecting house prices - just saying there's no evidence of it been presented and making policy based on assumptions/anecdote is stupid.

 

Soooo... Let's do a 3 year study and then make a decision?

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No, it's obviously much better to base policy on rumour and speculation.

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ok - let's be grammatically accurate - get the semantics right

yes you are correct in saying that the example given is anecdotal in that it is just one data item

Then it is more accurate to say that (semantically speaking) the statement in the lead article that there is "widepsread anecdotal evidence" is incorrect, because here in new zealand all of the evidence is second- hand, word of mouth, and therefore simply hearsay. The journalism in the lead article is therefore clumsy.

 

Even the categorical statement by David Whitburn on TV One's Sunday Program about the purchase by an international student of 3 houses for $5 million cash is also hearsay

 

The difference with the SA example it's an asian stating first-hand why he has chosen a low-tax, low-restriction jurisdiction to migrate to which is the very same attributes new zealand is offering .. the other difference is no investigative journalists ever get off their butt's and goes and interviews anyone and gets it first-hand straight from the horses mouth so that we can get more than one data item

 

And it doesn't take too many brain cells to guess where those south africans who are selling out to the chinese in Johannesburg are going - I am guessing of course

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Yes, we are copping it from both ends

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I thought that the 500,000 people was the interesting bit. In the case of NZ the idea that we can absorb a seemingly unlimited number of people from China and India defies all reason. The numbers are simply staggering.

The realty is that we do not need any more people, we need to look after the people we have. Why anyone would vote for more people is simply incredible to me.

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Another way of looking at people leaving is that it is a safety valve for the economy and what we really need the replacement people for is to stimulate the construction sector*.

*It would be nice to think that I'm wrong on that; that something other than growth for growths sake is what drives Auckland..... judging human behaviuor I don't think I'm wrong, however.

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I am always left astonished as to why people think that CAPITAL GAINS TAX  will  A) bring down house prices, B)  be paid willingly  by the "rich", and C) reduce house prices  .

Clearly , these folk dont understand how CGT works .

1) The tax is only paid on sale of the asset,  Capital losses on sale  are allowed as setoffs against other income , 

2) The seriuosly wealthy dont sell good solid  assets , they borrow against their assessed value to acquire more income generating  assets. CGT  will self -fulfill this cycle  of accumulation and acquisition 

3) CGT is  a TAX for goodness sake , it will end up being added to the cost of housing in the long run , and will have the reverse effect to what is intended

4) In a market with constrained supply ( Auckland) , sellers will simply add the CGT  tax to their asking prices , and Joe Average will simply have to pay .

5) There are so many ways around the Tax its unbelievable , if there is a change of use and the owner moves in , it becomes exempt as primary residence on sale

5) It has not had reduced house prices in Sydney or anywhere else in OZ  , Canada , or even South Africa for that matter.

There are I am sure many other reasons not to do this

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I agree with all this except  perhaps for number 4. I dont think you can get more for a house because you have had to pay CGT compared with the house next door where the seller has no CGT liability. I do think overall CGT will add to house prices by reducing supply as sellers will not bring property to market unless they have to  More property is likely to be held by companies or trusts so there is no need to transfer ownership even if the owner dies. To the extent it changes behaviour at all it will also increase rents as residential property investment will be less attractive and the supply of rentals will diminish. It is interesting that rents have not risen as fast as property prices even in Auckland.

 

The argument that GCT will force investment into the productive sector is flawed as well unless the tax applies to primary residences ( which noone is brave enough to do ). If you can get a tax free capital gain on your primary residence but have to pay CGT on the increased value of a farm or business or shares in businesses the tendency will be to buy the flashest house you can and forget about investing in anything that might employ someone.

 

If we do have an emergency developing in Auckland and Christchurch it could well be worth stopping non residents buying in houses not previously lived in in some postcodes. Not sure if that needs to apply across the whole country as some bits are depopulating and could do with some more people.

I really dont like the idea of LVR restrictions. How do they help young people get into a home?

 

 

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Yip, I'd support this..... but only right after I sell my over inflated priced house to some asian, Then i'd get to buy back in once the market realises that there is nobody out there supporting the high ticket prices, as they're crashing back down to a realistic level.

I can hear the bleating already ............ .But i'd be right Jack.

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If capital gains were taxable, would not capital losses be tax deductible??

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Sure are....and of course this will benefit those who purchased at high prices and hadn't sold at the time the tax came in, but then had to.  Thus  a pointless tax that exposes the tax payer to more risk in the form of tax losses claimed.  The horse has bolted, a cap gain tax now is pointless and risky.  Those that can claim the losses will be into it, others will visit KPMG and get a work around.......

 

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No....

Pretty sure that Labour's CGT taxed at a reduced rate the difference in price, 15%?  but only positive numbers.

regards

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Just like cars, horses etc, there should be a number given - if you sell more than one house every two years it is more than 'normal' and gains should be taxed. Be careful singling something like housing out, when there are plenty of avenues for tax (trade me, town markets) where people are making a profit and not paying tax. Also, if the tax payers were happier with how theie tax was being used, they may be less reluctant to pay - at the moment it is pushing people to breaking point, while others who could possibly contribute (to society in general) elect not to. And before all the hippy do-gooders attack the comment because it is 'downing' all the people on benefits, that is not the point at all. But most new zealanders know someone who milking a benefit.

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99% sure that seeling frequently is covered already..  The only unknown is if IRD catches you....I'd assume when they did you'd be liable for late penalties plus maybe criminal charges.

regards

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Hi Steven -selling frequently is not tied down to a number - like I suggested. At the moment it is self governed by people who only need to show that they were not 'planning' to sell for profit. EG: They purchased to rent the property out and sold earlier than they thought, or they purchased the home to live in themselves and then moved again as it was not suitable etc. The IRD does start asking questions if people do this 'a lot', but at the moment the idea of 'a lot' is subjective.

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There was an article published in the news about a week ago about a young woman, in her early 30's, and her husband who are looking for a new home. They are currently living in their 7th home and now looking to move on to their 8th. How would you assess that?

 

I'm a greyhair and have only ever owned 3 homes in my entire life. Still living in the 3rd.

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Im still living in my first!

I'd assess that as taxable myself...

regards

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Ok, but do we have any stats to indicate there is a significant (or even small) problem? ie dont fix what isnt broken. Does setting an articifial number really achieve much? Are those already not declaring selling for a profit going to care?

Say Im a landlord and own 30 properties, at 65 after 30 odd years I want to sell up and retire at 300,000k each, say thats 9million, OK do I pay tax, or not?  If you have a rule that says yes more than 5...Ok, yes on 25 of them, which 25?  

So Im a landlord and knowing the 5 rule, I dont buy 30 low end houses that provide renatl accomodation for those who need it, I buy 5 multi-million dollar houses instead that I leave sitting empty cause I dont want them damaged.

Say Im a farmer and own 1 large farm its worth 20million, after 30years I sell and its 1 farm....clearly less than 5.

Whos breaking the rule more? I'd suggest the one in the middle is providing no value what so ever compared to the first and the third...yet only the 1st gets taxed. When really only no2 should (clearly) do.

regards

 

 

 

 

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Anyone else heard the radio ad of Bayley's asking people to list their Auckland homes with them because they have so many FOREIGN INVESTORS!

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Kimy Says:

I love taxes. Show me a tax and I will show you a loop hole.

........................

Land tax... they make you throw up I recall?

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Interesting how much effort he puts in to tax dodging instead of a productive enterprise....examples like this show just why the [tax] system around housing needs changing.

regards

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Just add to rent....of course that assumes the renters can pay...

Hence why I like it....cant be dodged...

regards

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[Singapore]

Is Population Growth a scheming Ponzi Scheme: Why more is not necessarily better...

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

"According to Ponzi demography, population growth — through natural increase and immigration — means more people leading to increased demands for goods and services, more material consumption, more borrowing, more on credit and of course more profits. Everything seems fantastic for a while — but like all Ponzi schemes, Ponzi demography is unsustainable.

When the bubble eventually bursts and the economy sours, the scheme spirals downward with higher unemployment, depressed wages, falling incomes, more people sinking into debt, more homeless families — and more men, women and children on public assistance.

That is the stage when the advocates of Ponzi demography — notably enterprises in construction, manufacturing, finance, agriculture and food processing — consolidate their excess profits and gains. That leaves the general public to pick up the tab for the mounting costs from increased population growth (e.g., education, health, housing and basic public services)."

http://www.reach.gov.sg/YourSay/DiscussionForum/tabid/101/mode/3/Default.aspx

 

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link doesn't work too well for me.

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