A land tax just for foreigners? Come on John, you’re better than this says Gareth Morgan. It won't solve the core problem

A land tax just for foreigners? Come on John, you’re better than this says Gareth Morgan. It won't solve the core problem

By Gareth Morgan

John Key has floated the idea of an annual land tax on foreign buyers of residential real estate as one response to the influx of money into the Auckland market particularly.

Land tax is part of one of the biggest holes in our income tax regime so in principle I agree. For years now I’ve advocated taxing all effective income from capital. Currently New Zealand doesn’t do this and it’s an insult to fairness.

However, the prime minister is looking at a land tax only rather than a tax on effective income from all capital  – and he’s only looking to tax foreigners. That’s the sort of tax incoherence that Muldoon championed and the Rogernomics revolution got rid of, so I can’t agree with him, just as respectable economists couldn’t agree with Muldoon’s livestock incentive scheme or his crazy wage and price freezes. Arbitrary and selective reactionary taxation is the epitome of policy naivety. One would have hoped John Key wouldn’t take us back into that black hole.

If you are going to tax land, why not tax the houses that stand on them also? Both give untaxed benefits to the owner. Or in the case of farming – a sector that consistently operates for tax-free capital gain  what about other capital improvements? What about the scores of lifestyle businesses that are over-capitalised compared to the returns they create, a clear sign that they are being used as a tax write-off by their owners?

But of course desperate times and prolonged indolence always lead to desperate measures. There is little doubt that New Zealand’s ever-rising appeal as a safe bolt-hole for capital fleeing authoritarian regimes, combined with the massive tax and credit breaks we afford property, is about as toxic a potion for property hyper-inflation as one could engineer. So of course the PM wants to deal to it – there’s fewer and fewer votes in sending house prices beyond the gambit of ordinary New Zealanders, despite the capital gains windfalls that National’s traditional core of property-centric wealthy might enjoy.

So the PM is looking at a land tax for foreigners. If that were to eventuate, I smell an even greater profit opportunity personally than just accumulating empty houses. To become the go-between that the Chinese or other foreigners needing to effectively own more and more of New Zealand’s housing stock looks enticing. I’d simply use a blind trust or nominee company to do the buying for them – for a small share of the capital gain of course. And if that were too hard, I’d raise funds in China to establish a company to do the same.

Come on JK, you are better than this. Look at the core problem here.

By not taxing the effective income every owner-occupier enjoys from owning property we have created the biggest tax loophole available. This enables New Zealanders to get rich from the flood of buyers into that market – no matter whether they’re foreign or local. If you really want to keep the price of property within reach of everyday New Zealanders you need to actually close the loophole. Just barring foreigners from playing this game simply opens up great arbitrage opportunities for some of us to exploit.

Think again, think less reactively and try to think beyond pleasing just the property-owning class that always vote National.


This article was first published on his blog, Gareth's World. It is here with permission.

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98 Comments

Gareth , thank God we have New Zealanders like you , people who stick their necks out and call a spade a spade .

Yeah Boatman, right on. He's so important to New Zealand we should erect a stature in his honour and... oh wait... that's already been suggested hasn't it?

I appreciate the work he does. Has done some excellent reports for the public good. Something quite difficult for a landlord to comprehend.

So would provincial house owners whose house value has declined get a tax refund or a home-owner benefit?

Oh for goodness sake , TAX should not form any part of the housing equation .

Buying a roof over your head should never be complicated with tax issues , and it should never be taxed or done to get a tax benefit

We have created a monster here in NZ with complex tax benefits around property investment ,its wrong on every level and has distorted the whole market for too long now , so the effects have blown out of all proportion

The landing will not be a soft one

Boatman have you looked at Gareth Morgan's suggested alternative? You may not agree with him given your comments about not having your house taxed.
His Big Kahuna idea proposes a capital tax on all property, not just land.

I have read all about the big Kahuna , and I disagree with it completely . Just because I think Gareth Morgan is outspoken and good on him , does not mean I agree with him on all issues .

Housing or shelter is the most basic of human needs and should neither be taxed or tax incentivised .

I also believe that basic fresh food should not be subject to GST

Gareth , it seems the Government has been caught like a hare in the headlights , and is clueless as to what to do

The reality is a simple 4 step solution that can be in place in weeks

1) Foreigners should be restricted to investing in new builds ONLY as is done across the ditch
2) We need to phase out the generous tax losses allowed on our salaries from negatively geared leaky wooden shacks ( to phase out over the next 3 years to allow orderly exit and prevent a collapse)
3) Buying vacant land is NOT an investment because there will never be any income stream , its purely a speculative activity and people doing this are simply land dealers and should be taxed as such
4) We need rules to force the development of fallow residential sections being held by Land-bankers and other speculators , this can be done through penalty rates and taxes after say 2 years of subdivision ( Auckland Council needs the money anyway)

All under control

Auckland Council has just increased the fees for 8 hour (all-day) road-side parking in the outer CBD from $16 to $42 per 8 hours - that's $9000 yr after tax money to be found to work and park in the city

Welcome to Auckland

Its appalling , do you have a link to the info in your posting about parking charges ?

There it is - just below - next post

Catch the bus. With the traffic and costs of parking everyone will simply start avoiding the CBD. Am looking at changing Dentist, just cannot handle the nightmare CBD anymore. With all the shopping malls just down the road from you, why go into the city ? unless you stuck there for work and get given a free carpark with your job, stay away.

Onstreet parking around Auckland's downtown area is to become more expensive, with an eight-hour park in the outer CBD zone rising to $42

http://www.radionz.co.nz/news/regional/302458/auckland-council-to-charge...'s-parking

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A massive free-kick for Wilson Parking - a multi-national profit-shifter who doesn't pay tax
http://www.smh.com.au/business/wilson-parkings-tax-numbers-appear-to-def...

We are cutting our own throats

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This a question JK and English should be answering - why this company, and other multinationals get away without paying tax. Also companies like Sanitarium that are operating commercially, but because they are owned by a registered charity, also don't pay tax. To be fairer, lets ensure all the commercial operators pay their share of tax. There has to be tens, or hundreds of millions in it for the country if they do.

agree

I don't see anything wrong with the council increasing prices. More money for the Council. If you wanna park in the city you pay for the privilege

Uber will be stoked.

More expensive than central Tokyo

1) is not going to help a huge amount. The cost of building a new house underpins the cost of existing houses. If it costs foreigners more to buy the same house regardless of whether it is new or existing it will lessen the demand from foreign investors and create a more level playing field. it is however asking existing home owners to take less for their property. A much better solution is to address the supply shortages of housing my making it more cost effective to build.There are many places around the country where the cost of the property including the existing house is less than the cost of building a new house. The cost of building a new house is a major problem. The leaky home issue has also added to the supply issues.

2) Negative gearing only works when capital gains are being achieved and there is a limit to the number of negatively geared properties most people can support. Reducing the supply of rental properties will put pressure on rents so expect rental increases. There is a case for stopping the transfer of the losses from the property to other income like salary etc. Loses should be able to be offset against future income. Negative gearing should be a an indication of intent for the purposes of taxing capital gains. i.e if you plan to be negatively geared for a extended period then it is likely you intend on getting a return on investment via capital gains.

3) Buying land and banking it only works because of the high cost of developing it . Providing incentives to develop should be put in place rather than penalties for not developing.

4) Provide incentives to build and people will build. Land banking only makes sense when property prices are increasing. Taxing people for owning land is like taxing people for having money in the bank or taxing someone for not renting out a second home.

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Remove the deductibility of interest on residential investment properties and wait for the squeals.

In place now in the UK from April 1st this year.

A home owner who has to repay in tax paid dollars simply can't compete with a so called investor using fully deductible funding.

Gareth is correct in highlighting the gross disparities in our tax system and the now urgent need for them to be addressed.

Or you could always allow home owners the right to claim interest back for tax purposes.....A government is only meant to collect taxes for the purposes of upholding constitutional rights and is something that Gareth seems to be totally unaware of their existence!

JB and notaneconomist
You know not that between your two ideas a political party could offer both of your ideas within the one package which would
1. Curb market progress upwards and
2. Balance new buyer v investor competitiveness
2. Allow more home owners and less investor holdings
3. Be fiscally neutral !!
Have a think about that.
It would need help in Auckland from immigration constraints and elimination of overseas buyers

That is your opinion, but then you are not an economist or a lawyer.

Yeap JB, a simple solution to a big problem. Problem is getting passed the mass of political self interest

There is a better way - a half-way-house if you like

In the final years of the reign of Muldoon, when his stewardship of the economy wasn't going too well, he changed the rules on interest deductions on investment properties. It was allowed for the duration the property was owned, but the lot was clawed back in a lump sum as income for tax purposes the year it was sold

That was clever

The deduction of interest from income on investment property is real problem and is providing investors real good income. The loss , they claim from investment property is funded by general public as IRD. This is how investors keep adding properties and then reducing tax at the same time. Some investors keep boarder and also earn huge additional income as IRD is not monitoring or boarders can live without knowledge to IRD. The loss claimed from income tax in not recoverable from the profit earned from capital gain when property is sold. In summary: investors are king , enjoy all benefits on the expense of hard working salary class. They do not like any suggestion contrary to this therefore will never allow political parties sell an idea of capital gain tax. I will like to clarify here. the well designed capital gain tax never affects adversely to people who live and either gift or sell property to legal heirs to live. However will apply if legal heirs do not live and use the property as rental. i.e capital gain tex should only apply on investment property , a property where owner lives is not a investment property. Capital gain tax , and taxing foreign investors on land is necessary to get some reasonable out come. IRD should also monitor the students where they live and how much they pay , as this is hidden income, the investors are earning and are able to afford multiple properties. Students can be easily monitored through Work and Income or immigration or where they are enrolled as foreign student. IRD exemption for boarder income to about $250 should go .

It funny how JK said a year ago, "if the property market ever gets away on us, which its not we will consider tools" JK still doesn't reckon it a problem till he sees the facts of the survey.........come on JK

I am for a land tax on all residential property that is not a primary residence. Countries around the world now have to use Taxes to control the property markets as interest rates have become ineffectual. As usual NZ is the last to react.
The new taxes in HK,Singapore and UK are all starting to have the desired effect.

You lost me at "Come on JK, you are better than this".

Who knew Gareth was a raving delusional optimist?

Gareth its time to step up and run for PM.

Gareth would make a shocking politician he is too direct and honest

With Morgan in control of NZ and Trump in control of the U.S.A. we have plenty to look forward to.

What? You didn't get the memo? TPP is a go therefore: Trump in control of USA = Trump in control of NZ.

The core problems are the money, banking and debt systems, the institutions that control them, the hoarding and accumulation of "wealth" and power in the hands of a few, mankind's sole purpose of pursuing wealth and economic growth, selfishness and greed of the people.

We are failing to evolve and adapt. We are holding on to belief systems that no longer serve the planet and people for the benefit of all.

Gareth makes a couple of fraught statements here; firstly for people living in their own home; there is no undeclared income stream, it actually costs money. Gareth talks as though everyone should structure their life as a business, with every part of it having a cost or benefit. The average, and majority of Kiwis (or anyone for that matter) should not have to do this. Gareth is saying that by owning your home, you're saving on rent, which is utter BS! All home owners pay their rent; it is called rates, insurance, maintenance and so on. The rates are the tax component. On the other hand I do agree with Boatman who advocates second and more properties should all have a tax on them, but taking Gareth's point, taxed at the Capital value, not just the land value.

Another point Gareth tries to make is life stylers declaring losses on their blocks. He makes the assumption that the block is registered as a business, and then the costs associated declared for tax purposes. I know a few life stylers, none of whom have done this. To be fair, there probably are a few, but we need to see some actual figures, not guesses and assumptions before we lump everyone with an unreasonable tax based on the actions of just a few.

...some people just dont get it.

If you had a deemed rate of tax on very asset, inlcuding the home, there would be no loopholes. Tax would be paid by all....land banking would end, inflated house prices would end. Investment cash would flow to productive sectors, not the sit and bubble as a present.

Values woud retun to a base that represented income returns.

PAYE would drop and be spread amongst all wealth, not just labour.

And lifestylers who have claimed gst on their 'farm' and "business' expenses on their block would be paying. You know...the ones land banking just outside town waiting for the tax free cap gain.

Time to end the nonsense.

PAYE wouldn't drop - government spending would simply increase to utilise any extra tax income.

Rubbish! Why should the Government (or anyone else for that matter) be able to rock up to your home, decide it has a certain value and demand a tax on it? I derive no income form my home so what is taxable on it? It's value might have changed in someones eyes, but not mine. I have no mortgage, I have not invested in any change of value, so why should you be able to tell me that it is unfair that I don't pay tax on it? Actually I do they're called rates, and for years they've been higher than most Jafas pay. My rent takes the form of all the costs that come with owning my own home. I happen to know that for some it is higher than the rent they pay on their accommodation, and less than on others, how is that unfair or inequitable? My life is not a business, i do not place a cost or benefit on every part of it just because some greedy prat thinks he should be able to make me pay for some part of it. I earn just slightly above the average income in the regions. We're already over taxed and under paid. Right wing economics is destroying us and this is just more of it -power to the rich an powerful while they screw the rest.

>>> I derive no income form my home so what is taxable on it?

Sigh. You derive a benefit, whether you think of it as an income or not. Renters have to pay rent with after tax income, and their savings are taxed. If you didn't own property, you would be paying income tax on the yield or interest of any alternative investment.

>>> Right wing economics is destroying us and this is just more of it

A land tax is pretty left wing innit...

I derive a benefit from my car, push bike, wave ski, wet suit, TV, radio, computer and on and on...! SIGH! Where does it stop! By your statement renters could be made to pay a tax on their rent because they derive a benefit from paying to live in a house! The whole concept of being able to pay taxes on "derived benefits" is so far beyond totally stupid, there are no adequate adjectives fit to describe it! The concept of a land tax is ,IMHO is pretty neutral, how it is applied is either left or right wing.

......Income from asset accretion is taxed when that asset is cash in bank (the interest merely reflects your cash revaluing itself) . A person renting with cash in bank is taxed as it trys to retain its value, but the home owner with the same value of asset is not. There is the inequality and biased towards ppty assets and owners of.

Incidentally, a home owner can get accomodation supplement, a renter with cash of $8,100 cannot as the asset test is failed. There is a systematic widespread bias through public policy against the non owning asset classes. They have reason to be p###d.

Correct and correct

Apparently the landed gentry genuinely don't understand the problem, and will be thoroughly confused when the metaphorical guillotines come out. Poor souls.

Cars etc are consumer goods where GST was paid. So their consumption has already been taxed.

Rents would pay for a land tax, indirectly, obviously.

The whole wealth tax is wrong. If two people earn the same income and pay the same tax. One saves some and the other spends it all in Las Vegas at a casino, why should the person who saved have to pay again? If I rent a house to to some good tenants and as a result, I don't change them as much as I could because I want to keep them, should I have to pay tax on the difference? If I own a vineyard and I could subdivide the land and build houses instead should I pay taxes as if I had even if I stick to making wine? Saying I get a benefit from owning my house which I paid for with my after tax income so therefore I should pay tax on it again is double dipping.

Tongue in cheek as I point out the following.
If your landlord has his/her capital value reduced by tax changes for example from $500k to $400k the return on investment (assuming the rent remains the same) is suddenly increased by 25%.
If geared by mortgage the return on the capital invested is even greater.

I am not sure I can agree with Mr Morgans proposition that not being taxed to live in my own home is a 'problem'.

Would it still be a problem if our income taxes went down by a corresponding amount? (presuming it is a net zero sum tax game if the same overall services are delivered)?

Aren't we already "taxed" to live in our homes - don't they call it rates?

..you got it. The point is its based on a net zero sum tax game, the tax being targetted on a much wider base. Hence some relief for paye earners and some pain for land bankers and pprty speculators etc. The fairer spread should encourage investment towards productive assets and not biased towards peferential tax treatment. The tax system is encouraging this non productive investment.

Unfortunately the debate gets derailed by squeels of no more tax/an increase in tax...an entirely different issue.

There are additional hidden factors. Part of the cost of owner-occupier is the opportunity cost of equity. If you were renting that $ would be earning a return at the next best alternative, e.g. invested in business or just earning a term deposit interest - either way those returns would be taxed. So that part of the benefit of your house ownership is not being taxed, or it is being 'paid' with untaxed income depending on how you think about it. That's a (one of many) distortions in the market.

What you call equities, investments and markets, I call home.

Not everything in life is about money.

Your home costs money and provides a financial benefit to you. QED.

Life is about money whether you like it or not.

So you would penalise someone for making a decision to save, get a mortgage and own their own home? It seems you want people to just accept the fact of life that they are all cabbages and should just roll over and do as they are told, ... oh and be a slave to someone. That is just dictatorship! Why not tax all the people who are stupid enough not to save, but spend all their income on living and having fun? Call it a hedonist tax. You know one of the things about having a job, earning money and paying tax on those earnings is that in a democracy you actually get to choose how you spend it. If you chose to spend it in a way that furthers your income, all well and good, pay tax on the income actually realised, but don't come along and tell me that I have some kind of invisible income (that actually doesn't result in any money in my pocket) and expect me to pay tax on it.

>>> So you would penalise someone for making a decision to save, get a mortgage and own their own home?

I would even the playing field and remove hidden distortions from the market. However you cut it, land provides you with a benefit. If you accrue that benefit directly (e.g. by being an owner occupier) and avoid currency, you get that benefit tax free. That is inequitable to every other tax payer. Hence the basic precept of a land tax.

>>> Why not tax all the people who are stupid enough not to save, but spend all their income on living and having fun?

Ummn. They are taxed, massively. They are spending after-tax income and all purchases are levied 15% GST plus varying duties.

That is just accounting and economics double speak! look at my earlier post, I derive a benefit from most things in my life, that does't justify them all being taxed! I chose to sacrifice my life style, and it wasn't easy, to own a home. It was my after tax income I chose to spend on my house, not any tax free income. The cost of ownership goes beyond money, but the benefit is that I have a house over my head that, so long as I continue to pay my bills, no one can kick me out of it. That to me is the only real benefit. Why should that be taxed?

This extreme right wing economics is what the real problem is with the world today. Where a few create a concept the encapsulates an imagined benefit that someone else has. I own a Ford Ranger, the "derived benefit" from that that I get is far more than if I had bought a similar priced sedan, but the GST on it was only based on the price. And by the way that GST was paid from my already taxed income! So should the derived benefit each individual gets from a possesion be individually assessed for tax purposes. The concept is so stupid it defies imagination.

>>> that does't justify them all being taxed

Well your govt and society mostly disagrees with you, most all earnings including investment earnings are taxed, and most all consumption is taxed. So I'm not sure what your point is because you are starting from false assumptions.

Quit with the 'extreme right wing' rhetoric, it is not. Trying to check the landed elite from snowballing their tax free estates at everyone else's expense is quite the opposite.

>>> to own a home

You actually don't 'own' your home in the true sense of the word, you only own a title issued by the govt and only valid so long as a certain set of circumstances continue to hold. Stop paying your rates and you'll soon find out who is the real owner. I make this pedantic point to try to get you away from this emotional my-house-my-castle mentality, in the hope you can think about things more altruistically.

>>> I own a Ford Ranger, the "derived benefit" from that that I get is far more than if I had bought a similar priced sedan, And by the way that [car] GST was paid from my already taxed income!

Correct, so there is little justification in considering it an asset and landing your with a related tax, I have not argued this. Did you pay GST when you bought your land?

>>> So should the derived benefit each individual gets from a possesion be individually assessed for tax purposes. The concept is so stupid it defies imagination.

No - because if such a tax was implemented, both land values (and consequent taxes) and rents would in theory, notwithstanding other complications, adjust to a point where they were balanced. The desirable outcome is for neither renter nor owner-occupier to be in a tax-advantageous position vis-a-vis the other.

....sighhh. Its like tryng to explain climate change to the koch brothers..

Not really. I actually do understand it, but i resent the fact that some academic thinks he can put all into the same little boxes and completely level the playing field. the real world isn't like that. You cannot apply some form of Marxist principle over monetary policy where variations can be ironed out with a few tweaks. Plus i do believe that people need to be able to accept responsibility for the consequences of their decisions. My choice to sacrifice to own my own home was available to every one, so you are now trying to tell me that I should be penalised for making that choice and sacrifice, because others who chose not to make it are being penalised because of the path they chose? Tough. The problem today is that a lack of regulation due to right wing application of policy has led to a highly distorted market that has removed the option of home ownership from most Kiwis because investors, both local and foreign have been able to monopolise on an unregulated market. Taxing people living in their own homes, because they do so, will not solve this problem. Regulating the investor side of it will.

"people need to be able to accept responsibility for the consequences of their decisions" and there in is the crux of the problem. Its always someone else that caused the problem, so many people just blame the government its easy for them to do that.

I like how you accuse your opponents of Marxism and right wing'ism at the same time.

Not to mention how you think owning a financial asset is a 'sacrifice' that others with similarly valued alternative assets have somehow not made.

And that the only appropriate attitude to take from your position, vis a vis those being 'penalised' (again, your word), is "tough".

So with your ignorance, solipsism, and entitlement exposed - now we know who the real right winger is.

Absolutely. I am amused how some can twist policy to favour various ideologies. The argument about leveling the playing field to treat every one the same, taxing on "derived benefits" is a marxist principle that fails to recognise the complexities and consequences that rise from choices, but a lack of regulation is right wing, that allows a few to monopolise and manipulate a market, usually at the expense of the majority, and can result in a virtual anarchy that can be difficult to fix. Hence the current article and discussion.

I do struggle in that most people commenting on this site swing too far one way or the other, but most of the time there is always some merit to their perspective irrespective of where they come from. walking the middle ground can be difficult some times. I try to argue for "balanced regulation" but at the same time I also recognise that achieving this can be a very difficult exercise and unintended consequences, and manipulations by power players can significant influence outcomes.

..so murray86 youre happy for savers to be penalised for holding cash, but not you because you hold it in a house? Its not right nor left wing...its called equality of taxation burden.

I'm a saver too, but yes, if they bought a house to live in as a home. If my house reduces in value should I be able to use that loss of value to offset my tax liabilities? Since I purchased my house, it has both appreciated and reduced in value, while my income has remained more or less constant with the CPI, although my rates and costs have increased well over the CPI rate. How does this get factored in? If I had been renting then the land lord would have had these worries, but he should have been charging a rent that covered his costs and then some. This equates to my cost of ownership. The difference is my sacrifice in lifestyle has provided me with an asset that if i maintain should have some value when it comes time to dispose of. Savers, myself included have loaned our money to a bank to be put to use, thus generating further income. That income should be taxed. That money does not sit there gathering dust until I decide to spend it. That is the purpose of a bank. My house does not produce any income for me, rather it has a cost.

We tax tobacco to discourage people from smoking, we tax consumption (gst) to encourage saving (i.e. not consuming), if we tax owning your own home then what do you expect to happen? People have to live somewhere. The whole issue is people can't afford to buy homes so the solution is to tax them so they don't won't to?

Firstly, I would suggest any offset to income tax won't help my 80 year old mother who lives off a government pension. Your theory of 'zero sum' won't be that in practice.

Secondly, because council rates can be much more directly linked to the services they provide I do not consider them equivalent to government taxation. Which is an endless black hole of demand.

..last time i looked the pension was taxed. She also pays gst. So she may end up with the same tax burden overall ...because she is already paying her fair share of tax - she can't escape it. But the ppty land banker in the same postion as your mum may currenlty be paying no more tax in total than her. But will pay more with an asset tax.

Dont rubbish it until the numbers are run.

If you read my first post you may realise my objection is not monetary.

You realize this is a finance site yes? People expect you to understand economics from 5th form level. Your emotional concept of "your own home" is simply a bit of a scarce resource which has a certain yield, whether you realize that yield in currency (rent) or directly (owner occupy). I.e. it is a financial asset. It provides you with an exclusive economic benefit. It can be taxed, or not, just like any other income or asset. Deal with it.

It's not going to happen.

Of course it's not. And the IRD is not going to go after every house sale in Auckland for the speculative trading income that each and every seller INTENDED to make, despite the law that says they should, are they?

Nonetheless the article is about land tax.

No Gareth. That's the core symptom. The core problem = low wages.

So if you all want to tax those of us with more than one house to make it a fairer society. I can accept that if we make everything fair. For a start rates are a tax on homeowners only, but non ratepayers like renters and adults living in a parents home are allowed to drive on our local roads, get books out of our library's etc etc for free. To make it fair we need to scrap rates and introduce a new local tax that every user pays. Please don't say tenants pay it as part of their rent. Rates go up every year but it's not easy to add that increase to the rent

>>> non ratepayers like renters

Rubbish, rates are passed along to renters, like any other cost. The customer always pays. How naive can you be - where do you imagine the money comes from?

>>> Please don't say tenants pay it as part of their rent. Rates go up every year but it's not easy to add that increase to the rent

Of course it is. You send the tennant notice. Done.

I think both Key and Morgan are suggesting taxing profits that have not yet arrived. This is a dangerous ground because one never knows just how much cash in the hand will result after the sale. Dare I suggest the sale and onward purchase even if we are talking about trading up or down the property market. Farmers of course have had this for years being taxed on the stock that is sitting out in the hills being counted by? Ever wondered about rustlers?
Goodness banning foreigners will not do you any good. Property prices are going through the roof in Vietnam and China but foreigners can not buy there. Then are we going to tax the increase in value of intellectual property that has not yet been sold. Like that book I or Morgan has not even written yet.
Tax should only be about what money comes in minus the cost of stock and production.

it already happens on your kiwisaver, you have to pay tax on the CG on your shares held outside of NZ and Australia that have not been sold and gain locked in

The problem with land tax or interest deductability is that it favours well heeled cashed up buyers ala overseas millionaires (Asian or otherwise), any policy has to have some preferential treatment for NZ citizens...but how can this be done with free flow of capital? Look at the "Migrant Investment categories", Investor plus, 10 Million "invested", 44 days a year in the country and no age limit, no english or business experience and you tell me that JK hasn't put NZ on the block? The first thing we have to do is remove this category and enact "gift duty" on funds entering NZ to an individual (with criteria and exceptions for estate settlements) otherwise at the best you are wasting your time or at the worst making it impossible for an NZ citizen to buy a house in their own country

Another ridiculous article completely missing the point. No tax will make any difference on property investors whatsoever who hold for the long term, even decades, all this tax would do is put rents up. How you cannot see this is beyond me. The problem NZ has is a lack of supply of property, the supply tap can never get turned on significantly in this country with a crazy resource management act which has stifled building and made it so hard to build things economically and quickly. I know first-hand having subdivided and developed property over the years. My last one in Wellington took me 2 years to complete, just hopeless the amount of hoops required to go through, professionals you have to engage, people have no clue how hard it is, especially yourself! Developing property is a risk, in my experience NZ is one of the only countries in the world where property developers are held in such disdain, we need the buggers. Make is easy for them to develop a massive amount of property and the problem will be fixed….simple.

I'd like to see how much of a supply issue existed if we took "investors" out of the demand-side.

Peeled it back to pure supply/demand dynamics - people who want to buy a roof over their own head.

Active developers aren't held in disdain, speculators are (i.e. res 'investors' & land-bankers).

You have wise words PK the reality is tax is ALWAYS paid by the poor bugger at the end of the rope .

A land tax will simply be passed on to the tenants over time pushing up rents and further impoverishing the poor

I don't see how rents are going to be pushed up?

Yields are currently 2.5%-3.0% - If there was scope to increase yield don't you think Landlords would have already pushed rents up??

Rents are limited by fundamentals (i.e. the income of tenants), there is only so much a stone can bleed - I know, I know... the idea of "fundamentals" is a strange concept in the parallel universe that is Auckland property investment.

There is another way to keep current yield in the face of taxes.... lower your bids on houses.

Serious investors are important in our society as they hold property and provide a service for decades, there are always going to be a good sum of people not interested in buying, young people, students, singles who want flexibility, people who don’t want the responsibility of owning. If there were no private landlords then it would be up to the State to pay for it which would cost hundreds of millions per year and would be a complete waste of money. However, punters who just buy a basic house that provides no cash flow is not an investment, it is speculation. There is already a tax for speculation, but perhaps we should make the bright line test after 10 years instead of 2 years, that way people who are serious about property investment would do it properly and there would not be as many taking up first homes for young kiwis.

I keep hearing this argument and I keep thinking it is total rubbish.

There is 'a' place for rational investing - how is 'investing' in the current environment in any way rational - gross yields of 2.5%-3.0% when debt servicing is at least 4.2%.

The Property Institute make out like investors are modern day Mother Theresas, doing God's work and stomaching losses so their tenants can have a roof over their head.
The reality is that they aren't astute enough to understand any other asset class.
'A' place for 'investing' is not 80% of properties sold at the lower end of the market.

As far as I'm concerned, the more 'investors' that are shut out of the current market (mugs that are as close to the unsophisticated-fool end of the investor spectrum as possible) then the more sound our financial and social systems will be.

had a discussion today where an immigrant couple have brought a rental in henderson for 655, all borrowed on the equity of their house.
neg geared so they will have to tip in, their plan is to sell after 3 years they reckon they should make 300k on the way things are.
they could be right, but it shows that something is very wrong a with banks lending on that and b why we are not making them pay tax on it.
and before you say they should, they will just say selling due to change in circumstances and its a year outside the bright line so will get away with it

the state already pays private landlords, through accomadition supplements and tax foregone on neg gearing and guess what it is in the hundreds of millions

That option is cheaper than building, administering and maintaining state housing.

is it, do you have facts and figures to back that up or political spin.
the state can borrow cheaper than you or me, they can aquire land cheaper, they can build cheaper as they can create economies of scale whilst reducing the cost of materials through duty concessions
and at the end they own assets that appreciate in value with which they can accommodate their people for a cheaper rent (lower accommodation supplement) also the net rent paid goes back to the state to be used for other services for the taxpayer of which last year HNZ paid a dividend of 90 milion

Haha, what rubbish! The state are idiots, would build houses which would cost twice as much because bureaucrats are never responsible when using other people's money. Everyone knows that. A example would be that two houses would be built for say 800k by a developer, the state would build for well over $1mil, simple, they are clueless. Investors provide a costless service to the State.

Its obvious! On top of that it just creates slum areas. Look at Otara.

If this is remotely accurate, then so much for any 'supply' solution. If it isn't up to standard, or even fit for purpose, then building more just makes the situation worse over any timescale longer than about 3 minutes.

http://www.stuff.co.nz/business/79190790/Auckland-building-inspectors-fr...

I firmly believe that JK is only using the idea of a Land Tax to distract everyone from the elephant in the room. That being why the hell we continue to allow non resident foreign purchase & ownership at all.

He's simply putting forward a very small lightweight opportunistic idea out there to simmer the debate.

He would of gone to China and got the "we are concerned about how the Chinese are being treated" line, thus put forward the "look if you just pay a little tax ...then we won't be pressured into shutting the door completely" .

Does the Chinese Govt approve of their citizens emigrating and/or buying Western houses or property?

http://www.wsj.com/articles/china-boosts-efforts-to-keep-money-at-home-1...

I don't see or hear any protest from Shanghai openly, and they weren't the ones insisting on the introduction of a NZ bank account and IRD number. The fact is it's happening around the globe, not just here in NZ. Somehow huge amounts of money are leaving their country and buying not only homes, businesses, mining operations, port and shipping operations, farming, water......Much of it the Chinese government themselves yes.....but

"It wont solve the core problem"
Cmon Gareth, you are better than that. It doesn't have to solve it, all he needs is the illusion he is doing something to help the 99%ers while the status quo remains for his target group the 1%ers.

(JK- Just 3 more years pretty please, I did play hard ball with Xi after all, if you dont believe me check my personally written press release.)

Gareth doesn't mention statues?
Should there be a tax on statues too?

maybe there should be a land tax on garages only...seems when other people use them the un-taxed owner can get rich...

Rents are going up due to a lack of supply, simple, it is basic supply/demand economics 101. They are only able to put them up because of increasing demand caused by a lack of supply and supply which has been ruined by the RMA for over 20 years.