Brian Easton examines the tax incentive mess we have got into with our housing policy, and suggests some ways to get out of it

Brian Easton examines the tax incentive mess we have got into with our housing policy, and suggests some ways to get out of it

This article was first published on AUT's Briefing Papers series. It is here with permission.

By Brian Easton*

While housing obviously fills a need – people need somewhere to live – it also has an investment aspect. How this investment is treated by the tax system influences the housing market, and the investment available for other purposes, such as business ventures.

There is an implicit tax-subsidy to housing investment and it is necessary to understand this in order to understand how the housing market works. Consider two people living in identical houses. Suppose they sell their $1m house to each other, but continue living in their old homes, now as tenants. The people are both home owners and renters: they receive rent for the house they own but do not occupy and they pay rent for the house they occupy but do not own. Assume each landlord clears $20,000 a year after housing costs such as rates, insurance and maintenance. Each person’s position seems neutral from the change – paying rent and receiving rent – until they report their net rental income to the Inland Revenue Department which assesses them as liable for tax. With a marginal tax rate of 33 percent, that’s $6,600.

Of course they do not sell to each other – better to live in the house one owns and avoid paying tax on rental income. In effect, owner-occupiers receive a subsidy by not having to pay tax on the rent which owners implicitly pay to themselves for living in their own homes.

It is not the intention of this analysis to challenge the principle of this tax-break for home-owners although it will argue that it is applied over-generously. That conclusion comes from observing that the consequence of current arrangements is that we over-invest in housing, distorting the pattern of savings and investment in the economy.

Consider, as an illustrative exercise, owner-occupiers being taxed as if they were landlords – an imputed rent – with a corresponding reduction in tax rates on all income. Faced with a tax bill of, say, $6,600 for living in their own home, the household might make different decisions about housing. Older adults whose children have left home may well decide to downsize in order to reduce their tax liability. The savings from the cheaper house could be used to pay off debt or invested.

After full adjustment, across the whole economy, possible outcomes include:

– a better match between family and household size: small families would be in smaller houses and larger families would be less squeezed by having moved into the larger houses they left;

– the same number of houses (or possibly more) but eventually the average size of houses would be smaller;

– a reduction in household debt and hence offshore debt (which funds household debt on the margin);

– more wealth available for investment in other – more productive – activities;

– lower house prices;

– more young families would be able to purchase their own homes;

– a lesser need for accommodation supplements and the like.

To complete this analysis, attention needs to be given to capital gains. In fact, an owner-occupier does not make capital gains (on average) when they move from one house to another, for any capital gains they make on the sale of their old house are offset by the capital losses they make on the purchase of their new one.

What about investors who do not live in houses which they own? At present they get exactly the same tax subsidies as the owner-occupier. The current arrangements enable the investor to rort the tax system. For instant, an owner of the million-dollar house could borrow $500,000 at 4% p.a. which would be covered by the tenant’s rental payments of $20,000 p.a. The return the investor would get would be from the capital gain. Allow a 10 percent annual gain, and the investor is $100,000 up at the end of the year, which is a 20 percent return on $500,000 of equity, on which they pay no tax. For housing investors make capital gains in a way that owner-occupiers do not; they do not have to invest in another house.

There is an even more ingenious way to make a profit on investment housing in times of rising values. Why take a tenant in at all? Admittedly the landlord has to pay for the rates, insurance and maintenance but there is no hassle of a tenant. The result is houses which are untenanted but generating a return via capital gains. That certainly does not help the homeless.

Removing tax breaks for investors would have a similar impact to taxing the imputed rent of owner-occupiers, although the magnitude would be smaller. Whatever one thinks of the tax-subsidy to home-owners, the case for a similar subsidy to house investors is thin, especially as it screws up the housing market for those without their own homes, diverts resources from productive activities and increases offshore debt when investors borrow to leverage their return.

What is to be done if we want to avoid these ills?

First, the logic argues for a comprehensive capital gains tax on housing which is not owner-occupied. It need only be calculated on capital gains after the date of introduction. Taxing past gains will not get the behaviour the policy is about. An interesting possibility is that some jurisdictions only have a capital gains tax exemption on owner-occupier houses up to a limit – say double the median house price – and tax any capital gains above that. Tricky to apply, but it makes the point that the tax exemption on owner-occupied homes is for comfortable living, not for extravagance.

Is there a case for some penalty on houses which are owned but not occupied? Because it is administratively complicated one needs to know something about the size of the problem – and in any case a capital gains tax would discourage such vacancies. But in principle, if the tax treatment on owner-occupiers is to enable occupation, it is not obvious why it should be given when the houses are not occupied.

As much as they will help, changes in taxation on housing will not solve all the problems in the housing market. A building programme will still be necessary. Because it will be building fewer large houses, the available resources will be able to build more houses. We probably need to reform the accommodation supplements.

Instead this analysis finishes with attention to savings and investment. Recall that which drives these proposed changes is the distortionary effects on overall investment of the tax exemptions on housing. The intention of the package is to cut back wasteful investment in housing and channel the savings into more productive activities. New Zealanders invest in housing and property because that is the only investment they understand. They will pay off any debts as they unwind out of their investment, thereby reducing the amount of offshore borrowing, making New Zealand financially more secure. But what will they do with surplus funds?

Many will deposit them in banks or finance companies which may, or may not, route the proceeds into business investment (as well as paying off international debt). However, there is also a need for a more direct channel from households to business. Kiwisaver is an example. New Zealanders need greater confidence in investing outside property or financial institutions.


Dr. Brian Easton is now an adjunct Professor of the Auckland University of Technology. A former director of the NZIER and a one-time member of the Prime Minister’s Growth and Innovation Advisory Board, he is a Fellow of the New Zealand Association of Economists. This article was first published on AUT's Briefing Papers series. It is here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Great article, I particularly agree about the second part, how money would be better spent elsewhere but the majority of people only know about property investment.
I think that is partially because property is seen as a safe 'can't lose' investment, and the media has been pumping the market up to a large extent.

Maybe some articles about being self employed or starting a business would help a little.
There are some industries such as the trades which need a massively larger workforce, and anyone suitably qualified now and working for someone, could in my opinion go out and start their own electrical, building or plumbing business and you will be inundated with work.
I know where I am in the Waikato there is a good 3-4 month wait to get a tradesperson in to do jobs.

Of course if people used some savings to start a business instead of buy a property investment they would have a positive impact on employment too, leaving a vacancy with their previous employer to hopefully be filled by an apprentice, and maybe taking on a hammer hand or apprentice themselves as well.

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Of course if people used some savings to start a business instead of buy a property investment they would have a positive impact on employment too, leaving a vacancy with their previous employer to hopefully be filled by an apprentice, and maybe taking on a hammer hand or apprentice themselves as well.

Hmmmm......

If someone asks for a business or personal loan these days, the banker asks for the house.

The result is that traditional small business lending has dried up, and with it business investment, while Australia has the highest ratio of household debt to GDP (134 per cent) in the world, since business owners have to borrow against their houses. Read more

How much of bank 'business lending' is actually just more housing-backed borrowing in disguise since banks are much less willing to back business ventures on their own merits?

When it comes to being responsible citizens, banks truly are failing terribly. They're not the only ones obviously, there's the big corporates and the big consulting firms. But they're the entities that much of the public directly relies on. Their investments dictate where the average Joe's money flows to.

With the banks relegated to mortgage mediators, operating on razor thin margins, what are people to do? Even if you were philosophically against investing in housing, why even bother saving money if it's just going to end up in some house anyways? And that's part of the problem, in most people's minds, there only two options: save money or borrow money for housing (with most people currently in the latter category). And they both boil down to effectively a single result.

When people talk investment, you often hear the word 'diversity', which is exactly what the banks tend not to do. You wonder why innovation is struggling and R&D investment is non-existent. Should it be the banks jobs to foster these? I don't know. But I don't think they should be synonymous with property barterer (next time, just give me an IOU on a percentage on a house when I deposit money).

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Shame John Key our PM for his denial and arrogant approach.

http://m.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=11700890

More experts and media should come out with facts and expose to shame the national government as the only way to avoid future social unrest in NZ as national has totaly lost the plot.

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Or maybe people should actually vote out the serial liar?

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Just one problem with that, you have to wait for a bleeding election. There's plenty more damage can be done waiting for that.

[Low quality comment deleted. Silly xenophobia. Ed]

Godwin's 2.0 Kiwi Edition

Based.

I don't think there are many NZers left that believe John.Key is acting in their interest. There are so many ex national supporters who were sold on the idea of a brighter future to find the reality is a nightmare.

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If housing is not a crisi as per PM than how come is in news on a daily basis everyehere. This in it self suggest that housing is a crisis how ever Mr PM may deny. Also everyone knows that supply by init self will never solve the problem and your best bet and must be hoping to put it under the carpet till next election but will get BIGGER and worse and the earlier government faces the issue of foreign buyer, the better for them as well to NZ.

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Anyone else see Nick Smith on The Nation? Couldn't stand him for more than a minute, more spin, more lies, more back tracking.

#JKexit and Make New Zealand Great Again

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Unbelievable, but I could not believe that Gower just let the bit about foreign buyers and Nick Smith's clinging to the 3% garbage, just slide on by. Terrible.

Agree. Gower doesn't come across as very professional or intelligent to me.

I thought he made smith look an idiot. Sure he missed the 3% bit but one could clearly see how exasperated he was becoming with such elusive answers. He had a go, which is more than most are doing. Slowly I suspect the journos are running out of patience... Fran Osullivan being another.

Don't trust O'Sullivan as far as I can kick her. She herself seems to be conflicted and is a member of the NZ China Council. Feathering her own next I suspect.

Watch Paul Henry have his chat with his mate JK, that is sickening. I think Paddy has just given up, these idiots just toe the party line, are always at the ready with positive spin, there's a lot to be said for taking responsibility and admitting that they haven't done this right.
Maybe the PR people should have a think about this, laying on the sword doesn't always end in tears, especially when everyone knows your lying through your back teeth.

The questionnaire that gathers data about home purchases has not been changed yet. Probably won't as it doesn't fit Keys bullshit.

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Agree with you undecided voter. Whenever you see any of the national minister on TV spoils the day as is very irritating to see their denials and lies.

They do not even realized that today they stand totally exposed. May be surrounded by too many yes man to feel the mood of the country. Power makes one arrogant and absolute power corrupts.

Strongly #JKEXIT

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We kiwis need to be stronger in voicing our opinions. .. we know the LINZ data is crap, when it excludes key data capture. Key just can't continue to get away ignoring these concerns and pretend that every thing is fine

I know that, you know that, Key knows it as well, but he is hanging on for grim death till the election, where, they will either win and retain the status quo or lose, and if Labour does the right thing, there will be a correction, then Key, or whoever replaces him, and co, can try to take them to task for bringing house prices down. Cynical, cynical, cynical.

With you house overpriced. John key and his gang lie which is irritating but what is more irritating is them thinking that people of NZ are stupid and will accept any lie. Tthey doubt our intelligence, actually they should as we actually voted for them and were stupid.

They do not realise that now they stand totaly exposed and no one trust them. Infact trust deficit is so bad that even if at 12 noon on a sunny day they say that it is day people will doubt if it is day or night.

Linz data ok just the govt , linz and media interpretation which is at fault.

13,500 foreign students and temp workers ticked the boxes confirming purchase of a property.
13billion NZD based on Auckland's average price. 1billion a month.

I don't get your first conclusion, so are you saying to level the playing field everyone should be able to claim rates, insurance etc against a rent not paid and pay tax on the difference. who sets the rent amount IRD?
would that just not encourage everybody to neg gear, never pay back the principal so interest only loans for everyone.
the only winner there are foreign owned banks

To control inflation OCR will be reduced but even if OCR is reduced to zero than what - NZD will still be high and inflation will be as it is as this is what is happening world over but reserve bank will have to reduce OCR as is the norm so the only solution (Sorry not supply alone) is to introduce tax specially on foreign buyer to control the ever growing housing prices which will prove to be a disaster in future both economically as well as socially but this government is not thinking beyond next election.

what else should we expect from someone who is heading the government who has always been comfortable in speculative market atmosphere. The only difference here is that is not only playing with money but also Playing with life of the people.

I know we voted for him so are to be blamed and hope that we correct our mistake sorry blunder next election by not only showing him the door, which we will but by huge margins - should be humiliating defeat. Karma

I assume this article is primarily about Auckland. I will solve Aucklands housing issues that being high prices overnight without worrying about any tax issues. 1/ I will ask the RBNZ to curtail interest only loans for residential property .. 2 /I will ask the RBNZ to restrict loans to 4/5 verifiable incomes. 3/ Ask RBNZ to start gradually raising the OCR .4/ I will tax any vacant land held for more than 5 years. 5/ I will place a buyers premium on any Auckland home, proceeds to be spent in regional New Zealand ,( places most Aucklanders have never visited) 6/ I would stop worrying about foreigners , as over 90 percent of all home purchases are between ourselves.. 7/ I understand fully that our 4 megabanks, those that encouraged overindebted Kiwis with IPads and petrol vouchers will be mortified. 8/ At some point we need to stop deluding ourselves on what lays ahead. 9/ The current average Auckland mortgage is 4.3 times larger than those outside Auckland. What a tragedy.

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Check again on those foreigner numbers, they are utter rubbish as they do not include people here on student and working visas. With those taken into account, you are looking at a probable 29% of house sales to foreigners. Those groups are included as foreigners in Australia and Canada and so they should be here, and for most of us, we do include them, it is just the government in denial that won't.

CPAT - What about all the immigrants - those highly skilled 2$ shop attendants, waiters, petrol station hands, taxi drivers, 17 year old fully trained chefs, cleaners, students rorting NZ, geriatic parents under the Balance of Family, elderly home assistants etc will still need somewhere to live and continue the pressure on houses?

By the way do you really believe the 90% quote?( "OURSELVES" ?????) For that to be even half true you are drawing a pretty wide definition of kiwis and must be including all the scammers.

Smalltown , obviously all those highly skilled migrants, working as shop attendants and chefs purchase 1Million dollar homes. Admittedly they rent , squeezing more into each home. The pressure should be on rents . Rents have increased but far less than one would expect.

Really. OMG. . Is this how intellectuals deep think? I suggest he's spent a bit too much time in his own brain fully investgating a limited thought. Abstract linear thinking at its best ( or worst)
How about just educating people on the benefits and disadvantages of different structures and allowing them to have an iota of financial literacy to best suit their current and future economic position.
And a reality check for good measure. Alright to have your heads in the clouds as long as your feet are firmly on the ground. You can't break an omlete to make an egg.
Sometimes we laugh those who think the earth is flat but fail to understand our own understanding is also flawed and limited and there is more at play
Here is an example http://m.youtube.com/watch?v=LImKNjMZdWY
And there would be similar considerations to bring an economicall model closer to reality than as we were taught or think. One that would open possibilities in understanding.
Maybe like the valuelessness of money with fractional reserve lending and the rush to illiquid assets.
President of Property

With around 80% of rentals in the country supplied by private investors any impediments, taxes, or regulations will have a direct impact on the supply and costs of renting.
As there are hundred of thousands of landlord investors ( plus their families and friends) who all have the vote, it would be political suicide for any government to do anything that would markedly interfere in the market.
Mr Easton has now joined the long queue of failed experts who think they have the answer to every problem without understanding the consequences.

You only get one vote per person not one vote for every house you own, frustrated owners being forced to rent from you, will be outnumbering you by then, I'll bet

Thank you BigDaddy, that is the best response to this nonsense I wished to hear and reply myself.

... I shall add that Mr Easton's scenario is a TAX fraud and IRD catches people in his example and punishes them severely for tax evasion ... Obviously he doesn't have a clue about property investment financials and assumes that all investors are buying cash and have no expenses other than rates and insurance and are just pocketing CG --

living in the fantasy world is nice but building fantasy over fantasy is lunatic .. he also failed to realise that by promoting such ideas and scenarios he is encouraging people to commit fraud and get into trouble. Let alone publishing this in an AUT paper !!

Mr. Easton - in his obvious and hasty enthusiasm - does not seem to comprehend capital gain when he says buying and selling in the same market does not realise gain !! really??

I agree that he has joined the cue of people on here and elsewhere who are becoming so obsessed in bringing down the Gov and promoting chaos and so hopeless in driving the changes they want to force upon everyone else -- without having a clue about the negative economical consequences which these ideas can cause! ...

We are going to see More of this kind of nonsense and desperation as we get closer to election next year.

EB are you sure its a fraud?
I have done a bit of research and can't admittingly find much on the scenario where two friends own/rent but if it was set up well I would think it would be legal. Almost the same as desperate FHB's buying then renting it out and living with their folks. That is going on all over Akl as imaginative kiwis respond to JK's crazy housing and immigration Ponzi.

with our tax laws a FHB would be better off to buy rent it out, and live in a rented property themselves, as long as the rent they are paying is equivalent to what they would pay in mortgages payments the advantage gained due to neg gearing against their wage earned income could be worth quite a bit.

Ì am sure the case you mentioned of a FHB or anyone buying and renting out while living with parents is Absolutely legal and a lot of smart guys do that ( specially students while working and studying - the story of the 19 year old student few years ago was a live and formidable example)... but, my view is, that the scenario mentioned in the article has fraudulent intentions:

"Of course they do not sell to each other – better to live in the house one owns and avoid paying tax on rental income. In effect, owner-occupiers receive a subsidy by not having to pay tax on the rent which owners implicitly pay to themselves for living in their own homes." !! ??

because you cannot claim losses or expenses unless you are deemed to have a rental property actually rented to someone other than yourself (IRD judge and tax on intentions)

If IRD caught wind of such a reciprocal arrangement aimed at claiming tax refunds and discovered that you are actually living in your own house and you are not really in the Property Investment Business, then it will be put down as fraud and unlawful tax refund claims ... and they are very good at that !!

Sure you may be able to dodge them for a while .. but is this where this nation is going?? Fraud? immorality? clever ways to break the law? and for how long?
Is this the best that intellectuals or anyone can think of?

However anyone wants to twist the rules does that on his own risk .

It was political suicide in the long run let it get to this point. It's national suicide to let it continue

You have now situation where a house costs 10x household incomes closing on 11x.

Either it stays that way forever and generation after generation of kiwis are homeless in their own country. Or you get a disorderly correction sooner or later. The RBNZ has a 2% CPI inflation manate so let's not kid ourselves about growing incomes.

The numbers are heavily stacked against the rentier class as time rolls on. It will be political suicide to keep on with this madness. Change tack or be slaughtered.

I'm 26, they will never get my vote.

NZ First for life.

U V: You probably have tatoos

Scaremongering Big daddy that's all that comment is.

Make investor and foreign buyer stamp duty exempt on new builds and that will encourage more rental supply not less. More supply equals more properties to rent out.

End of the day landlords fighting over existing supply with fhb is not helping anyone as the total supply of houses stays constant. If a landlord wants out then a first home buyer can take his place.

Only new supply will help. Rest is just crap talk.80% 90% whatever...

Political suicide for labour, greens and nz first if they DON'T act against investors and foreign buyers. They haven't acted for the last 8 years and look where it got them

On the sidelines. Nz is sick of high prices. Highest in world relative to incomes. Vancouver were also sick of it and they acted. Nz Time now.

End of the day the huge increase in prices caused by landlords aka investors is pushing up house prices (46% buyers invstors) which increase the cost of state housing to the government for new state housing. Which in turn is paid for by the tax payer. Just look at the accommodation supplement out of control now. As home ownership rates decline this will only get worse.

There are many things that can be done without more taxes. What about our unelected Reserve Bank Governor limiting the amount the Banks are able to lend on houses? What about having an income to loan limit? What about restricting any tax advantage on investing in housing to each house. What about restricting house sales to permanent residents only? Why couldn't our unelected RBG start doing something for the people of NZ when we have a Government that refuses to do so?

It's the same answer each time.
Whether it's the RB, the Government or the opposition (in the unlikely event that they ever get in), every action has a reaction. In the case of investment housing and tenants, given the numbers, any reaction will be bad fpr the people who need help the most.
The better answer is more help for the deserving poor rather than punishing the rental providers.

And there are so few people on here who can comprehend that simple logic

Sounds like feudalism dressed up as benevolence. The point is that without govt support, the whole social structure wouldn't exist and the nouveau feudal landowners would suffer accordingly.

Which is why, this "benevolence" is actually for the landlord, and in my world it would be them that went cap in hand to MSD to apply for it. That would sort the sheep out from the goats

I agree, but the establishment does subconsciously understand how fragile the charade is, which is why ultimately the landed gentry is still accountable for some risk, despite the system's massive efforts to safeguard the system. Much of it does come back to accepted dogma about monetary policy and monetarism. This is being staunchly upheld as people's whole lives and careers have been built around it.

The best help for the deserving poor is lower prices and cheaper rent.

Not more subsidies that do nothing but transfer taxpayer money into landlord pockets and place a price floor on rents that everybody else suffers for.

Just how greedy do you need to be? Why is it never enough?

Virtually all of your posts do nothing other than illustrate that landlords hold a knife to the throats of tenants. Every suggestion for change made by anyone brings a comment from you about unintended consequences being passed on to tenants and that landlords will make them suffer if the exploitative status quo is not maintained. Your do-nothing standpoint cannot feasibly continue much longer without its own "unintended consequences"

For G*d's sake!

Just for once can we have a piece where the solution to the housing problem ISN'T more tax!

Sure. And how about removing middle class welfare and watch house prices crash.

New Zealand is as obsessed with tax as it is with housing. Welfare where it's necessary, irrespective of class.

And new taxes will ensure prosperity, right?

We have lowest purchase tax rate in the world... zero percent

Exactly how is that obsession ????

correct
ban non citizens from buying residential property , they can lease or rent until they become a citizen
cap immigration at 15 K-25 K per year
abolish tax claims on residential housing
abolish the accommodation supplement
use the 2.5 billion saved per year to build houses for citizens to buy or to house those that cannot afford to buy rent at 30% of wages

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After watching Nick this morning it has reinforced my theory that this govt is well aware we are sitting on a precipise of house price correction (collapse?). They are like a possum in headlights and literally too scared to move in any direction. Do nothing and just hope it holds long enough to get re-elected. Or do something now, look like they created the collapse and thus get the blame. So they will do absolutely nothing to deter foreign buyers, land bankers, speculators, fraudulent cash..... And get the immigration tap wide open. All short term stuff to hold onto the drug called power that they just can't do without. What a stuff up they have made managing NZ.

Political leadership is all about steady as she goes. Only problem is that we're living in unprecedented times and it's an anathema to talk about that in public.

Whats the point of capping immigration in NZ when its already slowing down? Not to mention you can't stop 1 million+ expat Kiwis currently living overseas from returning back home to New Zealand.

Former Australian Labor party MP Kelvin Thomson called for a immigration cap on New Zealanders moving to Australia back in 2009 yet both the Australian & NZ Governments poured cold water on it.

A one month decrease of 500 or 1000 isn't slowing down.

Yes it is. any decrease regardless how big or small is still slowing down.

Share trader, if the Govt.banned rental property claims or costs, that would mean you would not need to pay tax on income from the rents doesn't it?

I agree with you sharetrader, although I think ring-fencing residential housing tax losses would be fairer and still do the job. If our FTA don't allow banning foreign investment in housing, then slap on a 20 or 30% stamp duty.

agree, it should be used to offshoot future profits from that particular rental property. but then you have to make sure the tax law can not be circumvented

Mr PM and his supporters reaction to the article below :

http://www.stuff.co.nz/business/83627043/housing-campaigner-predicts-spi...

Well we actuall know John Key's reaction : Denial and Lie and supporters are fast running away from him and Non Residents foreigners whon he is protecting and supporting does not vote.

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The economy was seen to be JK's strength. Now even though nominal GDP is thereabouts it is fast becoming his weakness. Really to paraphrase the man himself 'at the end of the day' is this a surprise? Look at the facts:
Came into power with a $10bn govt debt - now over $100bn.
Gutted Kiwisaver and The NZ Super fund - both set up by Labour and shining examples of what a good govt can do.
Dropped taxes against all reasonable reason benefiting mostly the wealthy.
Chearleaded dairy into the (very polluted) ground.
For some reason decided $25m spent on a flag referendum was a good idea - could it not have waited until the election?

Now he is doing a Nelson with both eyes, backing himself into a really tight wedgie, claiming there is no crisis.

I ask you - will it be a crisis only when Max tells the old man there is nothing under $5m for his first home?

Did he get elected to represent kiwis or not?? I am still waiting for someone to list his achievements - my folks tell me that he is the man because house prices have risen but along with a lot of that age they don't get out much.

did your folks not give the standard answer, well hes better than the other mob
and when you ask how answer is bloody lefties.

Sharetrader - Yes -That gets trotted out as the Urban Legend it is but you only have to mention the record of "Collins, Brawnlee, Smith, Parata, Guy, Woodhouse, Joyce, Wagner and that idiot of a foreign minister and they go Oh yes, forgot about that." English and Adams seem respected and thats about it. When Collins was the "Justice Minister" the knowledgeable viewer knew they were taking the piss.
The days of Labour being "bloody lefties" is long gone. All round the world the labour governments have evolved with the times except for maybe Australia. The New Labour model in the UK for example was more Tory than any Thatcher government.
I have been a Nats, Liberal (Aust) voter all my life but what is happening at the moment in NZ is criminal. Leaders are elected to lead and JK and his team are doing nothing.

Taxes - a sales tax on foreigners might or might not level the field but it won't worsen the situation and might significantly increase the tax take at no cost to ordinary kiwis. Has to be done and quickly. Anyone who says different is simply spruiking their own book.

Umm... supporters are NOT running fast reena... the polls say they are there still there ...For now at least !!

Mr. Pavletich hasn't said anything new in this article ... he just forgot that the Crown has limited land around hot areas like Auckland to release .. and they did release some ! and construction is going on them.... The rest of the land is either in private hands ( some huge investment groups) or the Council ....which have been refusing to release land since 2007 ...( see the article)

Mr. Pavletich forgot the Auckland City Council and redeemed them from any responsibility for sleeping at the wheel in the last 5 years ... only took action and claimed credit when told to accept and notify the Unitary Plan .. or else!!

I believe that any central Gov has limitations in influencing local Gov plans and prefer not to be seen as dictating their demands unless when it comes to crisis point and National security issues ...

I think that the Gov was caught in this problem just like everyone else, they wanted immigration and Needed it badly ... Maybe not everyone was on the same page and My guess is that no one realised that things / prices would get out of control in such a rate ...

and Yes , by the time they reacted, be it allowing to relax monetary agreements or pushing for the implementations of the Supply side etc, it was a bit late and prices have taken off ... not only by migrants of all shapes and forms, but local kiwis proved that they too have a lot of money to invest in the market, and they DID.

I think National has a bit of egg on their face and are trying to catch up ... whether they will deem introducing taxes and stamp duties useful to the entire economy at this stage is yet to be seen and judged on merits and results.

However, Election is next year ... we all have 12 months to monitor, weigh and judge actions by the current Gov on all fronts including house prices, Affordability, Inequality, and standards of living among many other things .....

I am sure that NZs will vote them out if they prove unworthy of holding office .. just like they wont vote anyone else in if they fail to gain their trust and lack of a credible plan ...

We've had 9 years to assess their performance. It's a big fail. New Zealanders would vote them out right now, but there sure seems to be an awful lot of non New Zealanders voting these days.

These articles are pointless fluff. We have hundreds of them all suggesting broadly the same solutions and a government that steadfastly refuses to do anything but persue it's damaging ideological agenda.

The only change that will come about is getting rid of them. They have demonstrated they are willfully blind and deaf on the issue. Reactive instead of proactive. Arrogant and putting special interests ahead of the national interest.

Enough is enough.

Remind me what the previous Govt did about rising house prices? Oh, right, they did nothing. They left income tax rates criminally high while more and more NZers became top-bracket earners (despite qualifying for WFF assistance) and the only thing that stopped house prices exploding then was the GFC.

Everyone is wilfully blind on this issue - don't for a second think a changing of the guard will change a thing.

Rubbish. This government is going down over housing. Helen Clark ain't coming back and it's time for fresh hands to sort out this nightmare. Green, Labour, NZ First whoever it takes.

The one sure thing that means no change is leaving these fools in charge another term.

They aren't going down. Plenty of people who actually vote have benefited from them.

Australia is looking better everyday unfortunately.

Another term to national and will turn entire NZ into a speculative arena supportedby overseas buyers. Than will have another refferandam not on changing flag but for changing name from NewZealand to ChinaLand or similar.

Oh well ... let's keep this debate a bit more realistic and mature rather than going down the path the children take in parliament ....

look, No one knows, in the entire world, what the new definition of Productivity and Deflation and the new Interest rate.

Inflation numbers and values are being redefined and quantified with the current World's Economical Situation.... this means that the influence of the world economy will affect us because We Are All Connected ,,, ... politically, regardless which lot is in power - you would really be very naive if you think that we have absolute control on our economy !!

So, does anyone really knows what will happen when a 15% tax on foreigner buyers is applied?? No one has an answer to that .... Yes , i hear the lefties crying Vancouver !! ..but they have just started and it is only on new residential properties etc and of course there will be an initial knee Jerk reaction .... BUT, what will that result in 6 months , 12 months time?? we don't know yet ... and No one knows .... Maybe prices will drop significantly ... AND maybe they wont as there are others waiting in the wing to buy them and stabilise the prices again because of lack of supply ... Or they could gradually GO UP by 15% from here and that will be the New Normal ...we have to wait and see !

The world is experimenting solutions as they have not been in this position before ...low rates, low inflation, and a lot of printed money.....and Tons of Millionaires... someone mentioned that we need to redefine our financial and monetary models to deal with this ...

Simple question? why is this phenomena of foreigners buying all sorts of property in the US, UK, CA, AUST, NZ and EU countries intensively in the last 2-3 years ??
.... the foreign buyer are mostly Arabs, Chinese, Wealthy people from India and other emerging economies ?? Why now??

look a bit at the discussions in and around Jackson Hole Wyoming ... the FED and international RBers meetings .. and you will start drawing some conclusions ....

We owe it to ourselves to understand what is going on around us ... Not just call for change ... maybe it is wise after all to wait and see what each step accomplishes and what others who have gone down this path have achieved .. just Maybe !

EC - if you have children or care about the future of NZ then the status quo has been unacceptable for a very long time. JK and his cronies have done very little as their sole economic plan is built on bringing in more to keep the building Ponzi going. Sure there might be some mistakes along the way but to do nothing is a very poor look.
I am expecting the Nats to whip up some half pie stuff going into 2017 but in their inimitable way "at tbe end of the day" it will be a dollar short and a day (at least 3 years) too late. Hopefully the voters won't be seduced by these and any tax reductions which we can't afford.

Come what may, to save NZ has to be #JKEXIT

Smaltown, I have children and I do care very much about NZ but I look at things from a different perspective ... I do not expect my kids to sit back and wait for a cheap house to fall on their laps ... they have to adapt and be very competitive to be able to survive just like anyone in their age is doing in the entire world. they have to learn to save and improve as they go alone ... there will be another Boat to catch, it's not the end of the world!!

The status quo has Not been Unacceptable for a very long time as you say .... but life goes in cycles ... and each day is different ! we have been doing well as a country compared to many others and we are currently the envy of the world .... there is a price to pay for being successful.

NZs were very happy and cheering when they first received their tax cuts in 2008 after being held back by labour ( although it was a dead wrong policy in the view of many because we were heading into GFC), however they were also very happy with the next rounds of tax cuts, and so they will all be when the next one will come next year .... They are very happy NOW with the low inflation around them - cheap Food, goods and services takes the pressure out of daily life , the cheap petrol is a pay rise on its own... we don't need to give the NATs any credit for it , but it is there....BTW, some of that is a because of some immigration investments ..

I am not sure why you are against building up and expanding the country? NZ major cities will not go back to the days of the bushy suburbs and 1/4 acre life style blocks ... whoever wants that should move further out to the countryside ... so there is no PONZI here its called evolution ... sure many of us don't like it , but such is life and it is unfair and we need to live with it and adapt ... the immigration factor ( I like to define it as the net population gain factor) has distorted and tipped some balances, not only in NZ, but world wide ... they are the devil that you love to hate a double edge sword ... so we cannot have our cake and eat it too!

We cannot judge the whole economy of a country by only looking through small peep holes ( like housing , or exchange rates ..etc) ..that is being unfairly selective .. to be objective , one needs to cover a lot of internal and external effects and many factors which can and will affect entire people's life and satisfaction ... housing is just one of these factors !! there is also employment stability, level and continuation of services provided ... and so on ...

Unfortunately, a lot of people complain about one issue and forget how that may affect others, and when there is lack of money to have in education and health and policing etc...
then people will start complaining about these too.

No one is happy with the status quo ... I suspect not even the Gov, .. but i guess they do not want to mess up with systems, taxes, and people's personal wealth and maybe are waiting for market forces to balance up and for supply to catch up .... every country is trying a solution according to its own domestic situation and results are yet to come out and they won't happen overnight!

What I know is that we are not AUS, nor Canada..or Hing Kong . what applies there ( given the entire economical and social factors) does not necessarily apply to us ... so maybe it is not suitable to just copy cat things just because they did , and because few are crying for it ... These issues are left to the specialists and the officials of the country's economy to decide on ... not to all and sundry !!

As to the crazy calls to crash the market or tax the hell out of land owners or investors, these are very short sighted cries ( no matter where they come from) which I am certain any Gov would have taken if there was any merit to it after weighing it against other factors that will keep the boat steady. They also reflect how short sighted, reckless and dangerous some political parties who support such measures ...like the Greens.

While some like to pick this issue and just run with it blindly as a political football , I suspect that that is helpful at all .. you just have to watch the comedy and bullying which some program presenters like to exercise with ministers and officials or some journalists who like to provoke the public with silly titles and selective stats just to grab attention or push a political agenda ...

Because it is the silly season , lots of clowns are jumping around ...

National bird seriously that comment was longer than the article. Going forward can you just summarise what your party wants you to say in a few paragraphs tops.

Did love your comment that your kids will have to learn to save .. lol... you will be paying for their deposits Mark my words.

Anyway please try and keep them concise going forward.

EB when you fwd War and Peace spin manure from central headquarters you really should provide qotation marks and also references to the actual author.

Xenalga, take charge of your own life instead of always blaming everyone else

ACT has been pushing for tax rates to be inflation linked i.e brackets risr each year by rate of inflation to stop bracket creep, about the only policy of theres I agree in.
as usual national said no we will not change anything

I think that home owners who live in their primary home should get the same tax breaks as investors, and then it is a level plying field...if that did happen I'd even entertain a 20% capital gain tax on all properties no matter what your intention...the thing is you cant have tax free gains if you can claim back your expenses on your primary home...this is the US model.

I beg to differ Keywest ... Rental property business is just that - A business - and provides a service to others like a hotel or a motel ....it has its H&S, insulation and other regulatory expenses and improvements, the agro and endless tenants' issues, bad dept ...etc
We tend to forget Why these tax breaks were allowed in the first place and why negative gearing was designed to encourage this specific investment class - don't we?

A universal CG tax will not change a thing ... it didn't all around the world , it is just extra income to the IRD / Gov that's all ... another tax replacing heritage tax and gifting tax ....does not solve any price or availability issues ... after a while it just moves nominal price brackets and then becomes the new normal...Hope no one will complain about higher house prices then !! they will be passed on to the buyer just like Council Contribution Fees and other imposed expenses...

the Bright Light policy is taking care of kerbing speculation if IRD does its work properly and that can be increased to 3 or 5 years although 2 is quite reasonable as it is....

BTW, there is a small army of Property managers and Body corp administrators who live and leach on the rental property market .... most of which are completely useless and surplus to the workforce, however, they will be roaming the streets looking for work when rental properties disappear along with the homeless tenants waiting for Housing NZ to build them free accommodation.

I guess no Gov wants to take landlords' problems on to their hands , they all know that , and already have a big mess with existing stock.

Buying rental properties as a business, yet pay residential interest rates, a business? My rear end, it is nothing more than parasitic and has been set up to easily be so. It should NOT be compared with providing motels, their owners pay commercial interest rates. Houses are for people to make HOMES in, but with increasing prices, high rents and garbage tenancy laws, all NZ landlords are doing is depriving people of HOMES!! It must all change and soon.

Your comments assume everyone wants a home? Not everyone wants to own their own home they live in. I am nearly 40 and have never lived in a home I have owned. Please don't confuse your ideals with other people's needs and wants.

Yes but you own a houses... so have that security so when you are old and your income drops and rents are through the roof you won't have to downsize to some 40m2 apartment like many of the middle lower class who don't own homes.... you can't guarantee that the government will be there to house everyone

Bring in German style tenancy rights (10 yr agreements) nd maybe then maybe you may have something however landlords have way too much power at the moment

JP, there are houses in new Zealand selling for $200k...also I am in Germany and got turfed out by landlord after 3 years...

Eco Bird, what I am saying is everyone whines about property investor tax breaks, perhaps one way to recalibrate the taxes lost through introducing universal negative gearing is to then introduce a flat 20% CGT on all properties (or something else)...just an idea and I still find it hard to get my head around why a student flat next door gets tax breaks but a hard working young family living in their own home gets hammered...in Germany if you do work on your house by a proper tradesmen (not under table) then you can get that tax back even on your rental home if you are a renter! so assume is for your primary home owners as well....this incentivizes home improvements, not going under the table and homeowners (and renters) in general to participate in making homes a better place...of course you pay 55% income tax!

Nice theoretical piece of writing,.. next

When ever i hear hard luck stories of landlords my heart bleeds ..

Capital gains tax on all investment properties and stamp duty on any investor/speculator aka landlord investing in existing properties. 15% stamp duty should do the trick. Same applies to foreign buyers (studs + temp)

Make new housing exempt to encourage supply then landlords can really provide a service. Buying existing homes is just changing the ownership type and not helping with the supply issue.

Will you guarantee the outcome JP?

CGT on all properties and not just investors and then I am OK with that...of course I don't support CGT but if it were introduced should be for all properties, as these rules will be bent to hell if it is just for investors and will never be fair...its like stamp duty, has to be for all properties not just for naughty foreigners, you get my point...

. (repeat)

One of our problems is that although key and Co have confirmed THEY DON'T WANT HOUSE PRICES TO GO DOWN, so did labour. So get rid of key and then what..?
Yes I know, Winston Peters. it's just unlikely unfortunately
re a 15% stamp duty on foreign buyers. A business analysis done by a potential investor would show it as being an annoyance, but would not stop the decision to buy when annual capital gain is more than that and likely to continue.
It could deter local investors to a point?

Correct. Labour will also do diddly squat, just as they did from about 2003-2008 when the problem was already well obvious and known.

Too right Justice. MPs are keen real estate buyers the last thing they want to see is house prices go sideways. The Pecuniary Interests of MPs data is a real estate brochure. Vested interest.

http://parliamenttoday.co.nz/2016/04/pecuniary-interests-of-mps-to-31-ja...

Robt, you might want to add that Labour said they wanted to get the foreign speculators out of the market and they are also on record as saying immigration needs to be looked at very closely.
The longer housing keeps rising the bigger the mess. Remember the Nats only concern is to get thru to late 2017 without it all going tits up. Then they can take another 3 year break.