Monday, June 19, 2006

Prejudice and property?

According to this Herald story (and I can't find anything on the Green party site, so it may be a misrepresentation), the Green leader, Russel Norman, is calling for (further) restrictions on foreigners buying NZ property in an effort to limit house price rises.

To me this smacks of racism, and I don't think it fits well in the policy of a progressive party.

I don't believe non-resident foreigners are a major factor in the NZ housing market, except maybe in a few places like Herne Bay or Queenstown. Returning Kiwis and new immigrants with pounds/euros/dollars to spend might be, but I can't believe the Greens want to stop permanent residents owning houses?

I'd suggest the following non-discriminatory measures that would work much better in controlling house price inflation:
- Just as the Reserve Bank has a target for general inflation, set a similar target for house price inflation and use mostly fiscal measures to achieve it. I'd suggest 2% under general inflation for the next five years.

- Introduce GST on larger mortgage payments (e.g. a mortgage over $300k).

- Introduce capital gains tax on house sales over say 500k (with an indexing allowance).

- Introduce a wealth tax on fortunes over, for instance, $2mln. Making this fall on any property in NZ would ensure that any "wealthy foreigners" would be making a fair contribution to the country.

All the above measures could be adjusted to achieve the inflation target (and abated to control a house price crash). The revenue could be used to reduce income tax and/or GST, helping ordinary people afford houses. They'd also help address the massive imbalance between taxes on capital and taxes on income in NZ (why is it that if I earn $80,000 working I pay 39% tax, while if I make the same amount of money speculating in property, I pay *no* tax).

3 comments:

Make Tea Not War said...
This comment has been removed by a blog administrator.
Make Tea Not War said...

When I was buying a house it was my strong feeling that it was baby boomers buying houses, in the first home price range, for rental properties who were pushing the price up. Whenever we went to Open Homes there they were. There oughta be a law against them!;)

(reposted with typos corrected)

mike courtman said...

I agree that the imbalance between taxes on labour and taxes on capital is extremely unjust and probably contributes to the brain drain as well. I would also like to see some sort of capital gains established. I don't think it would be 'political suicide' (as michael cullen argues) provided it was intelligently worked out.