March 29, 2021
The reported anger of property investors at the Government’s new housing policies, announced last week, is mis-directed at best.
Under the new law any owner who sells a property that is not their family home within 10 years of purchase after today will pay tax on the profit. That could be as high as 39 per cent, depending on other income and the amount of the profit.
In reality we now have a capital gains tax in drag and it would have been much easier to simply do that from the outset without trying to disguise it. The Labour Party was almost bluffed into promising not do that in the lead up to the last general election. There was significant support for the move but the party seemed to get a case of the jitters over the idea at the last minute. It is to be hoped that they don’t get the jitters over their bold new policy and water it down in the face of objections from real estate speculators.
Strangely the New Zealand Property Investors Federation has claimed that most investors were buying for the long-term, while speculators were paying tax anyway. Neither of those comments actually address the real issue the Government is trying to resolve.
Investment in existing housing has never made a real contribution to the nation’s economy regardless of how long the properties were held before sale and speculators should always have been paying taxes anyway. The new law does not add to the latter liability.
If investors are angry with anyone it should be past administrations which allowed the situation to develop to the level it has. A look in the mirror might also reveal some other culprits as well.
Investors and speculators in real estate are equal contributors to a ridiculously overheated housing market and they should have seen these changes, or something similar, coming at them like a freight train at least five years ago. There have been warnings enough that the booming house market would not be allowed to continue without Government intervention. If anything, that intervention has taken too long.
We can expect the Opposition to pick holes in the new policy. That is their job and the more genuine faults they find the better as that will help fine tune the initiative. It is far from perfect but it will take much more than what we have seen from them so far to convince the Government to make any changes.
Howls of protest from property investors, speculators and the real estate industry were also predictable but these social parasites deserve little sympathy when we see rents as high as $700 a week for a basic house and nearly a $1million to buy one. Families with well above average incomes had no chance of ever getting out of the rent trap and buying their own home under that system.
Not all landlords are that avaricious and many are generous and caring people but unmitigated and unregulated market forces for something as basic as a warm safe house could not be allowed to continue.
The new policy can only ever be part of an overall strategy to make home ownership affordable, it won’t help renters in the short term and it may not be completely successful in the long term but we could not allow the development of a new-age landed gentry living off the basic needs of ordinary working people. Some of our ancestors came half way around the world to leave that feudal system behind about 200 years ago.
Not since the cruel days of the Great Depression of the 1930s has the plight of homeless people been so serious. In those days there were many people with young families living rough, in tin shacks and worse. That tragic era of our history should be long gone as we are supposed to be in more enlightened and caring times but we still have too many people who cannot afford to buy a basic house and too many people willing to wring every last dollar from their plight.
Successive Governments from both sides of the political divide have failed, so far, to adequately address the problem. It has always been too easy to applaud the accumulation of wealth, no matter how it was accumulated, and to blame the poor for their poverty.
There was no doubt that the housing market needed to be cooled down, rather than extinguished, if we were to see a meaningful reduction in the number of people sleeping in cars and under bridges. If that means a dramatic fall in house prices it will not come soon enough for some and it will not be the first time speculators have lost capital on unwise investments.