Housing failure set to continue

I’ve long been sceptical that any government is likely to fix the housing market problems any decade soon.   Some of that was specific New Zealand points: National seemed to be doing almost nothing, Labour had done almost nothing when it was in government, and Labour seemed likely to rely on the anti-development Greens if and when it formed another government.    But most of the scepticism was – and is –  rather more overarching: no one has been able to show me a case study anywhere in the world where intense land use restrictions had once badly messed up a housing market, and where those controls had then been successfully unwound and housing made affordable again.   In principle, there was no reason why New Zealand should not have been first.  But the ages of pathbreaking New Zealand reforms  –  whether the 1890s or the 1980s –  seem well behind us at present.

It wasn’t a weekend that led my to revise my opinion.    In yesterday’s Sunday Star-Times Rob Stock had a piece reporting widespread scepticism about the claims that both Labour and National are making.  He began with both leaders’ reluctance to even call for lower house prices.  No one much seemed persuaded by the idea that nominal house prices might hold flat and incomes rise steadily to reduce price to income ratios.  On paper it could be a plausible story, but even if so it is a solution for the next generation not the current one.   And the article also reported a great deal of scepticism about the apparent Labour aspiration to introduce a lot more lower-priced homes without having much impact on the prices of existing dwellings.    The people Stock quoted seemed a bit more optimistic that –  despite the disavowals – Labour’s plans might actually lower house prices.   Fundamentally improve the land supply situation and perhaps that might be realistic.  Without that, government-sponsored builds seem likely to substantially displace private sector builds.

But then there were the policy cues.  Yesterday morning, National announced that, if re-elected, it would increase the subsidies offered to first-home buyers.  First-home buyer grants, in a supply-constrained market, are a policy so daft that I’m not aware of any serious analyst, from any side of the political/economic debate, who thinks they are a good idea (and Treasury and the Reserve Bank have opposed them).  New Zealand was mercifully free of such subsidies for most of its history –  and policy people used to look across the Tasman, slightly disdainfully, at the grants there.   First home buyer grants are, largely, an expensive way of getting house prices a bit higher than they otherwise would be.  And here that outcome is even more likely given the announced increases in accommodation supplement payments next year.   Renters will be able to pay a bit more (so investors can afford to pay a bit more), and potential first home buyers would now also be able to pay a bit more –  perhaps especially in provincial areas where the grant goes a bit further.  Since the policy is well-foreshadowed, most of the effects will have been compounded into prices before the first young couple can get their increased grant.  And, as so often, the winners will be the people selling out of the market –  those who already have.  It is the sort of policy that gets adopted when governments have given up on  believing that they might actually fix the underlying problems –  and/or given up believing that they can convince voters that they might.    Subsidies to home buyers –  rather than fixing the underlying problem –  is like some throwback to the early 1980s (actually the last time we had such direct first-home buyer subsidies).

The messages from the other side of politics weren’t much more encouraging.  The leader of the Opposition yesterday announced her plans for the first 100 days of a Labour government.  Housing appears on the list, but the three most specific items are

  • Pass the Healthy Homes Guarantee Bill, requiring all rentals to be warm and dry
  • Ban overseas speculators from buying existing houses
  • Issue an instruction to Housing New Zealand to stop the state house sell-off

Whatever you make of the Healthy Homes Guarantee Bill, it won’t improve the affordability of housing (if anything, rather than contrary for renters).  And stopping the sell-off of state houses might (or might not) make some sense, but again it won’t alter, by one iota, the affordability of housing in New Zealand.   And, in fairness, both are probably being done for other reasons.  And so the one specific thing they’ll pledge to pass by Christmas actually designed to improve housing affordability is the proposed ban on non-resident foreigners buying existing housing.  Consistent with this, on Labour’s website, the very first thing one comes to under housing policy is

Crack down on speculators

Ban foreign speculators from buying existing homes

Reasonable people can differ on the specifics of this (and other “anti-speculation” measures –  the extension of the bright-line test for investment properties, and ring-fencing).   To me, it has the much the same feel as that around first-home buyer grants –  it is the sort of policy one adopts when one has given up on dealing with the underlying problems.    Blaming “speculators”, for the symptoms of a rigged and dysfunctional market, is a distraction strategy from way back for politicians here and abroad.

Banning non-resident foreign purchases of existing houses isn’t the worst policy imaginable –  and any adverse impact on New Zealanders is likely to be small to non-existent – but as a flagship policy for a possible new government it is hardly one that suggests a serious focus on fixing the underlying long-term problems.  Sure, it is probably quite easy legislation to draft  (though no doubt MFAT officials will be turning their minds to the issue of how to reconcile the proposed ban with, eg, the New Zealand-Korea “free trade” agreement) and comprehensively fixing the planning system isn’t.  But after years in opposition, and with policies around land supply that look promising on paper, if they were really serious about far-reaching reform in this area, one might have hoped they’d have found something specific to have done in the first 100 days –  a stake in the ground, an earnest of a serious commitment to free-up land supply later in a first term.   But when the previous leader never mentioned the issue, the current leader never does, and when there is nothing in the 100 day action plan, I’ll stick with my scepticism for the time being.

Bloodless economists probably aren’t supposed to do disgust, but that pretty much summed up my reaction to the weekend story that, less than a year out of office, John Key had sold his Parnell property, at what is apparently a very substantial profit, to enable him and his wife to downsize.    No doubt it is mostly about “time of life” thing –  kids off their hands etc –  and I’m not suggesting that the National Party’s failure to do anything much about fixing the housing market problems for nine years was mostly about personal enrichment.     But this was a leader whose approach to the increasingly severe housing disaster was to glibly call it a “quality problem” or some sort of “sign of success”.  As I put it 18 months ago

In a speech to an Auckland business audience yesterday –  there is a report here, and also video footage –  the Prime Minister repeated his breezy claims that Auckland’s “challenges” around housing and transport are “a quality problem”, and a “sign of success”, and that both the city and the country are doing “incredibly well”.

Perhaps that is how it appears when you are already wealthy, live in a large house in a prime inner suburb, and have a taxpayer-provided chauffeur at your constant disposal.  Neither housing nor traffic problems must impinge terribly much.

And so, having moved on from public life, Key now extracts what is reported to be several million dollars of profits which are really just monopoly rents.  Keep the land supply market dysfunctional, boost the population considerably, allow house prices to be driven up to an extent that an ever-larger proportion of the young and the poor can’t afford to buy, and then simply take your own profits.   It is, in effect, money taken at the expense of the poor of Auckland –  not because any of them could afford Parnell, but because most of the increase in Parnell land prices is a reflection of the same common factor that has driven prices high across Auckland.  It is easy to be indifferent to a problem when you yourself benefit – even just passively –  from that continuing indifference.    The record, the policies, National is campaigning on today, including around housing and land, are more or less exactly the same as those of the first eight years of a National government, under John Key –  who has now cashed-out millions of dollars personally, made from his government’s refusal to fix the housing market.

Putting disgust aside and returning to the numbers, one often hears the current Prime Minister talking of 10000 houses a year now being built in Auckland, as if somehow this is the answer to the past policy failure.    It is often complemented by references to bureaucrats’ claims that tens of thousands of new houses are in the pipeline – I think I’ve even heard references to some multiples of Hamilton being built in the next few years.    (I’m not sure why we should be impressed by that figure, when New Zealand’s population is currently growing by as much as Hamilton every two years).

Of course, as Core Logic has pointed out, the actual increase in the housing stock is much less than the number of new dwellings being consented (many new builds require the demolition of existing houses), but even just focusing on building permits, is there any sign that the number of permits being granted in Auckland is getting ahead of the population growth?

The chart below uses official data.  It shows the number of building permits being granted in Auckland each (June) year relative to the (SNZ) estimated increased in the population over that same year.  Comparisons that look just at consents per capita are meaningless –  it is increases in the population that (are the biggest factor that) increase the need for accommodation.    The data are only annual, but for the year to June, so the actual building consents numbers are almost right up to date.    The population estimates for individual areas for June 2017 won’t be out until later next month.  But Auckland’s population is estimated by SNZ to have increased by 2.82 per cent in the year to June 2015 and by 2.83 per cent in the year to June 2016, and there has been no material change in net migration inflows over the most recent year.  So I’ve assumed a population increase in Auckland of another 2.82 per cent in the year to June 2017.   It is a rough estimate, but it would be surprising if the SNZ estimate next month was materially different.

building permits per person increase

So, yes, in annual terms, the number of building permits for new dwellings per person increase in the population has increased, but not by much.  But in the last two years, the rate of consenting has still been lower than in any year in the first decade of the data series.    It is unspectacular at best.  Sure, there is a lot of building going on right now, but then there are huge (government-abetted) increases in the population which don’t yet show any sign of abating.

And if there is a lot of house-building activity going on at present, there are straws in the wind suggesting there will be less in future.  At a national level we’ve already seen some of that already in the building work put in place data released last week.  But here is a chart of Auckland new dwelling permits.  The data are noisy from month to month, so here I’ve taken the annual growth rate in the three-monthly total (eg May to July 2017 over May to July 2016) and shown the data for (a) the total number of new dwellings consented, and (b) for the total floor area of those consented new dwellings.

building permits 2

Both annual growth rates are now (a) well below where they were, and (b) actually are negative.  In other words, in annual terms the volume of new housing being consented in Auckland is dropping.  And there is no sign that the rate of population increase is.

Views will differ on whether these numbers reflect capacity constraints or the limits of effective demand at the prevailing (extremely high) prices.  My own bias tends towards the latter story –  and Rodney Dickens at SRA has done some analysis taking the same view.  But whichever story you think is more convincing, the numbers don’t suggest any near-term lift in the overall supply of houses relative to the increase in the population.  Taken together with the lack of much land-use regulation reform, it all provides little reason to think that housing affordability in our largest city is likely to improve much, or for long, on anything like current policies.  Meanwhile, the system will remain skewed to those who have, and against those who have not, and we can only expect yet more ad hoc measures –  whether from the elected government or outfits like the Reserve Bank –  to paper over the symptoms of housing market failure.


33 thoughts on “Housing failure set to continue

  1. Michael my understanding of the difference between National and Labour wrt house prices is that National wants house prices to stay the same and for affordability to catch-up via income growth. While Labour are saying they want existing house prices to stay the same and to bring versus reforms through which will lower the prices of new housing and that it is this newly built lower priced housing which provides the opportunity for first home buyers to access affordable housing.

    We have discussed this second option here on CroakingCassandra and it seem although there could be some uncertainty and debate about the details -that on balance it is likely that reducing the price of newly built houses will put downward pressure on the price of existing houses.

    If existing house prices drop under a future Labour led government, it will be interesting to see how they respond, do they scale back on housing reforms which provides the lower priced new houses or do existing house owners have to adjust to changed marketplace conditions?

    Michael as to your claim that KiwiBuild will crowd out private developers, Labour seem to be aware of that of risk. Andrew Little discussed this last year in his speech to the property council -in the KiwiBuild section.


    • Thanks Brendon

      I hope they are right about Kiwibuild not displacing private sector activity. Curiously, the chances of significant displacement probably increase the more serious Labour is about doing land use regulation liberalisation (since if there is a gap in the market re new builds at present, it presumably largely stems from the regulatory distortions that seem to make building big houses the most economic option – there is no reason why that should be so in a liberalised market.


    • Brendon

      just noticed a richard harman prifile of grant robertson. in it, he is asked whether, surely, house prices need to come down, and replies (direct quote) “no, our view is that they need to flatten out and that people’s incomes need to rise”. depressingly explicit. of course, perhaps given prompting he’d add the caveat about new more affordable housing pulling down the average/median.


      • Not too sure why that would be depressing? In most cities where they are able to build highrise and get economies of scale working, housing becomes alot more affordable and the average house price falls. It does not mean that 4 bedroom houses on quarter acre sections become cheaper in those cities, it usually means that there are more multilevel dwellings that deliver a lower priced housing alternative.


  2. I think that the speech to the Property Council details how Labour would increase responsiveness of housing supply. If it was implemented then it could be expected that number of new builds would increase and their costs would decrease.

    I think Labour’s approach is more believable than Bill English’s demand subsidies, which he must find embarrassing to promote given he used to be a Treasury policy wonk and Treasury as you detail repeatedly report that demand subsidies in supply constrained markets -such as Auckland’s housing market -the gains are captured by the property seller not the first home buyer.


  3. The Auckland Unitary Plan is already set in stone and it took 4 years of public consultations. There will not be any changes for at least the next decade from any Labour or National government. The only remaining action that can be taken at this stage is to get rid of the RMA which will definitely not happen under a Labour/Greens government. Under a National government at least they are making the correct move in this direction of removing the RMA.

    Labour is dreaming if they believe they can build anywhere they choose without having to deal with disgruntled neighbouring properties. Kiwibuild is going to be blocked by numerous legal threats from neighbouring properties.


    • RMA can be changed by a National Policy Statement.

      At a deeper level the government when it has a mandate for change can do make whatever laws it likes. So whatever impediment there is in the marketplace that artificially inflates the price of new housing can be removed.

      Jacinda will be highly motivated to follow that course of action to give her government substance to go along with ‘stardust’….


      • We are all motivated until faced with reality. Bill English was initially very gung ho about building on the $10 billion of housing NZ properties putting up his hand and volunteered for the Housing NZ ministerial duties. He was highly motivated until he realised that in order to build highrise and high density he needed to remove hundreds of existing tenants would may be in their 70s and have living there for the last 40 years who believed that they had an absolute right to live in those state houses with quarter acre gardens.

        The other problem was the zoning needed to change and the government like anyone else had to wait for Auckland Council to go through the public consultations process and that took 4 years. There were many threats by the government to override the Auckland Council to steam ahead but as we have found the 125 special housing zones had very little or no impact because there was no infrastructure to build those houses.


    • Dealing with the disgruntled … otherwise known as the NIMBY Brigade … yeah it wasn’t so very long ago that our resident scribe here was painting hissself with that very stain … asserting very clearly about cycleways in Island Bay


      • not sure I see the connection. I don’t favour riding roughshod over existing use rights, do favour allowing groups of existing owners to contract out of existing restrictions, and do favour allowing easy new builds on the urban peripheries (oh,and favour cutting immigration for other reasons, but it would reduce substantially the need for new dwellings).

        the cycleway is about a sheer (and now repeated) waste of public money, disregarding the interests of locals, not in the interests of (say) newcomers but of some ideological vision of cycling (in a city as unsuited as any in the world to cycling)


      • International Students and Tourism is a $15 billion industry and a service industry. Services mean more people not less. You can’t have one without the other. They come hand in hand. No wonder economists do not believe in forecasting if they can’t even identify the fundamental base assumptions correctly.


      • I’m simply pulling your chain just a little bit – I do agree with your position on the cycleway

        I have some difficulty following your claims about land-use restrictions being a big impediment to housing costs. While I dont have any facts and figures at my disposal I think of (a) the current trajectory of inner suburban density intensification and the rights of a home owner of an old single level home on an 800 square metre block of land suddenly having their quiet enjoyment destroyed by the development of 3 x 2 level row townhouses next door impeding their view and being overlooked by the second story next door, and (b) all vacant land within the urban area is either owned by Auckland City Council, the crown, or privately. The majority of the privately held land is (in my view) held by individuals who are happy with the status and should not be forced to sell, and not subjected to claims of landbanking, and the increasing demands of French or Canadian Style taxing them out of their holdings. Therein lies the connection to your Island Bay situation. We should not be judging the individual acting in their own selfish interests.

        I’m for preserving the characteristics of our country – particularly Auckland where I grew up – I see a place where the population has doubled while the green-space / recreational areas are being cannibalised such as golf courses and football stadia – one example is Manukau Golf Course sold off 5 years ago to Fletcher Residential and nothing has been developed yet. Green recreational spaces in Auckland are merely things planners cannabalise simply in order to accommodate migrants

        Do you know where Blandford Park is?
        Do you know where Carlaw Park is?
        Do you know where Newmarket Park is?
        Do you know how much larger Ellerslie Race course was?
        Do you know how much larger Akarana Golf course was?

        Then there is the cannibilisation of Alexandra Park Trotting Club, and Avondale Racecourse, and Hillsborough Bowling Club, all in the process of going now in 2017


      • Not sure where Blandford Park is but I do know the answers to most of your other questions. I used to cycle through the rather larger Ellerslie Racecourse to get to school.

        I largely agree with you although I don’t think I”d go as far as you on the two storey townhouses. But, of course, in most private developments these days, covenants help manage these issues and help provide certainty to both sides. I’d like to entrench existing provisions in the equivalent of covenants and allow groups of people to negotiate out of them, including compensation as required for any losers.


      • Blandford Park and the Historic Grafton Cemetery were in Grafton Gully and both were consumed by the Southern Motorway connection to Wellesley Street


  4. On the immigration front, I assume National have no plans for any change to current settings – as non have been announced;


    Whereas Labour at least have some published target numbers for reductions;


    which they will no doubt be held to account for if they do become the next government.

    I think the ban on foreign, non-resident purchases will have a very beneficial downwards effect on house prices. Not that these purchases account for a large percentage of the overall purchase numbers, it’s just that all property prices tend to rise in line with the outlier prices that are paid – and those outliers tend to be purchases from offshore, i.e., those that have better buying power – be it earning in high wage economies, and/or having exchange rate/currency advantages.


    • Time will tell on the foreign investment ban. My impression is that, for the time being, capital outflows from China have substantially dried up (generally, not just to Akld property) and that may be one factor behind the current stabilisation.

      On immigration, I’m a bit more sceptical of Labour. As I’ve noted in an earlier post, their proposals will have a one-off reduction in the number of students here (and thus a one year fall in the PLT inflow). They have reconfirmed the same residence approvals target as National. Of course, one can’t include everything in a 100 day list, but i was interested they chose not to put any of the immigration changes on that list, even though you’d think they’d want them in place for next year. Perhaps it doesn’t jibe with the current “relentlessly positive” mood, but i also wonder whether Ardern is really behind even the immigration policy proposals put out while LIttle was still leader. I’d like to think i was wrong about that, and so time will tell.


      • Yes, nothing in the first 100 days on immigration was telling. They seem very reluctant, as well as unsure on immigration – I suspect in response to certain sectors of the business and agricultural lobby.

        Liked by 1 person

  5. Michael,
    I think it would be useful for this site, yourself & the contributors to propose robust set of policy solutions to the issues raised. Here’s a starter for 10 on housing.

    1) Demand – Reduce the immigration rate to a level that is more sustainable. We cant control NZ citizen & Australian permanent residents movements but we have control over the rest and can target a 12 month rolling rate. (As I’ve noted before I’d personally like to see it given to the Reserve Bank as a macroprudential tool). Most of the housing issue is in Auckland as most of the new migrants stay there.

    2) Interest Rates – Set by world markets, but the real NZ rates could potentially drop with lower migration rates. Worldwide rates are low meaning asset prices like housing have been bid up. Personally I’m in favor of LVR & DTI to limit the maximum extents of leverage. Alternatively, the capital ratios of the banks can be increased.

    3) Supply – The RMA needs further amendments to free up the ability for the market to build. I don’t agree with National that the baby should be thrown out with the bathwater and the RMA replaced for urban development. It’s insane we have something like 60+ district plans and then regional plans as well. These could be required to be modified via a National Policy Statement to have 1 nationwide effects based land zoning system without density restrictions.

    4) Supply – Building supplies – have the commerce commission further look at breaking up the duopoly on building supplies in NZ.

    5) Supply – implement a land tax and rate on the same basis. Offset these taxes through reduction in other taxes.

    6) Fees – Developer contributions – remove developer contributions completely. They add upfront capital cost to housing. The costs should be paid by the end user through targeted rates or bonds etc.

    7) Fees – Cross subsidise building consent fees for a period of time so that there are no fees on new or denser development. Fund this through the gradual implementation of rates on Crown land (i.e remove the subsidy). In the end the extra local government funding can be used to remove some of the funding constraints local government currently faces and would be better than a tourist tax.

    8) Spatial Demand – Introduce congestion tolling to support market demand for denser developments around high frequency PT. Reduce fuel tax to offset the congestion tolling revenue.


      • 1. 20,000 residential property owners have signed up to Air BnB for a booming tourism market. 3.5 million tourists need to be fed and served together with 125,000 international students spending $15 billion. You just cannot do without the increased foreign workers to feed and to service this $15 billion industry. Service industry means more people and not less people. Reducing demand reduces GDP. In 2009 we had less people but we also had a lousy recession. House prices was falling and I recall property investment was a bad name and anyone investing in property was considered an idiot. Economists like Shamubeel Eaqub was advising people to rent and not buy as property offered zero capital growth compared to shares.

        2. Interest rates are higher than they need to be because NZ banks have a captive installed client base. Migration has really nothing to do with interest setting behaviour.


    • some interesting ideas there. I’m more sceptical than most on land taxes – or TOP’s net wealth tax – partly because real interest rates are now so low that a reasonable (non-confiscatory) rate would be so low it isn’t likely it would make all that much difference. Plus, I haven’t seen a good study of the impact of how markets behave differently as between capital value and land value rating.


      I put some of my suggested emphases in this post
      including my serious proposal for a compensation scheme for owner-occupiers who lose a lot, in a quid pro quo for serious commitment to lower house prices,


    • Like Brendon I think they are sensible too.

      1. Immigration should be cut but it is tangential to the housing issue. Even Winston in charge would have no impact on immigrants already being processed – say 40,000 for the next year and after that not on the uncapped partners of Kiwis (about 13,000pa) or the humanitarian (over 4,000pa). For example they could retain current numbers but target immigrants to the provinces therefore we cannot use immigration numbers as critical to solving un-affordable housing in cities.
      2. Interest rates – historically they are low and they could be lower but what would happen if inflation and wages remains below 2%pa and say five years from now interest rates jump to a typical 8% or 10% ? My son has a recent mortgage in France and it is fixed for 25 years. Instead of minimum deposits they could insist on very long term fixed mortgages.
      3. & 4. RMA and Building supplies – worth doing but will take time and not be a dramatic solution.
      5. 6. & 7. Land tax to pay or partly pay developer contributions & consent fees. Relate consent fees to purchase price & habitation – that delays payment to the council but helps developers finances.
      8. Sophisticated Congestion tolling. Requires very little time to get government approval and relate payments to the vehicle rego. Bring in gradually and at low prices with any income going to public transport, fuel tax and negative tolls; the aim being to retain public acceptance. The delay would be the computer programming; hopefully they could buy a package and get it working in say 6 months.


    • A walk around central Chch, observing all the empty spaces, and the waiting-to-be-demolished buildings, and the half-finished new buildings, would quickly disabuse one of the notion that we need to reduce immigrant numbers. If anything, we’ll need a doubling or tripling of imported builders and construction workers if Chch is to be rebuilt in any of our lifetimes.


  6. 4) Supply – Building supplies – have the commerce commission further look at breaking up the duopoly on building supplies in NZ.

    Last time I looked there were 4 majors, Carters, Mega group, Bunnings, Itm and I’m sure others. Hardly a duopoly

    .6) Fees – Developer contributions – remove developer contributions completely. They add upfront capital cost to housing. The costs should be paid by the end user through targeted rates or bonds etc.

    Pray tell us why the current ratepayers should subsidize new builds and renters. At least the way it is currently the person who stands to gain i.e. the purchaser of the new house fronts up but can recover their cost on sale.
    Ditto for 7.

    You see the problem isn’t these things.
    If the argument is that first home buyers can’t afford the price of a new house or a current house then maybe, just maybe there expectations are greater than their ability to earn or save or even their motivation to do so. Perhaps their expectations are unrealistic in today’s world. Indeed it seems that in other countries they simply cannot afford the choice so accept their fate in life is to rent.

    200 sq mtr houses with all today’s mod cons cost a lot and if they expect to do this in the middle of Auckland (where the problem mostly is), then that is simply unrealistic.

    If however they would be prepared to begin their house owning journey with say a 90 sq Mtr house with no garage, no media room etc., like many of us did, then we can build them for them way cheaper. 3 beddy for 150K

    But it won’t be done on prime land either. It has to be done where land and the subdivision suits that build cost. Well out from the city centre and even more importantly it needs to be done by a developer who doesn’t impose covenants that prescribe the style of house, the materials to be used, the size of the house and the amenities that the house must have. i.e. like we did in the sixties and seventies.

    The houses that can be built this way today will be better in many ways but there are thousands of the older ones that are in use and many many of them where the owners have gone on to add further rooms, garages etc etc.
    We could also used recycled houses but not on any current subdivision.

    There are solutions but it takes intestinal fortitude from any Govt. to develop subdivisions like that. The argument being a comparison with Porirua or many other not so nice places of the past. Not that it should be so.

    But the customer is always right and the customer is king.Currently they demand that 200 sq mtr close to town new home,that is if someone else will subsidize their life after world tripping and student loans et al.


    • Agree with a lot of the comments. Targeted rates were used to fund the build of a seawall at Raumati to protect private frontages back in the 1970s.


  7. “….with an average total shareholder return since 2003 of 9.5 percent, and 17.0 percent for the 2015/16 financial year. This is largely due to increasing property values across the country, but particularly in Auckland, where 43 percent of Housing New Zealand’s properties are”.

    HNZ annual report to June 2016: indeed, rising land values a sign of success for a key taxpayer funded entity…


  8. Logic to me is that even with less than adequate housing available, any taxation move that induces investors to release stock to the market would make those shut out happier. Obviously that would include a price lowering effect. Too simple?


    • Some possible tax changes would be likely to work in the right direction, but the effects would be likely to be small. Others further distort the tax system (I’d put ring-fencing, focused on rental housing only, in that category). The other problem with land tax is that, while it looks v appealing on paper, the political economy process seems to push for more and more carveouts (which is what happened with the land tax NZ had for a long time).


    • The main problem would be in identifying the rental property versus your own home. Make it too difficult and people will stop declaring the rental income and start moving into and out of their rental properties.

      There is a big assumption that there are losses to claim. But with interest rates at 5% for most property investors they have to deal with a profit rather than a loss. It is newby investors that have losses and usually those losses do not go on beyond 10 years even for newbies.


    • When you increase the tax on cigarrettes, you increase the price of cigarrettes. When you put in more taxes on property why would anyone expect prices to fall? With the price of cigarettes too high it encourages smuggling activities. Therefore expect a spike in tax avoidance activity. IRD has just informed 4,000 IRD workers that they will be out of a job soon. Don’t expect they will be too on board with more work on tax avoidance administration and enforcement any time too soon.


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