PHOTO: PEOPLE GATHER OUTSIDE A REAL ESTATE AGENCY’S AUCTION ROOMS IN AUCKLAND CBD IN OCTOBER, 2020 (PHOTO: GETTY IMAGES)
Currently, investors are essentially subsidised to outbid homebuyers. Instead, why not give homebuyers a tax cut and make the speculators pay?
Have you ever wanted to throw a party but worried no one would come? My wife and I thought of having a party this year to celebrate paying off our mortgage but quickly realised it wouldn’t be fun for our friends – most of whom have mortgages well north of $500,000, or haven’t made it on to the property ladder at all.
It made me reflect on how it now takes privilege and, in our case, loss to experience what was, until recently, a typical Kiwi home-owning story. It was the privilege of education and opportunity, and being able to live rent-free with family, that allowed us to buy relatively young, before house prices exploded. It was deaths of affluent family members that led to inheritances that allowed us to pay off the mortgage early.
Luck is no basis for a just and equitable system. Yet the luck to have been born into a family that will give you opportunities and financial help has become a prerequisite to own your own home in New Zealand. And with house prices exploding due to record low interest rates and loose lending, that is only becoming more true.
I’ve got an idea for how to fix it.
Grant Robertson has said the government will look at new measures it could take on the demand side – ie discouraging investors and speculators – while not going back on the election commitments Labour made ruling out things like capital gains tax, wealth tax and a land tax.
Extending the bright line test further is no good. It runs into diminishing returns and the justification that it’s to stop people flipping homes gets more and more tenuous the longer you extend it.
Broadening the first home grant won’t help. It costs quite a lot of money per family it’s helping, and it’s ultimately adding net demand to the market, pouring more petrol on the fire, which will increase prices.
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