Just read an article about the Reserve Bank proposing capital gains tax on property investors in today's newspaper. It is all based on the problem of housing affordability in New Zealand.
The crux of the problem is down to the fact that take home pay for the average kiwi is too low and current house prices are now way too high for young people to get into the property market or those in the market looking to step up the ladder.
Its kind of ironic that the Kiwi Saver scheme is potentially going to make this worse. I think middle age working kiwis basically fall into two camps, those that are already well placed on the property ladder and those that never jumped on board. The latter group are probably those that will get into Kiwi saver as they can't afford a house deposit and want to try and save something.
Westpac economist Dominick Stephens raises a good point in the article, saying the first thing Kiwis do with a bit of spare money is buy a house - if they started a business they would be employing people.
When you compare house prices overseas relative to incomes, NZ's prices are way too high. I don't think anyone wants to spend the bulk of their income on mortgage repayments but in NZ it is the current reality.
I believe the current prices will be sustained unless, CGT is introduced. Any other investment gets taxed so houses need to too. The property investors honeymoon will finally be over and hopefully more kiwis can enjoy a higher standard of living in the future, creating more productive workers and fueling growth in our economy by more funds being channeled into business growth.
Anyone beg to differ?
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