WELLINGTON: Much has been made recently about how both the expectation of tax-free capital gain is at least partially fueling the overheated Auckland property market, and how this overheated Auckland property market is, in turn, holding the New Zealand economy to ransom.
If the comments of the deputy governor of the Reserve Bank on April 15 are anything to go by, the Reserve Bank is clearly concerned about the risk of the overheated Auckland property market to the stability of the New Zealand economy.
Grant Spencer said that “New Zealand is one of the few advanced economies that has not had a major house price correction in the past 45 years”, and believes that “particularly stretched” Auckland house prices are being driven, in part, by investors expecting “high rates of return based on untaxed capital gains”.
The Reserve Bank cannot lower interest rates to let New Zealand exporters compete with the rest of the world without the risk of inflaming the bubble of the Auckland property market. The rest of New Zealand suffers, including young families (Gen Rent) trying to get started on life, thanks to overzealous investment in non-productive Auckland property.
Clearly a tax on capital gains must be imminent, as apparently promoted by the Reserve Bank, as a means of trying to moderate the risk that the Auckland property market poses to the New Zealand economy. It’s also needed to somehow find some revenue to help fund the exponential future cost of pensions and medical care.I am no tax expert, but I could not find another OECD country that does not tax capital gains.
Something is morally wrong in our country if the average salary and wage worker battles away to both put food on the family table and fund New Zealand, while the property investor can make a quick million without contributing a penny to New Zealand’s funds.
