Kiwi housing 'chronically over-valued'

Last updated 05:00 14/12/2013
property auction
UNDER THE HAMMER: Our housing is now chronically over-valued, writes Arthur Ord-Hulme.

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The current and long-term over-valuation of New Zealand housing is largely the result of a tax system which encourages speculation on and inflation of the property market.

This has been the case for so long that our housing is now chronically over-valued, and our economy is to some extent hostage to this.

Home-buyers tax relief on mortgages should be just that, and such tax relief should not be available on properties that the owner does not live in.

Likewise, tax relief should not be available if a houses ownership is 'hidden' by use of a trust.

Restricting housing and other property sales to New Zealand residents would prevent our housing market being abused by overseas speculators. Other countries do not permit foreigners to purchase real estate, we should be doing the same.

Combined with a capital gains tax on housing sales (perhaps on that portion of the gain on value which is over and above the general rate of inflation) such measures would restore a measure of sanity to the housing market.

The housing market should be about homes, not investment, about people having the security of their own homes, not about artificially creating an increasingly stratified society of multiple property owners who profit from a system which allows them to pay very little tax, and renters, much of whose income disappears in rent, preventing them saving for a house deposit.

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