The Kiwi Dream of homeownership is slipping away. Only a quarter of adults under 40 own their own home, compared to half in 1991. Homeownership is at its lowest level in 65 years. Out of control house prices are putting homeownership beyond the reach of middle New Zealand.
Speculators flicking houses for quick capital gain are out-bidding families looking to buy a home for themselves and forcing up house prices at a dangerous rate. The current government’s policies have been half-baked and half-hearted.
The current government implemented a bright line test last year, requiring property investors who sell a house within two years of buying it to treat any net gain on sale as income for income tax purposes. This has had little impact on the rapid rise of house prices because two years is too short a period to affect speculative behaviour.
Overseas speculators are a significant factor in the out of control rise in house prices. Kiwi homes should not be gambling chips for overseas speculators. The current government’s requirement that foreign buyers have an IRD number had only a temporary effect.
- Tax speculators by extending the bright line test to five years.
- Ban non-resident foreign speculators from buying existing New Zealand houses.
- Consult on rules around negative gearing to prevent abuse by speculators.
The current exemptions from the bright line test will continue. Labour will never apply the bright line test to owner-occupied homes or inherited properties. It will be grandfathered, so the extension to five years will not apply to houses bought before the change comes into effect.
Labour’s ban on non-resident foreign buyers purchasing existing houses will be based on the Australian policy. Removing this speculative demand from the market will help stabilise prices and give Kiwi families a fair shot at buying a place of their own.
Negative gearing can be used by speculators to make taxpayers subsidise losses on their properties. This is effectively a subsidy for speculation. Labour will consult on ways to close this loophole.