New Zealand’s sky-high house prices could drop if the government would introduce a capital gains tax and prevent high-income people from borrowing too much money, according to Helen Clark Foundation’s latest report.
The report revealed that the skyrocketing prices benefit baby boomers but threaten the younger generations, especially if the government would not do anything about it.
Jenny McArthur, the lead author of the report, blamed property speculators’ debt-fuelled buy-up of housing for the housing crisis – emphasising that investors would continue to buy property as long as they could borrow and get untaxed capital gains.
“The system has made one generation wealthy, but it is unsustainable in the long term. Without targeted interventions that disrupt this system, prices cannot be brought down to genuinely affordable levels,” McArthur said, as reported by NZ Herald.
Read more: House prices expected to rise in 2020
McArthur explained that a capital gains tax could fix the dilemma by disincentivising property investment. Meanwhile, limiting how much wealthy people could borrow would restrict investors’ ability to buy.
Andrew King, executive director of Property Investors Federation, begged to differ – pointing out that house prices are still affordable.
“It's always been [challenging] to buy your first home. And if we introduce a capital gains tax on people providing rental properties, then we are making rental properties more expensive,” he said. “Therefore, when rents go up, it makes it even harder for tenants to save a deposit for a house.”