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Let's consider wealth tax: Little

Property speculators are in the sights of the Labour party’s new leader.

Monday, November 24th 2014, 12:00AM 1 Comment

by The Landlord

Andrew Little is proposing the party drop its capital gains tax policy. He said it had cost the party votes at the recent election.

“We have put a capital gains tax out two elections in a row and people don’t see it as us fixing a problem,” he told TV3’s The Nation.

He said fixing housing affordability came down to two parts – the supply side, which Labour would tackle with its Kiwibuild policy, and the demand side.

He said the Reserve Bank’s loan-to-value restrictions were failing first-home buyers.

“There is the issue of how to deal with property speculators, people who are in and out of houses and clearly doing it as a business, clearly doing it to raise income but are inflating house prices. There’s talk of do you have special conditions, special interest rates for after you’ve bought your first house. There’s a range of things we can look at.”

He said if housing was to become more affordable the Government would have to improve supply and take measures to dampen house prices.

“Far too many people can’t get into their own homes.”

A tax on wealth was another option, he said. “Let’s look at property speculators. Not the mums and dads who do all the extra overtime, get a bit of money aside and buy themselves an investment property that they use for their retirement. Let’s look at the people who are buying 8. 109 ,12 houses. Let’s look at the people who are buying houses one day, 18 months later selling them again.”

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Comments from our readers

On 28 November 2014 at 3:20 pm guitarguy said:
What an interesting comment.

For those who have amassed 8, 10, 12 properties means that throughout their lives they have managed their money well,working hard, forgoing short term thrills and racking up consumer debt on credit cards and waiting for time and the compounding effect of incremental gains to do their thing. They have taken a good or not so good start and made something better of it

They will have known fear and acted anyway in an attempt to better their and their families situation. At times they will have lay in bed awake worrying about vacancy rates, interest rates and bill payments or how much damage a non paying tenant may or may not be doing in one of their properties.

They will have taken on significant risk through debt and managed that debt and all the finances that need paying relating to properties, initially contributing extra out of their pay packets and claiming the legal tax deductions that despite ongoing either downright dishonest or downright ignorant political comment are tax deductions that have no advantage over any other financial instruments legal tax deductions in this country. In fact it is now the only financial instrument that is discriminated against by the non allowance of depreciation on buildings. (It’s land that appreciates not buildings, unmaintained buildings depreciate and eventually fall down)

Instead of spending all their tax paid dollars they will have used some of them to pay debt.

Those with a high number of rental commercial or residential properties are the opposite of speculators they are providing long term housing/business premises and most hope to be able to live off the rents in 20-30years. Some achieve this a lot sooner commensurate with the risks they took.

They will pay a lot more than the average income earner in taxes on the rent that is earned when after decades the mortgage is paid off or they sell some and pay off the debt. The skills and confidence they get as they grow will make many of them start their own businesses and become employers.

They won’t have got impatient and taken short term gains, they won’t have got scared and sold at a loss in tough times. They will have waited a long time and they will end up self sufficient not depending on the State. They will have provided housing for New Zealanders and taken all the risks as well as the gains. And risks there are, ask some of the people who purchased properties in 2007 and sold them, discouraged a couple of years later at a loss.

If you don’t have residential property investors the same Labour Party will be telling all of you how they need to increase your taxes so they can build houses instead of spending it on schools hospitals medical treatment and infrastructure.

The argument that there is risk to the banking sector through its exposure to housing in this country and the touted comparison to what happened during the GFC seems spurious to me because our banks are not repackaging the mortgage debt and shifting the risk to other parties renamed as an investment as occurred in other countries.

If there is a market reversal which there will be sooner or later its private investors that take the hit not the government. Why would you further discourage those providing long term housing in an environment that keeps screaming about the lack of housing as the reserve bank intends to do with its plan to increase interest rates for multiple property owners who have 5 or more, the absolute opposite of the speculators they are troubled by.

The idea that investors are making it hard for young people to buy houses and if we fix this it will solve the problem is laughable. Get rid of all the investors, it will still be hard for a young couple to get a house in Auckland. It’s always been hard to get your first house. It takes discipline determination and self sacrifice and maybe you can’t have the house you would like and all the latest gadgets you want first time.

Holding a house for the long term as an investment is no different than holding an index based passive fund, or a buy and hold share portfolio, There is no capital gains tax on that either.

The other group Mr Little talks about are the turn around sellers. There is already a capital gains tax on that sort of behaviour like there is on purchasing anything with the intention to sell it at a profit. The IRD has boosted its coffers by millions paying more attention to this type of activity and collecting the taxes it rightfully returns in recent years.

A wealth tax, call it an envy tax instead. If you see someone who started with bugger all and they now have something significant it will mostly be because they did a lot of things and had to worry about a lot of things that most people are not prepared to do. Maybe luck had a part but you have to be in the game for luck to happen or have an effect.

For all the people screaming about how landlords are profiting and rents are increasing in for example Christchurch, how many of you would have wanted to be a Christchurch property investor on the day after the September and February earthquakes. Like any other business activity there are good times and poor times winners and losers. The residential property market is the same as any other and I’m tired of hearing about how it’s the cause of all our ills from people who clearly don’t know the difference between the meaning of words such as Investor,speculator, developer or seeming incapable of understanding the reality of our tax laws.

Wealthy people through the entities they own, companies trusts, employee contributions to this and that etc pay an enormous amounts of tax proportionate to the average person. They end up having more but they contribute more too. You hear in the media that some of the richest people pay little or no tax but that is only part of the story, companies and entities they own or control will in most cases pay a lot more than the average Joe and in some cases millions more.

What you want,in my opinion is more people to know that they can do it too, that improving your circumstances even slightly is more about curiosity desire and determination than luck or brains or birthright.

Nobody was ever given a job, research grant or hefty donation to individuals or the arts by a poor person.

So we don’t need a wealth tax but the Labour Party needs better ideas and leadership than the drivel it’s trotting out now and I can’t believe the Labour faithful are all envy ridden idiots that believe this kind of bullocks, worse than that, I don't believe anyone smart enough to be the leader of a political party believes it either.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 6.79 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 6.79 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 ▼8.09 ▼7.59 ▼7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 ▼9.09 ▼8.59 ▼8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.49 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.89 6.65
Median 8.64 7.29 7.32 6.65

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