Key on property investors' menu too?

Some numbers from Treasury this week show how important housing is to our overall wealth, and why it would be foolish for the government to make too many changes to property investment tax rules next week.

Treasury released its estimates of household assets and liabilities. It showed that houses make up nearly three quarters (74%) of our total gross assets. The actual number is $603 billion verses the $212 billion we have in financial assets (shares, KiwiSaver, deposits etc).

Yes there should be some encouragement to shift the balance so more of our wealth is held in financial assets, but it should be done on a softly, softly basis rather than by using shock tactics.

Plenty of New Zealanders are wary of financial markets and you can’t blame them when you see what has happened to share and bond markets in recent years.

We have seen government’s wipe millions off dollars of savings off New Zealanders before. One of the more recent examples is when the Labour government changed the rules in the telco market and destroyed massive value for Telecom shareholders.

Next week’s budget shouldn’t be National’s version of what not to do to people’s savings.

If it is then Prime Minister John Key could well end up on the menu at the property investors conference.

Housing is an important source of wealth not just in New Zealand, but also across the Tasman. Australia is often heralded as being a nation of sharemarket investors and a country where people own many financial assets because of its compulsory superannuation scheme.

However it still has the majority of its wealth in houses. Figures show that 59%of their wealth is in bricks and mortar, as opposed to our 74%.