There’s a hot debate going on in New Zealand over whether to implement a Vancouver-style tax on foreign buyers of residential real estate.
Auckland’s Mayor, Phil Goff, has called for a 15% tax on foreign owners, but National Prime Minister (and chief bubble manager), John Key, is seeking to shut-down the debate. From Interest.co.nz:
The just-elected Auckland Mayor on Saturday told The Nation’s Lisa Owen: “Vancouver, a couple of months ago, decided they’d put a 15% property transfer tax on foreign investors who didn’t live in Vancouver. That is already producing good results.
“It’s supported by the Governor of the Reserve Bank of Canada, the Prime Minister of Canada, and my first argument to government will be, ‘Think what most New Zealanders are asking at moment. Why is it that when we allow foreign investment to come into New Zealand into the housing market we don’t require them to invest in new housing, which is producing additional housing for New Zealanders, not simply pushing the rate of inflation up?’ It’s a good question…
Labour, the Green Party and New Zealand First have been more vocal in calling for the Government to ban foreign property buyers altogether.
So if the Maori Party’s two members of parliament support the introduction of a Vancouver-style tax, it would have support from 60 MPs, while 61 would be opposed…
Key said he would need advice on whether a tax on foreign property buyers would contravene New Zealand’s free trade agreements…
Key went on to say: “Where there’s often confusion is a person who’s… of Asian ethnicity turns up at an auction at the North Shore of Auckland and people say they’re a foreigner, but actually they’re working here, living here, could even be a second, third, fourth generation kiwi…
“For any demand-side model to work – and generally the history shows you they work temporarily and not for very long – they have to be hitting the right target, and if the number of non-aligned, non-New Zealand buyers are not very many, then you’re not going to have much impact”…
ACT has told interest.co.nz it does not support a tax on foreign property buyers, because: “As a matter of property rights, New Zealanders should be able to sell their property to the highest bidder without government interference”…
With a general election due next year, and concerns over housing affordability reaching fever pitch, the National Government would be wise to endorse this proposal.
Not only would a foreign buyer tax take some much-needed heat out of the market, but it would also raise much-needed tax revenue, which could then be used to benefit existing residents (e.g. via the building of social housing). It’s a no-brainer both politically and socially.
