Capital gains tax not the answer

by Amy Adams

Recently I sent a survey to a random selection of residents living in Selwyn. One of the questions I asked about was whether people supported the introduction of a capital gains tax.

The majority of those who replied to the survey stated that they did not support the introduction of a capital gains tax and I personally agree with these respondents.

Those who support the introduction of a capital gains tax claim that it will make homeownership more affordable. I disagree with this view.

Australia has had a capital gains tax for many years, but the housing affordability issues there are every bit as challenging as they are in New Zealand. It is simplistic to say that a tax change would fix housing problems here.

Focussing on constraining demand and making people less likely to want to own or invest in property is in my view, not the right approach. We need to increase the supply of housing and increase the supply of rental properties, but a capital gains tax may well deter people from building houses, which is not at all what we want to happen.

In order for us to have more affordable housing and more affordable rental accommodation — we need to encourage investment in property.

Property speculators already face a form of capital gains tax known as the bright line test, which discourages buyers from purchasing property with the intention of on-selling 
within a short timeframe to make a profit.

A capital gains tax that applies across the board will effectively punish mum and dad investors who’ve saved up a bit of money and want to invest in a rental property as a long-term investment.

If these people decide that being a landlord is not worth the hassle if they’re going to be taxed on any increase in their property’s value, then the supply of rentals will decrease, and rents will go up.