thorg wrote:

Kazmeistyr wrote:NZ needs to produce and sell more stuff.

Can't rely on inanimate thingies to keep the country running.

Problem solved.

why be the slave when you can be the master

Not much fun being a master if you don't have anything to shake your stick at.

jo wrote: With CGT you would expect an increase in rental prices.

rental prices are alread as high as the market will bear?

If you increase the cost of doing something (through added taxes, CGT), it is reasonable to expect the price to increase also.
http://en.wikipedia.org/wiki/Supply_and_demand
CGT would reduce the supply of rental properties (as it is no longer as profitable to do so), and the price would rise.

jo wrote:If you increase the cost of doing something (through added taxes, CGT), it is reasonable to expect the price to increase also.
http://en.wikipedia.org/wiki/Supply_and_demand
CGT would reduce the supply of rental properties (as it is no longer as profitable to do so), and the price would rise.

will it reduce the producton of them no ( as developers already pay tax on the profits they make)
if a renter buys a rental property and lives in it, then they are reducing both suply and demand thefore no change in rental price.

jo wrote:If you increase the cost of doing something (through added taxes, CGT), it is reasonable to expect the price to increase also.
http://en.wikipedia.org/wiki/Supply_and_demand
CGT would reduce the supply of rental properties (as it is no longer as profitable to do so), and the price would rise.

Pretty hard to make money off the rental returns on most residential property, that train left 20 years ago. Rents have been artificially low because everyone has been staking their borrowed money against capital gains in concert with tax offsets. Been there done that.
If CGT was brought in that would blow some of those available gains, so in theory rents would have to rise to compensate, but then property values would also lower as property becomes less attractive so the cost of paying interest on loans would be less as you don't have to borrow as much. Then there's interest rates..there's so many variables..but what Bernard Hickey and Gareth Morgan are saying seems to make sense to me, our wasting our energy (and borrowed overseas money) on a domestic housing 'market' is pathetic and damaging for us as a nation. I'd welcome a CGT.

philstar wrote:if a renter buys a rental property and lives in it, then they are reducing both suply and demand thefore no change in rental price.

This is true.
The problem I was directly talking about was the lack of housing, and what my response was basically that the market would provide.

Nostromo, I agree most of the return is in capital gain on the rental property. I'm thinking in investmetn terms, ROI. Increased cost, decreased return, so maybe I should put it somewhere else. I'm not sure whether property values would actually decrease, cos in theory it would become more attractive to buy a house rather than rent and I guess that'd be a question for treasury. I know for me ATM it is more attractive to rent than buy. A substantial increase in rental costs would make me buy instead. Whether that is a good thing (more home ownership) should be debated.

I particularly agree with

nostromo wrote:but what Bernard Hickey and Gareth Morgan are saying seems to make sense to me, our wasting our energy (and borrowed overseas money) on a domestic housing 'market' is pathetic and damaging for us as a nation.

jo wrote:The problem I was directly talking about was the lack of housing, and what my response was basically that the market would provide.

the market will provide as long as it is not restrained by the law (OMG I'm becoming a libertarian ), which means removing building restrictions ( freeing up more land ( and building more roads) or letting people build higher).

or land ownership dose not become a oligopoly in which case it is in there interest to keep the housing supply in deficit ( there we go back to dirty commie)

Isn't one of the main reasons that "Other" forms of taxation are being considered, of which a CGT is one, is to also widen the tax base. The taxation base at the moment is narrow and tightly tied to economic conditions. PAYE and GST, and business taxes have all shrunk in the last 18 months at a time a govt needed to actually spend more on benifits etc.

Going forward the baby boomers will move out of the work force and you have a shirking percentage of the populate that pay PAYE. In reality Working with families pretty much means the lower income groups in NZ pay no net tax as well. So you end up taxing the shit out of the group that earns something and this group is getting smaller.

Personally I actually like a land tax (think of like rates, but by central govt and applies to all land, housing, farming, commercial). Its a low percentage, few exemptions (national parks for example) and is a low percentage. Its not a capital gains tax, its tied to the rateable value, not the purchase price or sale price. Land is finite, you can't hide it, if it has a title, it has an owner that's liable for the annual land tax. The infrastructure is already in place to do the valuations. And generally the richer you are the more land you tend to own. yes you could put it in a trust or company, but the land tax still has to be paid by that entity even if it makes a financial loss. It may "slow" land price speculation down but won't stop it, but thats not its primary purpose.