A new investment tax measure designed to cool the red-hot Auckland market isn’t the answer to slowing the Sydney boom, according to an economist.
New Zealand, this month, announced a 33 per cent tax on investment properties bought and sold within two years in an attempt to get house prices and foreign investment under control.
However, Australia already has similar measures in place and so needs to consider different ways of getting the market back under control, according to Housing Industry Association senior economist Shane Garrett.
“We have a similar idea in Australia where if you hold an asset … for more than 12 months you receive a 50 per cent discount on your capital gains tax, which encourages people to hold on to assets for longer,” he told Mortgage Business.
“This rule, which has been around since 1999, penalises people for holding assets for less than a year.”
Mr Garrett said excessive taxation and a slow planning system help explain rising property prices.
“There are massive amounts of taxation on building a property – infrastructure tax, GST, stamp duty and other various taxes – which means of the final purchase price, about 35 per cent is accounted for by taxes,” he said.
“Also the planning system is slow, so organising things like roads, sewage, water supply, telecommunications and broadband have become quite cumbersome to building a home.”
Mr Garrett said Sydney is the ultimate buyers’ market, with a lack of greenfields land reducing supply, and low interest rates and strong population growth driving demand.