Prime Minister John Key's suggestion of a possible land tax may be driven by new data showing foreign buyers are a problem, the Labour Party says.
A villa in Devonport, Auckland. Photo: 123RF
Mr Key said yesterday the government would consider a land tax if data, due out in the next few weeks, made clear who was buying New Zealand homes.
New Zealand changed its property tax rules in September last year, requiring property investors, including those from overseas, to have a New Zealand tax number.
Labour deputy leader Annette King said Mr Key may already have an idea what the figures would show and suggested that may be driving his new suggestion of a land tax.
But she said the best way to discourage foreign property buyers was to ban them altogether.
"Speculators are, we know, buying up the homes in the cheaper parts of Auckland, places like Otara." - Annette King
"We're talking almost five years of this - speculation which has gone on and pushed up the prices in Auckland to unbelievable levels.
"We would ban foreign buyers from buying existing houses in New Zealand, as Australia has done."
She said mooting a land tax was a "real flip flop" from the prime minister who had spent the last three years "protecting speculators."
She told Morning Report no matter what the figures showed, speculation on residential homes should be stopped.
"Why should foreign investors, who don't live in New Zealand, buy up houses, and we know that there are houses left empty as they wait to make a killing on them, why should we allow that?"
Ms King said a large increase in the supply of houses was needed as property speculation was now creeping into previously affordable suburbs.
"Speculators are, we know, buying up the homes in the cheaper parts of Auckland, places like Otara."
She said the government had land in Auckland and thousands of affordable homes could be built on it.
Tax specialist Geoff Nightingale, from PwC, told Morning Report a land tax should be applied to all land buyers, not just foreigners.
The idea of a land tax was first raised by a Victoria University tax working group in 2009, but met with resistance from the government.
A land tax is imposed annually as a percentage of the value of land - effective the same way as rates but on a national basis.
Mr Nightingale said it was a simple tax.
"The land tax has got a lot of positive points: it's easy to collect, it's simple, it's straight forward, it's hard to avoid, one of the negatives is implementing it and the effect it has on property values."
"That drop in values is in effect one of the things that you'd like to achieve." - Geoff Nightingale
He said once a tax liability was attached to a piece of land in perpetuity, its value went down.
"That drop in values, while you wouldn't want it happening overnight, that is in effect one of the things that you'd like to achieve."
He said the efficacy of such a tax imposed on foreign buyers depended on a number of factors such as how many foreign property buyers there were and the level at which the tax was set.
Mr Key told TVNZ's Q+A programme yesterday the government was not trying to stop the investment coming in, but it would take into account new data on the number of foreigners buying houses in New Zealand.
"We've always said look, if the thing became a runaway train on us and we were really concerned about it, that's always an option available.
"And to be blunt, land taxes are far more likely to deter people than a stamp duty...you only pay a stamp duty once on the way through, a land tax is an annual thing. Lots of countries have land taxes."
John Key suspects the data will show only a small number of foreigners are buying New Zealand homes. Photo: RNZ / Alexander Robertson
Mr Key said his "gut instinct" told him the number of foreigners buying houses in New Zealand would be quite low.
Land tax would come too late, say opposition
But New Zealand First leader Winston Peters said the prime minister had left it far too late to act.
"The truth is there are far more New Zealanders today who are tenants today in their own country, than ever before, under Mr Key.
"And instead of dog-whistling why doesn't he have a land and house register, do what other countries are doing, rather than sitting there for seven years doing nothing."
Winston Peters Photo: RNZ / Alexander Robertson
There has been an explosion of offshore purchases of New Zealand homes and land under the National-led government, Mr Peters said.
"And he comes with this idea as a possible suggestion? He is just not serious," Mr Peters said.
Green Party housing spokesperson Metiria Turei said while the government was right to be looking at measures to cool the housing market - it needed to do something now.
"The fact is that there is a problem already," Ms Turei said.
"House prices are rising at a very rapid rate, New Zealand families are already locked out of the housing market - there is already a problem that has to be addressed...ordinary New Zealanders know that there is more that needs to be done."