Source: New Zealand Parliament – Hansard
Hon GERRY BROWNLEE (National): Madam Chair, thank you, and I just want to, before I talk about Minister Parker’s response to my question before, just make it very clear that the brightline test was brought in in 2015 for the very purpose of clarifying that intention, which had been in the law for a long time and never enforced. It was also in response to a growing concern throughout the country about what were, effectively, foreign buyers coming in, and the belief that foreign buyers were putting upward pressure on house price. Well, we’ve seen that largely decline. We’ve seen new laws come in that pretty much make that a no-goer, but it has not had anywhere near the dampening effect on house price in the last couple of years. The only thing that is driving house price at the moment is supply—nothing surer than that.
It’s worth noting that while the Government wants to say “Well, if you invest in a brand new house you won’t get caught by the 10 years, you’ll only get caught by the five years.” on the basis they want to encourage more new house building, I think more new house building’s obviously a good thing, but don’t forget that on the current new house price, the Government takes in GST alone around about $100,000 inside that price, paid by the end buyer. Of course, all the way along there’s a massive amount of tax paid by all the tradespeople who work on it, all the trades companies who provide services, and, of course, the developers and construction companies, as well. So there is a big factor of cost inside a new house price of which the Government is quite a significant beneficiary.
The Minister said in answer to my question, quite simply, that officials didn’t know whether this would make any difference to rents and didn’t know whether it would make any difference to rising house prices. Well, I would suggest that they simply have a look at this history of the last three years and see what’s happened, as I said earlier: a $250,000 average capital gain on an average house price in New Zealand in three years, and a brightline test that will only take $70,000 from them. I’m not making a case for more tax, by the way. All I’m saying is that you cannot use the tax system to solve a problem of supply, and the thing that is really very, very irritating, listening to speeches today from the Prime Minister, from Mr Robertson, and from others who have made comment in the media, is the complete denial of the supply problem. The idea that you can put up $300 and something billion for pipes and roads and goodness knows what else, and then that’s going to solve it all, is utter rubbish, because unless there is consented land, then there is no further supply, and where there is consented land, there is no shortage of capital for its development.
I heard today, interestingly—particularly after a conversation I recently had with her—the Hon Megan Woods talking about what was done in the 1950s and 1960s, when a lot of houses were built on parcels of land that were allocated well ahead of final survey, well ahead of any infrastructure that was put in, well ahead of, often, roads that were even put in. But it met a need and it met it fast and it delivered for people at a reasonable cost, because it took loads of costs out of the system. This bill puts loads of costs back into the system.
No one is going to look at their extra, on average, $120 a week costs that they can no longer put down as a deduction—effectively, the $40 a week deduction, or numbers around that, depending on the circumstance—and say, “Oh, well, I’ll just take it on the chin.” This is a recipe for rising rents at a rapid rate. We already know that there’s pressure in the rental market. Look here in Wellington, where people have to queue up for hours just to get a look at a rental property, and then they go through a process where we’re hearing stories all the time where they’ve got to answer different questions and all the rest of it. But one way to drop those queues is to put the price up, and there’ll still be someone there, in a tight market, a supply constrained market, to take up that property. So this is simply a recipe for increasing the price of rents and increasing the upward price on houses.
I’ll bet that before we’re here too much longer—maybe one more Budget cycle—the Government will be scratching its head and saying, “Oh, well, that didn’t work too well, did it?” Meantime, what’s that done for people in this country that have aspirations to own a house? Very, very little.
Hon DAVID PARKER (Minister of Revenue): This bill puts no extra costs into a new build, because they are exempt. The member said that the key to supply is more houses; I agree.
Hon Gerry Brownlee: No, I said land—I said land.
Hon DAVID PARKER: More land is part of more supply, and this bill does not increase the costs of that, because new builds are exempt.