Kiwis have 'perverse incentives' around property investment - Chlöe Swarbrick

October 1, 2020

Chlöe Swarbrick and Geoff Simmons say too much of Kiwis’ money is funnelled into property.

Green Party MP Chlöe Swarbrick says Kiwis’ reliance on property investment contributes to inequality, which is not helped by the fact people have “really perverse incentives” to do so to get even wealthier.  

Speaking on TVNZ1’s Breakfast this morning with The Opportunities Party leader Geoff Simmons, Swarbrick said speculation on property was why New Zealand had a growing waiting list for housing, and why there were thousands of vacant properties in Auckland. 

“We have really perverse incentives … to invest and funnel all of that money into property right now to establish, effectively, capital gains,” she said. 

Swarbrick said some people were excluded from earning wealth in that way, which would lead to a “continued divergence” between the rich and poor, as well as older and younger generations. 

“There has to be recognition that those outcomes, whether it’s owning a house or otherwise, is effectively hard work plus the environment that you’re in.”

The Green Party proposes that a capital gains tax should be applied to all investment properties, excluding family homes. 

The party also announced in June it wants to introduce a new tax of 1 per cent on an individual’s net wealth above $1 million, and 2 per cent over $2 million. The tax would affect the top 6 per cent of the wealthiest New Zealanders.

Swarbrick was also the only candidate in TVNZ’s Young Voters’ Debate on Monday to explicitly say  that house prices should go down. 

Meanwhile, Simmons said there was “political fear around taxing property”. 

“I think, also, we’ve just gotten so used to the idea we can get rich buying and selling houses off each other that people don’t think there are alternatives. But, there are businesses out there.”

He said the Greens’ wealth tax would “really hammer business investment”, which was why he favoured TOP’s proposed policy which would tax 3 per cent of the equity of a property, as if it were in a bank. 

“It really targets making sure that property pays the same amount of tax as other forms of assets,” Simmons said.

TOP later said it had amended its policy to tax roughly 1 per cent of the equity of a property, in line with interest rates. 

He said this would drive people to invest in businesses, rather than in property. 

Simmons also touched on intergenerational inequality, pointing to younger generations who were locked out of the property market and were, generally, worse off than older generations. 

“Change is coming - it’s just a matter of when not if,” he said.

Swarbrick added: “If people grasp that power, this is often pitched as intergenerational warfare but it doesn’t have to be.”

Host John Campbell asked whether it was fair that people who were retired, who tended to have less income but have more assets, would be taxed for what they owned.

Swarbrick said the Greens’ policy would allow people to defer payments until their wealth was realised. 

Meanwhile, TOP would give people the option to roll over paying a property tax until the property was sold. 

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