House prices in Auckland have increased so fast that it is becoming very difficult for first home buyers. Prices have been increasing 14.6% per year for the last few years. In the past 3 months, the increase was 9.5%. Average Auckland house prices are now around $800,000.
Some people blame speculators for the increase in house prices. Speculators are investors who buy houses, hoping to sell them quickly for a large profit. Some agents believe that 40% of house sales in Auckland are to speculators.
Another concern is that foreign buyers are pushing up the prices of Auckland houses. Agents, both here and overseas, are advertising Auckland houses in Asian countries. They say that buyers can make more profit buying in Auckland than in Singapore, Sydney or New York.
Now the government has announced some new policies. From October 1st, investors in residential properties will have to pay a capital gains tax if they sell their property before 2 years. A capital gain is the profit they make from buying an asset and selling it. Many countries have a capital gains tax (not limited to 2 years) but New Zealand does not. Before last elections, the Labour Party wanted a capital gains tax. The National government has never supported this tax before.
Also, non-resident buyers will need a tax ID from their own country, a passport, a New Zealand tax ID and a New Zealand bank account. The Minister of Finance, Bill English, said that this will stop money laundering.
Last week, the Reserve Bank said that investors in Auckland residential properties will need a 30% cash deposit. This could make it harder for investors to buy properties.
Vocabulary
• blame – they say high house prices are because of speculators
• residential properties – houses, apartments, a place where people live
• asset – an expensive item you own e.g. your car or house
• non-resident – overseas
• money laundering – criminals who hide money by not using banks
Questions
1. Will these new policies work to bring down house prices?
2. What do you think the government should do to bring down house prices?