ACT leader David Seymour says we need to "build like the Boomers did" to stop runaway house prices, saying taxes to discourage house-flipping would have a "zero-sum" result.
His comments come after Finance Minister Grant Robertson wrote to the Reserve Bank asking it to consider house prices when it makes monetary policy decisions, and Treasury for advice on how the bright-line test and other measures aimed at cooling the market are working.
Though he has not suggested an extension to the bright-line test - which requires taxes on capital gains to be paid for houses bought and sold within five years, excluding the family home - Seymour thinks that's where things are heading.
"A capital gains tax will not control house prices - if there is to be a shortage, prices will keep going up," he told The AM Show on Thursday.
"All the capital gains tax does is make the Government a partner in the speculation. We've had the debate - we've said we're not going to have a capital gains tax. Now we're getting one by stealth.
"The National Party planted this acorn back in 2016 - I said at the time it'll be two years, then five, then 10 - guess what? The Labour Party got in and made it a five-year bright-line test. Now they'll make it a 10-year bright-line test, and before you know it, you have an effective capital gains tax."
Seymour did indeed predict the bright-line test would be extended from its initial two-year length, during the Taxation (Bright-line Test for Residential Land) Bill's third reading in November 2015. He also predicted it would eventually be 15 years and apply to a "wider range of homes", which hasn't happened yet. Jacinda Ardern has categorically ruled out a comprehensive capital gains tax of any kind while she's Prime Minister.
New data from property analysts CoreLogic show the average profit made by sellers in the recent quarter was a near-record $229,000. The average gains for owner-occupiers and investors were about the same.
The average number of years a residential property is owned before sale is 6.9 - outside the remit of the current bright-line test, but the lowest since 2010, CoreLogic noting investors "haven't needed to hold a property for as long to generate their desired capital gain".
While Seymour acknowledged a capital gains tax would generate revenue and act as "political balm" for those who want it, he said it wouldn't result in any new homes being built.
"There's two ways this can go - either some political parties will sell to a younger generation, 'they got theirs - now we're going to tax them and give it back to you'. That's zero-sum thinking.
"The other way that you can look at it is that we need to get our infrastructure funding, our resource consenting, our building consenting right, so the next generation can build like the Boomers did. If we choose to build our way out of this problem, then we're going to be just fine."
Housing consents actually reached their highest in nearly 50 years this year, but fall well short of what was being built in the early 1970s when adjusted for population.
"On the other hand, if we decide that we're going to try and get even by taxing each other, we will become a more dismal and poorer place," Seymour continued. "At the end of the day, trying to end a shortage of housing by increasing the bright-line test is like trying to end a famine by increasing taxes on food."
Lessening demand from investors will make getting on the housing ladder easier for first-home buyers, Seymour said, but still wouldn't result in more homes being built - not improving a lot of those resigned to renting for perhaps the rest of their lives, with house prices way out of reach.
"It's not obvious why a Labour Government would want to try and advantage first-home buyers over renters. There's no philosophical soundness here, there's no economic soundness here. They need to get down to the real issue - that it is too hard to develop property and build a home in this country."
New Zealand's growing house prices have been blamed for the growth in inequality in recent years, with massive gains in wealth going to owners while those who can't afford to get on the ladder are left behind, facing rising rents.
