June 18, 2007

Low wages blamed for house price crisis
1:35PM Monday June 18, 2007
My Source: NZ Herald.

Low wages are at least partly to blame for house prices becoming out of reach of many people, the Council of Trade Unions (CTU) said today.

In the three years to 2007, house prices increased by 38.5 per cent while wages went up by just 8.7 per cent, union economist Peter Conway said.

It is urging a parliamentary select committee considering housing affordability to look at New Zealand's low rates of pay as a key reason home ownership is being pushed out of reach.

Mr Conway said: "If house prices are outstripping wages by four to one, then it's no wonder that home ownership is increasingly out of reach for low and middle income New Zealanders."

Last week, in its submission to the commerce select committee, the Reserve Bank proposed introducing a capital gains tax on investment properties.

The bank's governor, Alan Bollard, has raised the capital gains tax issue several times recently in his monetary policy statements and in speeches when he has talked about the need to curb the boom in house prices, which he largely blames for rising inflation.

The submission suggested the Government should consider a policy more in line with Australia's, where realised capital gains on rental properties are taxed, but at half the normal rate.

Mr Conway said the CTU also supports a capital gains tax on investment housing.

He added that it "also suggests introducing stamp duties for higher priced houses and removing the offsetting of expenses for rental properties against income".

Its submission to the parliamentary committee also suggests more state housing and subsidised home lending programmes.

Prime Minister Helen Clark and the National Party have rejected the idea, but the suggestion has gained support from the Green Party.

The Green's co-leader Russel Norman said the party supported measures to stabilise the housing market such as a capital gains tax but said it would have to exclude family homes.

National's finance spokesman, Bill English, said his party did not support a capital gains tax and it was the wrong time to think about imposing it on investment properties.

To have an effect it would have had to be introduced when house prices started going up, not as they were flattening or dropping, he said.

Miss Clark said today the bank and its governors had been suggesting a capital gains tax for years, but the Government had continually ruled it out.


Low wages blamed for house price crisis

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