Stamp duty better than land tax, says property expert

Which would help reduce housing prices best - stamp duty or a land tax? Photo / Bloomberg

A top New Zealand property expert opposes a land tax and says a stamp duty is a far better option.

Dean Humphries, a national hotel broker and a former Auckland University lecturer, was responding to PM John Key talking of a land tax and said that would not resolve the issues around foreign buyers purchasing houses here.

"Stamp duty is a no-brainer and could bring in tens of millions of dollars annually. Land tax is the most draconian thing I've ever heard of. Where does the Government get their advice from? Stamp duty is so easy because you pay up front at the time of purchase and just a percentage of what you're paying. It's just the easiest thing to do and the tax can be used for a multitude of things," Humphries said.

Key is threatening to apply a land tax to foreign-based house buyers if there is evidence they are pushing up New Zealand house prices - and it could also apply to Kiwis abroad.

Key said there would be no land tax measure in the May 26 Budget and there was no evidence yet that one was needed. He is waiting on data on the number of foreign buyers.
That is due to be released by Land Information New Zealand this week.

But Humphries said land tax made little sense.

"Why on earth is the Government not introducing a stamp duty like most other counties as opposed to a land tax for foreign investment?" Humphries asked, citing the Australian state of Victoria which has increased stamp duty for foreign investors from 3 per cent to 7 per cent.

"It's a no-brainer as we have clear precedents with many other counties such as Australia and Singapore," Humphries said.

"We need to make it clear: it's for foreign investment or for investment generally but not when you're buying your own house. It's not just the foreign investors fuelling this market but people buying second and third homes because the interest rates are so low.

"It can be changed, increased over time or decreased, depending on the market. There's no reason if we had a big downturn in the market, you couldn't put it back to zero.

"The income it generates could be distributed to the Government and also territorial authorities where the houses are being built. It would give the local councils revenue for their activity - providing infrastructure, helping to pay the consenting process and inspections. Why can't it be used for something like the City Rail Link in Auckland, for example?" Humphries asked.

New Zealand once had a stamp duty on property purchases but it was abolished last century.