Acting Prime Minister Winston Peter's "aspirational" target of an average house price equal to around five times the average annual wage may be unachievable, but it reminds me how skewed the market has become in the last few decades – to the next generation's cost.

When many boomers were looking to buy their first home in the 1970s and 1980s, that was more-or-less the standard income/price ratio. And you could achieve it, and support a family, on a single wage.

Hard to believe, right? But true.

Subsequently we post-WWII children, now in or nearing retirement, have reaped immense – nay, outlandish – benefit from the house-price boom, apparently with little thought as to how our children and theirs in turn will be able to afford the Kiwi dream of a piece of land and house of their own.

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Well, excepting what we might bequeath them by way of deposit, if we don't fritter it all on leased corporate retirement villas and more-sedate reruns of our OEs.

Besides, with the average lifespan now well into the 80s, the kids might have to wait til they're pensioners themselves before they get their hands on any inheritance.

And then, given house prices today are 15 to 25 times the average wage, depending on location, and are rising at a faster rate – by 71 per cent since 2010 - than any other advanced nation, still face a mortgage of a size to boggle the brain.

There's nothing fair or equitable about this. We boomers have created an enormous intergenerational debt and we don't, on the face of it, seem to give two hoots.

Mind you, considering the disastrous state of the planet thanks to our frenzied consumerist approach to existence, that's no surprise. Indeed, debt may be the least of our offspring's worries.

The arguments on how and why we got to this position are many and varied, though there is widespread acknowledgement our tax system is biased against saving and toward housing as an investment. Banks collude in this by making it easy to borrow money to buy property but harder to invest in any other security.

ROTORUA DAILY POST
28 Jun, 2018 4:54pm
3 minutes to read

Otago University's Andrew Coleman, in a paper published in May last year, argues that what he calls "the great tax experiment" of 1989, brought in by the Lange government, is fundamentally to blame for much of the skew.

It adopted taxing retirement savings on an income basis (rather than on withdrawal) without simultaneously taxing imputed rent or capital gains, so it differentially favoured income from residential property.

In consequence, people put money into property rather than savings schemes. And with landlords only paying an estimated 1 per cent overall tax yield, why would they not?

Like many others, Coleman suggests some kind of tax on property could at least partially fix the problem.

Westpac last week estimated a 10 per cent CGT would lower prices overall by almost 11 per cent. Estimates for a 1 per cent land tax (on unimproved value) or half a per cent property tax (on capital value) result in about the same reduction.

Given the noises emanating from Parliament recently, there may be sufficient will in the Labour-led coalition to finally bite the bullet and bring in such a tax.

Sure, a CGT now exists in a limited form, but an all-inclusive tax is the correction most analysts agree is needed.

The real question, especially bearing Peters' aspirational goal in mind, is whether the older generation is now willing to politically support parties that seek to tax their property gains in order to reduce market prices – and the debt burden on their sons and daughters.

• Bruce Bisset is a freelance writer and poet. Views expressed are the writer's opinion and not the newspaper's.