Increasing supply is the only way to cool off New Zealand’s red-hot housing market, the country’s deputy prime minister told CNBC, ignoring the central bank’s call for a capital gains tax.
Property markets across New Zealand’s major cities are steadily climbing, prompting fears of a sharp correction. Sales volume in March rose to an eight-year high, with median prices in the capital city of Auckland soaring 13 percent on year, nearly double the nation’s 8 percent gain, the Real Estate Institute of New Zealand (REINZ) said on Tuesday. New Zealand is one of the few advanced economies that hasn’t experienced a major price correction in the past 45 years.
Those statistics prompted an unusually aggressive warning from the Reserve Bank of New Zealand (RBNZ). In a speech on Wednesday, deputy governor Grant Spencer said he “would like to see fresh consideration of possible policy measures to address the tax-preferred status of housing, especially investor related housing.” That’s a clear reference to a capital gains tax on the sale of investment properties, economists widely agreed.