Norman Russel: Taxation (Land Information and Offshore Persons Information) Bill — First ReadingText is incorporated into the Bound VolumeNorman Russel: Taxation (Land Information and Offshore Persons Information) Bill — First Reading[Sitting date: 25 June 2015. Volume:706;Page:4807. Text is incorporated into the Bound Volume.]Dr RUSSEL NORMAN (Green): I rise on behalf of the Green Party to speak on the Taxation (Land Information and Offshore Persons Information) Bill. The Green Party will be supporting this bill as weak as it is because it is a very very small step in the right direction. The problem that this bill and a number of other Government policies are attempting to grapple with is what is going on in the housing market but in particular what is going on in the Auckland housing market. So I think it is important to get a few facts on the table about what has happened in the housing market.In terms of median house prices in Auckland in 1999 when the previous Labour Government came to office the median house price in Auckland was $230000. When it left in 2008 basically it was about $450000. So it is certainly true that there was a very significant increase in house prices during that period—about $220000 or nearly a doubling. It was a very significant problem and the Greens spoke out about it at the time and the key problems around it. However what we have seen since then is that although prices stayed flat for a little bit they have since accelerated dramatically from $450000—the Auckland median house price when this Government into office—to now about $750000.So what we saw under the Labour Government was an increase in the median house price of about $220000 and what we have seen under National is an increase in the Auckland median house price of about $300000. It is a dramatic change in housing affordability in New Zealand because of course salaries have not increased to keep up with those kinds of increasesby any stretch of the imagination. But perhaps just as significantly in the last year we have seen a $125000 increase in the median house price in Auckland. I mean that is a dramatic change. A $125000 increase in the median price for a house in Auckland in 1 year is an incredible change; it is about a 20 percent increase. This is a housing market that is completely out of control. This is a market that is completely on fire and it is a danger to our economy and it is a danger to our society.The reason why it is such a problem is that it is driving up the price of housing whether you are buying house or whether you are renting. If you are not facing the full increase yet in the cost of your rental you will in time or people will in time face the increase in their rentals. Rents are already going up but they are going to go up further because of the big increase in prices. It also means that people are spending more money on housing whether it is on rent or whether it is on a mortgage. They are having to spend more money on housing and they have less money for all the other things that are expensive.It is driving financial instability. The Reserve Bank has identified as have the OECD and others what is going on in the completely insane Auckland housing market as one of the key reasons for concern in terms of financial instability in New Zealand at the moment. Of course it is keeping interest rates higher than they need to be because the Reserve Bank is worried that if they drop the OCR—the official cash rate—it will fuel the insane fire that is going on in Auckland in terms of housing prices. This bill in its own small way is an attempt to deal with that.We know that the drivers of what is going on in the Auckland housing market are pretty straightforward and have been well established for many years. They are similar to the drivers that happened during the last insane period 2002 to 2007 and so they have not really changed that much though perhaps the different elements have changed. The first driver is the tax-free gains. Basically because we do not have a capital gains tax on investment properties it means you can make tax-free gains. The Government is introducing some measures to try to place some limits around that with this 2-year rule and it will have some effect but it is pretty marginal. So the tax-free gains on investment properties will remain in terms of pushing up demand.The other part of the demand side is coming from migration. There is a big surge of migration into New Zealand a lot of which is actually not particularly within the ability of the Government to control because it is caused by a lot of New Zealanders and Australians who have rights to move in and out. So there is not so much the Government can do about that.Then in terms of the demand side we have the offshore demand. This has been a problem in the past but it is now a really really big problem. This bill in its own way tries to deal with some of the offshore demand by requiring foreign buyers to actually give their identity essentially and have a New Zealand bank account and a New Zealand tax number. So there are certain measures within this bill to try to deal with this but there is no way that this bill is going to deal with the huge surge in demand coming out of Mainland China.The previous speaker Jami-Lee Ross said it was xenophobic to identify the big surge in demand coming out from Mainland China. That is just ridiculous. It is just a straight analysis. Normally I would not quote Fran O’Sullivan because although Fran I think is a person of integrity I disagree with her on many occasions. What she said was that what is happening now is that as the Chinese Government lifts some of the restrictions on capital outflows there is a huge surge of demand coming into the Auckland housing market. And it is not just Auckland; it is going on all around the world and it is coming out of Mainland China. The estimate is somewhere around over $10 billion in the years ahead in terms of the demand side for property in New Zealand particularly concentrated in Auckland in New Zealand.So we are seeing this huge surge on the demand side of the equation in terms of offshore demand for housing in Auckland. That is one of the key drivers and this bill really is not going to deal with this problem because it is of a massive scale. The Financial Times now says that Mainland China is the biggest of the foreign buyers in the US market the UK market and the Australian market. The Financial Times is not renowned for its xenophobia—quite the contrary. Fran O’Sullivan is not renowned for her xenophobia—quite the contrary—and neither are the Greens; we take a global perspective. And when you take a global perspective you can see that there are very large capital flows going into housing markets in Australia New Zealand the United States the United Kingdom and Canada and that a big part of it is coming out of Mainland China. That is just the reality of it. That is why Hong Kong has introduced restraints on the capital inflow from Mainland China into the housing market in Hong Kong. Singapore has done the same and Australia has done the same. All around the world everyone is trying to grapple with this problem and in its own small way this bill does a tiny tiny bit to try to address that as well but there is so much more that needs to be done.Then there is the lack of supply. The Government has talked a lot about the lack of supply and it is a fair point. There is a need for more supply. But let us just be clear: there is no way you can beat this thing by increasing supply. It is just not possible. The kind of huge surge in the demand side that is coming into the housing market in Auckland will not be beaten by housing supply; you actually need to place some constraints on demand and particularly the offshore demand. You certainly cannot beat it on the supply side through urban sprawl which is the Government’s strategy. If you think you can outrun this demand-side surge and that you can outrun it on the supply side through more sprawl in South Auckland on the urban fringes you are kidding yourself. You cannot build enough houses fast enough to beat this thing and to outrun the demand side. It is just not possible. I think you do need to increase supply but in different ways to what the Government thinks.In terms of the solutions we do need restrictions on foreign buyers. The Greens have been saying this for a decade. It is pretty plain; everyone says it now because it is very plain that what is happening is this huge offshore demand going into the Auckland housing market. It is not just a New Zealand problem; it is a global problem. It is just the reality of the world we live in now. China has a heap of capital. There is a bunch of people in China who fair enough are looking for safe investments in housing and other markets. That is a perfectly reasonable thing for them to want to do but it has huge impacts on our housing market and it has huge impacts on the affordability of housing in our country and the financial stability of New Zealand.We need a capital gains tax on investment properties—a proper one. It is not very complicated. Every other OECD country has one. We also need to deal with the issue of supply. What we need is quality medium-density housing with good public transport walking and cycling. The Government’s idea that it can beat this thing through subsidised motorways and subsidised urban sprawl where we have all these houses built on the urban fringes—which the Government thinks will somehow beat the demand side—is wrong. It has not worked anywhere in the world. It is not going to work in Auckland. It is a failed strategy.We actually need a compact urban form. Auckland needs to go up not out. That is just the reality and the sooner we admit that and face that the better we will be. The Government’s attempt to sprawl Auckland and force it out by sprawling and more sprawling will not solve the supply side.The final thing I would like to say is that we need to ask ourselves what the purpose of housing is. Housing is not just a place to make money. It is where people live. It is the collective responsibility of the people in this House to make sure that decent housing is affordable that it is quality that it is energy-efficient that people can afford to live in it—it is not just the cost of building it; it is the cost of running it—and that the transport costs associated with it are not unbearable as they are with the urban sprawl motorway strategy of the Government where you have to drive your car for miles to get to your job.It is about saying that housing is a market—and we do need to consider it as a market—but that it has these other social purposes as well and Government policy needs to reflect that. This bill is a tiny step in the right direction but the issue around housing and housing affordability and particularly housing quality and compact urban form is one that the Government has completely failed to get its head around.