COMMENT: Who wants property prices to fall? In New Zealand there have been plenty of commentators, politicians and economists who have argued long and hard that New Zealand's property market is grossly inflated and needs puncturing.
Certainly, it's an argument that finds favour among those who are struggling to get a foot on the property ladder - why wouldn't it? - but it's an argument that is often rooted in the politics of grievance and is a risky card to play - just look at Brexit and Trump to see what unleashing the beast can lead to.
In the UK, some pundits are celebrating reports published this week that Britain has suffered the biggest monthly drop in house prices in almost eight years.
The Guardian newspaper's chief economics writer Larry Elliott argues that "falling house prices are not disastrous, and only in a country with such a perverted relationship with bricks and mortar could they be seen as such".
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"Ever-rising house prices are a curse. They are bad for social mobility. They are bad for young people. And they are bad for the economy. The billions that are spent pushing up property prices could be more productively invested elsewhere," Elliott writes.
Politicians in the UK are being urged to take radical measures to address home affordability. One thinktank, Resolution Foundation, wants each person in Britain to be given £10,000 when they turn 25, as a way to help young people stump up the money for a deposit on a home.
In New Zealand, the push to address the country's housing shortage has largely been focused on house building measures, but humming away in the background are other efforts aimed at the property investment sector as a way to take the "heat" out of the property market.
The Labour-led Government has flagged it is extending the "bright line" test, meaning property investors will have to pay tax on capital gains if they resell an investment property within five years rather than two years.
And the Tax Working Group set up by the Government is likely to recommend the introduction of a capital gains tax and the ringfencing of tax losses for property investors.
These measures seem crude at best and punitive at worst, and seem like a stab in the dark rather than a well thought-out solution.
In a discussion paper published this week, the Tax Working Group seemed to admit as such.
"It is difficult to quantify how much the tax system affects the housing market," the paper says. "There is little definitive empirical evidence regarding the tax impact on house prices and rents in New Zealand. The tax system has probably exacerbated the housing market cycle in recent decades, but constraints on the supply of housing are likely to be the dominant driver of housing market performance."
The killer line was this: "Tax reform, at least by itself, is unlikely to solve the housing affordability challenge."
There will be those that argue that ills of the property market have been caused by "evil" property investors but this ignores the fact that most property investors in New Zealand are not big corporate-like entities with huge property empires; they are mum-and-dad investor-types who have one or two properties and are in it for the long run, with the investment property their nest egg for when they retire - I know, I'm one.
There seems to be a collective willingness among some policy-makers to ignore the fact that many property investors will be forced to pass on extra costs to their tenants or leave the market altogether - a big problem when the country is already facing a shortage of rental stock.
Elliott, in the Guardian, at least acknowledges the risks at stake. "For many people their house is easily their most valuable asset, and they are relying on being able to downsize when they retire. That makes a large chunk of the population highly resistant to policies that might drive down prices, such as higher property taxes or changes to planning laws."
Which brings me back to the original question: who wants house prices to fall? You can bet your last dollar that those currently craving a crash as a way to get onto the property ladder will be expecting capital growth once they are on it. And why not? No one wants to see their retirement tank.
New Zealanders deserve a better answer than "let's burn the house down".
Owen Vaughan is OneRoof Editor
