An Australian report that lays the blame for rising house prices on a lack of land for development, rather than a “price bubble”, could have reached the same conclusions here, a free-market think tank says.
The report, by the Sydney-based Centre for Independent Studies, said Australian house prices had risen at an annual rate 3 per cent higher than inflation since the 1970s.
Author Stephen Kirchner said foreign and domestic property investors had been made a scapegoat when the real problem was zoning and planning rules. They restricted the availability of building land and prevented the more intensive development of existing residential areas.
The supply squeeze in Australia was compounded by taxes such as stamp duty and capital gains tax, he said.
Australian house prices have risen at much the same level as New Zealand. What is useful to note is Australia has had a Capital Gains Tax since the 1980s.
So when Labour goes on about how a CGT will magically mean house prices decrease, ask them why has that not worked in Australia?
The solution in both countries is the same. Make more land available. It is about as basic economics as you can get. Artificially restrict the supply of land, and of course the price of land increase.