Land tax could be used to curb foreign investment in housing: Key

Prime Minister John Key says his government could use a land tax to restrict foreign investment in residential housing under any renegotiated free trade agreement with China.

"We've always said, if the thing became a runaway train on us and we were really concerned about it, that's always an option available," he said.

"And to be blunt, land taxes are far more likely to deter people than a stamp duty ... you only pay a stamp duty once on the way through – a land tax is an annual thing. Lots of countries have land taxes."

As part of reforms introduced in September and October last year, non-resident house buyers have to open a New Zealand bank account and get a New Zealand tax number – meaning the number of house sales to offshore buyers can be tracked for the first time. So far, no data has been released, and Mr Key said he doesn’t have any early indications.

“My gut instinct tells me that the buying that’s happening in Auckland – Chinese buyers or buyers of other ethnicities, I think they’re New Zealand-based. So I think they’ve got residency. They may or may not have citizenship," he said.

The prime minister told Q+A a land tax could apply exclusively to non-resident investors, and not target or exempt any particular nationality.

“We wouldn’t do it specifically for a country. We wouldn’t say, ‘For Chinese investors, you’ve got to have a land tax. If you’re Australian, you don’t.’ If we were going to apply that sort of thing, we would apply it to offshore investors," he said.

He noted, "We always have the right to make restrictions on investment in New Zealand, firstly through the Overseas Investment Office, depending on the criteria," he said.

“We don’t have the right to put on, funnily enough, a stamp duty, and the reason for that is that stamp duty was taken off the table, if you like, through the free-trade agreements we had not only with Australia and Japan, and that also includes Mexico.”

But the prime minister added, “At the moment, we’re not trying to stop the investment coming in.”

In an appearance on The Nation, he said the government is also actively seeking Chinese investment, particularly in hotels.

"There are a lot of misnomers about foreign investment," he says.

"New Zealand has relied on foreign investment for a very long period of time. Without it, we have to accept we’re going to grow as a country at a lower rate. I think what a lot of New Zealanders would say is they quite welcome foreign investment but they want to see it creating jobs and more capacity for our economy, not just gobbling up farmland."

Too late – Peters
New Zealand First leader Winston Peters said the prime minister had left it far too late to act on foreign investment.

"The truth is there are far more New Zealanders today who are tenants today in their own country than ever before, under Mr Key," he said.

"And instead of dog-whistling why doesn't he have a land and house register, do what other countries are doing, rather than sitting there for seven years doing nothing."

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