News Release 21 June 2001

Real Estate Institute Welcomes Rejection Of House Tax Proposal

The Real Estate Institute has welcomed the outbreak of common sense by political party leaders in rejecting the Taxation Review Committee’s proposal to tax home-owners for living in their own homes.

“We are encouraged to see the leaders of all the major political parties rule out this radical proposal”, said Rex Hadley, National President of the Real Estate Institute of New Zealand (REINZ).

“The Committee clearly believes that New Zealanders should be discouraged from buying the family home in favour of other alternative forms of saving. This view is much favoured among the managed funds industry but has few friends elsewhere.”

According to the REINZ, the fact that 70 per cent of New Zealanders own or are in the process of freeholding their own home is not a problem; in fact it is a national virtue.

“It is the overall level of household savings that are important, not the choice of savings vehicle. Contrary to the assertions of some commentators, if home ownership is included in the equation then New Zealander’s are nowhere near the bottom of the national league table for household savings. Furthermore home ownership has considerable social benefits.”

The REINZ believes that most New Zealanders aspire to owning their own home for a variety of practical reasons including providing a home for their family and acquiring equity, enabling the homeowner to borrow to fund a business or other investment for their retirement.

“It is hard to take seriously the view that investors are motivated to buy their own homes because of inconsistent treatment of different savings vehicles’, the so-called ‘concessionary treatment’ of homeownership. I think such investors are so rare as to be almost extinct.

“The REINZ cautions that any move to increase taxation would not only reduce the discretionary income of individuals but also have a detrimental effect on the wellbeing of most New Zealanders by limiting their ability to save by accelerating their mortgage payments. It would also adversely affect the ability of people saving for their first home.”

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Commenting on future prospects for residential property market, Mr Hadley said, home ownership statistics showed that the average suburban home might be a better investment, than those promoting alternative savings vehicles may wish to suggest.

“The average New Zealanders believes that no one will look after his or her savings more carefully than they can, which is why we need to protect the New Zealand passion for home ownership and the ability to use the home as a safe savings mechanism,” Mr Hadley said.

“Not only does the family home have economic and social benefits, it is still the only investment that houses the family.”

ENDS

Real estate information is also available via the Institute’s official property directory – RealENZ – on the Internet. RealENZ is a search facility providing comprehensive information on residential, lifestyle, rural, commercial, investment, and rental properties. RealENZ’s Internet address is: www.realenz.co.nz

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