The Left trying to solve problems created by their own policies

ACT Leader Jamie Whyte

The Greens today claimed that the appreciation in Auckland property prices shows that a capital gains tax is needed. They claim that that the profits earned from investing in rental properties “draws more and more money into the market, pushing up prices at an unsustainable rate”. Taxing the capital gains on rental properties would supposedly discourage this investment and bring house prices down.

This ought to strike The Greens as strange. Investment should push prices down, not up. If the returns on rental properties are very high, profit seekers will build new rental properties in an attempt to capture a share of them. This will increase the supply of housing and bring prices down. That is how markets normally work.

The Auckland housing market doesn’t work this way because restrictions on land use, of the kind favoured by The Greens, make it hard to build new homes. As so often, the Left recommends meddling in markets to solve problems created by their prior meddling.

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