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Settings stoke house prices

Letter

Having lived 25 years in Canada, I’m aghast at the disproportionately high cost of NZ housing relative to average income.

With no capital gains tax on property and ability to write off real estate investment losses against personal income, government is encouraging investing in non-productive entities.

The Canadian federal government’s creative, visionary approach to the housing market encourages alternative investment in their capital market/Canadian infrastructure and simultaneously assists folk to save for their future retirement.

Simplistically, here’s how they linked it together.

All property became subject to capital gains tax except one’s primary residence.

Property investment losses were ring-fenced and only used to offset future property profits.

To encourage investment in their capital market, the government legislated that through approved “mutual funds” (portfolios of Canadian companies), annual investments to a maximum 6 percent ($13,000 limit) of one’s income would be tax-free and only taxed when withdrawn on retirement through an annuity programme, ie, tax deferral at a much-reduced retirement rate. Thus, the birth of their popular “Registered Retirement Savings Program”.

It significantly reduced the demand by aspiring landlords and benefited a vibrant Canadian capital market.

This has application and merit in NZ. It needs a government with political foresight to enact similar legislation here.

Tony Fellingham, Tauranga