Ed McKnight: Opes Partners Resident Economist breaks down Labour's Capital Gains Tax

An economist says Labour's proposed capital gains tax won't stop house prices rising.

The party wants gains on commercial and residential property to be taxed 28 percent, with revenue going into the health sector including free doctor visits.

It excludes the family home and inheritances. 

Opes Partners Resident Economist Ed McKnight told Mike Hosking that the tax is often thought as a house price killer, but that's not the case.

He says in Australia since they introduced the tax, house prices went up 6.5 percent on average and in the UK they went up by 8 percent a year.

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Episode Transcript

Speaker 1 (00:00):
Labour successfully got their day in the sun, of course,
yesterday for a policy idea, a capital gains tax on
your business or investment house. A lot of questions came
out of the leaked announcement, not least of which was
why was it leaked? But as for the numbers, Ed
McKnight is the resident economist at Ope's Partners and is
with us.

Speaker 2 (00:15):
Ed Morning, great to be here, Mike.

Speaker 1 (00:17):
As you look at the numbers yesterday and their claims,
would you be confident that they're accurate or are we guessing.

Speaker 2 (00:24):
Well, one hundred million dollars that are expecting trays in
the first year. Sounds pretty reasonable to me. They are
relying on probably a couple of percentage points worth of
capital growth in the first year, but it's based off
some pretty realistic numbers in terms of how many investors
might actually sell, which is about six to seven thousand
by my numbers.

Speaker 1 (00:42):
I don't think it's your area. But the stalking horse
aspect of it is this the beginning of something bigger.
Potentially if you were writing the policy.

Speaker 2 (00:50):
It could be. But what I would say is this
isn't a real capital gains tax because not everything's captured
by it. This is a real estate investor tax. Now,
so I don't know I look like a football, but
I certainly feel like a political football at the moment
being kicked around between the two major parties.

Speaker 1 (01:07):
Yeah, exactly, Now this one, I mean everyone, the idea
that everyone's got one, and that was their line yesday.
Oh lots of people have got one. Is that a
good enough reason to implement a tax?

Speaker 2 (01:17):
Well, not everybody's got an investment property. We've got this
idea that every man and his dog is out there
buying investment property, but only somewhere between ten to fourteen
percent of people own residential investment properties in New Zealand.
And it's come into this kind of national psyche that
everybody's doing it. But it's kind of not the case.

Speaker 1 (01:36):
No, indeed not. What I meant was that everyone internationally,
every country has a capital gains tax, therefore we may
as well have one as well.

Speaker 2 (01:44):
I've got chen out. Yes, well, most countries do have
capital gains taxes. There are a couple of small exceptions,
like Singapore, the United Arabemraates, Hong Kong and Macaw. I
always thought it wouldn't it been nicer to be like Switzerland,
Singapore and the United Arab Emirates rather than like everybody else,
because those center of something, right.

Speaker 1 (02:01):
So that was our point of difference. Nicola Willis was
making that point yesterday. It's our point of difference with Australia.
She has a point, then you would argue.

Speaker 2 (02:08):
I think there's something to be said about it. The
other thing that I'd say about the capital gains tax
is we've always thought of it as a bit of
a house price killer. But I've got some numbers that
suggest that's not the case. Tell me, well, Australia introduced
a capital gains tax nineteen eighty five. Since the in
house prices have gone up and averages six point five
percent a year. The UK they brought one in nineteen

(02:30):
sixty five. Since then house price is up over eight
percent a year. Canada nineteen seventy two. Since then, house
price is up six point seven percent a year. The
USA nineteen thirteen is when they introduced their capital gains tax,
and since nineteen seventy house prices up five point four
percent a year. So this idea that caperal gains taxes
are going to kill capital gains in the housing market

(02:52):
just not the case.

Speaker 1 (02:53):
Good insight. I'd appreciate it very much. Ed McKnight, who
was the resident economist at OPEZ this morning Mike Hipkins'
proposal to meet a new demand on GPS. How are
they going to do that when everyone gets free visits?
It's a good question. And why are they giving free
visits to people who don't need them. Hipkins is going
for shock and or mic to bring attention to the
party and the young revolutionaries, bring them out of the

(03:15):
closet to vote. I'm not sure that's true.

Speaker 2 (03:18):
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