The Government’s Budget moves to try and slow down the Auckland housing market were rushed through Cabinet after the deadline for the Budget had passed.
In just 17 days — a period of time which Treasury obviously thought was too tight — the whole Budget housing package was worked out and agreed.
the moves followed a warning from deputy reserve Bank Governor Grant Spencer about the Auckland housing market — and also concern being expressed at a Cabinet level by Auckland MPs.
The Cabinet quickly rejected a Treasury proposal to impose on the capital value of all Auckland rental housing a one per cent levy.
That revenue would have gone to the Auckland Council to provide infrastructure.
In a series of papers — including a scoping paper and the final Cabinet paper — released yesterday by Treasury the urgency with which the Government suddenly decided to deal with rapidly rising Auckland Housing prices is readily apparent.
The timeline reads like this:
| Wednesday April 15 | Reserve Bank Deputy Governor Grant Spencer says there is an increasing presence of investors in the Auckland market and this trend is t being reinforced by the expectation of high rates of return based on untaxed capital gains. “While there are difficult issues and trade-offs to consider in this area, the Reserve Bank would like to see fresh consideration of possible policy measures to address the tax-preferred status of housing, especially investor related housing,” he says. |
| Monday April 18 | Cabinet meets |
| Wednesday April 20 | Deadline for all Budget decisions that will have a fiscal impact |
| Friday April 24 | Treasury reports back to Bill English with tax options plus provision of IRD numbers for Auckland property purchasers. They also include a proposal to impose a levy of one per cent on the capital value of all Auckland rental housing. The revenue would go to the Auckland Council to provide infrastructure. But they say their report is longer and less considered than they would normally provide because of the very short timeframe. |
| Tuesday April 28 | Bill English; Housing Minister Nick Smith and revenue Minister Todd McClay meet to discuss Treasury’s paper from the previous Friday. They agree the Reserve Bank to be briefed and consulted because it is preparing to introduce its own macro-prudential controls to try and restrain the market. |
| Friday May 1 | Treasury comes back with a paper advocating:
The proposal to levy all Auckland rental housing has been abandoned. |
| Monday May 4 | Final deadline for Budget documentation. Cabinet Meets English, Smith and Social Housing Minister Paula Bennett meet Treasury officials. They debate whether the bright line test should apply to property that is sold within two or three years. Treasury warns that: “This is basically a judgement call but the longer the time period, the more that the bright-line test is likely to be interpreted as a capital gains tax with an arbitrary cut-off Period. This will raise questions about why not tax capital gains on other property.” |
| Monday 11 May | Paper to Cabinet Business Committee confirming the bright line test and the IRD numbers. Also confirmed that the Prime Minister will announce the moves on the following Sunday on his return from the Middle East — just 17 days after the first Treasury paper. Cabinet ticks off both proposals. |
