Raybon Kan: Will housing correction be Key's lasting legacy?

Land tax remarks not enough to excuse housing bubble negligence.

I don't mean to sound like Game of Thrones, but: The Correction is Coming.

All these months, we've been told the number one issue facing New Zealand was the design of our flag - Richie said it, Dan said it, but apparently, insidiously, in those quiet corners of New Zealand where everyone's houses are, there's been another issue simmering away. The Prime Minister thought his legacy would be a new flag. History will show it to be The Correction.

In a staged moment of candour during an intimate press conference, the PM decided to think out loud, down the barrel, House of Cards style, about a land tax, on non-resident owners (if it's shown they're contributing to the increase in house prices). In his soliloquy, however, he warned this could impact New Zealanders living abroad - which is basically saying, "This law could be written very badly if a band of monkeys did the writing". And we know how much he cares about non-resident Kiwis: witness his support for detainees in Australia.

The real message was this: when The Correction comes, he wants it on the record that he uttered a solution. By mentioning it, he wants to say the Government is blameless. Three terms presiding over the housing bubble, and now that he's mentioned the prospect of a land tax - mentioned it as a possibility - his view is that nobody can accuse him of not doing anything.

He's the fireman who for three terms has accused the fire alarm of liberal bias.

Our PM knows his way around a spreadsheet the way Hugh Hefner knows a woman's body. And he knows polls even better than that. The people of New Zealand have kept re-electing him by greater and greater margins. And why wouldn't you re-elect Santa when the Opposition is the Grinch? But when The Correction arrives, will it all have been a pyramid scheme?

My view is that people without residency shouldn't be allowed to own NZ real estate. Land isn't an asset class like shares in Xero. Land is the fundamental ingredient of a country. If this breaches the TPP, the TPP is the problem.

You might retort: the easy way around that is to buy shares in a company, locally registered, which does the land ownership. And maybe that is an easy workaround. But you know what, I'm a columnist, not a law-maker. Get specialists to make it work. A land tax is a tax on the land component, not the buildings. So the incentive is to invest in property with the lowest land component. It will encourage the ugliest of shoebox apartments. Houses with sections and trees - which are beautiful - will be punished.

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In a way, our attitude to The Correction is like our attitude to climate change. Someone once said that climate change was the perfect design to discourage preventive action. Any harms are waaaay in the future, anything you can do is personally expensive, and it all feels like a drop in the bucket. Why recycle when the skies in Beijing are beige?

We get perverted results, like New Zealand spending real taxpayers' money on bogus Ukrainian carbon credits, because the market saw an opportunity for, well, a new market. And that, naturally, was a boom for the people who create markets. Open up a new spreadsheet! Set up a brokerage! The market in markets is looking good.

What can possibly avert The Correction? Well, first, it depends if the house prices are a bubble. It's entirely possible that houses are worth what they seem to be worth. Not to New Zealanders of course. But to buyers with money from overseas.

Once upon a time, the limit to your money laundering had to do with the volume of your lower intestine. Diamonds were compact, but frighteningly jagged. Now, with technology, money laundering doesn't require you to risk your digestive system.

Without wishing to bet against the ingenuity of money launderers, if money laundering from China is what's pushing up house prices, at some point that will slow down. Not because New Zealand will become puritanical - we're a tax haven after all - but because China will crack down. (Macau, China's home of casinos, was recently turning over five times the revenue of Las Vegas, until it dawned on the Chinese regime that it was a bit suspicious how much disposable income communist public servants seemed to have. A quick round of executions later, and Macau's turnover is in trouble.)

If all that China money dries up, we'll have to look elsewhere for the bubble to stay afloat. Time to encourage the Russians who invented fake carbon credits to take a look at the Grammar Zone.

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