Wednesday, November 16, 2005

Home ownership

Strangely everyone seems to assume housing investment high housing prices and a lack of capital gains tax raise home ownership. But, surely, if you add a capital gains tax it is the property investors (not average families) who will flee the market. Then the only people left to buy those properties will be current renters now able to enter the market because of the cheaper/bargain houses (who are more interested in owning their own property than making profit from it). This explains why we have high prices now but lowering home ownership.

This is all beside the fact that the limiting case involves average house prices in Auckland (for example) going only slightly higher before it is basically impossible for the average home owner to pay the interest on the average home loan. Imagine for example if the average house was worth 500,000 and interest was 10% in that case the people would have to make 50,000 a year after tax to pay for it clearly they would not be able to afford that so in theory house prices should not go (or not stay) that high until incomes catch up OR if there is a massive drop in home ownership.


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