1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

Policies to Rebalance Housing Markets in New Zealand

A considerable housing boom has been a key feature of persistently large saving-investment imbalances in New Zealand over the past decade. Wealth is concentrated to a greater extent in property compared to most other OECD countries, leaving households and the banking system heavily exposed to a correction in land and housing markets. Supply rigidities and tax incentives that bias savings decisions towards property investment have amplified the increase in house prices, widening wealth inequalities in the form of larger homes for those who can afford them, but deteriorating affordability for the rest of the population. Substantial distortions via tax planning have been evident in rental property markets. Although the 2010-11 budget introduced measures to reduce some of these distortions, further reforms are needed to remove the significant tax bias favouring housing. The economic downturn has increased financial pressures on the social housing sector, with a shortage of public dwellings in areas of high demand. Regional supply constraints reflect inefficient land-use policies and long delays arising from an overly complex urban planning system. The adoption of spatial planning frameworks is a positive step forward, but they should include pricing mechanisms for land and road use that are aligned with broader policy objectives. This Working Paper relates to the 2011 OECD Economic Review of New Zealand (www.oecd.org/eco/surveys/NewZealand).

English

Keywords: housing prices, land-use planning, property tax, housing policies, New Zealand, land prices, household saving, housing taxation, housing wealth, urban planning, capital gains tax, housing markets
JEL: R38: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Production Analysis and Firm Location: Government Policy; E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles; H71: Public Economics / State and Local Government; Intergovernmental Relations / State and Local Taxation, Subsidies, and Revenue; R31: Urban, Rural, Regional, Real Estate, and Transportation Economics / Real Estate Markets, Spatial Production Analysis, and Firm Location / Housing Supply and Markets; E21: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Macroeconomics: Consumption; Saving; Wealth; R52: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Regional Government Analysis: Land Use and Other Regulations; H23: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies; H21: Public Economics / Taxation, Subsidies, and Revenue / Taxation and Subsidies: Efficiency; Optimal Taxation; H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes; R21: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
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