Property tax danger seen

Press, Volume CXIII, Issue 33276, 13 July 1973, Page 2

Property tax danger seen

(New Zealand Press Association) WELLINGTON, July 12. An exemption clause of the Property Speculation Tax Bill would lead to increased prices, said the president of the Real Estate Institute (Mr E. M. Harcourt) today.

! Clause 20 exempts from the tax any land which has been improved I by a speculator or developer to the extent that improvements represent at least 10 per cent of the total cost of land and improvements. This was not as innocuous las it sounded, said Mr HarI court. A small, old cottage in a (metropolitan area might be; ’bought for $lO,OOO. The average renovating developer would spend probably s2ooo’ on it and then sell, after adding profit and costs, for about $15,000. By doing this he would ’have turned an unfinanceable; property into a really fin-; anceable one, and made a ;contribution to the housing! position and the economy. He would also have made a (profit for himself. “UP TO $20,000” Mr Harcourt said that (under the new bill (he same t cottage might be bought for $lO,OOO — but to avoid speculation tax it would be neIcessary to spend $7500 on the !cottage to exceed the 40 per cent of total outlay. Having spent $17,500. the developer would then add on his expenses and profit, taking the resale price to at least $20,000. The effect was that he

! would not do this—he would just go out of the renovating business or move into highercost renovation, said Mr Harcourt. “MANY HURT” “This one clause means many people will suffer. “The vendor of the rundown. low-cost property will have his market narrowed almost to the point where his property is unsellable. “The small-time builderrenovator will be deprived of 'this source of legitimate income; and the ultimate would-be purchaser will be ’unable to buy the property of his choice or pocket.” said Mr Harcourt. “Builders’ employees will be out of work and the country itself will lose good, valid housing improvement. Also, the economy will be inflated even further, because if property is renovated as it must be, there will be pressure by the bill to over-develop, thereby pushing up the price.” Mr Harcourt said the Property Speculation Tax Bill could have only a highly inflationary effect.