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Betting on capital gains: housing speculation in Auckland, New Zealand.

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International Journal of Housing Markets and Analysis, 14(1), 72-96

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This paper scrutinises the pervasive nature of housing speculation in Auckland, situating it within the global context of unaffordable housing markets.

By defining housing speculation, the authors differentiate speculative buyers from genuine investors through a rigorous methodological framework that leverages New Zealand’s Income Tax Act’s intention test. Through an exhaustive examination of rental property purchases from 2002 to 2016, the study reveals an almost universal tendency towards speculative investment in Auckland’s housing market. The paper critically engages with the effectiveness of New Zealand’s anti-speculation policies, notably the ‘bright-line’ rule and the intention test, arguing for a more evidence-based approach to policy-making that can accurately determine investor intent and curb speculative behaviour. The study also delves into the cultural and economic factors underpinning the popularity of housing as an investment in New Zealand, highlighting the financialisation of housing and the societal valorisation of property ownership. The authors contend that speculative investment is not solely a product of individual greed but is embedded within a broader socio-economic framework that includes lax regulatory environments, the allure of tax incentives, and the banking sector’s complicity in fuelling speculative bubbles. As the authors note, even while political leaders have decried that the “speculation-driven housing bubble in Auckland is a social and economic disaster”, the government’s main anti-speculation tool – the Income Tax Act’s intention test – sits idle and inoperable. By not using this key policy tool, the report concludes, politicians foster housing speculation and use residential property investment to buttress New Zealand’s asset-based welfare system.

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