Land profits

The Herald reports:

A land banking business with a big piece of residentially zoned real estate on Auckland’s outskirts has made more than $6 million a year for almost two decades – doing nothing.

QV records shows Yi Huang Trading Company owns 39 Flat Bush School Rd, which it bought in 1995 for $890,000.

Now, this 29ha block is listed on the market for $112.6 million, promoted as “the land of opportunity, vacant but close to Barry Curtis Park”. …

Developers say Auckland Council officials have blamed them for building high-priced houses but they say land speculators took a bigger toll because they were inactive and reaped rich rewards for locking land away from being put to productive purposes. If it achieves the full asking price, then each year the company has held the land it made $6.2 million, they said, for doing nothing.

There are two solutions for this.

The first is free up the land supply. Because there are so few areas that can be used for residential development, it has produced massive profits for those land bankers. By not freeing up land supply, you encourage them to land bank.

The other solution is a land tax. That will encourage land to be used for productive reasons, not just be banked up for future use.