Why are House Prices High?

NAMIBIA holds the dubious distinction of having one of the highest housing prices in the world. Only 10% of the population can afford to live in a decent house and this percentage consists primarily of ‘white’ people.

‘White’ Namibians who only make up 8% of the population own 90% of the land. I am of the opinion that a land value tax is the main solution to this unacceptable state of affairs and would like to suggest that all should pay a land value tax of 6% every year.

This should include not only the farmers, but also the home owners, the mining companies, the banks, etc.

Land speculation is at the heart of the problem of high housing prices and high rents in Namibia. Land is obviously the most precious physical resource and is simply more important than buildings and infrastructure. As the population grows, the value of land also goes up.

This is an effortless income for the speculators, the real estate companies and the wealthy. The rich are encouraged by the current tax system to hold on to land and properties, without having to be productive with it and in addition, it is tax deductible for them.

There is no cost involved in merely holding on to land and no hard work is required for a huge profit. A perception that land is scarce is deliberately created for realising super-profits by a few. But this unfair gain of the landowners should rather go to everyone in society. Land, like air, is a common good and all of humanity should share in the wealth.

A land tax has a unique effect in that it is not only costly to the owner, but it pushes the property back onto the market and decreases the price of land and houses. Owners are encouraged not to hold on to vacant land or too many properties. This is certainly desperately needed in Namibia with its exorbitant housing prices.

Furthermore, the land tax means that other forms of tax on labour and capital could be removed, i.e. income tax, sales tax and payroll tax. Land is different from labour and capital in that it represents an unearned increase. So land is a so-called pure rent, while labour and capital are about real productivity.

Removing these other forms of tax would actually reward productivity and put more money into the economy. Taxing the land does not have any adverse effects on how it is used or how productive it is.

Presently, it does not make much sense for the rich and poor as well as ‘white’ and ‘black’ to pay the same income or sales tax because of the historical disparities in the country.

Rich and ‘white’ people already have a huge advantage over the rest and the current tax system does not allow for this inequality to be overcome. This is where a land value tax would be beneficial.

At the moment, land prices exceed the salaries of most people and that means this country’s economy is heading for a crash. The land/housing bubble will burst at some point. It is time for us to realise that it is land speculation that causes recession.

The main reason why Hong Kong is successful is because of land tax; it derives 30% of its revenue from that tax and has low levels of income tax which means more spending power for citizens.

Instead of shifting the tax burden onto the productive sectors, it is proper for all land owners to pay their fair share. We should all have equal rights when it comes to natural resources. The current tax system has been set up to benefit the rich because land cannot be moved to a tax haven.

Land monopoly is the most important form of domination. This country should implement a 6% land value tax to decrease the housing prices.

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