New Zealand is definitely headed towards a financial crash caused by a collapse, or severe deflation, in its housing market.

The housing market is over-inflated for a number of causes, the two principle ones being excess demand over ability to supply and excess financial investment due to a heavy bias towards this market in our taxation system.

To 'avert' the rapidly approaching financial crash we need to reduce demand and reduce investment.

To reduce demand quickly we need to rapidly reduce the number of immigrants permitted. This may be done by simply reducing the number of foreign, as opposed to returning Kiwis, immigrant permits issued. Note this is the immigrants coming to live in New Zealand and not students or workers with certain necessary skills on defined study or work permits. Also, these immigrants must have a contract to purchase a new build house signed before the immigration permit is issued.

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At present, the investment market is incredibly biased in favour of the housing market. Anybody, Kiwi or foreigner, intending to invest in New Zealand would have to give first choice to investing in our housing market. The profits made in this market are tax-free and costs incurred in generating those profits are tax deductible from your normal income tax.

There are a few options available to reduce this heavy bias towards this market.

Central government must introduce a stamp tax payable annually on land lying "fallow" in a residential zone. If that land has usable property on it on the market or has been developed to the stage where it ready to be built on, then the stamp duty is only paid once, when the property is sold. Also, a sales tax, or GST, should be paid when any property is sold.

The reserve bank must reduce the proportion of our bank loans to the investment sector of the housing market. This can be done by making them keep a higher percentage of reserves for their housing investment market portfolio.

If the above steps are taken soon then they may be taken in small steps to prevent a Market collapse. If left another year, or more, then a market collapse is nigh on certain with disastrous consequences for all Kiwis.