The Opportunity Party's land tax proposal could cut house values by at least 10 percent, economists say.This will pay for a weekly "citizen's income" payment to most adults of $370, with top-up support for pensioners and some parents.Westpac chief economist Kelly Eckhold said there would be an impact on house prices."There's a paper we wrote back in 2018 that examined the implications of a land tax and in that scenario a 1 percent land tax imposed on house prices we modelled would reduce house prices by 9.5 percent."He said that was the change in the fair value of housing and it did not necessarily reflect what house prices would do."If actual house prices were undervalued it might just end up bringing the fair value back in line with where current prices are. You can't be sure exactly how this will impact on things but there would be a reduction in the attractiveness of houses and land from an investor perspective relative to before the tax."He said a larger land tax could reduce the fair value of housing by a larger percentage."It will vary quite a lot depending on the house concerned. Higher-value properties might be more impacted because their land value could be larger. Lower-value properties typically have better rental yields as well."Cotality chief economist Kelvin Davidson said there were estimates that land taxes could reduce values by 10 to 15 percent."The land component will go down and that's reflecting that it's going to cost more to own in the future."He agreed the impact would vary around the country."If you look at a market like Auckland, and you look at the breakdown of the overall property value, how much of that is land and how much of that is dwelling, in Auckland that land proportion is very high. Most of the value of the Auckland housing market is land."Whereas, my own house, in parts of Canterbury where there are lots of new builds there's more theoretical land available, the highest proportion of your property value is actually the house rather than the land. So there's going to be some interesting regional elements to this."Opportunity Party leader Qiulae Wong said she estimated a reduction in values of 10 percent to 15 percent.People who did not have the money to pay the tax would be able to defer it until the property was sold or inherited."We specifically called out retirees and farmers as the two groups that would be able to defer that land tax. That's because they tend to be the ones that may not have the cash flow. For farmers, their income is very seasonal, it goes up and down. For retirees, they may have a lot of equity in their property but not the cash flow year-on- year to be able to pay that. So we've proposed that they could defer it and then they would be paid when the property is sold or inherited."Wong said there was no limit proposed on how much tax could be deferred."I believe over 70 percent [of retirees] own their own home mortgage-free so they would have to defer for a very long time, 50 years, to be losing all the equity in their home."Obviously it will erode some equity. But when we look at having to transition to a fairer tax system that's going to deliver more productivity for future generations, for my generation for example, I would rather there's less equity or less inheritance when my parents hand that property down to me and we've been able to deliver a more productive economy in the meantime."The children who would be inheriting the home will be receiving the citizen's income under this tax policy as well so they have had more take-home pay, money in their pocket to be able to save for the future, so it balances out that way as well."Eckhold said someone who deferred the tax for 20 years could end up with up to 40 percent of the equity in the property gone."You could imagine people might be interested in potentially selling properties that have a relatively large land component. Instead of staying in your big Whangarei house you might move into a small townhouse."Davidson and Eckhold said it was likely the citizen's income policy would push up rents more than the land tax would."Lots of people who maybe don't have a house will get the universal basic income, so they would have more money they could spend in the rental market for accommodation," he said.Davidson agreed that investors tended to be "price takers" rather than setting rents according to their costs."You can have properties where the landlord might have some pricing power and push up rents if their costs go up... but I think in general rents are set more by supply and demand and tenant affordability."If tenants had more money available, that tended to drive up rents.Eckhold said a capital gains tax, as proposed by Labour, could also affect house prices."They're reducing the after-tax expected return of investors in housing. It's logical that you would see reduction in land and house prices. It's very much questionable though whether that's going to happen very quickly or whether it might just happen gradually over time."Sign up for Money with Susan Edmunds, a weekly newsletter covering all the things that affect how we make and spend money