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@nzzp said in Housing hornets' nest:
@snowy said in Housing hornets' nest:
The "older uninsulated stock" was good value years ago, I did a reno on a couple to get them up and they became a more attractive proposition to buyers. You really do need a team of trusted tradies to manage it though and you are gambling with large amounts of money because you don't really know the end result in value.
Reno with small kids ... ugh. And yeah- you need a good team of tradies. Motivate yours by sudden disappearance of those who don't do well by any chance?
Well, that threat was always there.
Yes, that is why other people do the renos, like me. Some people just want to buy a nice house as is. Good for both parties.
Other people don't like it, gentrification, capital gains, etc. I don't invest in oil companies for example. Each to their own.
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Akl Council Chief Economist take on govts latest tinkering
Precis: Rents probably won’t rise sharply, the bright line
tax extension will make little difference, but
interest deductibility will slow house price
growth. -
I've got a builder mate who moved to Bleheim about 4 years ago. He immediately noticed that the local market was out of whack (surprise, surprise) but especially for older folks looking to downsize without going to a retirement village. They are typically living in the statehouse/traditional 3-3.5 bedrooms and 90-110m or so.
He partnered up with another guy and they've been building about 3 smaller houses on larger sections, with a focus on easy access and maintenance. Obviously a different scenario when you factor in city density and RMA.
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@paekakboyz good call, interesting.
Met a bloke on the Kapiti Coast who had done really well. He was building lots of 1 bed and studio units to rent out - filling a niche for (mostly) single people that struggled to find housing. Was getting massive yields off sites, and offering good quality housing at the same time.
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@paekakboyz said in Housing hornets' nest:
I've got a builder mate who moved to Bleheim about 4 years ago. He immediately noticed that the local market was out of whack (surprise, surprise) but especially for older folks looking to downsize without going to a retirement village. They are typically living in the statehouse/traditional 3-3.5 bedrooms and 90-110m or so.
He partnered up with another guy and they've been building about 3 smaller houses on larger sections, with a focus on easy access and maintenance. Obviously a different scenario when you factor in city density and RMA.
I'm going to look at that. It is very easy to get sucked into "3 bed" syndrome even in the country. We do need more small cottage type places.
Dividing the land within the rules... well just fuck.
It really is difficult. I could put a second 2 bed on my property for my father who is struggling a bit since my mum died. The max 60sqm is really restrictive even though I have 11ha.
I could rent it out when he goes, another property built and available but I'm not allowed.
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@snowy It seems the government is considering running with ideology and gestures over economic fundamentals. Rent controls only sound good.
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@nzzp said in Housing hornets' nest:
@jc rent controls are the best way to destroy a neighborhood short of bombing.
Some economists think they are even more effective
New York is an excellent example of the damage well meaning policy does in that space.
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@antipodean said in Housing hornets' nest:
@nzzp said in Housing hornets' nest:
@jc rent controls are the best way to destroy a neighborhood short of bombing.
Some economists think they are even more effective
New York is an excellent example of the damage well meaning policy does in that space.
Found the quote - Assar Lindbeck.
In many cases rent control appears to be the most efficient technique presently known to destroy a city — except for bombing -
@nzzp said in Housing hornets' nest:
@victor-meldrew there is definitely a supply problem.
From 2015, but the best analysis I've read on this linked to below. Sheets home the responsiiblity to government constraining supply through RMA, and stimulating demand through immigration (and urbanisation).
since the article was written house prices have gone nuts everywhere, but it's still got some great arguments
Thanks - really informative article. Couple of thoughts came to mind after I read it.
Tax doesn't make much difference to house prices, it's all about supply and demand. (As an aside, the UK has some of the highest land taxation and a fall in house prices significantly impacts government revenue so there's no incentive to reduce/curb the rise in house prices)
Local councils and planning bureaucracy have a huge impact on housing prices (and not just in NZ). People won't vote for people or policies which reduce or cause the value of their house to stagnate.
Similar problems exist all over the world. An intractable problem or just too difficult politically?
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@snowy said in Housing hornets' nest:
@reprobate You did call all property investors c*nts and scum. I happen to be a property investor. Happy to move on though.
Anyway the government are also c*nts and scum apparently (as if we didn't know):
I suppose they have to do this to stop the situation that I have been describing with private investors pushed out and no rental stock. Not fixing the problem just shifting it sideways.
I actually didn't say that about all investors, you misinterpreted, and I've already tried to clarify that I was referring specifically to investors having a cry about rule changes and how they were going to raise rents in response, while enjoying massive capital gains and the lowest interest rates ever, and already having been raising rents in that situation.
Your link is about the government buying houses since 2017 - that's not because of the situation of a 'coming soon' rule change that you think is pushing investors out. It's pretty clearly trying to solve one problem by worsening another, and beyond doubt a shit idea - but nothing to do with recent policy.
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@victor-meldrew said in Housing hornets' nest:
@nzzp said in Housing hornets' nest:
@victor-meldrew there is definitely a supply problem.
From 2015, but the best analysis I've read on this linked to below. Sheets home the responsiiblity to government constraining supply through RMA, and stimulating demand through immigration (and urbanisation).
since the article was written house prices have gone nuts everywhere, but it's still got some great arguments
Thanks - really informative article. Couple of thoughts came to mind after I read it.
Tax doesn't make much difference to house prices, it's all about supply and demand. (As an aside, the UK has some of the highest land taxation and a fall in house prices significantly impacts government revenue so there's no incentive to reduce/curb the rise in house prices)
Local councils and planning bureaucracy have a huge impact on housing prices (and not just in NZ). People won't vote for people or policies which reduce or cause the value of their house to stagnate.
Similar problems exist all over the world. An intractable problem or just too difficult politically?
I think tax does affect pricing in NZ. NZ has a highly favourable tax situation for rentals, the capital gain is untaxed - which is why every old couple wants to put all their retirement savings into buying a rental. Plus it's consider safe, because old people are stupid and think that putting all your eggs in a basket is safe. You can have a housing shortage, but if all the people clamouring for the one property have bugger all money, then the price is limited. If your demand includes old rich people, and it includes people who can access interest free loans, and people who can write the interest off as an expense, and if the RB artificially lowers interest rates, and if the banks turn 20 year mortgages into 30 and lend irresponsibly, and if the government and rich kids' parents are trying to subsidise the poor to be able to compete, then that all cranks up the price despite the demand (in terms of population) being constant - which it pretty much is right now, due to Covid.
All the other stuff needs fixing too, I don't mean to minimise that.
There's a potential contradiction in blaming migration (China) while saying NZers want a 1/4 acre section so there is no demand for higher density... And who votes in local council elections? I assume turnout is pathetic, so wouldn't have thought that unpopular policy would really matter - due to having no idea what any of the candidates actually stand for. I do think we have an issue with those in power, be it local or central, having a conflict of interest due to so many of them owning property. -
@reprobate said in Housing hornets' nest:
I think tax does affect pricing in NZ. NZ has a highly favourable tax situation for rentals, the capital gain is untaxed - which is why every old couple wants to put all their retirement savings into buying a rental.
Do you think a Capital Gains Tax in NZ will stop people investing in property for their retirement? (It hasn't in other countries). What is the return (after tax) on rental v stocks/bonds and what rate would a CGT stop people investing in rental?
You can have a housing shortage, but if all the people clamouring for the one property have bugger all money, then the price is limited.
Isn't that the same thing as people not being able to afford the price of the house?
that all cranks up the price despite the demand (in terms of population) being constant - which it pretty much is right now, due to Covid.
Is the demand constant now, or has it been constant for a while or has there been a big growth in demand?
. And who votes in local council elections? I assume turnout is pathetic, so wouldn't have thought that unpopular policy would really matter - due to having no idea what any of the candidates actually stand for.
Are there objections/campaigns when a council approves higher-density housing or new developments which might impact (nearby) house prices?
Genuine questions. Appreciate your thoughts.
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@victor-meldrew said in Housing hornets' nest:
@reprobate said in Housing hornets' nest:
I think tax does affect pricing in NZ. NZ has a highly favourable tax situation for rentals, the capital gain is untaxed - which is why every old couple wants to put all their retirement savings into buying a rental.
Do you think a Capital Gains Tax in NZ will stop people investing in property for their retirement? (It hasn't in other countries). What is the return (after tax) on rental v stocks/bonds and what rate would a CGT stop people investing in rental?
You can have a housing shortage, but if all the people clamouring for the one property have bugger all money, then the price is limited.
Isn't that the same thing as people not being able to afford the price of the house?
that all cranks up the price despite the demand (in terms of population) being constant - which it pretty much is right now, due to Covid.
Is the demand constant now, or has it been constant for a while or has there been a big growth in demand?
. And who votes in local council elections? I assume turnout is pathetic, so wouldn't have thought that unpopular policy would really matter - due to having no idea what any of the candidates actually stand for.
Are there objections/campaigns when a council approves higher-density housing or new developments which might impact (nearby) house prices?
Genuine questions. Appreciate your thoughts.
No, I don't think it would stop people completely - depending on the level obviously - but for the past decade it has been the best tax avoidance option - and available only to those with money - which is pretty wrong in my opinion. The government has been shortchanging itself by not taxing this area, which then means other taxes have to make up that shortfall - if you assume that the tax requirement is set. I would like to see it taxed, and income taxes reduced. Tax can be used very effectively to incentivise / disincentivise behaviours. We desperately need to incentivise building of houses, and disincentivise buying of existing houses by people that don't need them - if people want to invest in housing because it is viewed as safe, then that can be a great thing if we use it to increase supply.
As for return, it depends totally on when you bought. Anyone who bought before house prices went ballistic is killing it on rental yields in terms of money spent and interest rates, not to mention capital gains. Anyone buying now, at crazy prices, will be seeing a crap rental yield - this is a big part of the unfairness between generations which is a big social problem. The older buyers also have to question the opportunity cost of holding an asset which (hopefully) has done most of the appreciation it is going to do, as wages ought to provide some limit on how much rent can be charged. This is one of the reasons why people are trying to raise rents - up 6% nationally, and 14% in some areas March to March annually - i.e. before the new rules, in a period with investors having everything in their favour (except high house prices). So high house prices are bad for investors too, if they are genuinely rental investors and want to buy - but the reality is most people are chasing the capital gains - though I'm sure for many that won't be their 'intention' as far as the IRD is concerned.
Compared with shares, well that depends which. The NZ market is tiny and not very liquid. International shares have tax issues. Over the long term, the share market tends to do better, and you have the ability to diversify risk - NZ has basically no financial literacy unfortunately, and people are scared of it - but it is in my opinion a far better option. Low interest rates inflate shares too, as bank deposits are pointless. -
@reprobate said in Housing hornets' nest:
It's pretty clearly trying to solve one problem by worsening another, and beyond doubt a shit idea -
Well we agree on that.
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Thanks for your thoughts. Informative stuff. Seems to me from what you've said, and what I've read, that the problem is one of supply. Similar to much of the UK, though there is a major issue with land for housing here, which should be less of a problem in NZ.
The only thing I can comment on is beware of capital gains taxes and increasing taxes on rental returns. They have increased tax on rental properties and abolished virtually all tax benefits here in the UK and the costs seem to have simply been passed onto tenants in increased rents.
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@victor-meldrew said in Housing hornets' nest:
Do you think a Capital Gains Tax in NZ will stop people investing in property for their retirement? (It hasn't in other countries). What is the return (after tax) on rental v stocks/bonds and what rate would a CGT stop people investing in rental?
It hasn't been successful in other countries as you say, and was discussed at length when it was raised by labour a few years ago. Stamp duties don't really work either. You are just adding a tax that the people who are struggling to buy can't afford either.
The other comment about about relative returns - historically houses (not just property) have doubled in value over a 7 to 10 year period (that will be a bit distorted at the moment). The NZX50 has returned:
"As of April 2020- the NZX 50 has returned 476% since the year 2002."
https://www.passiveincomenz.com/nzx50-past-percentage-returns-table/
"Average 10 year period 7.09 %"
Extreme example of course - if you bought Apple shares 10 years ago at around USD12 they are now worth USD130, so property ain't all that.
I agree with some of what @reprobate says above. We will disagree on a few things but we have been through them already. Tax, etc.
Out of interest why do you keep bringing up interest only loans? They are available to anybody who has the income, or assets to borrow. The banks financial lending criteria are the same for everybody, not just people who own investment property or want to buy investment property. Owning your own home is a good start but most people could get an interest only loan. I don't know why you would though, other than bridging finance.
The article about the government purchasing houses against first home buyers has data from 2017 because it wouldn't be much of a sample if they took the purchases from just yesterday. Most investors have seen this coming with this government for some time and have been bailing out, the consequence has been they are having to fill the gap in the rental market by purchasing property. Just socialism in the end I suppose. More state owned and controlled than private.
Anyway, as you said a shit solution.
@reprobate said in Housing hornets' nest:
Anyone who bought before house prices went ballistic is killing it on rental yields in terms of money spent and interest rates, not to mention capital gains.
That actually doesn't add up because yield is measured against the value of the asset, not the purchase price and you cannot put rents up fast enough (nor could tenants afford it) to keep up. I have mentioned the diminishing returns as property values go up earlier and why private investors are getting out, and the government stepping in before we end up with a really serious homeless situation.
@reprobate said in Housing hornets' nest:
The NZ market is tiny and not very liquid. International shares have tax issues. Over the long term, the share market tends to do better, and you have the ability to diversify risk - NZ has basically no financial literacy unfortunately, and people are scared of it - but it is in my opinion a far better option. Low interest rates inflate shares too, as bank deposits are pointless.
Yep, and how I ended up in this discussion at all. Property isn't a good investment at the moment, whether you pay tax on any capital gain or not. It is a good time to sell though. What you do with the cash afterwards isn't so easy.
Housing hornets' nest