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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.
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@snowy I'm a relatively passive player in the sharemarket. My portfolio has changed significantly but over time. There's not a holding that i haven't held for at least two years and I have managed to double the value every 5 years.
Dividend yield would be less than rental income but I haven't had the hassle of property ownership. I have also been able to bail out whanau on 3 occasions which I wouldn't have been able to do if my investments were bricks and mortar. Kiwi's do fear the sharemarket - legacy of 1980's I guess although anyone with Kiwisaver is already in it.
Unlike @reprobate I don't think old fucks are to blame for the housing crisis. Politicians have got us to the present point mainly through inaction. Plus Kiwi's seem very reluctant to look at alternatives to a mcmansion in the burbs.
The first generation of apartments were fucking awful - everyone wants a garage bigger than the house I grew up in. There's a whole host of reasons why we are where we are. there needs to be a similar range of solutions. Interfering with the independence of RBNZ is not one of the answers though. I'd like to see the government try and build broad cross party consensus on what needs to be done, but unfortunately both Labour and National have turned housing into a political football when it should be an inalienable right.
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@dogmeat said in Housing hornets' nest:
@snowy I'm a relatively passive player in the sharemarket. My portfolio has changed significantly but over time. There's not a holding that i haven't held for at least two years and I have managed to double the value every 5 years.
Just as well, you could be taxed on it, just like property. Become a trader at your peril tax wise.
Definitely agree with you on liquidity, and the rest of it actually.
Pros and cons to all of it and a balanced investment strategy is generally best. The '87 crash must have had impact on the mindset of many people, a little more added caution may have pushed the pendulum too far.
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@voodoo said in Housing hornets' nest:
I dont particularly like comparing housing returns to property unless you account for leverage and finance costs properly. Nobody is going to lend you a million bucks at 1.99% to gear up your share portfolio at 90% lvr!
Ever tried to buy bare land to build on? LVR will be about 50% which is why I have made distinctions between property and houses (I think that you meant shares but it still works). Properties without houses really aren't worth much as far as the banks are concerned. That might answer one of @Victor-Meldrew s questions earlier about a country with so much land having a supply problem.
Probably also one of the reasons that we have this mess too, it's even more difficult to buy land in terms of lending and then build to increase supply. You also end up with complaints about land banking from some if you don't build on it straight away. Property developers don't have it easy.
It really is a hornets' nest.
Good news though, this morning my plans were submitted to council for the minor fee of $7,040.
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@snowy said in Housing hornets' nest:
@voodoo said in Housing hornets' nest:
I dont particularly like comparing housing returns to property unless you account for leverage and finance costs properly. Nobody is going to lend you a million bucks at 1.99% to gear up your share portfolio at 90% lvr!
Ever tried to buy bare land to build on? LVR will be about 50% which is why I have made distinctions between property and houses (I think that you meant shares but it still works). Properties without houses really aren't worth much as far as the banks are concerned. That might answer one of @Victor-Meldrew s questions earlier about a country with so much land having a supply problem.
Probably also one of the reasons that we have this mess too, it's even more difficult to buy land in terms of lending and then build to increase supply. You also end up with complaints about land banking from some if you don't build on it straight away. Property developers don't have it easy.
It really is a hornets' nest.
Good news though, this morning my plans were submitted to council for the minor fee of $7,040.
Location is everything when it comes to splitting house and land value!
Agree property developers don't have it all easy, for every billionaire out there there are 50 that went bankrupt . That's where I was pushing in earlier comments around derisking some of the process.
Congrats on getting plans in, sounds like a bargain!
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@jc said in Housing hornets' nest:
@dogmeat No you're wrong, us old people are to blame because we're stupid. And we only got where we are because of luck and selfishness.
yeah you dumb lucky selfish fucks!!
i wish i could afford a 2nd house.
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@snowy said in Housing hornets' nest:
The '87 crash must have had impact on the mindset of many people, a little more added caution may have pushed the pendulum too far.
Yeah, that had a long-lasting impact. I knew a load of people who lost big in 87 and you can't blame them and their families for being gun-shy. That provides much-needed context to the preference for real assets that many older investors have. The other side of that coin is that plenty of people my age came up with not very much and can live without instant gratification, so liquidity isn't as important to them.
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@kirwan said in Housing hornets' nest:
@snowy tax...tax....taxinda!
i fucking hate tax as a deterrent
i hate it because all it does is governments more to spend on dumb shit
i hate it because governments are addicted to taxation, so even if it's not working, it'll never get rolled back
i hate it because it always always targets the less fortunate, because rich guys have better accountants (who often work for the same firms that wrote the tax code)
I hate it because governments would rather tax easy shit like this, or booze, or gambling, rather than actually making everyone pay their fair share. -
@jc said in Housing hornets' nest:
@dogmeat No you're wrong, us old people are to blame because we're stupid. And we only got where we are because of luck and selfishness.
How selfish to take all the luck.
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@antipodean Good job we left all the cleverness for the younger generations so they're able to tell us at length where we went wrong. I don't know about you but I always want to help out people who tell me what a scumbag I am.
Housing hornets' nest