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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.
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@dogmeat said in Housing hornets' nest:
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.
I don't think that at all, my ranting is very much about policy by successive governments. The outcomes of those policies have favoured those who are older, because they purchased property when it was at a more reasonable income multiple. Now that multiple is fucked up, so the young have been screwed by comparison - to the point where it's verging on those with rich parents being the only ones buying houses they can get help - which is a terrible situation for social mobility or equality of opportunity or whatever you want to call it: it's messed up.
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@snowy said in Housing hornets' nest:
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.
Looking from afar, this makes sense to me as poss. a key reason for NZ's housing issues. LTV on land here in the UK is much lower (20-30% deposit). Interesting that many of same problems exist in both NZ and here, though I don't know how much housing prices drive and heavily influence the NZ economy as they do here.
@nzzp , @reprobate , @Snowy Many thanks for the input - really useful in giving an understanding of the issues.
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@snowy said in Housing hornets' nest:
@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."
"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.
NZ sharemarket is tiny - Nasdaq has gone from below 2000 to about 14000 in that period. Housing increasing far faster than wages is not a good thing, hence the criticism of the policy allowing it to happen.
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.
Investors use them, leveraging existing property equity on the back of housing inflation, the interest only repayments are much smaller, and write it off as a business expense - because they're after the capital gains. None of which first home buyers have access to, meaning the investors can afford to pay more, and so the kids get no house. I think it was 40% of new lending to investors was interest only loans recently (?), highest ever anyway. Not a good idea from a financial stability point of view.
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.
But investors have not been bailing out, they've been piling in. Lots of people see the money that others have made - far more than from actually working - and assume it's going to stay that way. The housing shortage is due to lack of supply, which is a consequence of other things discussed, it's got bugger all to do with investors selling properties because they fear the government - until very, very recently perhaps.
@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.
That's why I specified 'in terms of money spent'. If your house goes up my 200K and you are complaining about your reduced yield you aren't likely to get much sympathy, but of course selling it ought to be considered, as there is an opportunity cost to holding it.
@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.
If I had property, I would be selling, no doubt. I would cash up and hope that the RMA review etc and building incentives come to pass to address supply, and consider getting back in on that front if I wanted to stay in property. Shares in general are overvalued. Plenty of buying opportunities when Covid hit, now is selling time for a lot of things, but the stimulus and infrastructure packages, and the banks with all that flood of lending may create some options.
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There's a lot of focus on property investors, but there's a lot of government policy that really just allows landlords to collect more rent. Minimum wage and benefit increases are terrible for house ownership affordability as they make rent increases more affordable. So rents increase. Because rents are higher, house buyers are willing to pay more as the alternative would cost them more as well.
The accommodation supplement is probably one of the most obvious ones. If you say ,"we'll give you $x towards rent" how can you expect rents not to increase by the same amount?
The people getting more money aren't any worse off (maybe very slightly better off) but the ones who don't get as much (or nothing) from these and don't own their own house are pushed further from home ownership as now they're spending more on rent, and therefore able to save less, and the house prices increase as well.
The housing shortage is what enables this all to happen, but these do exacerbate the issue of housing affordability.
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@reprobate said in Housing hornets' nest:
@snowy said in Housing hornets' nest:
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.
Investors use them, leveraging existing property equity on the back of housing inflation, the interest only repayments are much smaller, and write it off as a business expense - because they're after the capital gains. None of which first home buyers have access to, meaning the investors can afford to pay more, and so the kids get no house. I think it was 40% of new lending to investors was interest only loans recently (?), highest ever anyway. Not a good idea from a financial stability point of view.
Investors only account for 30-odd % of interest only lending. The majority is to owner occupiers.
Housing hornets' nest