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Interesting in this article, BNZ Economist theorises that landlord's likely response to increase rent would likely lead to inflationary pressure and RBNZ needed to raise interest rates. But wait, if house prices drop a bit, no need to tighten monetry policy.
So, clear as mud, could go either way.
All other things being equal, this will initially push up rents and/or reduce the supply of rental accommodation.
"What happens to the rents and the costs of construction feeds directly into the CPI [inflation].
"We think that in this respect inflation will probably be higher and, hence, heighten the possibility that the Reserve Bank might tighten monetary policy. However, house price inflation is a major driver of the Reserve Bank’s private consumption forecasts. If house prices are lower than they otherwise would be, the RBNZ’s models will produce lower GDP growth and lower pressure on capacity than previously and, hence, less need for tighter policy.
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@nzzp This arrived in my inbox this morning. Tangentially discusses what we were talking about re brownfield developments. Thought you might be interested
The gravity of
Auckland's density
• Auckland house prices are up 24% year-on-year
despite the pandemic. Dwellings consented in
Auckland have increased 14%, with the growth
concentrated in multi-units (apartments and
townhouses) in existing urban (brownfield)
areas.
• The Auckland Unitary Plan allows for denser
development in many brownfield places, but just
because dense development is allowed does not
necessarily mean that it’s been taken up.
• Take-up of enabled density in the region’s most
densely zoned areas is mixed.
• Land values, and thus feasibility of more dense
development, play a big role in whether an area
redevelops, but it is only part of the equation.
• Other factors such as government led
redevelopment can also stimulate regeneration.
• More than four years into the new planning
regime, business transformation in the most
densely zoned areas is still modest. A likely
reason for this is that these areas are still
relatively early on in their transformation despite
the work done already. -
Just received an email from an accountancy firm that I used previously. Some very angry people about regarding investment property and what the government have done. Comments like this:
"Extension of the bright-line test to 10 years is one thing, but making interest on residential property investments non-deductible is quite another. On top of this, Labour ignored expert advice and didn’t consult with those who actually provide residential rental housing in New Zealand. "
"What is possibly worse than the changes themselves, is the fact that Labour were lying to us when they adamantly stated in the 2020 election (only five months ago) that they would make no further tax changes. They added insult to injury when they said Robertson was “too precise”
"These changes are just the latest in a long list of attacks on property investors, who seem to be considered the scourge of the earth by the Government and the media, conveniently forgetting that private landlords and NGOs provide approximately 440,000 of New Zealand’s 520,000 residential rental dwellings. "
The last bit is the most interesting to me. I have already sold residential properties as I saw the writing on the wall. I suspect other property owners will do the same.
So where are the current tenants all going, or going to go? Most of my tenants, current, or previously, have never been in a financial position to buy, so freeing up housing stock (and possibly lowering prices with more supply) still won't work. Homeless families and more people living in cars?Even though we have very low interest rates and the tax deductions would be small (currently), the removal of deductions on "only" residential property also goes against the ethos of a fair taxation system. Commercial property investors can still claim, businesses can still claim. I shifted my money to commercial or elsewhere altogether.
Could somebody please tell me what I am missing? How is any of this going to work? Do they have a plan? Alienating and disproportionately taxing the people providing rental properties just doesn't seem to add up.
I will start on building costs, exporting raw materials instead of processing here (that was previous governments) and the restrictions put on people who want to build next. How does that solve a housing shortage?
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@snowy said in NZ Politics:
Just received an email from an accountancy firm that I used previously. Some very angry people about regarding investment property and what the government have done. Comments like this:
"Extension of the bright-line test to 10 years is one thing, but making interest on residential property investments non-deductible is quite another. On top of this, Labour ignored expert advice and didn’t consult with those who actually provide residential rental housing in New Zealand. "
"What is possibly worse than the changes themselves, is the fact that Labour were lying to us when they adamantly stated in the 2020 election (only five months ago) that they would make no further tax changes. They added insult to injury when they said Robertson was “too precise”
"These changes are just the latest in a long list of attacks on property investors, who seem to be considered the scourge of the earth by the Government and the media, conveniently forgetting that private landlords and NGOs provide approximately 440,000 of New Zealand’s 520,000 residential rental dwellings. "
The last bit is the most interesting to me. I have already sold residential properties as I saw the writing on the wall. I suspect other property owners will do the same.
So where are the current tenants all going, or going to go? Most of my tenants, current, or previously, have never been in a financial position to buy, so freeing up housing stock (and possibly lowering prices with more supply) still won't work. Homeless families and more people living in cars?Even though we have very low interest rates and the tax deductions would be small (currently), the removal of deductions on "only" residential property also goes against the ethos of a fair taxation system. Commercial property investors can still claim, businesses can still claim. I shifted my money to commercial or elsewhere altogether.
Could somebody please tell me what I am missing? How is any of this going to work? Do they have a plan? Alienating and disproportionately taxing the people providing rental properties just doesn't seem to add up.
I will start on building costs, exporting raw materials instead of processing here (that was previous governments) and the restrictions put on people who want to build next. How does that solve a housing shortage?
Yep, I can point out a few things from the other side of the argument.
Regarding Robertson 'lying', I am no fan of his and not that politicians lying is anything new, but the quote around facts changing and hence minds changing springs to mind. In those five months, house prices have gone completely fucking ballistic - this is directly because of the government/reserve bank interfering in the market via interest rate manipulation. A cursory look at the numbers can show you just how bad that is if you want to be informed, but I think it's common knowledge by now.
A 'long list of attacks' on investors - my fucking arse. Residential property has been favourably taxed in NZ for decades. You want to talk about leveling the playing field, how is it that anyone who owns a house can have their equity go up by more than anyone without a house could ever hope to save - from actual productive work - which is taxed far higher by comparison?
Property owners selling houses. It's not like the houses disappear. Someone buys them, and they live in them or rent them out, same number of houses as before - virtually no change to supply. The exceptions (which should reduce via bright line extension) come from NZ fucking itself so hard in this area that there are people who do nothing at all with property, and sit and wait for the tax-free capital gains. Of course this option is only available to the rich, who can afford to buy and sit on the property - as opposed to the poor, who work for a living and therefore get taxed and can't access tax-free income. Poor old investors.
The difference with actual productive businesses and commercial property is that they don't compete with people having somewhere to live. Someone who wants the house to live in cannot claim the interest, so financially they could not afford to pay as much as an investor. That's not a level playing field. Banks have been handing out interest-only loans to investors, shitloads of them in fact: the repayments on those are far smaller than those for someone who wants to live in the house, so the investors can pay more . That's not a level playing field. These loans still exist, so the field is still tilted to the investors.
Lastly, the new rules (and my rant for that matter) don't apply to people building new, so it actually provides an incentive to build if you want to invest in residential property, thus theoretically helping to address the supply side of the problem. Of course that can only happen once the investors stop crying about how hard done by they've been as they pocket the hundreds of thousands of dollars in capital gains over the past year, pay the lowest interest rates ever on their mortgages, and reflect on raising rents by the most in any month in history in February. In all seriousness, absolutely fuck those whinging fucking fluffybunnies. They are scum.Is it going to work? Nah probably not, because they haven't gone far enough - but at least it is something.
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@reprobate I'm not saying that I agree with all of what the accountants said. I was questioning the outcomes of the governments actions (and the likely unintended consequences) some of which you mention with very emotive diction.
The tax is the same as any other investment (your own home is obviously different and has always been exempt) the only time that you are going to pay more tax for actual productive work is on income over $180k - 39%. RWT is 33% on over $70k.
Nobody said the houses disappear. I was saying that there is a difference in the supply, and quite a substantial one, where a large amount of the available rental properties may be removed and that none of my tenants have ever been in a position to buy. They mostly get money from the government to pay the rent that I have have given them through paying tax. Where do they go?
@reprobate said in NZ Politics:
sit and wait for the tax-free capital gains.
Where does this myth come from? It is simply not true about property investment. The IRD will classify you a property dealer / trader and you have to pay tax on any capital gains. It has been there for years. We have always had CGT If you don't declare it you are evading tax and in breach of the law. Any accountant will tell you this. You even "taint" any other properties that you own and have to pay tax there as well.
Property investment is very unattractive at the moment. Rental yields are really low and reflect the interest rates. It isn't possible to raise rents at the same rate as the increase in the property value so you end up with rapidly diminishing returns. You are relying on an unrealised capital gain to make any money. Not a great option.
I would politely suggest that you reconsider some of the wording used as well. I have provided fully insulated, ventilated, heated, renovated healthy homes for many families over the last decade or two.
I had net returns under 3% at times. Greed was not a motivating factor. They were all good people and looked after my houses, so I left them there and the government, for the most part, paid their rent from my taxes.
@reprobate said in NZ Politics:
In all seriousness, absolutely fuck those whinging fucking fluffybunnies. They are scum.
So I think this is unjustified.
I do agree that "investors" that leave houses empty aren't helping anybody. They are generally called speculators rather than investors, but either way that isn't right.
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how many ex-pats returned to NZ during COVID? Are there hard numbers and any evidence for if/how much they pushed up rentals or property costs? Just kind of interested as I don't see this debate around the world (at least, not in Australia)..
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@nostrildamus Some numbers in here but it is a bit old:
https://www.stuff.co.nz/national/the-detail/300133652/the-detail-the-reality-of-the-expat-kiwis-coming-homeIf you believe Stuff, because there is this too:
https://www.stuff.co.nz/business/300122274/flood-of-returning-kiwis-is-a-myth-economists-say?rm=aMore reliable answers here I would think:
https://www.stats.govt.nz/news/nz-citizens-migrating-home-in-record-numbersAs far as housing goes? Who knows. How many are renting, how many are buying, how many plan to leave again?
I think that it safe to say that the influence on the property market is small except in the high end stuff which has huge fluctuations anyway. NZ has been seen as a safe haven which is why it has been mentioned and probably not so talked about overseas.
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@nostrildamus said in Housing hornets' nest:
how many ex-pats returned to NZ during COVID? Are there hard numbers and any evidence for if/how much they pushed up rentals or property costs? Just kind of interested as I don't see this debate around the world (at least, not in Australia)..
Lowest net migration in since forever.
Also highest number of new housing builds since 1974.
Yet the slashing of interest rates and relaxing of the LVRs created a frenzy.
Although there was a surge in March, April last year. But overall affect over the year is a drop in the ocean compared to the migration inflows
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In the year March 2020 to February 2021. The most recent figures.
https://www.scoop.co.nz/stories/AK2104/S00217/net-migration-loss-of-non-new-zealand-citizens.htm
a provisional net loss of 1,400 non-New Zealand citizens and a net gain of 18,900 New Zealand citizens made up an overall net migration gain of 17,400.
In the 5 years previous the average net migration gain was 50 to 60k per year.
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@rapido said in Housing hornets' nest:
In the 5 years previous the average net migration gain was 50 to 60k per year.
Most of them probably stayed as well. Getting residency, buying homes.
The Kiwi's can come and go as they please. Who knows what they are up to.
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@rapido said in Housing hornets' nest:
In the year March 2020 to February 2021. The most recent figures.
https://www.scoop.co.nz/stories/AK2104/S00217/net-migration-loss-of-non-new-zealand-citizens.htm
a provisional net loss of 1,400 non-New Zealand citizens and a net gain of 18,900 New Zealand citizens made up an overall net migration gain of 17,400.
In the 5 years previous the average net migration gain was 50 to 60k per year.
Thanks just curious as apparently one of NZ's fav sons (?) Mike Hoskins is worried about the brain drain to Australia (in the NZ Herald today).
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@kirwan said in Housing hornets' nest:
@snowy The rant above your post is a good example of the politics of envy.
I'm not envious at all mate, I think it is a terrible unproductive situation for NZ, which is going to essentially cause an intergenerational class system and drive a heap of smart young people out of the country. I'm well and truly on the rich side of that class situation.
Your post is a good example of how someone stuck in their dogma dismisses any points to the contrary without thinking about or being able to address them - just parroting soundbites eh "Taxinda"? -
Only read the last few posts but has anybody actually acknowledged the biggest factor of the house price boom?
The open policy of Jacinda to appease the Chinese and let them do whatever they want in New Zealand. They have taken full advantage of Auckland real estate. When I exited that market a few years ago (to buy my current house in UK ... ) I had 6 bidders on my place. 5 were Chinese, one Indian. I've not read a single article about the NZ property boom where the buyer wasn't Chinese.
History is repeating the same as it did in Hong Kong. Jacinda needs to stop being kind, and start being pragmatic.
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@snowy I wasn't having a go at you, I was having a go at the accountants' statements. Yeah I get a bit ranty on the subject, but it fucks me off because it is so bad for NZ.
The tax is not the same as any other investment. This is from the IRD website:Example: Joe and Gail buy a second property
What happens when there's more than one reason for buying a property?Joe and Gail own their own home. They buy a second property as a rental. While they hope that in the long-term, the property can be sold for a profit if needed, their reason for buying the property is for rental income. They had not decided to sell the property at the time they bought it.
They do have to pay tax on the rental income . However, any profit from the eventual sale of the property is unlikely to be taxable, unless it is within the applicable bright-line period.
i.e. not taxable. it's not a bloody myth, and maybe you need a new accountant.
The houses don't disappear, someone who was renting buys them, which frees up a rental property. The numbers basically stay the same whoever owns the property. The difference is that more people can own their own home, which I would have thought was obviously a good thing. Right now, despite the 'good deeds' of all these property investors, there are a shitload of people living in government paid motels. There's no difference.
Rental yields are low compared to the recently severely inflated house prices, yes. Which just goes to illustrate that people are doing it for the capital gains. You are happy to talk about your rental yields, are you happy to talk about your capital gains too?
Anyway, the swearing was directed (I thought clearly, but perhaps not) at property investors who are now whinging having just had everything go massively in their favour and reap huge returns - it is the whinging that gets me.
Yes, there are good landlords, and there are healthy homes - and I am totally in favour of people investing in building rental property - but out-competing people who want to live in an existing home when there is a shortage, because the system is rigged in your favour and you can is a shit thing to do. And crying about a change which goes some way to level that playing field directly after making unprecedented massive returns at lowest ever interest cost, which no person working for their income could hope to match, well that's fucked. There's a housing shortage, they should tax the fuck out of all but one home, they should tax the fuck out of unused property - and drop income tax and business tax by a commensurate amount to actually promote some productive economic activity instead of this bullshit selling houses to each other for ever increasing sums and pretending it is building anything. In any economic sense that is absurd. -
@majorrage said in Housing hornets' nest:
Only read the last few posts but has anybody actually acknowledged the biggest factor of the house price boom?
The open policy of Jacinda to appease the Chinese and let them do whatever they want in New Zealand. They have taken full advantage of Auckland real estate. When I exited that market a few years ago (to buy my current house in UK ... ) I had 6 bidders on my place. 5 were Chinese, one Indian. I've not read a single article about the NZ property boom where the buyer wasn't Chinese.
History is repeating the same as it did in Hong Kong. Jacinda needs to stop being kind, and start being pragmatic.
Foreign ownership is kinda llegal now (2018?), though there are ways around it.
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@reprobate said in Housing hornets' nest:
@majorrage said in Housing hornets' nest:
Only read the last few posts but has anybody actually acknowledged the biggest factor of the house price boom?
The open policy of Jacinda to appease the Chinese and let them do whatever they want in New Zealand. They have taken full advantage of Auckland real estate. When I exited that market a few years ago (to buy my current house in UK ... ) I had 6 bidders on my place. 5 were Chinese, one Indian. I've not read a single article about the NZ property boom where the buyer wasn't Chinese.
History is repeating the same as it did in Hong Kong. Jacinda needs to stop being kind, and start being pragmatic.
Foreign ownership is kinda llegal now (2018?), though there are ways around it.
If there is a way around it, it's not illegal.
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@majorrage said in Housing hornets' nest:
@reprobate said in Housing hornets' nest:
@majorrage said in Housing hornets' nest:
Only read the last few posts but has anybody actually acknowledged the biggest factor of the house price boom?
The open policy of Jacinda to appease the Chinese and let them do whatever they want in New Zealand. They have taken full advantage of Auckland real estate. When I exited that market a few years ago (to buy my current house in UK ... ) I had 6 bidders on my place. 5 were Chinese, one Indian. I've not read a single article about the NZ property boom where the buyer wasn't Chinese.
History is repeating the same as it did in Hong Kong. Jacinda needs to stop being kind, and start being pragmatic.
Foreign ownership is kinda llegal now (2018?), though there are ways around it.
If there is a way around it, it's not illegal.
Yes it is. Like speeding is illegal - but plenty of people do it and don't get caught.
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@reprobate said in Housing hornets' nest:
@majorrage said in Housing hornets' nest:
@reprobate said in Housing hornets' nest:
@majorrage said in Housing hornets' nest:
Only read the last few posts but has anybody actually acknowledged the biggest factor of the house price boom?
The open policy of Jacinda to appease the Chinese and let them do whatever they want in New Zealand. They have taken full advantage of Auckland real estate. When I exited that market a few years ago (to buy my current house in UK ... ) I had 6 bidders on my place. 5 were Chinese, one Indian. I've not read a single article about the NZ property boom where the buyer wasn't Chinese.
History is repeating the same as it did in Hong Kong. Jacinda needs to stop being kind, and start being pragmatic.
Foreign ownership is kinda llegal now (2018?), though there are ways around it.
If there is a way around it, it's not illegal.
Yes it is. Like speeding is illegal - but plenty of people do it and don't get caught.
No, thats not even close. Speeding is illegal. You just don't get caught.
If you setup a law to stop foreign ownership, but leave a way around it for foreign ownership then you've basically not made it illegal.
You think all the Chinese students in NZ on student visa's who stayed on and got citizenship & then suddenly at 23 years old had the cash to afford to buy property after property was due to the outstanding work they did being heavily rewarded in such a short period of time?
Housing hornets' nest