Pray tell me how I am doing it wrong? How should I be doing it? If I sell a property within 5 years of purchase I pay tax on it. If I am in the business of buying and selling properties I pay tax on the profit irrespective of how long I hold them.
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Inequalities and widening inequalities do cause some of the problems in society. What is adequate housing today? A simple hut or relative’s garage that keeps you dry? Or a brick and tile house with independent power supply, filter systems, underfloor insulation, double glazing, central heating and air conditioning, moisture extraction two inside bathrooms, bidet, and shower, a fast fibre connection. It is so much easier for the children in households with the latest and best to stay in top condition, have access to opportunities and to have the option to take advantage of them.
If selling properties 'every couple of months or so', then that is a taxable activity. If you're an investor in real estate you pay tax on rental profit.
GST is not known as sales tax. It is a tax paid by any GST registered person. The sales total, while used in the calculation is not the figure GST is paid on. From sales or income a registered person deducts costs and purchases etc, and pays on that figure. i.e. the profit.
I get the distinct impression you are one of those snivelling small-minded sad-sacks who spends your life worrying that under every rock is someone doing better than you. Well if so, it's because they are more deserving than you, boosted largely by a positive attitude.
If you are an investor in residential real estate then you can pay income tax at marginal rate on capital gain. Bright line test. Note residential rentals only. Then there is the intention test as well.
There is an increasing number of gotchas in relation to rentals. Some have sold up or not added to portfolios, others owners might well be waiting for the 5 year mark to sell, or until the carried forward rental losses have been used up.
Could be a rental shortage now or coming up. There is already a shortage for even slightly risky tenants, as witness the skyrocketing social housing waiting list. And net migration is also rising fast.
Just an opinion piece, but relevant to the discussion. Not sure what you call it when a journalist is providing an opinion piece.
https://www.stuff.co.nz/national/pol...talk-about-why
Yep the Asset bubbles make the baby boomer rich richer.
There is no sense behind taxing every last cent of income (including all gains from money lent to businesses) yet leaving most of the gains from Leveraged investment housing and all the gains Owner-occupation untaxed. Residential Real estate bubbles are encouraged.
The real estate bubble (if it turns out to be a bubble - at current it is just a continuous uptrend with the odd minor ripple) has little to do with CGT or the lack thereof.
The main culprits are
- low interest rates - i.e. people can afford to pay more for a scarce resource (a worldwide problem)
- money created by QE searching a new home (see what I did there :) ) - again a worldwide problem,
- very expensive building methods (stick by stick instead of using industrial production methods - this is a NZ specific problem) and
- the aversion of most Kiwis to live in apartment buildings
(admittedly, there are hardly any good quality apartments in NZ. Chicken - egg?) - obviously a home made problem as well
Don't blame the lack of CGT for our high property prices ... most countries do have a CGT and housing is expensive there as well everywhere where people can find a job and want to live ...
Sure - I hear property prices in the UK are dropping, but this is because people don't want to live there anymore.
I agree with all those points. NZ has among the most expensive housing for our income levels. I would add two additional main points.
The lack of a CGT and stamp duties in NZ, unlike most other countries, has the effect of making real estate even more compelling an investment. The relative ease to borrow to fund the acquisition of a house or real estate (as opposed to greater difficulty borrowing for share investment and businesses) makes housing more appealing as an investment, as leveraged capital gains are more easily achievable by more people. Also no stamp duties are payable making more frequent buying and selling of the family home a more Viable and compelling option to boost untaxed gains in equity.
Housing also gets a fillip from the fact that alternatives to households’ investing in real estate are less compelling in NZ. We have a comparatively small share market (part of the reason being explained above) and a small managed fund sector. Also kiwisaver is newish and has weak incentives to attract funds away from the real estate investment for all of the foregoing reasons.
If the lack of a CGT tax does make R.E. a more compelling investment (and there's no proof that it does), then by all means leave well alone. The purchase of a home makes for a stable society, so should be encouraged - not discouraged. Of course many proponents of a CGT would like their own home to be exempt. The thinking for many of them seems to be 'it's a fair tax as long as it doesn't apply to me'.
Presumably then investor housing should be further discouraged then to make room for owner-occupiers?
There are countries with lower home ownership rates with stable law-abiding societies. So there are several factors at play and stability rests on factors other than owner-occupied home ownership.
As for real estate being a compelling investment in NZ, I guess the household wealth wrapped up in home ownership and RE investment should be compared with those assets households own in shares, businesses and managed funds. How does that compare with other countries.
A good post BP that I totally agree with. My wife and I were talking about this yesterday when we drove through one of the lowest socio economic area here in Nelson yesterday, where she works and we have a rental property. Houses are old and many have not been maintained well but all sitting on large properties. The whole lot should be bulldozed and nice apartments built. The population in the area could easily be quadrupled and all withing easy walking distance to the town center. This could be repeated right around the country.
I do not agree with FP that home ownership is necessary for a stable society. Germany is a good example of a society where over 50% of the population rents and societies do not get more stable than Germany.
But a good interesting discussion on CGT.
Hi iceman. Yes redevelopment could happen but why doesn't it? Nelson district apparently has a lot more demand than supply going by recent media reports. Developers could start with buying up 2 or 3 properties to demolish and build. That costs, but it is the day job for developers and potentially lucrative.
What is stopping it?
Good question and applies to all of NZ. I think it is mainly due to attitudes. Kiwis seem to think of only expensive city center or waterfront properties when apartments are mentioned. In my old home country nearly all young families live in nice apartments and do not even dream of houses for first homes. This Kiwi attitude is partly to blame for our high property prices
I find it ridiculous when schemes like Kiwibuild aim to provide first home buyers with brand new housing. Just build a range of saleable houses, quality homes to tempt established home owners - whatever the market demands. Leave first home buyers to snap up the older housing stock that will result. They can improve and renovate them over time. That would improve housing stock at both ends of the market. There is huge demand from existing owners wanting to trade up; every extra build adds to the housing stock - so let's forget the rubbish about building 'affordable' homes. There could be plenty of them, if only we could get the existing owners to shift out and into something nice and new. And they would if such housing existed. The answer is in town planning.
About 60% of res bank lending is to existing home owners, and not for investment, three times as much as first home buyers. (Reserve Bank.) Doesn't say if the are trading up, down or just changing. Still nearly $4bill a month so a whole lot of buying going on.
Probably a decent number will be moving into retirement villages. And those on this site have a handle on those numbers, with a couple of operators indicating increases in enquiries and sales.
Even leaving retirement village units aside, developers are going to be more interested in upmarket builds rather than the likes of Kiwibuild which are limited on several fronts.
Maybe this is why
https://www.zerohedge.com/markets/gl...-shocking-rate
Inflation is absolutely essential to get rid of debt.
If you thought they could not reverse what they are doing would it be reasonable to think it is unsustainable? or like a ponzi scheme if it requires more and more people taking on more and more debt to sustain the people who were in first.
If it is unsustainable what will be the eventual consequences? Where do I invest?
I still think getting rid of targeted inflation and having actual price stability as a goal is a good idea even if it brings the Ponzi scheme to an end.
The world central bankers appear to have taken a page from the John Law school of economics.
Dont be too harsh. "Attitude" is also people's lives. Not everyone asked for a population explosion, its a little unfair to begrudge society for wanting a bit of space for the dog and a few tomatoes on a leafy street if that is how they grew up. In my experience, apartments here are unlivable long term. Pokey, scant noise insulation, expensive and that view will be built out. Developer greed? Poor planning? Probably both. Old East European apartments are way more salubrious and genuinely nice places to stay. I suspect attitudes to commute-free apartments would change if the value/space/livability equation changed.
NZ is growing at a moderate rate, while Auckland is growing at a reasonably fast rate. Given population increases in other parts of the world, I'd say we're not really at a point where I'd call it a population explosion.
At the end of the day though, New Zealanders need to get used to apartment living if they want to live within or close to city centres. If they don't want to live in one, there's still plenty of land available throughout the country. People need to adapt.
Well said Zaphod. This is exactly what needs to happen. First home buyers should be looking at good quality, cheap to run apartments. Immigrants should have conditions placed on their Visa that they go to areas of NZ where their experience is needed. Like a medical doctor should go to Reefton if needed there, not Auckland to clog it up more . I just do not think like dibble in post 749 above and in fact think that attitude is the main reason for our silly house prices vs incomes.
This is stating the obvious, but the world changes, the older generation had to deal with other things that young people today don't.
People can either start today and work towards a house or sit around complaining and hope that someone else makes things easier for them.
I guess my view is that you can sit around complaining or work on ways to achieve what you want yourself (like buying a cheap property out of Auckland, doing it up, renting it out, etc). Property is all about getting on the ladder (love it or hate it), that's the way it is in a popular country like NZ. That everyone should be entitled to get on the ladder in Auckland just isn't possible.
Some generations do have it better than others - the generation that came after war, enjoyed socialised education and medicine, high owner-occupation rates and came before "user pays" and before the looming environmental crisis following unfettered consumption managed to hit a sweet spot?
True we do have to work with how things actually are - The existing tax and investment environment in NZ. However reform is always possible and one person's "complaining" is another person's seeking ways to reform and improve...
It does not mean that it was inevitable that NZ housing would be become so expensive for our income levels. It was never inevitable that investor housing would become the de facto pension scheme for so many - making it more difficult to get that toe-hold on "the owner-occupier ladder."
Herald reports today (behind paywall) that NZ is in a townhouse and apartment building boom in Auckland as this has now become the favoured for young buyers.
This comment sums it up: "We've created a situation where people want to get into a new house or apartment and they don't want to have any maintenance and they want double glazing and insulation - they want the best of everything," he said.
So your baby boomer argument may be a bit off the mark. FYI, my first home was in an apartment building some 35 years ago and it worked well for me back then.
There may be a boom, but until there are crews on the ground it is just a boom in approvals. I do think terrace and townhouse developments will do OK, but large apartment developments not so much. The latter provide mostly small less expensive places, especially as rentals, but will be cancelled if too difficult to sell off the plans.
Couple of years back Colliers reported that 49 consented apartment developments in Auckland were cancelled, for various reasons.
Getting a toe-hold for a first home buyer in the lowest quartile of the Auckland housing market would probably see little left over for renovation or maintenance? Plus with both people in a couple working long hours, just how much time would there be for work around the house? Especially with wood burners being phased out owing to trying to preserve the ravaged environment, surely double glazing and insulation are basic necessities? Also the average age of the first home buyer has been creeping up as the deposit needed increases at a rate faster than the increase in incomes.
I don't see how it negates my boomer point.
It is difficult for FHB to get their deposit together but servicing the mortgage is not that hard and certainly no more difficult than in the past.
This is copied from an article written by Ashley Church on One Roof on 29 August this year:
“There’s the fact that it actually costs less to service a mortgage, today, than it did in the mid-80s when the cost reached an eye-watering 52 percent of average household income – the highest level it has reached in the modern era. Today it sits at around 37 percent of the average household income despite the fact that median house prices have increased dramatically, which means that there is still significant capacity to service additional house price growth within the average household budget.”