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  1. #181
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    Quote Originally Posted by dobby41 View Post
    Would be good - and productive too.
    ...
    I thought one had to start the business for it to be a productive investment. Buying a second hand business, or buying a second-hand shareholding in a company that runs a business, was not productive. However, in addition, is it also if you buy an established business and work in the business too., then it is also productive. If you buy an existing business but get a manager to run it, then it is not a productive investment. Do I correctly understand the point (which I disagree with) you were making previously?
    Last edited by Bjauck; 08-12-2020 at 08:13 AM.

  2. #182
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    Quote Originally Posted by dobby41 View Post
    Would be good - and productive too.
    Unfortunately many people buying rental property wouldn't have the nouse to run a small business. Residential property is much easier.
    Annd many people who buy a small business should have had the nouse not to.

  3. #183
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    Quote Originally Posted by Bjauck View Post
    I thought one had to start the business for it to be a productive investment. Buying a second hand business, or buying a second-hand shareholding in a company that runs a business, was not productive. However, in addition, is it also if you buy an established business and work in the business too., then it is also productive. If you buy an existing business but get a manager to run it, then it is not a productive investment. Do I correctly understand the point (which I disagree with) you were making previously?
    Starting one is the best way but I expect that if they brought an existing one they would probably add to it.
    You are pushing the suggestion that I made (to start the debate) but getting an existing manager to manage it is similar, but not the same, as buying an existing share. In a small business, even with a manager running it, you probably add to the investment. With an existing share you only add to it if the company wants to increase capital.

    I don't see investing in residential property as being non-productive - you end up paying a lot of money on repairs and maintenance (both of which help the productive economy). Yet people keep trying to say that property investment is non-productive?

  4. #184
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    Quote Originally Posted by dobby41 View Post
    ...

    I don't see investing in residential property as being non-productive - you end up paying a lot of money on repairs and maintenance (both of which help the productive economy). Yet people keep trying to say that property investment is non-productive?
    I guess with residential property if you pay $1,000,000 for a house (land worth $700,000; building and other improvements worth $300,000) then you are getting a $300,000 asset which produces shelter whether you pay $700,000 for the land or $100,000 for the land.

    Certainly when it comes to owner-occupiers, It makes no sense not to tax the net product of a residential property producing a net benefit (shelter) for an owner-occupier while fully taxing the net product of a business that produce a net benefit (income, ability to eat and clothe) to the owner-operator.

    The initial investment or purchase of shares keeps the business alive when the start-up investors/shareholders wish to to retreat. What you may be referring to is subsequent injections of capital - or retention from annual net income - to maintain assets. In relation to a shareholding that would be retaining earnings within the business (which NZ companies are very poor at doing for various reasons.) NZ companies would also raise money from shareholders by way of a placement or rights issue.
    Last edited by Bjauck; 08-12-2020 at 10:44 AM.

  5. #185
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    Quote Originally Posted by fungus pudding View Post
    Annd many people who buy a small business should have had the nouse not to.
    This may have been covered before, but can someone more experienced or informed than myself answer this question.
    If borrowing to buy shares, via mortgage security, is the interest component tax deductible?

  6. #186
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    It is if they were brought for dividend income

  7. #187
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    Quote Originally Posted by Sgt Pepper View Post
    This may have been covered before, but can someone more experienced or informed than myself answer this question.
    If borrowing to buy shares, via mortgage security, is the interest component tax deductible?
    It is, but not restricted to mortgage security. It doesn't matter what the security is, and even if you can borrow with no security (from your grandmother or mistress ?) the interest is still a cost.

  8. #188
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    Fortunately the Prime Minister is up with the play. Or maybe not.

    Put to her that people who invest in shares, for example, don’t always expect the value of that asset to go up, so why should it be different for housing? Ardern responded: “This gets to the heart of the issue of why so many New Zealanders turn to the housing market.”Ardern then walked off stage, having previously signalled she was taking last questions at her post-Cabinet press conference.

    Whew, saved by the bell.

    https://www.interest.co.nz/property/...-when-it-comes

  9. #189
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    " As Clint Smith notes, interest deductions at present are, with the exception of the thin capitalisation rules, generally fully allowable if incurred in deriving gross income. The deduction relates to the rental income that is being earned from the underlying property being financed.

    However, as the argument for greater application of section CB 6 notes the economic returns from property are twofold. Firstly, in the form of taxed rental income and secondly in untaxed capital growth. The present treatment, therefore, gives an allowable interest deduction for both taxed and untaxed gains. "
    https://thespinoff.co.nz/politics/08...+December+2020

  10. #190
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    Quote Originally Posted by artemis View Post
    Fortunately the Prime Minister is up with the play. Or maybe not.

    Put to her that people who invest in shares, for example, don’t always expect the value of that asset to go up, so why should it be different for housing? Ardern responded: “This gets to the heart of the issue of why so many New Zealanders turn to the housing market.”Ardern then walked off stage, having previously signalled she was taking last questions at her post-Cabinet press conference.

    Whew, saved by the bell.

    https://www.interest.co.nz/property/...-when-it-comes
    I guess if it is government and central bank guaranteed then why would you invest in anything other than rental houses. Sadly some young people might see Jacinda Ardern as an advocate for youth but they would be sadly mistaken. She is little different to John Key as far as I can tell.

  11. #191
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    Out of idle curiosity, why are so many people so certain that the tax system is the best tool for solving the current housing crisis?

  12. #192
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    Quote Originally Posted by GTM 3442 View Post
    Out of idle curiosity, why are so many people so certain that the tax system is the best tool for solving the current housing crisis?
    That would take an extensive professional survey to find the answer. Check with Colmar Brunton or one of the various survey companies for a quote.

  13. #193
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    Quote Originally Posted by GTM 3442 View Post
    Out of idle curiosity, why are so many people so certain that the tax system is the best tool for solving the current housing crisis?
    There needs to be reform in many areas not just tax, imo.

    Ardern has more or less blamed the public for her failure to reform the tax system. She ruled out a CGT or Wealth tax. As Ardern's Party got a majority of votes, I am presuming that there may be more voters who think their self-interest is better served by allowing any housing issues to remain or worsen rather than reform the tax system.

    https://www.tvnz.co.nz/one-news/new-...s-ive-listened
    Last edited by Bjauck; 16-12-2020 at 06:21 AM.

  14. #194
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    Quote Originally Posted by GTM 3442 View Post
    Out of idle curiosity, why are so many people so certain that the tax system is the best tool for solving the current housing crisis?
    It isn't but the the tax system isn't right either.
    CGT won't drop the house prices - may do as a one off but then off they go again.
    Even with a CGT residential leveraged property investment is still the best game in town to grow your capital base (for the average punter).

  15. #195
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    Quote Originally Posted by dobby41 View Post
    It isn't but the the tax system isn't right either.
    CGT won't drop the house prices - may do as a one off but then off they go again.
    Even with a CGT residential leveraged property investment is still the best game in town to grow your capital base (for the average punter).
    While CGT may not solely fix the housing crisis problem in NZ, it will promote investment into more productive areas (as commonly seen overseas in Canada, Aus, US, UK etc). The table is so one sided in NZ that only a fool would choose investments non-other than NZ residential properties. The proof is clear ; look what happen since COVID came about and interest rates crashed. NZ corporations as a % of total of NZ's debt/GDP is insignificant when compared to real estate debt & gov't debt. Other countries don't game it that way. You get the principal resident home as a one off, anything more and the taxation (as how it should be) will be treated at the same level as making any other investment (ie share ownership).

    Frankly i'm sick of the excuses of having no CGT in NZ. The TWG recommended it - why should Jacinda know better? It's like they're trying to find the be all end all 'single' fix solution when CGT was never intended to function that way to address affordable housing.

    Earlier in the week I also heard another silly proposal of taxing in NZ (came out from Auckland Uni if I recall correctly). The person on talk radio explained that to address wealth inequality, the rich will pay a direct tax on their assets based on the bank's 'free market rate' which is basically at term deposit rates. So if a person had $500K in cash and was to invest into NZ residential properties, he/she may get a loan of $1M to buy a house, the new tax proposal is that $500K would be treated as if it was invested in the banks TD rate (ie the risk free rate) and that rate would be taxed at the individual's marginal tax rate.

  16. #196
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    Quote Originally Posted by GTM 3442 View Post
    Out of idle curiosity, why are so many people so certain that the tax system is the best tool for solving the current housing crisis?
    personally I don't think it is the best tool. As has been pointed out on here, Aussie has a capital gains tax and their housing market is similar to ours. One thing the govt could do is reduce the central banks inflation target to 0%. As housing and asset price inflation is a result of their policy to raise prices across the board at 2%.

    A capital gains tax could broaden the tax base and (I don't like to use the word fair as FP will attack if I use it) increase the perception of fairness as those with wealth benefiting from central bank and monetary policy would be seen to be contributing.
    Last edited by Aaron; 16-12-2020 at 10:39 AM. Reason: unnecessarily inflammatory

  17. #197
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    Good news on the demand side of the problem. Everyone keeps yapping about the supply side but if we closed the borders demand for housing would drop considerably and if I understood economics 101 correctly decreased demand should lead to decreasing prices.

    https://www.interest.co.nz/property/...pared-year-ago

    If the country just declared a man made climate emergency surely filling the country up with more people is not an appropriate response unless of course the govt is full of s**t. I think Greta called it virtue signalling.

  18. #198
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    Quote Originally Posted by Aaron View Post
    Good news on the demand side of the problem. Everyone keeps yapping about the supply side but if we closed the borders demand for housing would drop considerably and if I understood economics 101 correctly decreased demand should lead to decreasing prices.

    https://www.interest.co.nz/property/...pared-year-ago

    If the country just declared a man made climate emergency surely filling the country up with more people is not an appropriate response unless of course the govt is full of s**t. I think Greta called it virtue signalling.
    So that article says immigration down 90% but demand doesn't seem to have dropped?
    At the moment the border is open to Kiwis only - is that not enough closure of borders?

  19. #199
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    Quote Originally Posted by dobby41 View Post
    So that article says immigration down 90% but demand doesn't seem to have dropped?
    At the moment the border is open to Kiwis only - is that not enough closure of borders?
    "Home ownership rates have hit a 70 year low and those working in housing are not at all surprised. A new 150-page report from Stats NZ titled Housing in Aotearoa: 2020 reveals a grim portrait of the housing crisis."

    https://www.rnz.co.nz/national/progr...it-70-year-low

    Low interest rates encouraging more home ownership for an already limited supply.

    As for returning Kiwis - my opinion is they are only the 'displaced' / lost their job overseas etc. returning to NZ. I'm not sure how much wealth they would of brought back but those that are well established overseas with a decent job, assets, etc. would have no inclination to moving back here.

  20. #200
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    Quote Originally Posted by dobby41 View Post
    So that article says immigration down 90% but demand doesn't seem to have dropped?
    At the moment the border is open to Kiwis only - is that not enough closure of borders?
    That would be great if it stayed that way, not likely though. More people, more demand more consumption more growth, in population, prices and money supply.
    The money supply would contract if population leveled off and becomes sustainable.
    Doesn't seem to have affected demand for houses as you say. Mind you S&P 500 up last night on stimulus expectation and gold up as well which I would have expected to fall if everything is coming right.

    I wonder if house buyers, share buyers, goldies and crypto might appreciate that each time central banks print it is getting larger and larger so I wonder if the frenzied buying is just a dawning realisation that dollars are risky and are a bad thing to hold. maybe not even a realisation but a natural response to what is happening. I wonder if this is what a currency collapse looks like with the price of everything shooting up as more and more currency gets printed.

    Shares or Property? Maybe both or whatever you can afford while you can afford it.

    Possibly a bit dramatic but seems to be the way we are headed climate emergency declaration or not.

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