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  1. #141
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    Quote Originally Posted by JBmurc View Post
    Not sure how many on here read the "NZ Property investor mag" but now and again I get an issue and as I've enjoyed many a good investment return in NZ Property I like to keep up to date with present market >>

    Now in the latest issue I read a piece on "Why you should take interest only loans over your investment properties" and forget about paying off the debts as NZ property only goes higher in value on average 10% pa so just use the increased equity you get and buy more and more properties on I.O and never pay the properties off.

    Surely we must be getting to peak Property love here in NZ as looking over the average yields nationwide on current average selling prices we see yields of 3-6% so no wonder I.O lending is all the rave as after an ever increasing insurance/rates costs taxes etc not going be much if capital left to pay down any of the actually property purchase price .. pure madness IMHO
    seems like the core investment plan of many is BUY and hope for Cap gain as in the past it worked great so why would it top now
    Unless the financial system changes this will always make sense. With stable prices negative gearing would just be about people losing money and investing poorly without the 6-8% tax free capital gain it would just be stupid. People do not expect to pay back debt anymore, they know that central banks will engineering inflation (reduction in the value of a dollar) to sort out their debts. The display since the financial crisis has been shocking across the globe, wholesale printing of money and something as ludicrous as negative interest rates has been preferable to letting asset prices fall. The system doesn't make sense but property investor is giving the right advice for the times.
    We need to scrap targeted inflation as a policy it has only been around since 1990 in NZ when people still believed in trickle down economics. That is all it is a dumb idea that if rich people feel wealthier we will all be better off as the wealth trickles down.
    I haven't got the statistics but I imagine wealth is actually trickling down while the main flow upwards increases wealth and income inequality.

  2. #142
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    This article appears to confirm that NZ Property is on the right track with its IO advice.

    https://www.zerohedge.com/markets/wo...global-economy

    Interest rates can't rise the only way out would seem to be high inflation and a massive decrease in the purchasing power of currencies (currencies in which your loans are denominated).

    It seems wrong to me but there is no one in a position of power willing to change things.

  3. #143
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    Quote Originally Posted by Aaron View Post
    This article appears to confirm that NZ Property is on the right track with its IO advice.

    https://www.zerohedge.com/markets/wo...global-economy

    Interest rates can't rise the only way out would seem to be high inflation and a massive decrease in the purchasing power of currencies (currencies in which your loans are denominated).

    It seems wrong to me but there is no one in a position of power willing to change things.
    Article basically sums it up as, 'don't put your investment into emerging countries' because they have a far higher debt load with a much higher level of risk. It's the very developed nations that are benefiting from the rise in debt. The question is which nations can handle a rise in interest rate? Large nations like the US certainly can and when this happens, you'll see the lessor countries will suffer more into financial crisis.

    So the question is how bad is NZ real estate investment? NZ's currency is already been devaluing since the the Labour Gov't coalition and with a ban in foreign buyers of NZ residential houses (which reduces the liquidity), you'll find the NZ gov't has no option other than 1) raise taxes & 2) borrow more funds EXTERNALLY 'abroad'. FYI, many talk about how much debt the US has but fail to understand at nearly 3/4 of is internal or public held debt. The other 1/4 is gov't debt / foreign.

    Consider how much debt our NZ gov't has been borrowing abroad. We've grown from $270B to nearly $300B under Ms Ardern:
    https://tradingeconomics.com/new-zealand/external-debt

    My purse is in the US and fortunately so (as the article makes mention of "the Smart People") because quality attracts capital. Unlike NZ with foreign buyer ban, the US maintains an open market policy for foreign investment (most specifically in US equities which is far more productive than owning real estate).

  4. #144
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    America catches a cold; the rest of the world gets pneumonia.

    Apart from certain cities in the US, Americans have more affordable real estate than NZers?

    Before the foreign purchaser restrictions were introduced many insiders (sure many had a vested interest in high turnover of expensive property and mortgages) downplayed the involvement of foreign purchasers in residential real estate. We were informed that such bans would have just a limited effect. Surely the effect on liquidity would be minimal as the majority of demand is local?

    (2017) https://www.stuff.co.nz/business/984...property-sales

    https://www.tvnz.co.nz/one-news/new-...housing-market

    Just before the ban came into effect https://www.interest.co.nz/property/...and-houses-not
    Last edited by Bjauck; 07-01-2020 at 05:25 PM.

  5. #145
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    Quote Originally Posted by Bjauck View Post
    America catches a cold; the rest of the world gets pneumonia.

    Apart from certain cities in the US, Americans have more affordable real estate than NZers?

    Before the foreign purchaser restrictions were introduced many insiders (sure many had a vested interest in high turnover of expensive property and mortgages) downplayed the involvement of foreign purchasers in residential real estate. We were informed that such bans would have just a limited effect. Surely the effect on liquidity would be minimal as the majority of demand is local?

    (2017) https://www.stuff.co.nz/business/984...property-sales

    https://www.tvnz.co.nz/one-news/new-...housing-market

    Just before the ban came into effect https://www.interest.co.nz/property/...and-houses-not
    I watched an interview today on the US Markets talking about debt issues etc ... saying how the property bubble is back with House price-to-income multiples over 4 !!! here across NZ the average is around 6 Auckland 9 ---Queenstown the most out of balance with 13 !! (I'm sure Central Otago would be around Auckland rates)
    People don't have ideas, ideas have people

  6. #146
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    Quote Originally Posted by JBmurc View Post
    I watched an interview today on the US Markets talking about debt issues etc ... saying how the property bubble is back with House price-to-income multiples over 4 !!! here across NZ the average is around 6 Auckland 9 ---Queenstown the most out of balance with 13 !! (I'm sure Central Otago would be around Auckland rates)
    and that's the real reason! If the US is talking of a housing bubble where it's a multiple of 4, what does that leave for NZ? What keeps NZ real estate going is the preferential tax treatment vs investing in other ventures (ie small business or shares). If houses in NZ had capital gains tax similar to abroad, then we would see as much speculation and the housing multiples would be much lower. Also part of the reason for the much higher multiple in NZ is taxation is much higher than in America, meaning it takes a lot more years ; or a higher multiple. But overall you simply can't compare US houses to NZ houses as it would be like comparing apples to oranges. In the US, house sizes are clearly massive. The middle class person in the US lives in a house that only maybe the 1% in NZ would afford in NZ (and that's if 5000 ft^2 McMansion size houses were a common thing in NZ which they are not). Furthermore, US house sizes are based on "livable space" vs in NZ house size is determined by basically the size of the slab foundation (no factor on the thickness of the walls, hallways, aspects that matter on the term "livable space". The garage space or balcony / decks are not livable spaces in the US but can be in NZ. So a 280m2 size house in NZ is really only a 2000 ft2 size house in America.

    Don't believe the economists from various NZ banks as they're misleading like their Kiwi Saver funds NZ banks keep promoting. Well.. deceptive in that the full taxation of the funds and to the individuals are not spelled out clearly when investing NZ or foreign equities. They don't know the full impact of things on a global scale. So when a ban is set, the impact is it discourages OTHER forms of investments (trickle effect).

    Close friend living in Vancouver keeps me up with the un-affordability of housing there. But after his visit to Auckland last year, he completely understands what I meant by comparing apples with oranges. The Auckland house doesn't have the central heating / home comfort as the Vancouver and all at a price tag where the Auckland house is more than in Vancouver, while being 40% smaller in size. Narrow streets, no back alley access.

    One thing that will definitely hurt NZ is if migration goes the other way (more people leaving NZ and those coming in). Of course this is on to a different topic but the issue of brain drain is a concern. When NZ public hospitals get a low grade report because it's cheaper to use senior nurses to take care of patients when it should be a proper doctor (because most likely many of these doctors have left NZ). NZ gov't doesn't pay enough and each wave of strikes that happen, the Labour Gov't fixes it with raising more pay which in effect, loads up the productive class of NZ by making them pay more taxes.

  7. #147
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    Quote Originally Posted by JBmurc View Post
    I watched an interview today on the US Markets talking about debt issues etc ... saying how the property bubble is back with House price-to-income multiples over 4 !!! here across NZ the average is around 6 Auckland 9 ---Queenstown the most out of balance with 13 !! (I'm sure Central Otago would be around Auckland rates)
    Country multiples v specific location multiples. Frogs v pears.

    Also depends if comparing median prices with median wage or with household income.

  8. #148
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    Quote Originally Posted by SBQ View Post
    ...Close friend living in Vancouver keeps me up with the un-affordability of housing there. But after his visit to Auckland last year, he completely understands what I meant by comparing apples with oranges. The Auckland house doesn't have the central heating / home comfort as the Vancouver and all at a price tag where the Auckland house is more than in Vancouver, while being 40% smaller in size. Narrow streets, no back alley access. ...
    That is true. I think Australian residences also are of better quality to those in NZ. So extracting the value of the improvements and just comparing the value of the land part of the section, NZ real estate is even more unaffordable and expensive. Residential real estate does comprise such a large proportion of NZ household wealth. What happens with the price of housing will have a bigger impact in NZ than for other countries.

    i think NZ had net emigration and a brain drain in the 1980s, but the real price of residential real estate kept on increasing as well. It is also worth bearing in mind that the UK joined the EEC in 1973. Until then the UK had been our biggest export market (the UK accounted for 36% of NZ exports in 1970) and there was a challenging period for the NZ economy after that.

  9. #149
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    Quote Originally Posted by artemis View Post
    Country multiples v specific location multiples. Frogs v pears.

    Also depends if comparing median prices with median wage or with household income.
    Correct so I looked into it >>

    New Zealand's median income is $52,000 FEB19 - NZ median home price $630k late 2019 ===== Ratio 12.1
    USA median income- $63,688 USA JAN19 -median home price $227k JUL19 . ===== Ratio 3.6
    People don't have ideas, ideas have people

  10. #150
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    Quote Originally Posted by JBmurc View Post
    Correct so I looked into it >>

    New Zealand's median income is $52,000 FEB19 - NZ median home price $630k late 2019 ===== Ratio 12.1
    USA median income- $63,688 USA JAN19 -median home price $227k JUL19 . ===== Ratio 3.6
    Even if you factor the statistical measure with the bell curve, no matter which part of the bell, the results is so compelling that NZ is so far out of touch in affordability or what you get in a house.

    Another figure to look at is land prices for empty sections. Here in Christchurch we're looking near $300,000 for 600m2 size sections in new sub-divisions.

    Many years ago I remember on talk radio talking about some overseas celebrity visiting NZ that made a statement saying "NZ is a rip-off place" and I think the public kinda took offense to the person's statement. But there was some merit to the person's claim. I suppose when NZ residents hear that kind of negativity, they can't give any other excuse or a way to change it so they come back with remarks like "Well if you don't like NZ you don't have to visit again etc.."

  11. #151
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    Quote Originally Posted by SBQ View Post
    Even if you factor the statistical measure with the bell curve, no matter which part of the bell, the results is so compelling that NZ is so far out of touch in affordability or what you get in a house.

    Another figure to look at is land prices for empty sections. Here in Christchurch we're looking near $300,000 for 600m2 size sections in new sub-divisions.

    Many years ago I remember on talk radio talking about some overseas celebrity visiting NZ that made a statement saying "NZ is a rip-off place" and I think the public kinda took offense to the person's statement. But there was some merit to the person's claim. I suppose when NZ residents hear that kind of negativity, they can't give any other excuse or a way to change it so they come back with remarks like "Well if you don't like NZ you don't have to visit again etc.."
    Yes been looking over at Utah state ... looks just like one HUGE Central Otago but with much cheaper property
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  12. #152
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    Quote Originally Posted by JBmurc View Post
    Yes been looking over at Utah state ... looks just like one HUGE Central Otago but with much cheaper property
    Yeah, but look what the poor buyers get for a president.

  13. #153
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    Quote Originally Posted by fungus pudding View Post
    Yeah, but look what the poor buyers get for a president.
    LOL yes and we have Comrade Cindy .. polar opposites..
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  14. #154
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    Another week; another housing unaffordability article;Another drop in NZ home ownership rate? The housing divide continues.
    https://www.stuff.co.nz/business/118...ess-affordable

    Good news for the tax efficient de facto retirement schemes for boomers, but bad news for first home buyers and home upsizers.

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    Not sure which would be worse low interest rates and high house prices or high interest rates and low house prices.
    We have hindsight to know anyone buying in the 70s & 80s has had inflation to rapidly make the mortgage manageable in spite of the high interest rates.

    From recent history we also know that buying a house has still generally been a very financially positive move.

    https://www.rbnz.govt.nz/statistics/...e-price-values
    https://www.rbnz.govt.nz/statistics/...ph-90-day-rate

    I wonder if this will ever change or if there is a price that is too high or a yield too low (particularly in light of the additional costs being put on landlords).

    At negative interest rates no asset price is too high and any yield above 0% would probably be acceptable.
    Last edited by Aaron; 20-01-2020 at 04:45 PM.

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    Quote Originally Posted by Aaron View Post
    Not sure which would be worse low interest rates and high house prices or high interest rates and low house prices.
    Low interest rates make for the worst time to buy. Go mad when they are through the roof. If they drop your asset increases in value while your outgoings reduce. Buying when rates are low (and prices are high} is risky. If/when rates rise, your new asset value drops and the cost of ownership rises. Fungus's first law of economics. 'Interest rates and asset prices are the opposite ends of a see-saw'.
    Last edited by fungus pudding; 20-01-2020 at 05:29 PM.

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    Quote Originally Posted by fungus pudding View Post
    Low interest rates make for the worst time to buy. Go mad when they are through the roof. If they drop your asset increases in value while your outgoings reduce. Buying when rates are low (and prices are high} is risky. If/when rates rise, your new asset value drops and the cost of ownership rises. Fungus's first law of economics. 'Interest rates and asset prices are the opposite ends of a see-saw'.
    Agreed but will we ever have a chance to invest in a less risky time as central banks will only lower interest rates and this could go on for many years.

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    So much NZ household wealth comes from investment in land. With asset price inflation, as wealth inequality increases with current tax settings and wealth becomes concentrated in a small percentage of households, NZ will probably have to develop a strategy to reduce the social frictions.

    The following is about to years old, so the situation is probably even more polarised now.
    Oxfam report - Huge wealth gap in New Zealand where richest 1% own 28% of wealth

    https://www.nzherald.co.nz/business/...ectid=11979151


    Is Capital Gains Tax Really Dead?
    https://www.stuff.co.nz/business/opi...ax-really-dead
    Last edited by Bjauck; 21-01-2020 at 10:01 AM.

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    Quote Originally Posted by Aaron View Post
    Agreed but will we ever have a chance to invest in a less risky time as central banks will only lower interest rates and this could go on for many years.
    Rates will almost certainly stay around current low levels for foreseeable future, but the foreseeable future for me currently is shorter than the typical home mortgage.

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    Quote Originally Posted by Bjauck View Post
    So much NZ household wealth comes from investment in land. With asset price inflation, as wealth inequality increases with current tax settings and wealth becomes concentrated in a small percentage of households, NZ will probably have to develop a strategy to reduce the social frictions.

    The following is about to years old, so the situation is probably even more polarised now.
    Oxfam report - Huge wealth gap in New Zealand where richest 1% own 28% of wealth
    ....
    Suggest take Oxfam reports with a big spoon of salt. They have an agenda. They, and many journalists that create the headlines, are regularly smacked by some who compare the base data Oxfam use (from the Credit Suisse highly regarded global wealth report) with the Oxfam conclusions. And the headlines.

    Credit Suisse 2018 reports show that New Zealand’s wealth inequality declined from the previous year’s 72.3 Gini points to 70.8 Gini points. Don't see that in the headlines, probably not reported at all here.

    Kool-Aid.

    And even if the 28% is correct, Oxfam includes NZ billionaires from the Forbes annual list. Because it supports their agenda and keeps the donations rolling in.

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