sharetrader
Page 5 of 9 FirstFirst 123456789 LastLast
Results 81 to 100 of 172
  1. #81
    Dilettante
    Join Date
    Mar 2010
    Location
    Down & out
    Posts
    3,438

    Default

    You are right SBQ, it is all about protecting NZ real estate and high prices, by succesive Governments and the banking system. Our 24 yo daughter is currently going through trying to buy a fist home (value approx $550-600k), with our family trust likely to buy 25% of it with her to make it easier. She has $105k saved and over $20k in KS that she can access.
    The Trust has properties and shares but today I learned from our long term bank ANZ, that they no longer consider dividends (despite regular history for many years) from shares as income for their purposes of calculating income to debt ratio, which now is their preferred method and LVRs are basically redundant (in our case anyway).

    So the healthy portfolio the Trust holds in NZX shares assets and the dividend stream from it, is totally ignored by the bank. If we had the same amount invested in rental property with the more unreliable stream of rental income, they would lend the Trust enough to buy several houses.
    Go figure.

  2. #82
    Dilettante
    Join Date
    Mar 2010
    Location
    Down & out
    Posts
    3,438

    Default

    You are right SBQ, it is all about protecting NZ real estate and high prices, by succesive Governments and the banking system. Our 24 yo daughter is currently going through trying to buy a fist home (value approx $550-600k), with our family trust likely to buy 25% of it with her to make it easier. She has $105k saved and over $20k in KS that she can access.
    The Trust has properties and shares but today I learned from our long term bank ANZ, that they no longer consider dividends (despite regular history for many years) from shares as income for their purposes of calculating income to debt ratio, which now is their preferred method and LVRs are basically redundant (in our case anyway).

    So the healthy portfolio the Trust holds in NZX shares assets and the dividend stream from it, is totally ignored by the bank. If we had the same amount invested in rental property with the more unreliable stream of rental income, they would lend the Trust enough to buy several houses.
    Go figure.

  3. #83
    Senior Member
    Join Date
    Mar 2001
    Location
    Auckland, , New Zealand.
    Posts
    1,300

    Default

    Is the rationale that the income is unreliable (so are rents), you could sell the shares at any time, (can sell the rental property too - albeit would take a little longer), how about if you had funds in Term Deposit with them, would they take that as income - could withdraw that as well and blow it at the casino, it is no wonder property is seen as the best investment.
    Your daughter has done well iceman, hope my two boys can do the same, I can see 1 most likely will, the other not sure.

  4. #84
    Veteran novice
    Join Date
    Jun 2007
    Location
    , , .
    Posts
    7,240

    Default

    Banks have always been reluctant to lend against equities for various reasons: subject to potential loss of unquantifiable value; difficulty in taking security over shares; complex administration, tracking of fluctuating value/maintaining value margin over the loan amount; general lack of expertise regarding equities on the part of bank staff. They much prefer real estate and mortgages!

  5. #85
    Advanced Member
    Join Date
    Aug 2012
    Posts
    2,278

    Default

    Quote Originally Posted by Jay View Post
    Is the rationale that the income is unreliable (so are rents), you could sell the shares at any time, (can sell the rental property too - albeit would take a little longer), how about if you had funds in Term Deposit with them, would they take that as income - could withdraw that as well and blow it at the casino, it is no wonder property is seen as the best investment.
    Your daughter has done well iceman, hope my two boys can do the same, I can see 1 most likely will, the other not sure.
    She has done well - but is likely to get help from the family trust fund too to buy a house.

    The fact that NZers can raid the pension scheme to buy into an already expensive housing market underlines the priority and favoritism given to real estate investment. Why shouldn't the pension fund not also be used to buy a shareholding, establish a business or undertake post graduate research. And why shouldn't owning a business or shares have the same tax efficiency given to owner-occupied housing?

    I can understand the caution of the bank in using dividend history as a guide for future income. Just look at what happened to the big dividends from erstwhile market stalwart FBU.
    Last edited by Bjauck; 13-12-2019 at 02:45 PM.

  6. #86
    Senior Member
    Join Date
    Dec 2001
    Location
    Wellington, , New Zealand.
    Posts
    1,157

    Default

    Quote Originally Posted by macduffy View Post
    Banks have always been reluctant to lend against equities for various reasons: subject to potential loss of unquantifiable value; difficulty in taking security over shares; complex administration, tracking of fluctuating value/maintaining value margin over the loan amount; general lack of expertise regarding equities on the part of bank staff. They much prefer real estate and mortgages!
    Iceman's issue was to do with serviceability rather than security. Banks can have whatever rules they like, but I would have thought a dividend stream was at least as reliable as a household's employment income.

  7. #87
    Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    413

    Default

    Quote Originally Posted by iceman View Post
    You are right SBQ, it is all about protecting NZ real estate and high prices, by succesive Governments and the banking system. Our 24 yo daughter is currently going through trying to buy a fist home (value approx $550-600k), with our family trust likely to buy 25% of it with her to make it easier. She has $105k saved and over $20k in KS that she can access.
    The Trust has properties and shares but today I learned from our long term bank ANZ, that they no longer consider dividends (despite regular history for many years) from shares as income for their purposes of calculating income to debt ratio, which now is their preferred method and LVRs are basically redundant (in our case anyway).

    So the healthy portfolio the Trust holds in NZX shares assets and the dividend stream from it, is totally ignored by the bank. If we had the same amount invested in rental property with the more unreliable stream of rental income, they would lend the Trust enough to buy several houses.
    Go figure.
    Regarding 1st home buyers, I would like to direct you to a post I made few months ago comparing what Canada is doing for their 1st home buyers: (and perhaps this is something the NZ gov't should be looking at)

    https://www.sharetrader.co.nz/showth...l=1#post770998

    Basically, the gov't will lend up to 5% on existing home or 10% value of a newly built house on value up to $500K. No payment interest payments, nothing, this incentive is paid back at time of sale of the house in the form of a 'share of the capital gain'.

    Now regarding the use of Kiwi Saver funds to go towards a home mortgage, IMO is a farce and provides absolutely no benefit from a tax perspective. Canada for many decades have allowed the transfer of RRSP investments towards the purchase of their new home. However, the clear distinction is these Cdn managed funds under the RRSP model grows TAX FREE (or basically tax deferred until retirement age where taxes on the gain are paid when disbursements are made). VERY different to Kiwi Saver funds that operate under a model of paying taxes to IRD on the gain every year (either locally from dividends or foreign investments under the FIF rules). So basically, they're just telling people that you're not 'locked into KiwiSaver' - you can access the funds through converting it into buying a home - what kind of incentive is this??? certainly not a Canadian tax incentive where the gains become 100% tax free.

    Your problem about banks not recognising dividend income from shares is no different to most places abroad. On a different discussion on this forum, I expressed that NZ banks will gladly show you the door if you wanted to borrow funds specifically to invest in shares, but love to lend to you if you meet the requirement for a home mortgage. Why? Well the reason being is banks don't like taking different levels of risks and having shares certainly adds a different mix to their risk criteria. I would also be not surprised if the bank did not look at your 'trust' holding these investments because technically, a trust is a separate entity and banks don't like to involve 2 way liens on a property title as it limits their control in case of a forclosure. There use to be a time wher banks would take on all sorts of risks like lending for a new business start up. Not anymore without significant collateral. Throughout history countless of banks have gone bankrupt by holding corporate or assets in equities as when the stock market crashes, so too do the banks. But houses don't crash for a significant long term time frame; likewise they don't generate the same level of returns as equities however, that's not what the banking model is about. As others have said, banks are only interested in simple mortgages.

  8. #88
    Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    413

    Default

    Quote Originally Posted by Bjauck View Post
    She has done well - but is likely to get help from the family trust fund too to buy a house.

    The fact that NZers can raid the pension scheme to buy into an already expensive housing market underlines the priority and favoritism given to real estate investment. Why shouldn't the pension fund not also be used to buy a shareholding, establish a business or undertake post graduate research. And why shouldn't owning a business or shares have the same tax efficiency given to owner-occupied housing?

    I can understand the caution of the bank in using dividend history as a guide for future income. Just look at what happened to the big dividends from erstwhile market stalwart FBU.
    Pension funds like KiwiSaver already have the ability to produce higher returns through leverage (on margin). But using KiwiSaver to invest into a new business or towards school study is entirely a different can of beans. The fact that more than 95% of small businesses fail within 5 years is a good reason why banks shy away from lending for business ventures. Likewise with schooling. If the person takes on a useless degree than where would that leave in terms of wise use of KiwiSaver funds (when it could be kept in the pension to have more growth?).

  9. #89
    Guru
    Join Date
    Apr 2008
    Location
    Sth Island. New Zealand.
    Posts
    4,980

    Default

    Quote Originally Posted by SBQ View Post
    Pension funds like KiwiSaver already have the ability to produce higher returns through leverage (on margin). But using KiwiSaver to invest into a new business or towards school study is entirely a different can of beans. The fact that more than 95% of small businesses fail within 5 years is a good reason why banks shy away from lending for business ventures. Likewise with schooling. If the person takes on a useless degree than where would that leave in terms of wise use of KiwiSaver funds (when it could be kept in the pension to have more growth?).
    Where did you get that 95% rate of business failure from, and what makes you believe it?

  10. #90
    Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    413

    Default

    Quote Originally Posted by fungus pudding View Post
    Where did you get that 95% rate of business failure from, and what makes you believe it?
    A figure way back in college taking a course on small business. Over 50% fail after 5 years. But add those existing businesses that started before also fail a different 5 year window time frame. For eg there's a huge portion of small businesses we see today in smaller towns have closed up - call it the invasion of The Warehouse and or 'online shopping', such shops that existed decades below have vanished ie. Dick Smith Electronics. Another way to look is in the past 50+ years, what % of those are still around today? This is why banks are very weary about lending $ to small businesses ; not just counting new startups but also existing businesses that get into cash flow problems.

  11. #91
    Advanced Member
    Join Date
    Aug 2012
    Posts
    2,278

    Default

    Quote Originally Posted by SBQ View Post
    Pension funds like KiwiSaver already have the ability to produce higher returns through leverage (on margin). But using KiwiSaver to invest into a new business or towards school study is entirely a different can of beans. The fact that more than 95% of small businesses fail within 5 years is a good reason why banks shy away from lending for business ventures. Likewise with schooling. If the person takes on a useless degree than where would that leave in terms of wise use of KiwiSaver funds (when it could be kept in the pension to have more growth?).
    Sure the KiwiSaver money released for further education may result in failure for the kiwsaver concerned. The money released for real estate purchase may result in further inflating th housing market or it may be used to buy an over priced problem house. My opinion is that Kiwisaver should only be used for retirement and not as a real estate deposit saving scheme.

    The government should introduce a second tax concessionary scheme to encourage saving with the ability to withdraw savings (with a write-back of tax concessions for withdrawals over a certain amount and within a set time period) prior to retirement.
    Last edited by Bjauck; 14-12-2019 at 09:33 AM.

  12. #92
    Dilettante
    Join Date
    Mar 2010
    Location
    Down & out
    Posts
    3,438

    Default

    Quote Originally Posted by artemis View Post
    Iceman's issue was to do with serviceability rather than security. Banks can have whatever rules they like, but I would have thought a dividend stream was at least as reliable as a household's employment income.
    My point exactly artemis. They accept employment income and rental income but ignore 100% of the dividend income. I showed them back 7 years that the dividend income was certainly no less reliable than rental income but "rules are rules". That is the ridiculous part. Then we are told to diversify our savings and investments but the whole system is geared towards housing artificially maintaining worryingly high prices. And our young first home buyers and families are the biggest sufferers of this stupid policy.

  13. #93
    Veteran novice
    Join Date
    Jun 2007
    Location
    , , .
    Posts
    7,240

    Default

    Quote Originally Posted by iceman View Post
    My point exactly artemis. They accept employment income and rental income but ignore 100% of the dividend income. I showed them back 7 years that the dividend income was certainly no less reliable than rental income but "rules are rules". That is the ridiculous part. Then we are told to diversify our savings and investments but the whole system is geared towards housing artificially maintaining worryingly high prices. And our young first home buyers and families are the biggest sufferers of this stupid policy.
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.

  14. #94
    Senior Member
    Join Date
    Dec 2001
    Location
    Wellington, , New Zealand.
    Posts
    1,157

    Default

    Quote Originally Posted by macduffy View Post
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.
    Too true. Banks mitigate some risk by using a higher than actual interest rate to calculate serviceability.

    However employment income takes a big hit when the household of two with two incomes becomes a household of three with one income. Certainly very common with first home buyers. They usually make it through the tough years, often with free government money, and into calmer waters.

  15. #95
    Member
    Join Date
    Nov 2018
    Location
    Christchurch
    Posts
    413

    Default

    Quote Originally Posted by Bjauck View Post
    Sure the KiwiSaver money released for further education may result in failure for the kiwsaver concerned. The money released for real estate purchase may result in further inflating th housing market or it may be used to buy an over priced problem house. My opinion is that Kiwisaver should only be used for retirement and not as a real estate deposit saving scheme.

    The government should introduce a second tax concessionary scheme to encourage saving with the ability to withdraw savings (with a write-back of tax concessions for withdrawals over a certain amount and within a set time period) prior to retirement.
    If you really want to curb the rising real estate prices.. just tax it. Don't allow those owning more than 1 house to sell (after holding for more than 5 years) where the gains are tax free. Those that have made gains in Kiwi Saver would be a fool not to use those funds to put into their 1st home. (ie transferring from 1 asset pool that is taxable vs the house asset that has tax free capital gain). This reminds me again, i've asked local financial advisors if they worked out the difference between owning a Kiwi Saver fund vs owning a house (where they can leverage). They always come back saying "that depends".

  16. #96
    Guru
    Join Date
    Apr 2008
    Location
    Sth Island. New Zealand.
    Posts
    4,980

    Default

    Quote Originally Posted by SBQ View Post
    If you really want to curb the rising real estate prices.. just tax it. Don't allow those owning more than 1 house to sell (after holding for more than 5 years) where the gains are tax free. Those that have made gains in Kiwi Saver would be a fool not to use those funds to put into their 1st home. (ie transferring from 1 asset pool that is taxable vs the house asset that has tax free capital gain). This reminds me again, i've asked local financial advisors if they worked out the difference between owning a Kiwi Saver fund vs owning a house (where they can leverage). They always come back saying "that depends".
    Why the one house limit? Either tax capital gains - or don't.

  17. #97
    Dilettante
    Join Date
    Mar 2010
    Location
    Down & out
    Posts
    3,438

    Default

    Quote Originally Posted by macduffy View Post
    Yes, employment income can fluctuate - and disappear - just as dividend income can. But if the worst happens the value of the equities usually disappears but the mortgage on the real estate remains.
    In the unlikely and very extreme event of a diversified share portfolio "disappearing", IŽd say our housing market would be in serious trouble also. Best for the banks not to lend anything, just in case the sky falls in !!!

  18. #98
    Senior Member
    Join Date
    Dec 2001
    Location
    Wellington, , New Zealand.
    Posts
    1,157

    Default

    Quote Originally Posted by fungus pudding View Post
    Why the one house limit? Either tax capital gains - or don't.
    'Special' treatment for rental owners is having an effect.

    Last few headlines from Trademe's monthly rental price report -

    Rental prices continue their surge toward summer
    Rents in the main centres warm up with summer on the horizon
    Demand soars for rentals across the country
    Tenants in Wellington paying $60 more per week in rent
    Rents rise countrywide
    Rents rocket in the region

  19. #99
    Guru
    Join Date
    Apr 2008
    Location
    Sth Island. New Zealand.
    Posts
    4,980

    Default

    Quote Originally Posted by artemis View Post
    'Special' treatment for rental owners is having an effect.

    Last few headlines from Trademe's monthly rental price report -

    Rental prices continue their surge toward summer
    Rents in the main centres warm up with summer on the horizon
    Demand soars for rentals across the country
    Tenants in Wellington paying $60 more per week in rent
    Rents rise countrywide
    Rents rocket in the region
    What is 'special' treatment?

  20. #100
    Senior Member
    Join Date
    Dec 2001
    Location
    Wellington, , New Zealand.
    Posts
    1,157

    Default

    Quote Originally Posted by fungus pudding View Post
    What is 'special' treatment?
    Bright line test, ring fencing of rental losses, removal of building depreciation for starters. None of those apply to other businesses, including commercial property.

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •