NZ 1st homebuyers are ScReWeD...

[fungus pudding]

Only if capital gains (yes a more general CGT including owner occupied housing) are taxable. Otherwise I don't think it would be good for the country to make the tax system even more regressive than it already is.

It would reduce the income gap. e.g. to attract skill there's little point in offering another 5k a year when that is taxed at 39% - so more must be paid by the employer which indirectly means the employers' customers.

[Bjauck]

It would reduce the income gap. e.g. to attract skill there's little point in offering another 5k a year when that is taxed at 39% - so more must be paid by the employer which indirectly means the employers' customers.

Even better: Reduce the burden on income (reduce the income tax rate to zero as happened when the estate duty was reduced to zero), and place the burden on capital gains and wealth and away from services, goods, income and profit?

[Baa_Baa]

Even better: Reduce the burden on income (reduce the income tax rate to zero as happened when the estate duty was reduced to zero), and place the burden on capital gains and wealth and away from services, goods, income and profit?

How does this relate to first home buyers, or have you hijacked another thread with your incessant fixation on taxes?

[Bjauck]

How does this relate to first home buyers, or have you hijacked another thread with your incessant fixation on taxes?

My apologies for keeping you from commenting on this thread. Feel free to add a comment relevant to first home buyers being scr*d. Place me on your ignore list.

Sure I got sidetracked into whatiffery and flat tax. However I imagine you may acknowledge the relevance of tax environment on housing investors with respect to house prices and demand for housing and whether first homebuyers are being scr*d or not by being squeezed out?

A couple of links:

The tax battle: Property Investor vs. First-Home Buyer?


https://www.cooperaitken.co.nz/the-t...st-home-buyer/


While first home buyers will benefit from the new tax amendments, investors are doubly disadvantaged by the removal of interest deductibility for residential investment from 1 October 2021

https://www.saunders.co.nz/news/prop...y-tax-reforms/

“Berlin’s wall crumbled
We taxed savings, not houses Locking out the young.”
HOUSING, THE ‘GREAT INCOME TAX
EXPERIMENT’, & THE INTERGENERATIONAL
CONSEQUENCES OF THE LEASE
PDF link
https://www.motu.nz/assets/Documents...ve-Summary.pdf

[SBQ]

Sure - but these people bought the property and said they did not have the intent to become landlords. They were not accidental owners of the property.

Well i'm sure glad IRD requires at anytime when a house purchase is made, the solicitor is required to have the buyer fill out a 2 page form that is lodged into IRD. One of the key questions on the form asks, "What is the INTENT of buying this property?" and in the tick mark box there lies "For Investment Purposes" or "A principal residence".

We all know computers don't forget so maybe, just maybe, one day the NZ gov't can easily impose some rule to impose CGT on "Property Investment" category.

BTW, for as long as I lived in Canada, the term "accidental landlord" does not apply and CGT is applied to properties in a very close manner. Even the change of use on a portion of your house (ie renting the basement out) will change the tax free CG structure of a principal residence. Likewise in any inheritance, estate probate kicks in to ensure no unpaid taxes on the decease owner's properties does not slip through (deemed disposition applies at time of death).

[Bjauck]

Latest stats show House price increased 6.1% in just three months; 27.6% increase in the last year. It is a measure of how inflated the housing market has been that this slight decrease in the rate of increase is called "an easing" in the market. With other assets, that would be a fantastic increase in prices for existing owners. The NZ sharemarket is down about 5% in the past year...

https://www.stuff.co.nz/life-style/h...-is-easing--qv

[Bjauck]

Latest stats show House price increased 6.1% in just three months; 27.6% increase in the last year. It is a measure of how inflated the housing market has been that this slight decrease in the rate of increase is called "an easing" in the market. With other assets, that would be a fantastic increase in prices for existing owners. The NZ sharemarket is down about 5% in the past year...

https://www.stuff.co.nz/life-style/h...-is-easing--qv

A previous labour government introduced the fair dividend rate to tax (overseas) investments that had low income yields, but still had capital gains. An easier target for reform with fewer votes to lose?

[Logen Ninefingers]

US inflation now at 7.5%, increasing the pressure on the Fed to raise interest rates. The NZ property market is a sitting duck.

[SBQ]

A previous labour government introduced the fair dividend rate to tax (overseas) investments that had low income yields, but still had capital gains. An easier target for reform with fewer votes to lose?

House price rise? This is the same narrative for the past several decades in NZ. This morning on talk radio there was a person on RNZ talking about Finance and investing in the sharemarket. She had some words how the NZ FMA made it easier for people to invest in overseas shares through the many online portals (Hatch, Sharesies etc.). My thoughts were, what a complete bunch of BS. Her angle was the assumption that Kiwis find shares "complicated and confusing.." as she is trying to sell her book. I was disgusted. NOT A SINGLE word mentioned about the FIF taxation. Not a single word about why investment in NZ houses rarely pay any capital gains tax while the small investor (and there were calls on RNZ in this situation), when they invest into Kiwi Saver THAT INVESTS into overseas shares, have to pay tax on the annual paper gains. There is absolutely a loss in translation between how houses get the tax free benefit, while those trying to save for a house (by method of KS or by directly investing abroad), are hit with taxation on all their returns. You have financial advisors in NZ pride on saying "future compound returns", but never say that those compound returns are seriously eroded through FIF taxation.

It's a real shame how the investment community (in industry in NZ) has done a poor job in educating people both sides of the game (house vs owning shares) and instead, your average Kiwi assumes that owning share investments is 'confusing, complex, etc'. This is the thing i've brought about when attending past NZ Shareholders Assn meetings (pre covid). Financial investments in NZ is a downright fail, there are no afternoon TV talk on how to invest smarter, no talks about taxation, no talks about anything that is primarily relevant to investing for retirement. Because when I hear people say they got KS and think they are doing well, the sad story is they really are not. The neighbour down the road that buys his 4th or 5th home 2 years ago is always going to win.

[Logen Ninefingers]

In September 2014 the OCR was 3.5 and it stayed at that level until 11 June 2015 when it dropped by .25

From then on until 7 August 2019 it dropped steadily, and at that point was at 1.5
On 7 August 2019 it was cut by .50 and therefore was at 1 well before anyone had ever heard of COVID-19

Why did the Reserve Bank cut interest rates over this extended period of roughly 5 years? It can only have been as a response to economic weakness and flat-lining inflation. You only provide monetary stimulus if it is judged that the economy requires further monetary stimulus to remain above stall speed. So the cuts tell a very clear story.

We like to think that the New Zealand economy is fundamentally strong and that abnormally low interest rates are something that are a COVID-19 induced phenomenon. The truth of the matter is that interest rates were abnormally low before COVID-19 raised its head, and the New Zealand economy was sputtering along and required these historically low interest rates to continue to move forward at a level that was seen as acceptable to achieve inflation goals and full employment.

COVID-19 allowed for a further massive yet temporary sugar hit to mainline into the New Zealand economy. If we look at GDP growth and house prices - which seem to be the measures by which we judge economic success and health - then the sugar hit of a .75 cut to the OCR plus massive government spending has provided a veneer of health.....GDP and house price growth have been strong to say the least. But because GDP growth includes government spending and the activity in the housing market, we have found a way to trick the data into giving a false picture of economic health. Its like an athlete taking steroids and winning races, when we know that the steroids are a form of cheating and that they will do long term damage to the athelete in question.

We have pre-existing problems in the NZ economy that pre-date the appearance of COVID-19. We can kid ourselves that the economic framework is strong and healthy, yet the plain truth is that the economy was running on steroids prior to COVID-19 and then the pandemic just exacerbated existing bad trends and further entrenched them. We have become fundamentally over-reliant on government spending and house price growth to 'juice' our GDP figures. We look at some indictators and we think that the economy is healthy, and we may even think it is getting stronger. But look past what these indicators are showing and there is a frail substructure that existed prior to the pandemic & it will have only got weaker while we have gone through this latest 'sugar hit' phase.