NZ 1st homebuyers are ScReWeD...

[SBQ]

A crazy situation brought about by central banks and governments. The disease of QE and ultra-low interest rates started in the US with the Fed after the GFC, and we’ve just followed them as all nations must do since the USD is the global reserve currency. And now all the chickens are coming home to roost.

The massive QE and low interest rates did not matter to countries who's tax policies and gov't budgets were more in aligned with each other. Just look at how much McMansions cost in America or in Australia; they're significantly a lot less than NZ houses. That tells me the differences must lie in how different NZ treated houses as an investment (the absence of CGT, the Wall Street style of turning NZ houses into a gambling parlour, etc). Anotherwords the rise in interest rates abroad won't be as so pronounced as the rise in interest rates in NZ because people here spend more $ in owning houses (as a portion of their disposable income).

[Bjauck]

A crazy situation brought about by central banks and governments. The disease of QE and ultra-low interest rates started in the US with the Fed after the GFC, and we’ve just followed them as all nations must do since the USD is the global reserve currency. And now all the chickens are coming home to roost.

NZ interest rates followed international rates. However as SBQ put well, our other policies did not follow international norms, helping to create the investment imbalance weighted towards substantially unchecked residential property/inflated land prices.

[JBmurc]

The massive QE and low interest rates did not matter to countries who's tax policies and gov't budgets were more in aligned with each other. Just look at how much McMansions cost in America or in Australia; they're significantly a lot less than NZ houses. That tells me the differences must lie in how different NZ treated houses as an investment (the absence of CGT, the Wall Street style of turning NZ houses into a gambling parlour, etc). Anotherwords the rise in interest rates abroad won't be as so pronounced as the rise in interest rates in NZ because people here spend more $ in owning houses (as a portion of their disposable income).

A good reason why homes are cheaper in the likes of Aus and US is much cheaper build costs .. NZ like it is for most things is very expensive Vs average incomes

[Sideshow Bob]

A period of rapid house price increases coming.......

Tony Alexander predicts - Landlords.co.nz

[SBQ]

Meanwhile across the ocean, NY Times reports house prices are still crashing in NZ:

https://www.nytimes.com/2023/06/19/b...ng-prices.html

[Logen Ninefingers]

So far this latest data has not been reported in The New Zealand OneRoof Herald (=OneRoof); it directly contradicts what their main property spruiker Tony Alexander has been saying.

—————

https://i.stuff.co.nz/business/13247...gic-data-shows

‘The rate of house prices falls almost doubled in June compared to the month before, CoreLogic data shows.

The property data firm’s House Price Index (HPI) showed June was the third month in a row that house price falls gained momentum, with prices falling an average 0.7% in May, 0.6% in April and then 1.2% in June.

The findings may call into question growing claims that the housing market had reached the bottom.’

[RTM]

https://seekingalpha.com/article/462...estate-monster

Sounds like its more countries than NZ that have screwed up the housing equation.

SQB....if you stumble on this thread...

"I think there are a few reasons why residential real estate has risen so dramatically in price here. Capital gains on residential real estate are exempt from tax. Thus, I think it’s been seen as a great way for a non-business owner to accumulate capital. "

Sound familiar ?

[SBQ]

https://seekingalpha.com/article/462...estate-monster

Sounds like its more countries than NZ that have screwed up the housing equation.

SQB....if you stumble on this thread...

"I think there are a few reasons why residential real estate has risen so dramatically in price here. Capital gains on residential real estate are exempt from tax. Thus, I think it’s been seen as a great way for a non-business owner to accumulate capital. "

Sound familiar ?

In Canada exemption from CGT only, and ONLY applies if the residential dwelling is owned as a "principal residence'. There is no silly 'Bright Line Test' that we have in NZ on multiple ownership of houses. But the article makes no mention of the NZ residential market because in the past i've posted this before:

https://i.imgur.com/4GMUvHT.jpg

There's high housing prices in Canada... and then there's silly stupid, out of this world, high housing prices in New Zealand where it's many multiples of disposable income. Look closely at the chart and you will see Canadian house prices are really not that different to other OECD nations. But somehow the NZ line is excessively high at the top. I do not see this changing much as the vast majority of NZ's wealth by individuals, is locked into owning real estate.

Then there's an issue of banking quality that the article mentions, but unlike NZ, banks in Canada are regulated differently and have strong stress testing measures. When there's an alarm, then you get articles like this to warn share holders and the gov'ts in a case of insolvency. However, Canada does not have much of a record of bank bankruptcies like you see in the US, all due to strict gov't regulations and limits to how they and issue mortgages (along with restrictions on how foreign banks can conduct business in Canada vs NZ most of our banks here are foreign owned). You have mandatory CDIC deposit insurance in Canada, while there's none in NZ.

I'll repeat again, it's often healthy to have losses by those to leverage too much. But in NZ, there's a different kind of leverage as the banks here know that NZ houses don't collapse like they do in America. The continual, gradual, rising of NZ houses only makes the top 1% attain more wealth, while the general population OVERALL ; ends up OVER paying for a house. By all means, please look over in Canada and compare. In a new suburb big city, what a $2M house in Auckland say North Shore buys you compared to say the same $2M house in Surrey Vancouver. Not only the Canadian house is 1.5 - 2 times LARGER, but the streets are wider, more parking spots, safer against children riding their bicycles up and down the street, more efficient urban planning by use of alley ways (for future 'Lane House - 2nd dwelling' development). But the minute a person looks to buy their 2nd house as an investment, well i'm afraid the tax book is thrown at you. If you're rich and wealthy, your vacation home in Vancouver will be slapped with a Vacancy Tax. If you're a non-resident buying a house in Canada, how about a 20% tax on the purchase price? (psst. that's $400,000 you pay on a $2M home). The non-resident person buying NZ houses does not see any of these taxes, in fact, NONE at all. But it does not have to be this way ; yet none of the NZ political parties have the guts to balance our housing problem with CGT.

Another thing. Unlike NZ, in Canada you can get a 15 or 20 year mortgage LOCKED in FIXED rate. This means for many if they mortgaged 2 or 3 years ago, they could be leap frogging the recent high mortgage rates we see today.

[Aaron]

I know it is the USA but NZ is following a similar path with financialisaton and govt protection of asset prices. The author also probably just picks data that confirms his thesis. I found it interesting, not much discussion from any political party about this sort of stuff, in the election debates. I guess as it is great news for boomers so like national super, the real causes of house price rises must not be discussed. National in fact going to do well this election ramping up the speculation in houses. Seems to confirm my thesis about NZ and these elections.

Just a bit sad for the younger generation without parental support.

https://www.zerohedge.com/personal-f...ciety-unravels

[Azz]

In Canada exemption from CGT only, and ONLY applies if the residential dwelling is owned as a "principal residence'. There is no silly 'Bright Line Test' that we have in NZ on multiple ownership of houses. But the article makes no mention of the NZ residential market because in the past i've posted this before:

https://i.imgur.com/4GMUvHT.jpg

There's high housing prices in Canada... and then there's silly stupid, out of this world, high housing prices in New Zealand where it's many multiples of disposable income. Look closely at the chart and you will see Canadian house prices are really not that different to other OECD nations. But somehow the NZ line is excessively high at the top. I do not see this changing much as the vast majority of NZ's wealth by individuals, is locked into owning real estate.

Then there's an issue of banking quality that the article mentions, but unlike NZ, banks in Canada are regulated differently and have strong stress testing measures. When there's an alarm, then you get articles like this to warn share holders and the gov'ts in a case of insolvency. However, Canada does not have much of a record of bank bankruptcies like you see in the US, all due to strict gov't regulations and limits to how they and issue mortgages (along with restrictions on how foreign banks can conduct business in Canada vs NZ most of our banks here are foreign owned). You have mandatory CDIC deposit insurance in Canada, while there's none in NZ.

I'll repeat again, it's often healthy to have losses by those to leverage too much. But in NZ, there's a different kind of leverage as the banks here know that NZ houses don't collapse like they do in America. The continual, gradual, rising of NZ houses only makes the top 1% attain more wealth, while the general population OVERALL ; ends up OVER paying for a house. By all means, please look over in Canada and compare. In a new suburb big city, what a $2M house in Auckland say North Shore buys you compared to say the same $2M house in Surrey Vancouver. Not only the Canadian house is 1.5 - 2 times LARGER, but the streets are wider, more parking spots, safer against children riding their bicycles up and down the street, more efficient urban planning by use of alley ways (for future 'Lane House - 2nd dwelling' development). But the minute a person looks to buy their 2nd house as an investment, well i'm afraid the tax book is thrown at you. If you're rich and wealthy, your vacation home in Vancouver will be slapped with a Vacancy Tax. If you're a non-resident buying a house in Canada, how about a 20% tax on the purchase price? (psst. that's $400,000 you pay on a $2M home). The non-resident person buying NZ houses does not see any of these taxes, in fact, NONE at all. But it does not have to be this way ; yet none of the NZ political parties have the guts to balance our housing problem with CGT.

Another thing. Unlike NZ, in Canada you can get a 15 or 20 year mortgage LOCKED in FIXED rate. This means for many if they mortgaged 2 or 3 years ago, they could be leap frogging the recent high mortgage rates we see today.

How will taxing the sale of housing make it cheaper?