Final bullet into a dropping property bull?

[Hommel]

I fear that the way Bollard has played it - that is put up interest rates a couple of years too late - will now end up resulting in the feared "hard landing" scenario due to the huge increase in consumer debt over the last few years. I can see housing dropping at least 15% at some stage which will put many of those who have to sell "upside down" on their mortgages. The effect of this will ripple through the whole economy. I hope I am wrong about this....

[Halebop]

quote:Originally posted by tricha

Final bullet into a dropping property bull?

Yep, it has happened, they fired the ending bullet.

I can not understand it, sounds like the labour party are out to lose.

Immigration falling, this will plument it surely.

Housing will now plumment, thousands upon thousands of Young Kiwi's will be booked onto a plane to OZ.

Why, income, govt support, lower interest rates and juicy tax cut,its a no brainer.
Example come 1st July OZ tax on $6,000 nil, tax on the rest up to $30,000 something like 12%

The NZ Govt has a screw loose!

Think your confusing the labour government with the Reserve Bank, who have a mandate under the reserve bank act to ignore political considerations when governing monetary policy. Tax cuts would put upwards pressure on interest rates, not the other way around.

RBNZ tried to talk the market out of its speculative exuberance for 3+ years with absolutely no success. With that strategy failing, the only way to correct the situation (in the RBNZ ****nal) is a quick succession of interest rate rises to remind punters of concepts like cost of capital and sustainability.

The worst element is not the housing market. Housing (as housing, rather than an investment) is over valued and the cost of housing (billions of dollars in interest payments and bank profits to mostly foreign investors) don't add much value to the economy, despite evidence to the contrary like shiny Audis, VW Bettles and Mini Coopers scooting around town. The real cost is to the more productive sectors like agriculture, tourism and exporting thanks to a higher dollar. I think it's time to develop tools that target specific areas of concern:

Exchange Rate (Interest Rates?)

Domestic Consumption (Floating GST Rates? Sales / Luxury Taxes? Income Tax Rates?)

Housing (Interest Rate Levies? Review tax advantages for investors? Land Tax? Capital Gains Tax? Land Supply? RMA?)

Investment (R&D / Innovation? Accelerated Depreciation? Capital Gains Tax? Tax Shelters? Corporate Tax Rates?)

[JBmurc]

I'm certainly no expert analysts but from what I've seen over the last 3yrs the whole time the Reserve Bank being saying Save Save stop spending.
all the major banks have been screaming buy buy just the other day ANZ credit cards sent me a form to take all my credit dept on any other cards to them up to a max of 80% of the limit ($12,000) for the killer 6.9% interest rate for 6months [?] Or go to any Harvey Norman store No deposit No interest Pay nothing for 36 months

-As for the housing market it's been out of control for the last 5yrs+ if the government had brought in a Cap-Gain Tax on any short term sales say 5yrs with some exceptions I believe we'd been better off.

-I remember here in Queenstown couple yrs back there was a article in the local paper about a Yank that made over million tax free dollars in buying then reselling a section of land in under year
Never lived here ,I'm sure their's been hundred of these

[Halebop]

Gotta love how the mighty RBNZ pokes global bond markets in the eye too.

[Hommel]

Capital gains taxes and stamp duty on houses overseas has not stopped them having a huge property boom. I think the government should stop allowing "losses" on rental properties to be offset against other income - eg. salaries.

[JBmurc]

quote:Originally posted by Hommel

Capital gains taxes and stamp duty on houses overseas has not stopped them having a huge property boom. I think the government should stop allowing "losses" on rental properties to be offset against other income - eg. salaries.

-That law would certainly make me sell them sections quick[:0]

[Bel]

They did that in the US in 1986 which caused a massive plung in property prices.

[cantab]

quote:Originally posted by Hommel

Capital gains taxes and stamp duty on houses overseas has not stopped them having a huge property boom. I think the government should stop allowing "losses" on rental properties to be offset against other income - eg. salaries.

Good idea Hommel, they did just that some years back in Aust, investors dumped their properties and rents rose.

[cantab]

When Governments have a go at greedy landlords often it has the opposite affect. An example was when the government switched from market to income related rents. At the time the thinking was that this would cause private sector rentals to fall (claps and cheers)but the opposite actually occured. That was because there was no longer a need for 20 people to cram into a single state house. Everyone could now afford their own statehouse. Also the people with the state house no longer needed all the hanger-ons to help out with the rent because the rent was now very affordable. The consequence was that a lot of people got told to bugger off and had to rent from private sector landlords. Yep you guessed it, rents went up and we had to build more state houses.

The gummit is always coming up with good ideas.

[Halebop]

But Cantab it's interesting that arguments against tax subsidies on real estate trading losses indicate property values would drop and rents would rise (including your own). Surely this is market forces at work rather than "gummit" intervention? In other other commodity markets, prices (in this case rental yields) have to rise in order to stimulate supply. Why should this be different? With higher cash rates of return (rising rents & falling values) the argument for both property investment and owner-occupancy is clearer. Subdued rents and rising values does not send the right signal and instead smacks of speculation and tax driven investment rather than good business.