Auckland housing market

[GTM 3442]

Ever since the great influx of American silver to Europe in the 16th century, it's been generally understood that increasing the amount of money in circulation leads to a rise in prices.

The corollary is that decreasing the supply of something, while demand stays static or rises leads to a rise in prices.

The price of housing in Auckland is rising. So is it more money chasing the same number of houses, or is it not enough houses to cater for the demand?

If the first, then the Reserve Bank and the Treasury are stuffed to the gills with bright, well-paid economists who I am sure will have no trouble in sorting things out.

If the second, then increasing the number of houses seems a logical step.

But as for the "Auckland Housing Market", surely there's more than one "Auckland Housing Market"?

I should imagine that there :
People who want to buy a house to live in. (kiwisavers?)

And that there are people who want to buy a cheap house which they can do up and then sell (capital gain).

And that there are people who want to buy a house to rent out for the income stream (dividends).

And that there are people who want to buy a house to store value (gold).

So which part (or parts) of the "Auckland Housing Market" is/are actually "broken"?

[Bjauck]

I should imagine that there :
People who want to buy a house to live in. (kiwisavers?)

And that there are people who want to buy a cheap house which they can do up and then sell (capital gain).

And that there are people who want to buy a house to rent out for the income stream (dividends).

And that there are people who want to buy a house to store value (gold).

So which part (or parts) of the "Auckland Housing Market" is/are actually "broken"?

I don't think "the market" is broken. I do think that the Auckland market is affected by "broken" parts of the NZ financial system and circumstances which put increasing buyer demand on the market.

1. As per the previous discussion. There needs to be an overhaul of taxation on capital gains. We have a piecemeal approach at the moment with non-traders incurring taxation on the capital profits on some investments but not others. This then creates a tax bias in favour of other investments, including housing, that are free of any tax on capital gains. Also, maybe the law surrounding the taxation of capital profits on any asset bought with the intent of capital gain needs to be tightened.

2. Rental housing has been been the investment of choice by many because (a) after the 1987 crash in NZ, the stock market was seen as unregulated and too risky (b) in addition leverage by borrowing is readily available and (c) the memory of the Finance Companies collapse scared many away from fixed interest investments.

3. Housing, both rental and owner-occupied, has been used to store value because (a) There was no pension scheme with tax concessions or credits until Kiwisaver came along. With its advantages, real estate investment filled the void and became the default pension scheme for so many (b) In recessions, housing has been less volatile than shares and finance companies.

In addition, Auckland is the preferred destination for newcomers and there is unregulated overseas-based access to NZ residential housing.

[winner69]

Bring in a CGT as soon as possible. When property prices collapse plenty of tax deductions to soften the blow

[Bjauck]

This advert in Singapore recognises a good investment with little tax burden for an overseas investor, when it sees it! What's more...you get get Kiwis, desperate for a roof over their heads (and outpriced in their own home market), who will pay you half their income.

"The advert, aired amid '60s classic hits on Singaporean radio station 90.5 Gold, sells Auckland as "an investors' dream" with no land tax, stamp duty or capital gains tax."
http://www.nzherald.co.nz/nz/news/ar...ectid=11436779

John Key seems to like to play with a pony but won't address the elephant in the room!

[skid]

If you buy a house to do up and rent for a year (or three or five) you are considered an investor (trader) and you are taxed on the gains because the taxman considers that speculating--just like holding shares short term (trading)--If you bought and held you Apple shares for long term and sell for a substantial profit ,you are not taxed on the capital gain as far as i know--short term -yes(just like housing)
I believe they should legislate to stop (or make it very expensive)to buy for foreigners who are not residents,but the normal Kiwi family home is going to be a stretch.
In terms of investment properties--i believe those who have not done it, maybe dont realize what is involved--alot have tried it and given up.
You dont just get on your computer and check to see how much your investment has gone up (or down)-like shares.
Maintenance costs can be a killer-finding and keeping tenants can be hard--actually anything involving people (tenants) well..dont even get me started.
The tenancy laws are heavily weighted in favor of the tenant--those with the wrong intentions can easily do you out of a substantial amount of dosh.
Its a relatively illiquid asset that has the potential to lose alot of value(It happened in the States and it can happen here)
Im not complaining but on the other hand its not all easy sailing.
You have some points,but are also missing some

[Bjauck]

If you buy a house to do up and rent for a year (or three or five) you are considered an investor (trader) and you are taxed on the gains because the taxman considers that speculating--just like holding shares short term (trading)--If you bought and held you Apple shares for long term and sell for a substantial profit ,you are not taxed on the capital gain as far as i know--short term -yes(just like housing)
I believe they should legislate to stop (or make it very expensive)to buy for foreigners who are not residents,but the normal Kiwi family home is going to be a stretch.
In terms of investment properties--i believe those who have not done it, maybe dont realize what is involved--alot have tried it and given up.
You dont just get on your computer and check to see how much your investment has gone up (or down)-like shares.
Maintenance costs can be a killer-finding and keeping tenants can be hard--actually anything involving people (tenants) well..dont even get me started.
The tenancy laws are heavily weighted in favor of the tenant--those with the wrong intentions can easily do you out of a substantial amount of dosh.
Its a relatively illiquid asset that has the potential to lose alot of value(It happened in the States and it can happen here)
Im not complaining but on the other hand its not all easy sailing.
You have some points,but are also missing some

Apple Shares - If you are a long term investor - not a trader _and your total foreign FIF investments are over $50,000 and your shares go up by at least 5% in a year, then you are deemed to earn 5% as taxable income even if the actual dividend is 1%. So you may be liable to pay tax on an unrealised capital gain. DYOR.

On average, share prices can fluctuate more wildly than real estate. In NZ the 2008 credit crunch saw a much greater drop in share prices than residential homes. Savings were wiped out in the finance companies collapses. It is not as cheap or easy to use borrowings to leverage up your equity in shares as it is with bricks and mortar housing. For a fee, you can get an agency who will look after the maintenance and letting of your rental property. Just as, for a fee, you can get your share portfolio managed. Tenancy protection laws are more rigorous in many other developed countries. Each investment class has its pros and cons.

[baller18]

regardless with all the CGT and blah blah blah.
House prices of NZ has been long in an uptrend ever since yonky years.....

[skid]

Dont get me started on Property Managers --but your right there are pros and cons

In terms of Apple --not talking about taxable income--Im referring to Capital gain if you sell--Landlords pay tax on rent received in terms of income (dividends)

If captial gains are introduced, then there of course is some other cans of worms--The most level headed approach seems to me to be to value the home at the time the law comes into affect and go from there(and then if the value of your home goes down and you sell,can it be deducted from your normal income ?

[skid]

regardless with all the CGT and blah blah blah.
House prices of NZ has been long in an uptrend ever since yonky years.....

And research has shown that a CGT does nothing to stop that

[artemis]

If you buy a house to do up and rent for a year (or three or five) you are considered an investor (trader) and you are taxed on the gains because the taxman considers that speculating--just like holding shares short term (trading)--.....

Not necessarily. The tests are intention at time of purchase and any pattern which indicates trading. Same as shares. I record my intention at the time of purchase. With property an email to the lawyer at the time setting out the intention including expected timeframe to become profitable. With shares I email myself the contract note with a description of intention, which includes my views on income from dividends current or future.

Have never been audited so can't tell how IRD will interpret intention. But what I do is at least something.