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18-05-2015, 04:13 PM
#221
Originally Posted by winner69
but the guy is going to build a huge 8 bedroom (I think) mansion on this desirable site
Fact or making it up? He could probably fit on 3 townhouses which makes $600k look cheap for the land. Townhouse on 200sqm are going for $700k at Hobsonville.
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18-05-2015, 10:36 PM
#222
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19-05-2015, 08:56 AM
#223
I agree with Gareth Morgan's capital tax without exemptions. However it would be political suicide for whoever brought it in. You would need a cross-party agreement - maybe after a financial crisis...
Bubble territory or not, it is not satisfactory to see first home buyers being out-bid by foreign purchasers, who could then become absentee landlords to those potential first home buyers.
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23-05-2015, 08:30 PM
#224
We are seeing more and more traders in the Auckland housing market as it has become profitable business for those who have experience in the industry. We had bubble in the past as well. How many finance companies went under water? How about collapse of property market, crisis in banking and finance world in the past globally and in New Zealand? Do they think that this time is different? No it isn't different. Auckland market is one of the housing bubble markets in the world. It is pure speculation. Sooner we have some sort of solution it is better. Why only property business is free from tax? Any crisis in property sector will lead to banking and credit crisis.
It is sad to see first time home owners have to out-bid other speculators in the market. As unaffordable first home buyers have to pay bubble prices for houses, after property crisis there could be debt crisis as well when housing prices begin to fall in the coming years.
Last edited by Valuegrowth; 23-05-2015 at 08:35 PM.
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24-05-2015, 08:17 AM
#225
Originally Posted by MARKETWINNER
We are seeing more and more traders in the Auckland housing market as it has become profitable business for those who have experience in the industry. We had bubble in the past as well. How many finance companies went under water? How about collapse of property market, crisis in banking and finance world in the past globally and in New Zealand? Do they think that this time is different? No it isn't different. Auckland market is one of the housing bubble markets in the world. It is pure speculation. Sooner we have some sort of solution it is better. Why only property business is free from tax?
It isn't free from tax, and it is treated harsher than many other things for that tax as depreciation is not an accepted expense.
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25-05-2015, 08:27 AM
#226
Originally Posted by fungus pudding
It isn't free from tax, and it is treated harsher than many other things for that tax as depreciation is not an accepted expense.
The justification for many investors paying current Auckland prices is that they are buying in the expectation that the return from their investment will chiefly be from anticipated capital appreciation. Consequently they are prepared for their net taxable rent income (net of expenses and interest) to be minimal, non-existent or even negative.
Per $1000 investment in housing Landlords would end paying much less in tax than $1000 in shares or $1000 in bonds or fixed interest. So, despite the application of the same tax rules (depreciation* and recent budget notwithstanding), in reality, property investment enables the landlord's return to be relatively free of tax, compared with other investment types.
*Most residential buildings appreciate in value...so the depreciation would be recovered on sale anyway.
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25-05-2015, 08:46 AM
#227
Originally Posted by Bjauck
... Per $1000 investment in housing Landlords would end paying much less in tax than $1000 in shares ....
Not if it is capital gain.
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25-05-2015, 09:13 AM
#228
Originally Posted by artemis
Not if it is capital gain.
Exactly. I mainly invest long term in shares and my capital gain is tax free. No different to housing !
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25-05-2015, 12:37 PM
#229
Originally Posted by iceman
Exactly. I mainly invest long term in shares and my capital gain is tax free. No different to housing !
You can always find exceptions. It depends on the individual that's for certain..but I think the average individual investor in the average NZX company with average dividend yield, would have a tax burden far exceeding that of the average individual landlord with an average Auckland rental property.
What's more that investment in rental housing can be leveraged much more readily than the same value investment in shares. So if both real estate and equity markets increase by (say) 10% then with the easier leveraging, the real estate investment will produce greater untaxed capital return. That coupled with zero or negative net rent (by virtue of expenses and interest), will mean there is much less tax produced from the returns of that $1000 investment in rental housing in actuality - much less as a % of the returns.
I am not referring to traders but to long term investors in both rental housing and shares. The tax take from the return from the same value of equity in the average (Auckland) rental housing investment would be less than the tax take from the return an investment of the same value in an average portfolio of shares.
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25-05-2015, 05:53 PM
#230
According to Barfoot's, currently the Gross rent yield on the average Auckland property is 3.33%. Expenses are deductible from the gross rent. The dividend return on NZX 50 is about 5% (I am basing that on the NZX 50 Portfolio Fund). So even comparing cash investments in both rental property and shares, there would be more tax to pay on the income from an average investment in shares.
However in reality, rental housing investors are likely to borrow to fund a property purchase. An avenue much less likely for investors in shares. The mortgage interest being deductible from gross rent. With mortgage interest rates at about 5.5%. Even those investors who provide up to perhaps 50% of the purchase price using their own equity, could end up with sufficient mortgage interest (and other expenses) to reduced their net rent return to zero. They will end up with a minimal tax burden. These long term investors will be relying on capital appreciation to provide the return on their investments.
These are for average share investments and average properties. You can obviously find and invest in NZ shares that have no dividends and rental properties that furnish a higher than average rental return.
http://www.barfoot.co.nz/market-reports/2015/april/suburb-report
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