Who'd want to be a landlord now ?

[artemis]

... IRD in NZ is way too lenient in allowing the use of real estate as a way to escape tax when compared to other investment or business models.

There is no CGT in New Zealand, though there are situations where a capital gain is treated as income for tax purposes. The current government campaigned on a CGT, then set up a tax working group that (eventually) came to the CGT party. Next minute, the Prime Minister made a captain's call and canned it.

There were some exceptions to the proposed GST, like main home, small businesses sold to fund the owner's retirement, baches. The exceptions were not thought through and kept being added to or changed with voter feedback. It was heading for a big unpopular mess and a potential game changer for the government. So, gone.

[SBQ]

There is no CGT in New Zealand, though there are situations where a capital gain is treated as income for tax purposes. The current government campaigned on a CGT, then set up a tax working group that (eventually) came to the CGT party. Next minute, the Prime Minister made a captain's call and canned it.

There were some exceptions to the proposed GST, like main home, small businesses sold to fund the owner's retirement, baches. The exceptions were not thought through and kept being added to or changed with voter feedback. It was heading for a big unpopular mess and a potential game changer for the government. So, gone.

Yes i'm aware IRD will simply treat property gains as straight income gains whereas in Canada, the same situation would be the capital gain would be simply treated as capital gains tax (a different rate / criteria). My problem is in NZ, there is no clear distinction for those 'buying houses with the intent to make a profit.... but hold the property well after the 2 or 5 year brightline test' and therefore able to sell the house without IRD being aware of any knowing that rental income has been collected on the property. They've basically kept a complete blind eye on this area with no internal checks. For eg in Vancouver the city council compile records on how the property is used. ie. say if the person intends to rent a portion of the house out, then they require a rental license from the local city council ; for which the home owner has to declare on their insurance policy, for which the home owner has to apportion what % of the house is rented out to the CRA so when the time comes they sell the house, ONLY that % portion NOT used as rental is tax free on their principal residence (under the change of use of the principal residence act). Even leaving the house vacant, the City of Vancouver compiles that data and forwards it to the federal level.

Ms Ardern is a joke. Spent all this $ on an independent TWG - only to say no against their advice. Why was there a lack of communication between her Labour Party caucus and the TWG, WITH the NZ public? What came to her decision? What factors she did not like? The people voted her in to address housing affordability and she's failed miserably in this area. While countries like Canada have made great efforts to address affordability while at the same time, discouraging the incentive to use houses as a profiting tool. Because having grown up in Canada, only very few people i've come across make big $ from owning real estate; the vast majority have made their wealth on the sharemarket. But as i've said before in another thread, NZ's tax structure clearly discourages direct investment in foreign shares that fall under the FIF regime. Those living abroad wanting to reside in NZ would be hit with FIF on their overseas investments - yielding the only migrants that come to NZ are the poor ones that have no significant assets abroad.

[blackcap]

Yes i'm aware IRD will simply treat property gains as straight income gains whereas in Canada, the same situation would be the capital gain would be simply treated as capital gains tax (a different rate / criteria). My problem is in NZ, there is no clear distinction for those 'buying houses with the intent to make a profit.... but hold the property well after the 2 or 5 year brightline test' and therefore able to sell the house without IRD being aware of any knowing that rental income has been collected on the property. They've basically kept a complete blind eye on this area with no internal checks. For eg in Vancouver the city council compile records on how the property is used. ie. say if the person intends to rent a portion of the house out, then they require a rental license from the local city council ; for which the home owner has to declare on their insurance policy, for which the home owner has to apportion what % of the house is rented out to the CRA so when the time comes they sell the house, ONLY that % portion NOT used as rental is tax free on their principal residence (under the change of use of the principal residence act). Even leaving the house vacant, the City of Vancouver compiles that data and forwards it to the federal level.

Ms Ardern is a joke. Spent all this $ on an independent TWG - only to say no against their advice. Why was there a lack of communication between her Labour Party caucus and the TWG, WITH the NZ public? What came to her decision? What factors she did not like? The people voted her in to address housing affordability and she's failed miserably in this area. While countries like Canada have made great efforts to address affordability while at the same time, discouraging the incentive to use houses as a profiting tool. Because having grown up in Canada, only very few people i've come across make big $ from owning real estate; the vast majority have made their wealth on the sharemarket. But as i've said before in another thread, NZ's tax structure clearly discourages direct investment in foreign shares that fall under the FIF regime. Those living abroad wanting to reside in NZ would be hit with FIF on their overseas investments - yielding the only migrants that come to NZ are the poor ones that have no significant assets abroad.

Yet interestingly in NZ, there has never been a fund to invest in residential property. There are funds for commercial property. I asked Brian Gaynor a while back why this was. He said it has been tried in the past but it just does not work. There is no money to be made in residential property. (in other words its too hard). So I do not think there are profiting mechanisms with residential property. I manage three rentals that have appreciated in value the last 10 years, but if I go back and work out the return after all costs, I would be better off having put my money in the stock market. Once the growth in capital value that we have seen the last 10 years plateaus, it is going to be a season of discontent for those holding residential property.

[SBQ]

Yet interestingly in NZ, there has never been a fund to invest in residential property. There are funds for commercial property. I asked Brian Gaynor a while back why this was. He said it has been tried in the past but it just does not work. There is no money to be made in residential property. (in other words its too hard). So I do not think there are profiting mechanisms with residential property. I manage three rentals that have appreciated in value the last 10 years, but if I go back and work out the return after all costs, I would be better off having put my money in the stock market. Once the growth in capital value that we have seen the last 10 years plateaus, it is going to be a season of discontent for those holding residential property.

If you take your time frame longer, you'll find residential houses would perform better than shares. Of course subject to what houses or shares you buy - I would speak specifically houses in the Auckland market because i've seen many of my cousins that bought houses there shortly after 2000. The amount of windfall in gains is immense if they were to sell today. For the same period, you've had a dot come crash and a GFC.

Reason why no residential property funds? Because in the similar fashion with commercial properties ; the residential holding will be subjected to tax on the gains and rental incomes, for which the net result is little or no gain. HOWEVER, to the individual landlord.... that structures buying a bunch of residential properties over many years while collecting rental income, can sell over the long long term without paying a $1 in tax. As I mentioned before, no one considers taxation.. not even the manage funds in Kiwi Saver that addresses the taxation for investors. They talk about fancy annual returns over so many years but they're not net of taxes they pay and taxes that the individual has paid.

I seen the stock market crashes.... without a doubt, Auckland residential property has an advantage.

[iceman]

Yet interestingly in NZ, there has never been a fund to invest in residential property. There are funds for commercial property. I asked Brian Gaynor a while back why this was. He said it has been tried in the past but it just does not work. There is no money to be made in residential property. (in other words its too hard). So I do not think there are profiting mechanisms with residential property. I manage three rentals that have appreciated in value the last 10 years, but if I go back and work out the return after all costs, I would be better off having put my money in the stock market. Once the growth in capital value that we have seen the last 10 years plateaus, it is going to be a season of discontent for those holding residential property.

I agree blackcap. I do hold residential rental property as part of my portfolio and will continue to do so (unless this Government continues to make it harder) but it would be much easier and equally successful long term just to have it in shares.