nz shares or property

[artemis]

Owners have the option of selling if it becomes unprofitable to let it. Because they can. And if enough landlords choose that option the rental prices will rise. Because they can.

Quite so. AKA the Golden Rule. The ones with the gold might not make the rules these days but they sure can make their own decisions.

[dobby41]

Yep - people have worked it out that gains on housing prices go tax free and the NZ gov't won't address housing inequality (affordability - or whatever people call it).

New rental rules means, newer houses will fetch for higher prices while old dumps will go un-tenantable or will incur costly renovations.

That's the way it should be in a working market.
Unfortunately the market doesn't work properly at the moment because there is a shortage of housing - old dumps are rentling for far more than they should.
They don't get upgraded to a decent standard voluntarily hence the new regulations.

[dobby41]

Gains may be tax free, and losses are not deductable.

not initially but they can accumulate.
If held long term they do eventually make a profit - mine did.

[dobby41]

So what happens next when rentals start reporting a rental loss that cannot be offset against other income so is being funded from tax paid income. Umm, it's the market working so options are considered by the asset owner. Because they can.

What happens?
The person wears the risk they took on.
Some take it on with rose tinted glasses and get caught out - tough!

[SBQ]

not initially but they can accumulate.
If held long term they do eventually make a profit - mine did.

A fair assumption is only a small handful get caught out on paying taxes on the capital gain. I've heard of some cases in Queenstown developments etc. But for the individual, only a fool or some uncertain circumstance will have IRD taxing the gains.

How else does the middle class move up and make retirement savings? Kiwi Saver won't do it because of the lack of leveraging. Yet there's so much advertising in KS giving the illusion that the working class is missing 'better?' investments by not having a KS when the fact is, it's owning their own home by using the bank's money, will provide the largest nest egg net of taxes.

[dobby41]

A fair assumption is only a small handful get caught out on paying taxes on the capital gain. I've heard of some cases in Queenstown developments etc. But for the individual, only a fool or some uncertain circumstance will have IRD taxing the gains.

How else does the middle class move up and make retirement savings? Kiwi Saver won't do it because of the lack of leveraging. Yet there's so much advertising in KS giving the illusion that the working class is missing 'better?' investments by not having a KS when the fact is, it's owning their own home by using the bank's money, will provide the largest nest egg net of taxes.

With an average KS balance of $17k (https://www.junokiwisaver.co.nz/you-...isaver-balance) they aren't going to get much house. (I know averages lie a lot and I wrote that just for effect.)
Owning their own home puts them into a good position for retirement (it is well known that your pension goes much further if you aren't paying rent) but it doesn't give most people a lot of cash to play with.
To make property really work you need a second (or 3rd, 4th etc) house to be able sell it and recover all the capital.
Property gives capital gain (leverage and free) and shares give good income (sell a bit of the capital to spend if you need to - you can't sell a bit of a house and rent return is very low).

[SBQ]

With an average KS balance of $17k (https://www.junokiwisaver.co.nz/you-...isaver-balance) they aren't going to get much house. (I know averages lie a lot and I wrote that just for effect.)
Owning their own home puts them into a good position for retirement (it is well known that your pension goes much further if you aren't paying rent) but it doesn't give most people a lot of cash to play with.
To make property really work you need a second (or 3rd, 4th etc) house to be able sell it and recover all the capital.
Property gives capital gain (leverage and free) and shares give good income (sell a bit of the capital to spend if you need to - you can't sell a bit of a house and rent return is very low).

From that junokiwisaver link:
Why aren’t people contributing?

Hartmann says the main reason people aren’t contributing is they’ve taken a break from contributing, called a 'savings suspension'.

Hartmann says a lot of the people not contributing are self-employed, because it requires a bit more effort to manage contributions to your KiwiSaver account when you work for yourself.

The minimum in KS is 3% of one's income annual income which doesn't get you much despite employer matching of 3% (and in most cases, 3% is all that employers are willing to contribute if the employee wants to contribute more like 8% or more). Where I grew up in Canada, contributions can go up to 18% of one's income and many businesses do give the full matching to get the full tax deduction. However in NZ's case, the 3% is ineffective for those that want to max their mortgage. I mean the emphasis should not be KS 1st but rather, it should be get into your own home first. I recall reading 1 advisor saying "Get the MOST expensive house you can afford before you consider KS". The reasoning is you don't use KS for income - because that's what your day job is for and if income is an issue at retirement age (when NZ pension isn't enough), then what I see with seniors in retirement is they 'downsize' their home to unlock their equity. But of those that own a 2nd or 3rd home into retirement, well they're doing exceptionally well and i'm afraid no amount of contribution to KS will match that.

And after all if KS was such a great investment then the banks would be encouraging it instead of lending on houses.

As for the lack of participation by 'self employed' people in KS. Their answer is far from my experience. The business owners I deal with don't dabble in KS but instead, deal in buying houses. But don't ask me, why doesn't JunoKS go ask any bank manager this question? The banks have all this data and know what their clients are doing.

All in all i'm not impressed with NZ's marketing around around KS because I do believe they're only telling half the story. They make no mention of taxation comparisons, they make no mention of risk assessments, and as Warren Buffet touts, "all the incentive is for the financial advisers to tell people they need to be in some managed fund (so they can collect mgt fees and the NZ gov't / IRD collects all their taxes EVERY year), but they will never tell you to just sit on your rear end and buy an index ETF or the S&P500" - or in NZ's case, buying a house. In Jacinda Ardern's case, I was most disappointed when 3+ years ago she proposed NZ to have a "more fair & equitable tax system". Wasted all that money on a 'tax working group' when they recommended some sort of tax on NZ residential properties ; to only say NO after the TWG announcement. I recall Ardern saying "I will not pursue CGT for as long as i'm in politics"

and we wonder why houses are not affordable in NZ? Why Kiwi Build has been a disaster? Is this the NZ Kiwi ingenuity ? We can fix environmental problems but not 'real' problems like housing affordability.

[Bjauck]

...
And after all if KS was such a great investment then the banks would be encouraging it instead of lending on houses.
..

Kiwisaver is the poor person's retirement scheme with few crumbs of enticement. Even then it can be used as a boost for raising a deposit to try to get into NZ's richer person's pension scheme (residential real estate). Certainly For those that can afford it, the scheme with historically less tax per $ return (income plus capital) is leveraged residential housing - owner-occupied housing followed by investor housing.

[stoploss]

Kiwisaver is the poor person's retirement scheme with few crumbs of enticement. Even then it can be used as a boost for raising a deposit to try to get into NZ's richer person's pension scheme (residential real estate). Certainly For those that can afford it, the scheme with historically less tax per $ return (income plus capital) is leveraged residential housing - owner-occupied housing followed by investor housing.

Not too sure what SBQ means when he says "if KiwiSaver was such a great investment the banks would be encouraging it " The largest 3 KiwiSaver providers by funds under management are ANZ $16.4 Bio,ASB $ 12.5 Bio,WBC $ 8 Bio, they get plenty of fees .....https://www.fma.govt.nz/news-and-res...isaver-report/
So they are all over it .........

[SBQ]

Not too sure what SBQ means when he says "if KiwiSaver was such a great investment the banks would be encouraging it " The largest 3 KiwiSaver providers by funds under management are ANZ $16.4 Bio,ASB $ 12.5 Bio,WBC $ 8 Bio, they get plenty of fees .....https://www.fma.govt.nz/news-and-res...isaver-report/
So they are all over it .........

The banks are not going to lend you $1M to buy shares in a managed KS fund. But go show them a house valued at $1M and the door is wide open. Specifically a mortgage rate at 2% with no deposit.

Banks today aren't in the game for taking high risks. They only want the for sure deal knowing houses always go up in prices. But that's not the way KS has been marketed. The middle class workers are thrown into this investment scheme without asking some real basic questions. A) What are the tax outcomes? and B) Who are the other players benefiting in this scheme?

Sorry i'm being too critical about this because where I grew up in Canada, their gov't has shifted the balance of the scale towards the lower income and middle class in terms of investments. They don't bribe them like NZ does with a $520 credit. They start with a heavy taxation limit and remove them; such as Disability Savings Funds, Education Savings Funds - for those groups of people that are disadvantaged, will get the tax free benefit. Anotherwords the complete opposite of what NZ is doing.