Which way will the property market go now?

[stoploss]

If I make an investment in starting a small business, and it has long term assets and equipment that depreciate to a salvage value. When I plan to close up the business, these assets are taxed. Accounts receivables & cost adjusted inventory is also taxed at winding up the business. Then tell me why is it a rental property house after 5 or 15 years is sold without paying tax on the capital gain?


What is radical is the difference in capital required to buy a home. The individual or couple looking to buy their 1st home only has so much capital (earning ability). But to the landlord that has a much larger asset backing + cash flow, can easily pay MORE for the house in question. Capital is not free, it's strongly discriminated where the banks prefer to lend to less risky investors with high incomes and strong collateral backing. Basically the NZ housing market has turned into a meme stock investment portfolio and the losers are those that can get in and, if they do, they will pay dearly on long term 30+ year mortgages. Something that the Labour Party can do is implement what Canada has done for 1st time home buyers. Since the NZ banks have changed to a 40% LVR deposit - make an exemption for 1st home buyers of only requiring 5% deposit. For as long as I can remember since late 80s, Cdn gov'ts has forced banks to comply with this 5% deposit regardless of times during the economy.

Building new houses? Sounds like a business venture if the intent is to sell for a profit. But don't make it sound so bad, the Brightline test on new builds is still only 5 years. So one can invest into building new and hold them for 5+ years and sell for the tax free capital gain ; a move where most OECD countries won't allow regardless how long you hold them.

SBQ ,5 % deposits are available .
https://kaingaora.govt.nz/home-ownership/

Furthermore the banks are allowed to lend with less deposit than the RBNZ mandated LVR for a % of their lending. They generally allocate this to first home buyers.....
See the announcement here https://www.rbnz.govt.nz/news/2021/0...r-restrictions

The biggest problem the banks face with their customers wanting to borrow 95 or 90 % of the purchase price is them servicing the 95 or 90 % lending ....
Doesn't matter if you have a heap of assets- if you can't show you can service the debt (also at much higher test rates) from your income under "The Responsible lending code " they will decline.
https://www.mbie.govt.nz/dmsdocument...-december-2020

[SBQ]

SBQ ,5 % deposits are available .
https://kaingaora.govt.nz/home-ownership/

Furthermore the banks are allowed to lend with less deposit than the RBNZ mandated LVR for a % of their lending. They generally allocate this to first home buyers.....
See the announcement here https://www.rbnz.govt.nz/news/2021/0...r-restrictions

The biggest problem the banks face with their customers wanting to borrow 95 or 90 % of the purchase price is them servicing the 95 or 90 % lending ....
Doesn't matter if you have a heap of assets- if you can't show you can service the debt (also at much higher test rates) from your income under "The Responsible lending code " they will decline.
https://www.mbie.govt.nz/dmsdocument...-december-2020

That's great to know NZ has 5% mortgages for 1st Time home owners but I do read from their link there's quite a huge criteria and, " First Home Loans are issued by selected banks, building societies, and credit unions, and underwritten by us, Kāinga Ora – Homes and Communities." In Canada it's gov't mandated and banks there can not discriminate by not accepting the 5% deposit rule. In recent times, their gov't insurer entity CHMC has taken on more a direct approach by 'backstopping' and 'buying' off these mortgages directly with the retail banks (so it frees up retail bank's balance sheet removing some of the risk). The maximum amount to mortgage under their scheme is $1M and a mortgage period of no more than 25 years.

I can understand the seriousness when Jacinda made her speech last week. NZ can not afford a housing collapse because our economy is too tied and undiversified to handle such an event. It's a lot different to in the US when the GFC hit, their economy was large enough to handle through the recessions (because their wealth of the country, unlike NZ, it not only based on houses at the top of the food chain).

Unregulated banks will prey on anything that moves so the Responsible Lending Code are only guild lines. I say this as Jacinda pointed out last week that the banks in NZ didn't play ball and allowed housing prices to escalate long term. Moral Suasion only goes so far and as i've seen in NZ, it seems the Reserve Bank doesn't keep a good eye on retail banking behaviour.

There's many aspects that the banks look at when lending, however I agree that 'how to service the loan' is the top priority. It is not a surprise banks are far more willing to lend on houses than to lend on a business venture. If not owner occupied home, the banks know the house can be rented out which produces an income ; something that a business plan can not guarantee when you go for a business loan. Nevertheless, the banks in NZ aren't at fault. It's more rather socially systemic that in NZ, most people get rich at retirement through ownership of multiple houses (which has limited productivity). When you mention shares ownership of reputable companies around the world, they are clueless and say it's a scam, despite that's how the majority of the rich I see in N. America earn their wealth.