Regarding NZers' ongoing infatuation with housing, Brian Gaynor's latest is a must read.

"According to the net capital stock figures in the national accounts, which give a rough estimate of how our field is populated in terms of asset values, residential housing now takes up 49 per cent of our space compared with 46 per cent in 2002, 41 per cent in 1992, 37 per cent in 1982 and 35 per cent in 1972."

Gaynor blames our poorly regulated environment for investments, history such as the 1987 crash & recent finance company debacles, and the housing-friendly tax regime.

On the equities side, he comments "Australians' investment in domestic equities has increased from A$569 billion to $752 billion. New Zealanders' investment in domestic equities has shrunk from $23 billion to just $18 billion."

Are you listening, John & Bill?

http://www.nzherald.co.nz/business/news/article.cfm?c_id=1501241&objecti...

28_yr_old said: Is there any stats that breaks down who the sales are going to?

Nope - only anecdotal feedback from agents

Despite the media hype "values" are still down on 2007 levels, even if some are increasing.

Philly: that piece by Gaynor was excellent.
"...blames our poorly regulated environment for investments, history such as the 1987 crash & recent finance company debacles, and the housing-friendly tax regime.."

I for one will NEVER invest in New Zealands shonky share market or managed funds because of the failure of regulating bodies to regulate, and the mass manipulation that goes on in such small markets.

That only leaves property as a viable option that I have some control over, which is no doubt the same view that many baby boomers have come to & no amount of messing about with tax regimes will change that.

BTW i do disagree with the assertion that property investment has any different tax advantages than investing in your own business. No-one has yet shown any tax advantages that investing in property has that do not also apply if i invested in my own small business, so all this talk of singeling out property investment is active tax discrimination and there is no doubt that it will have exactly the opposite effect of the intention to "kill" the property market.

""¦.though a couple are buying a rental for their children and grandchild to live in"¦.The same young ppl who lived it up, didnt save and their baby boomer parents are sick of them budging off them."
Very asstute Steps, there's probably a lot in that, since a property in the family is still seen as an investment for the future, regardless of whether it is rented or not.
After all, it is most likely that these kids were the beneficiaries that the Boomers had in mind when looking at building their assets, moreso than for retirement income.

Is this the data the Bernard Hickey based his 30% drop on (November 2007 - 2009.) Can we get a confirmation on how much the actual drop was for this period.

@ Keith
"BTW i do disagree with the assertion that property investment has any different tax advantages than investing in your own business. No-one has yet shown any tax advantages that investing in property has that do not also apply if i invested in my own small business, so all this talk of singeling out property investment is active tax discrimination and there is no doubt that it will have exactly the opposite effect of the intention to "kill" the property market."

Yes, property is not treated any differently tax wise, the real difference is that there is an underlying demand for people to live somewhere that underpins the market. You do not get with other 'investments' such as businesses, shares etc.

For that reason in itself housing cries out for a different tax treatment, but I guess as an investor who bases their 'investment' decisions on discounted cashflows you will not see this.

People, especially those on this website, are not out to kill the property market just trying to stop our investment decisions being so lopsided and unbalancing the economy. 50% of the playing field attributed to housing is very wrong and the reason why we are on our way down and off the OECD ladder, currently 22 out of 30.
We only have countries like Mexico, Turkey and ex-eastern bloc countries below us now.
Does this not worry you?

to answer the question at the top:

- vendors who can hold will hold because they perceive that values will rise
- economic uncertainty: people who sell their own house usually trade up, but with a good deal of economic uncertainty still around this approach carries risk. Better to stay put at the moment
- lack of demand: prices are still unsustainably high
- fewer people emmigrating

Comment on yours 12.50pm, MattinAuck:

People I associate with, that are selling, are trading down! A need for the cash savings tied up in too larger properties. Makes sense that in that situation less sales=higher median. ie: Selling quite a bit above, and buying not at the bottm of the median.
Time to buy big=when the market is rising; to buy small=when it's falling. "The Pendulum Effect"

George:
clearly you have misunderstood or been deliberately mislead about the Tax laws
"(paying no tax or infact getting money from tax payers to fund there operations)"

Property investors DO NOT get money from tax payers, they only get refunded tax that they have paid !!!!
If you haven't paid it - you don't get it - unlike beneficiaries incl WFF who ARE getting money from the taxpayer, (which BTW most property investors are also tax payers since as you point out, if you permanently run at a CASH LOSS the business (property or commercial) will not be around for long regardless of any capital gain.)

Andy M
Its a chicken & egg situation
"trying to stop our investment decisions being so lopsided and unbalancing the economy. 50% of the playing field attributed to housing is very wrong and the reason why we are on our way down and off the OECD ladder, currently 22 out of 30.
We only have countries like Mexico, Turkey and ex-eastern bloc countries below us now.
Does this not worry you?"

yes it does worry me, but I don't say that we are at the bottom of the OECD because we invest such large proportion in houses,
I say we are at the bottom because
we do not make a business friendly economy
that provides for safe and secure investment into viable business,
with proper protection for investors,
and funding for the business, (that is not secured by property)
and makes it easy to hire staff
and that doesn't make it impossible to get rid of incompetent staff who are a drain on the business, not adding value to it,
and that doesn't put so many compliance costs on the small business owner that are actually collections for the government
and that doesn't put so much red tape into doing simple tasks that should be beyond council or government meddling

Hence we invest in the only viable asset - Property !!!!

Get rid of business inhibitors & i & many others would gladly invest in viable business - (but not through our dodgy share market.) which is what must happen for us to rise out of this Nanny state bludging mentality that pervades the working class of this country.

Q: I'm a 28-year old kiwi male. I have one rental property in Auckland. Why shouldn't I buy three more and go work in Australia? Can someone give me a reason why I should stay?

A1: Why shouldn't you buy three more? Because you probably can't afford it, even if you work in Australia. Secondly, one of the fundamental rules of investing is buy low, sell high. If you think long and hard about it, leveraging up for an asset class that's at the top of its cycle is not the smartest thing to do.

A2: Why should you go and work in Australia? By all means, go and the sooner the better. Just make sure that you broaden your horizons.

"Are you listening, John & Bill?"...good try Philly but those two are busy arranging the flowers on the 9th floor of the Beehive...and to make matters worse, John's lost his Longjohns and is all in a fuss cos it's several below zero in the Baltic region..

In real terms it is actually far more than a 5.9% fall. As housing is the largest single driver in the CPI which has still increased significantly since 2007. Falling rental costs and falling house prices in early 2009/late 2008 stopped inflation going over 3% but as soon as there is any pick up in these the RBNZ is going to have it's hands full. I would estimate it is around 17% using a conservative approach using both the GDP deflator and CPI from 2007-2009.

If anyone is interested this is how I came up with my figure of 17%.

Using the following data from the RBNZ:

CPI (consumer price index):
2007Q3 1.8
2007Q4 3.2
2008Q1 3.4
2008Q2 4.0
2008Q3 5.1
2008Q4 3.4
2009Q1 3.0
2009Q2 1.9
2009Q3 1.7
HPI (housing price index):
2007Q3 1518 11.4
2007Q4 1519 7.7
2008Q1 1510 2.7
2008Q2 1444 -4.4
2008Q3 1416 -6.7
2008Q4 1383 -9
2009Q1 1372 -9.1
2009Q2 1399 -3.1
(note RBNZ did not include Q3 so I had to put in the QV reported on nzherald.co.nz)

I calculated a nominal CPI rate that excluded housing at various contributing levels. The numbers that I used to calculate was this exclusive rate were based on 3 common CPI baskets - food, rates and consumer goods i.e. calculate the average percentage and then subtract the baseline figure from the RBNZ. This is certainly by no means perfect but it does give you a far better representation that tracking solely against the CPI given that we all know housing has fallen significantly.

This 17% then represents that if you had purchased $10 of food in late 2007Q3 and somehow preserved it till 2009Q2 you would be able to purchase $11.70 of housing. However it does not mean you could sell that same food for $11.70 cash.

Keith, met thinks you doth protest too much.
There is a lot less red tap invloved in running a business in NZ than a lot of countries around the world and staff are relatively easy to get rid of.
We are heading to the bottom because of the perception that making money on property is an easy no brainer, which it is currently. A lot less work and risk than running a business.
It is in these situations that the government needs to step and change the playing field because the market is sure as hell wont.
They'd better hurry because the Czech republic will pass us in the next couple of years (down to 23 out of 30).
That said, I once worked for one of the Aussie banks and they see property in NZ as a low risk no brainer as well. They loan a lot less in business here than they do in Australia for that very reason.

@28_yr_old

House prices don't go up and down. They go up. If you can show me otherwise I'd like to see it (and I'm talking ocean levels - not the tides). However, I'd only buy if I knew I could sell tomorrow and make money.

The deal of the decade comes along once a week.

Unless the bank is going to lend you some $$$ to invest in the sharemarket you have to play with your OWN money, right? And if the company goes bad - you can't paint the fence and build a carport so easily. Plus shares have a firmly established market price so no use turning on your negotiation skills or cleverly improving your asset as you go through ingenious means.

However, sounds like you are walking the walk and are well ahead of me - best of luck to ya!

John S,

"If you can show me otherwise I'd like to see it (and I'm talking ocean levels "“ not the tides)"

Is 50% in japan, 30% and still falling in the US and 20%+ in the UK enough of an ocean level for you????????? Ppty has done well over the past 30 years NOT because incomes/rents/demand etc have risen, its done well because debt has risen faster than incomes. This caused the GFC, and despite NZ blipping down, then blipping up, the debt wall that households have hit has not gone away and we will find this out when interest rates rise again. It is simply no longer possible to inflate assets beyond our incomes at the pace of the last 30 (and especially the last 10) years. Best you get used to the new paradigm of debt deleverage.

"...get used to the new paradigm..." well that's one way of describing what happens when the effluent hits the fan...big word that Paradigm jimmy...where will you be hiding out when the splattering picks up jimmy...might pay to keep you head down mate...

Now now George....we have to have our scum rising to the top of the social pond of effluent...if you do away with the pollies rorts the buggers will just create themselves another loophole to feed off....anyway, the number of mugs paying taxes is dropping faster than a Kiwi in full flight...pretty soon Bill's going to have to get Tokyo Rose to bankroll WINZ.

I have commented on this site, on a number of occasions, that the 'billion dollar Kiwi house is entirely conceivable'.

Whilst, theoretically, property can be described as 'the least risky option' it is extremely vulnerable to 'phase two' of the Keynesian/Friedmanite rort that is coming. This is where government is effectively forced to default on its liabilities via the political expedient of hyperinflation. Within this government can impose a lien on your property/properties on the basis that you have made a massive 'capital gain'. Of course, there is no such gain - merely a reflection of money's debasement. However, as with most 'protection rackets' they can simply 'declare' that you have enjoyed an arbitrary increase in capital and then demand their cut, their tribute, via your income. Problem is your income is most unlikely to have increased sufficiently to meet the taxes on you illusory windfall.

My suspicion is that 'property investors' would do well to be a little circumspect - before being tempted to strut 'peacock like' in front of the Kiwi 'untouchables' who have not yet climbed aboard the housing express. In my view the housing-trap has been nicely baited and all sorts of political 'tax kites' are now being flown that should at least give cause for a measure of concern. Buyer beware, because when the shell game of irredeemable debt money reaches its nemesis the next source of plunder for the elite will be your physical assets. This all ties in with the 'one world order' being hatched in Copenhagen this week. Remember, just as the proletariat in Britain were able to 'quasi confiscate' the country houses and estates of the 'rich' - via death duties - third world nations will ultimately be able to 'quasi confiscate' your rental portfolio via some related transnational lien. Laugh and sneer if you must - I have no doubt that is what Britain's landed gentry did when confiscatory taxes were first proposed on their estates!

A year from now may well make these comments interesting reading.
Whether it will be the boomers or the Busters the chances of both being right and happy is a BIG ZERO.

My suspicion is that "˜property investors' would do well to be a little circumspectlll

While there are as many propery investors in parliament as there currently are, then there is going to be no reason to be circumspect.

The left and right wing of the Growth Lobby have their seats in parliament. Is it any wonder the government will do everything it can to avoid any house price fall? Vested Interests rule.

Gibber, remember the politicians, and senior civil servants, have the capacity to protect themselves from what they impose on the rest of us. I have simply suggested being circumspect because, as government capacity to issue unlimited debt money falters, they will have to be much more aggressive in taxing middle class assets. The alternative will be to slash public spending - unlikely (although ultimately inevitable).

Trudy - voluntary abandonment is unlikely because it would effectively lead to major social disorder (try taking $NZ250,000,000 out of government coffers every week and see what happens). It would, presumably, also threaten the banks because the collateral (housing etc) against which so much debt money has been lent would plunge in price. It seems more likely that government will, eventually, have to turn on the printing press in order to meet its liabilities with increasingly worthless paper. However, never lose sight of the fact that most of the 'money supply' that has driven New Zealand house prices, to such scandalous multiples of income, has arisen from instruments of credit - not banknotes. Within this credit can implode and, were such to happen, the debate would presumably centre around whether a government could print fast enough in order to overwhelm the debt money destruction. This is exactly what happened in Weimar Germany - where the money supply was ostensibly exploding, whilst it can be argued it was really contracting! Hence, a gentleman with literally billions of Marks in his coat pocket could not afford a modest meal. Therein was the irony - despite billions and trillions there was insufficient money!

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