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Geoff Simmons has been thinking about the LINZ data and says it supports the idea of taxing all housing because rules and exemptions will just be exploited by the wealthy

Geoff Simmons has been thinking about the LINZ data and says it supports the idea of taxing all housing because rules and exemptions will just be exploited by the wealthy

By Geoff Simmons*

The data published [this week] by Land Information NZ (LINZ) was far from perfect, but what it did contain give some indications of what is happening in our housing market.

Foreign buyers – at least using the definition of non-tax residents – made up a paltry 3% of purchases.

There are plenty of ifs and buts – tax residency may not be a perfect fit with what we consider a ‘foreigner’ – and so numbers may shift over time. However, what is clear is that New Zealand tax resident investors are a major chunk of the purchasers. Taxes targeted at foreigners won’t work – we need to tax all housing if we want to fix the speculation problem.

The Numbers

First up, around 10% of the data isn’t available as the rules were being implemented while the transactions were going through. So lets discount those from the outset.

Of the remainder:

  • 41% were exempt because they were buying their primary residence;
  • 56% were New Zealand tax residents; and
  • 3% were non-tax residents;

Foreign buyers were more active in the Auckland market – making up 4% of purchases there. The majority of those buying houses in Auckland (around 60%) were Chinese. But there is little else to point to hordes arriving on New Zealand’s shores.

One explanation is that the changes in rules have effectively put Chinese buyers off from buying in New Zealand. Whether this effect is permanent will be interesting to see.

Labour has critiqued the numbers for their incomplete nature, and there are definitely grey areas. On one hand the non-tax resident figure might be too high as it includes people that are New Zealand residents but living and paying tax overseas. On the other hand there could be recent migrants purchasing houses that are here on working or student visas. Under the rules these people are considered as tax residents, but many people might consider them ‘foreign buyers’.

LINZ included a survey question to try to tease this issue out, but they think people misunderstood the question because 35% of buyers responded as being in this category. This is a massive issue where we need to wait and see – it certainly seems odd that migrants on working and student visas would be buying such a large chunk of our homes. Presumably in the case of students the houses would be bought by their parents but put in their children’s names.

What can we conclude?

Thus far, while a few questions remain we have to conclude that there is no immediate problem caused by foreign buyers. In fact, what the media coverage has overlooked is that New Zealand tax resident investors are snapping up the lion’s share of houses.

This won’t be solved by a tax on foreign buyers. The only solution as we have pointed out many times is a comprehensive tax on housing. That is why we have proposed a Comprehensive Capital Income Tax, which taxes all assets as if they were a bank deposit. If you have an asset that isn’t giving you a financial return, this tax simply assumes you are getting some benefit – at least the same benefit you’d get from putting the money in the bank – and taxes you accordingly. That would close all our main tax loopholes– including owner occupied housing.

Why tax owner-occupied housing?

If owner-occupiers are being squeezed out by the investors, why tax everyone?

The fact is that exemptions like this make a fool of the tax system. As we have seen overseas, exemptions are exploited by the rich to avoid paying wealth and housing taxes. Any tax has to be simple to be enforceable. If you exempt the family home, the rich will make sure their family home is as big as possible. And while we are at it, surely a husband and wife need a family home each? What about the kids?

A simpler approach is to have minimum thresholds for individuals – any equity over that amount can be taxed. That would reduce administration costs and ensure that any comprehensive tax on housing was hugely progressive – in other words most people will be better off.


Geoff Simmons is a senior economist at the Morgan Foundation. This article was first published on the Morgan Foundation blog and is re-published here with permission.

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121 Comments

so someone like me with no mortgage would be encouraged to take out a mortgage and buy a rental to reduce my equity therefore reduce my tax. no matter what system there will be loopholes
simpler approach is to have minimum thresholds for individuals – any equity over that amount can be taxed. That would reduce administration costs and ensure that any comprehensive tax on housing was hugely progressive – in other words most people will be better off

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Awesome. Simple, straight forward, easy to understand, no exemptions, no extra revenue for all the hardworking tax lawyers and accountants we desperately need to support. What's not to like?
Chances of progressing at a political level? - nil, nada, zilch, zero :)

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Was this a consequence of permitting foreign students to work in NZ - immediately becoming tax-residents

35% of those were work-visa's and student visa's, purchased a house - all categorised as FHB's

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I don't think anyone believes the 4% figure for Overseas Investors, not for one second. The whole LINZ data was just a shocking inconclusive travesty, where we still have no real evidence as to what is truly happening with the NZ housing market??

What is fact; is how the Auckland housing market was literally halted and then started to become more affordable from last October to January (Which is what everyone wants to see). This was a direct result of the IRD requirements that put the Overseas Investors on hold during the October to January period, so the Auckland property market very much slowed down, and dropped by -8%.

And then we have the very dubious 35% of house purchasers that were work-visa's and student visa's. Were these mainly 'cash' buyers? They must have been, otherwise how on earth would have they been allowed a mortgage?? This screams on money laundering activities! How about tackling corruption like the rest of the developed world before we truly end up a basket case economy.

No small tax requirement is going to put off the corrupt officials and money launders, that's for sure!

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How long before the Chinese government comes after all that leaked capital and go after the families of those students? Wouldn't take much arm-twisting for our government to hand all the information over, even if a lot of it wasn't already public record and/or hackable. Maybe Auckland is just a huge fox-trap.

I may have given up on any of this making sense from a New Zealand perspective.

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This speaks volumes
http://www.afr.com/real-estate/residential/foreign-property-investors-t…
The 3-4% figure is plainly wrong. Why doesn't some investigative journalist pick a low hanging fruit here.

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Can you name one NZ based financial investigative journalist ?

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The concept that one single property purchase at an outrageous price can and usually will trigger off a series of domino transactions as the seller trousers the proceeds and moves to a more toney suburb, previously unattainable, or downsizes or upsizes (relatively speaking), is real

That second transaction triggers off a 3rd and a 4th and a 5th and so on to near infinity, but generally 10 if they are all transacted at prices well over the odds, until the benefits run out

Under such highly probable circumstances the first transaction is merely 10% of the following cascading sales, so mathematically the sanitized figures of 4% could be possible. It's the noise from the subsequent sales that buries the significance of the first

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"we have to conclude that there is no immediate problem caused by foreign buyers." I disagree!

There’s not point arguing about the manipulated numbers. Bernard Hickey made a good case for up to 48% foreign buyers, but anyone with their feet on the ground who’s been to the auctions knows that the majority of houses being purchased in nice parts of Auckland are being purchased by the Chinese. Major irreversible structural damage is being done to the NZ economy. Foreign purchasing of existing NZ housing stock and land is not beneficial for the majority of New Zealanders. It may be a short term boost to aggregate demand, but long term damage due to rent extraction, and adverse social consequences. Lives are being ruined, people are putting off having children. If you analyzed the accumulated wealth of kiwis stratified by age you’d find tectonic shifts of wealth disparity. There are people who I know who’ve been displaced from the Auckland housing market and are heading towards their 40’s with no assets and no children. Look people are screaming at the top of their lungs in Canada too and their government is behaving the same as ours.

If you read between the lines National’s strategy is obvious (a) deny there’s a problem; (b) keep the Chinese money flowing into the property market; and (c) stop kiwis competing with Chinese buyers because they cant afford it and it’s a risk to our banking system.

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"anyone with their feet on the ground who’s been to the auctions knows that the majority of houses being purchased in nice parts of Auckland are being purchased by the Chinese"

How do you know they are Chinese ? Did you see their passport ? Could you tell a Chinese apart from a Korean, Phillipino, Japanese, Singaporean, Malaysian ??? I doubt it. How do you know these "Chinese" are not actually Kiwis living in NZ ?

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Chinese people have told me they are mostly ethnic Chinese buying. Also the majority speak Mandarin -I can even understand a little Mandarin. Quite a few Chinese are annoyed with the Chinese too! They could be Kiwis living in NZ but that doesn't really mean much anymore. Here at the Zachary estate in Epsom Chinese have bought and rent all around me. That's another aspect of real estate that seems to not be mentioned much and that is there are a lot of Chinese tenants in the good school zones.

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So are you saying all Asian people look the same?

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Wake up!!!!!

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It's what you classify foreign buyers end of the day. Students a d those in temp visas made up 35%. These people are not permanent residents and are therefore foreign buyers based in NZ. Foreign buyers based outside nz equals 4% and foreign buyers based in NZ equals 35%
Total foreign buyers equals 35 + 4 =39%

Not sure why the media are reporting otherwise.

When kiwis study in the states they are foreign students. When people come to Auckland university they are foreign students. They pay more fees. They are labelled foreign students. Isn't it convenient when it comes to labelling buyers the media choose to not label them foreign students anymore.

As I said before the media want to keep the status quo as their biggest advertising customers need the status quo. Banks and real estate firms.

Disgraceful. 10% Stamp duty on all investors. That's local investors, overseas based foreign investors, local based foreign students investors and local based foreign temp worker investors. New houses and owner occupiers exempt. Funds can pay for infrastructure.

The media headline should be 39% houses sold to foreigners. That's a fact.

90% of nz citizens wealth is tied up in housing. All the eggs in the one basket.

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Simple Joe.. For all new transactions only New Zealand citizens can buy New Zealand land. That would sort lots of issues. Mr Key wouldn't mind because he knows very very few foreigners seek to buy here. "At the end of the day it won't make any difference"

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yes according to this government its only 3% so ban non citizens from owning land in NZ,
unless they don't believe there own spin and know it could cause a correction and the problems associated with it

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I wonder if Key's personal circumstances have anything to do with his reluctance to act on this issue? Does the fact he has several overseas residential properties himself make him sensitive to the potential of being labelled a hypocrite? Might make it awkward at one of those regular overseas junket get togethers they seem to contrive...

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Still haven't seen one stamp duty article targeting investors only. Incredible when you think the two countries most similar to NZ (UK and Australia) have both brought in stamp duties this year to tackle investors. New stamp duties just for investors.

Let's remind ourselves. Investors buy nearly half the homes. In a market with low Supply surely the first people to target are investors. LVRS don't work when prices are increasing 15% a year. Their portfolios cover any extra deposit required based on the annual increase. Stamp duty is key. Tax them on day one. That would significant cut demand and get first home buyers back in the game.

We need corporations and our media to serve the public not just chase maximum profit. Geoff/Benard do an article on stamp duty on investors only. At least explore the option. #27

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and you won't. As you have been told about 27 times IT'S A NON STARTER! Keep wasting your time typing the same garbage. #keyboardenvytaxwarrior

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Despite the stamp duty Sydney and Melbourne real estate prices still went through the roof(and continue their rise). As long as there is demand for real estate in nz, as long as interest rates are low and and as long as there is further potential for capital gains, stamp duty will be but a small hurdle. Sydney and Melbourne proved that to me.

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All I hear from the RBNZ and govt are excuse, after excuse, after excuse. And economists offer more stupid solutions.

All that is needed is to stop interest only loans and the housing market will correct bloody fast.

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that is a good shout! I understand why people get these but on a personal level Id never do it.

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..taxes all assets as if they were a bank deposit..

This is like an idea that has bubbled up from the pits of hell.

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Instead of rushing to yet another new band-aid tax, wouldn't it be better to drop the tax on bank deposit interest ?
Many people rightly see housing as a tax free and tax credit investment. Make saving attractive and it may level the field a little in a way that the economy could benefit from.

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Round and round in circles..

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It is always interesting to see people responding with "I don't believe it" statements when new facts contradict their pre-existing views. As Keynes said "When my information changes, I alter my conclusions. What do you do, sir?" Clearly the answer for many is... double down on my beliefs and rubbish the facts. The flawed information from LINZ is the best we have now, so until the facts change again we should not be so convinced we have an overseas buyer problem.

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maybe because its human nature, humans tread to format their opinions and ideas from what they see with their own eyes (at open homes and auctions), rather that what they hear or read.

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Hey steeneveld, you need to view the footage showing the boss of LINZ squirming next to Louise Upston. This is a man who gets to keep his job if he goes along with the BS that the minister has just delivered. Not only is he uncomfortable, he knows that his credibility has now been shredded. Bet his team are right behind him when the next tranche of make believe is delivered whenever that might be. At least it gives the minister time to prepare another swathe of spin to be swallowed by you/us gullible Kiwis.
It's banana republic stuff with a compliant media whose inability or unwillingness to see through the veneer of lies and half truths adds to the dumbing down of the populace. Another dose of morphine please.

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Festingers's 4th reduction method.
Some we know base all their operating in this fourth zone.
Its rough on gear.

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Thanks for that HT. It's been a slow day listening to Springsteen's 5 album set Live 75-85 so a welcome addition to refamiliarise myself with Festinger's analysis (who said men can't do more than one thing at once?).You've provided some much needed but obvious enlightenment.
What's been staring me in the face is that the behaviours exhibited and expected by this government (we could also apply this to Clark's administrations and famously Dubbya's efforts after 9/11) are no more than cults and devotees performing cult like behaviours. Dubbya said after 9/11 that you're either with us or against us. Similarly, the domineering, persecution and child like antics of our PM offers no room for dissenting voices. These people live in a world that is black or white. It is idealogical in nature but requires absolute submission or else we'll be shunned.
I live in the comfort that I know what happens to all cults in the long run. Patience is a virtue.

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1984? Hey we are even 'Oceania'....

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Spooky that the current geo-political divides more or less mirror Orwell's vision. As usual, we're fighting over the spoils in the Middle East.

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Read between the Trade Agreement (TA) lines - Cloaked under the label NZ 'Immovable Assets' (otherwise known as residential property) is promoted as being available and offered up "for sale". NZ and Auckland ownership is changing. NZ voted for it, NZ approved it, NZ accepted it. So no more whining please. The consequence of this change into the future and under the law is that the new era of 'TA Voters/Ratepayers' will direct how things play in NZ because ownership in land provides significant legal rights in NZ.

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Geoff Simmons shoots his argument in the foot by first rushing to the 3% figure. He's knows it's total c..p information, but it suits him to lead with it. I did not read the rest of his article.

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Yes I was the same. I have to say I find the critical thinking of economists in this country generally very poor

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Further and better particulars required

No mention is made about - What the revenue raised should be used for

Or, is it simply proposed as a pricing mechanism
The fall-out for the elderly and widowed could be colossal
Which would set off a different set of social re-engineering problems and consequences
Then you have a another problem needing a different set of solutions

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Doesn't matter If foreign buyers are 1 % or 99%. They are simply investors just like nz investors.

All investors local and foreign should be taxed stamp duty. That cuts out the them v us arguments. Let's focus on the main issue. There are too many investors and they are ramping up the prices and killing the chances of FHBs.

Why wouldn't you it's a free for all. Prices rising 15%. No stamp duty. Same interest rates as non investors. Investors don't care about stamp duty. they pay it. The evidence is there as even with stamp duty there are more investors now than ever. 80% in some auckland suburbs.

Stamp duty 10% on investors. Then watch the market change. Let them pay zero stamp duty on new builds to encourage supply and provide a service to society. All tax revenue can fund infrastructure such as city rail loop so taxpayers can contribute less.

Genius isn't it.

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Are you retarded? What part of "Stamp duty will never be introduced due to preexisting trade agreements" don't you understand. Lets not forget all you want are taxes introduced that you won't ever have to pay. This is disgusting behavior and only appeals to the lowest common denominator. Keep dribbling on about Stamp Duty. Ain't no one listening, particularly anyone with the power to introduce it. #keyboardenvytaxwarrior

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"First they ignore you, then they laugh at you, then they fight you, then you win."

You have reached stage 3 of a losing battle - panicked rage.

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not at all. Im sick of reading the same crap in every single post from him.

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When I or anyone put our money into a bank account we are charged RWT on any interest allegedly "gained", but when that alleged gain is put against annual inflation then the gain taxed is not in fact real. No compensation is paid for this. So if savers can be taxed regardless of realized financial gain then so to should all those who invest in ANY property seeking 'annual' capital gains as a counter to their interest payments. Both are voluntary actions seeking a financial gain apparently. Why is one treated differently? There's the "family home" and there is also the "family savings account" so why the tax difference which effectively incentivises the one over the other? Namely borrowing over saving?

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Spot on justice. Kiwis 90% of wealth in their homes. This is a national disgrace as is due to the fact that property capital is taxed so lightly.

Nz need to encourage money into other investments other than buy to let's. Follow the lead of the uk. Increase stamp duties on properties and provide incentives such as EIS when investing in start ups. Eis allows you to claim 30% of your investment as a tax refund. Invest 10k and receive 3k off your tax bill. If the start up fails you can claim an additional 3k. You pay zero capital gains on any profits. You buy into startups using crowd funding sites such as syndicate Room.

That's the future not buy to let housing or buy to flip.

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Firstly I do not believe that only 3% of housing was brought by foreign buyers, however i do agree taxing them would be a waste of time.
I do believe there are people and companys (foreign and domestic) buying exsiting residential propertys for investment and speculation, this must be stopped (for a few years) and immigration tightened.

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The CEO of LINZ should hang his head in shame. He may have saved his own backside and embarrassment for his masters but at what cost? He has essentially laundered the statistics to bury the fact that an extra 35% of purchasers are foreigners with little or no skin in New Zealands game. That may have been perfectly fine in other circumstances but when young New Zealanders are being priced out of the market in their own country and all New Zealand taxpayers now being asked to foot the bill for the extra infrastructure ,healthcare and schools, it is not OK.

An honourable mention in the hall of shame to the media who,'with the exception of Bernhard Hickey, have brought these stats hook line and sinker.

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Agree. Thank Christ for Hickey. Dann at the Herald???

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Shaggers, we are in the drought from hell. No rain, hot windy weather is making matter worse. Neighbours started feeding sheep and cattle in early April and still going. Hills are brown and no sign of rain on the horizon.
Fencer told me that the holes he is digging are coming out of the borer like powder.

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It should be noted that the author, Geoff Simmons is a part of the Morgan Foundation, set up by Gareth Morgan, the nutty fellow who hates cats, and comes up with one dopey idea after another, usually centred around how to tax everyone more. It is often the case that the rich tend to become Socialists once they have collected their tax free mega millions, as Mr Morgan has done.

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Good point Olly (aka Big Daddy).

Do we know if Mr Simmons supports the idea of a statue of Gareth in the middle of Wellington?

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It's a self reinforcing feedback loop. Houses are going up due to finance, my friend has 14 houses, last week ANZ contacted him and offered all the finance he wants at %5.25, $2500 cash towards costs and no fees. He is now looking for more rentals and in the process pushing up prices, which in turn creates more demand, this is a finance problem and it could turn into a nightmare in a flash.

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14 is a little greedy. It should be restricted to 5. You can live a decent retirement on that and leave something to your kids.

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Ohh, ya reckon that's greedy? Umm how about some who own 100 to 1000? cause they are out there right NOW!

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Got any official stats on that? Or is this the usual crash troll "stat-pulled-from-ass" number?

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Official stats? Who collects those?. I know of one guy in chch who owns 900+ And another here Nelson who owns over 100 around the country who is a non resident from the U.S. They are out there. And how many does Olly own? Though I believe commercial is more his thing

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So that's a "no" then. Cheers for the confirm.

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'some owning 100 to 1000' LOL

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Yes a property investors portfolio of houses should be restricted to no more than five properties including their main home. And the banks should also bring in BuyToLet mortgages which have large arrangement fees, to further discourage greed.

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Nonsense, that's like saying anything bigger than very small is greedy. Do you want to ban big companies as well?

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Big companies aren't people saving for a pension. You would do well to know the difference.

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Didn't the high profile investor in South Auckland (Vietnamese name) have well over a hundred before he went tits up?

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Didn't the high profile investor in South Auckland (Vietnamese name) have well over a hundred before he went tits up?

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yes, but surprise he is back up and running the joys of trusts to protect your assets from company collapses

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Decent retirement on 5 house ? .... never. I'd have to cut out two cruises per year. Next you'll be saying I'm only allowed two cars.

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Cruises are for people who are terrified of the outside world.

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But I am, especially those Chinese guys trying to buy all our houses. Until they knock on the door and offer me $3million. They are OK then.

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Why not charge a fee of 50k+ to every one without NZ citizenship.If you choose to come to live in NZ that is the cost if your want to purchase a house. As for investors increase tax if more than three rentals. Start charging tolls on Auckland motorways and reduce super city rates to compensate.

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Lining govt coffers with additional taxes is daft, period. Deal to the useless local council, release land, build. Get on with it

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How do you suggest to deal with the useless local council when same people keep voting them back in. Also builders have not much incentive to build fast. Lining govt coffers not all bad IF it can be used to benefit NZ.

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Chinese student buys house for $31 million in Vancouver. See, they're not all good for nothing, inebriated layabouts.

http://www.zerohedge.com/news/2016-05-13/canaccord-founder-sells-31-mil…

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Geoff misses the point. The reason people invest in property is that firstly it is a real asset that won't evaporate in a puff of corporate malpractice, and secondly it provides a respectable rate of return. If the economy can provide alternative investments as good or better than this, guess what, property will lose some of its lustre. It just shows how poor the investment alternatives are. Land value cycle theory suggests this property boom will continue until 2025 or so, with a rest point coming up in a couple of years.

What is happening with NIRP globally is unprecedented. Any asset with a positive return like property increases in value as an inverse to ever-lowering interest rates. I read an article the other day on modelling of NIRP right down to -4% per annum. Yes, -4%. Even Australia is looking like getting close to zero in the next year or two, and where they go so will we.

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I think people like you miss the greatest point of all! We ALL need a place to live, so no matter how many properties you claim to own, you are only adding to a huge inflationary effect that does a gigantic disservice to everyone who follows after you. You and many others are just adding to the cost of living! You are producing nothing but inflation. You're screwing the next generation/s to a life of paying more debt than you while parasitically living off their labours! The whole concept of turning homes into financial commodities is unethical and sickening to society as a whole. And to have governments, banks and institutions like the RBNZ not only facilitating but encouraging such behaviour is repugnant. Just a bunch of complete self interested traitors the lot

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The inflation of course is almost entirely in the land value. Hopefully once Auckland rezoning allows multi-level apartments to be built over wide areas, many will be able to own an affordable apartment.

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The whole concept of turning homes into financial commodities is unethical and sickening to society as a whole.

No it is not. This is not a little village but a sophisticated global super-city. People like you don't belong in Auckland. Bluff would be a good place to live.

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I agree with Justice and disagree with you. Housing is firstly accommodation, and needs to be affordable for most people. When land prices get financialised through distorted and strangled supply, the gains accrue to a few players, are untaxed, and distort the whole economy. The risk is that real people who do real work won't be able to afford to live where their jobs are. That distortion will cost everyone in the end, even those unreal people who seem to have gained unreal profits from that distortion. Who will look after them? (And they will expect to be looked after.)

The delays in fixing this issue now risk a very unfriendly adjustment. It will be a history lesson in the costs of inaction.

It is true that that this is not only a problem for Auckland; other large cities around the world have also failed to make the necessary changes to keep housing costs affordable. The problem for Auckland is that our distortion is at the extreme end of the scale.

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If affordable housing is what you are after I'm sure there is a place in Bluff or Tokoroa for you too.
In the modern era the only way to create elite zones is through pricing people out.

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Hi denpal, am a newbie to this board and read your comment with interest. Do you by any chance have a link to the article you mentioned having read the other day on modelling of NIRP right down to -4%? I have a hunch what it may show(!) but would be very interested in reading as may others on this board. Thank you.

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Sure. It took a little while to find it, please see this link, plus another interesting commentary on Sweden's NIRP real estate bubble on David Stockman's website:

http://ftalphaville.ft.com/2016/02/11/2153029/how-negative-is-negative-…

http://davidstockmanscontracorner.com/debt-berg-on-the-baltic-swedens-n…

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No need for name calling Obeseballerina .... especially calling someone a "retard" as per above. Not cool in this day in age. May have been when you were younger. Just because you want to get rich at the expense of first home buyers. Pull your head in mate.

I have already discussed that bringing in a stamp duty will not be break any free trade agreements we have. There is enough MISS iNFORMATION without you spreading more. 10% stamp duty would work.

Refer teh Korean FTA your are probably refering to:
" applied on a non-discriminatory basis, as opposed to a
taxation measure that is targeted at investors of a particular nationality"

THE STAMP DUTY WOULD NOT TARGET FOREIGNERS ONLY AS WOULD BE APPLIED TO ALL INVESTORS LOCAL AND FOREIGN.

https://www.mfat.govt.nz/assets/_securedfiles/FTAs-agreed-not-signed/Ko…

refer

TAXATION AND EXPROPRIATION
The determination of whether a taxation measure, in a specific fact situation, constitutes an
expropriation requires a case-by-case, fact-based inquiry that considers all relevant factors
relating to the investment, including the factors listed in Annex 10-B and the following
considerations:
(a) the imposition of taxes does not generally constitute an expropriation. The mere
introduction of a new taxation measure or the imposition of a taxation measure
in more than one jurisdiction in respect of an investment generally does not in
and of itself constitute an expropriation;
(b) a taxation measure that is consistent within internationally recognised tax
policies, principles, and practices should not constitute an expropriation. In
particular, a taxation measure aimed at preventing the avoidance or evasion of
taxation measures generally does not constitute an expropriation;
(c) a taxation measure that is applied on a non-discriminatory basis, as opposed to a
taxation measure that is targeted at investors of a particular nationality or at
specific taxpayers, is less likely to constitute an expropriation; and
(d) a taxation measure generally does not constitute an expropriation if it was
already in force when the investment was made and information about the
measure was publicly available.

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Keep dribbling. End of the day and bottom line is all you want are taxes you won't pay. All because people want to save for retirement. I'll call you whatever I like, its certainly rings true when you cant understand something obvious.

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Lets remind ourselves of some of the facts at the moment

- NZ has the highest house prices relative to incomes in the world
- consumer debt rising at 8% p.a.
- consumer debt at 216bn
- investors making up over 40% of buyers and up to 80% in some areas
- house price inflation in Auckland at 15% yet wages moving by only 2%
- house price to income in Auckland (household) 10 to 1 approx.
- LINZ survey indicated overseas foreign buyers 4% and local foreign buyers 35% (students and temp visas). Thus total foreign buyers made up 39% of house purchases. (could be higher as 10% wasn't included)

- 90% of Kiwis wealth is tied up in Housing.

We tried "LVRs" - no luck
We tried "Wait And See" - no luck

Why not try
-Stamp Duty on INVESTORS
-Loan to income Ratios on INVESTORS

Demand Supply issue. Govt is trying to fix supply. Why not fix demand at the same time ?

STamp Duty revenues can be used to pay for infrastructure.

New houses will be exempt so Investors can make their millions there.

Sounds like an easy plan right.
What are the other options ?

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sounds boring. If you want to change the law go into politics. Its works better than copy and paste. Every generation before you worked and slogged to get ahead without punishing the generation above. Get over yourself. Life isnt easy, suck it up. Other options? Earn more! Do whatever it takes! If that means going to Aussie, America or London do it. Stop whining.

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'What other options?" As everyone has suggested non permanent residents and foreign corporates should't be allowed to own land or property, only lease. 2. Make all mortgages non-recourse as in the US. this would at least introduce a bit of bank responsiblity through their potential losses.

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The other option is to be really strict about 35% of as you put it 'Local foreign buyers' those on student and temp visas. And basically exclude them from purchasing property, since they are at such 'high risk' as cash buyers of being money laundering mules.

That would pretty much solve the Auckland hosing crisis over night.

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Justice - Just a bunch of complete self interested traitors the lot.

Simply taking advantage of existing economic realities is not treasonous. Ever since the sixties house in NZ have gone up in price and the laws around making a profit from that fact have changed little. Thirty years ago I rented out the little flat in my basement and no one regarded me as a traitor. Twenty years ago I sold my lifestyle block for twice what I paid for it after six years and no one called me a traitor. So what has changed?

A lot of people have come to NZ since the sixties. I believe Auckland has one of the highest ratios of foreign born people in the world. Newcomers have cottoned onto the fact that houses in Auckland are good investments and are thus keen to purchase them. It really is an endorsement of the good place Auckland is.
So why is it treasonous to seek to own properties to rent to people in Auckland? Should all the people in Auckland have a sort of unwritten law that you must help your fellow Aucklander? Should we all band together spiritually, have some common vision, like some little Germanic community living in an iron age forest village, with a solid notion of a community helping each other in a hostile world? We almost had that sort of scenario fifty to a hundred years ago and the consensus of opinion here was that it was a hell on earth, completely hideous, small minded and parochial and so on and on.

NZers want to be part of the global community. They want diversity too which means you can't also have that common sense of trust, justice and fairness. It seems to me that some commenters want a combination of parochialism plus diversity and the ability to gallivant around the world and take advantage what is on offer out there too. Have NZ as a sort of safe space for and kids and grand kids.
The trouble is we have gone global as have others. The demographics have changed, especially in Auckland, and the possibility has vanished of an organic, shared, common vision apart from self interest.

My suggestion for the those concerned about the morality of business in Auckland is to leave and go and set up a community of like minded souls in a small town somewhere. Leave Auckland to continue as a rapidly developing global super-city. See how it turns out. No one really wants your parochialism anymore. There is no possibility of a shared set of unwritten laws around fairness and community in a super diverse city. Most of the city dwellers wouldn't want to go back to that way of life anyway. We don't want an imposed communistic society.

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Brilliant Zack, wish I could give that 2 likes.

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Isn't this the Athens and Sparta argument? Hopefully there is someone who actually understands this who can comment, but wasn't there an idea that adversity (ie a harsh environment and poverty) leads to a stronger sense of communal identity whereas luxury leads to greater emphasis on individual achievement?

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Perhaps David Chaston could put a room out the back of interest.co HQ so you two can hug and congratulate each other on your mutual magnificence.

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Zachary
This doesn't need to be a crude, black and white debate.
As I always say, I know the reality of the modern global economy, and I also see benefit in migration and foreign investment. But there are limits. Like anything benefits ad costs need to be weighed up. In my opinion, the costs of current immigration and foreign investment policy settings probably outweigh the benefits.
This should be about nuanced policy settings and possibly adjustments rather than crude 'ban this, ban that' talk ...

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I agree that investors are simply making the most of the current situation and why wouldn't they. They are not to blame for poor government decisions.

For Auckland to grow to the global super-city we all want we need to encourage other forms of investments and try and reduce the flow of funds going to houses. Houses won't increase NZ's productivity and therefore GDP per Capita.

Do we want a city where rents and mortgage payments take up a majority of peoples incomes ? Is that the super city we all want? That is the question we need to ask ourselves.

We need to look past personal greed and consider the wider good for a change.

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My view is we will build a slum.
The reasoning is the super cities, London, Paris, New York, were built on vast natural resources or imperial pillaging.
A recent FT article on Raleigh , North Carolina, indicated attempts to build a city on intellectual capital tends to generate a city with increasing inequality.
You may point to Tokyo but they had to loose a war to achieve it.
Not our cup of tea, lets stop now.

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Aren't we doing some imperial pillaging by getting the Chinese to bring their wealth to us? So much easier than going over there and taking it by force.
(How do you "loose a war"?)

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A simple balance of payment question Zac
The imperial armies didnt bother paying, they looted.

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Isn't it true though that a lot of immigrants bring loot with them? Don't we demand that some bring at least 1.5M?
The British army were against looting but did charge a fee for the cost of military operations, administration and reparations where required.

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Im encouraged by your comments and hope our army are as lucrative in Afghanistan.
Ive seen some data that some immigrants are turning up with 100k but the ones ive met didnt have a rupee in their pockets and joined the night shift at a prominent burger bar
And that didnt mean their families didnt have money, just that the flow of money was in the opposite direction.

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The answer to your question is we should ask adolf but i suspect it is lack of attention to detail and poor eyesight.

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If intellectual capital doent work we could try manufacturing..the mythical factory.
Burberry is an example of what we could aspire to, good article in the guardian.
They have spent $100 Million on a factory to support 200 workers, are we up to it?
Great article about hard work, search under"The hands behind the heritage: inside the Burberry factory in Yorkshire"

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I had a watch Nick Smith on both Q&A and The Nation this morning. He reminds me of Comical Ali, the Iraqi information minister, who was declaring glorious victory when over his shoulder we could see the American tanks rolling into Bagdad. He really is in that much denial.

The resultant footage of people living in cars with wee kiddies and renting garages is an absolute bloody disgrace on all of us. Surely it has not come to this in our country. Why are we only hearing weasel words and blame shifting. This is turning into a massive issue and requires an emergency response. Even if you are not sufficiently moved by the human tragedy surely the pure economics of the billions required for the rental supplement, increased healthcare costs, higher crime and incarceration rates etc should be enough. Where is the leadership, this is not the New Zealand I ever thought I would see!

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I wouldn't trust the guy at all, especially when he was quoting the example of Syria from the OECD / Fitch report.

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We already have an emergency response, it's called Housing New Zealand.

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Yes the family featured in the news item about living out of a car did have a Housing NZ home in Southland and chose to come to Auckland to find work. This is commendable in a way but it is not as if 'we' were doing nothing to look after them. They were likely told not to come to Auckland as there is an 18 month wait for housing. Their car didn't look the best choice for living in either. Do people want the government to make sensible choices for them?

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so your solution is stay in southland and not work.
the real issue is we have a range of jobs that pay low wages and housing is now becoming to expensive in Auckland for those workers so what will be the solutions .
I will not be surprised if a future government brings in rent controls, they will see their expenses rise for accommodation supplements and neg gearing tax rebates if they do nothing, and will want to control the increase to a manageable yearly increase most likely at the rate of inflation
the only other solution is a massive building program of government rentals

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'the only other solution is a massive building program of government rentals'
I support this.

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And clearly it is overwhelmed. The obvious result of 70,000 migrants flooding in to an already powder keg situation.

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It would be really interesting to have statistics on the people currently in Housing NZ houses. How many are fairly recent immigrants? Quite a few I suspect.

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And why do you "suspect"? Do you hang around state housing and see a few "foreign looking" people exiting?

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I had a rental next door to a group of Housing NZ flats and noticed when some old tenants had died they were replaced with Sri Lankans in one case and a Muslim family in another case. Also the Afghan interpreters were most likely given Housing NZ homes in Hamilton. That's why I say suspect because I know this is just a small sampling however many foreign cultures probably assume that state provided housing is quite normal. Reports from Europe indicate that many Syrians and Afghans are expecting, even demanding, to be housed in proper houses in Germany.
I also noticed that they are quite good tenants, being pretty quiet and sober unlike some locals I have had experience with. Its all anecdotal that's why I'd love to see some official statistics on this.

Oh and I just remembered my sister has a rental leased to Housing NZ and that has an immigrant family in it too. So you can see why I have this suspicion.

Sorry to go on but yes I am hyper situationally aware, always observing, always alert, always reading, always seeking information, always thinking...

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OK, so that's 3 observations to raise your suspicions....and what you know about Germany.

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Look, mate, that's more than enough and all I'm saying is I'd like to see official statistics. What's your problem with that? Are you implying it is somehow wrong to notice or ask about these things?
Would it be dangerous for this information to be known? Should it be a state secret?

Furthermore if the state decides to assist immigrants/refugees it should ensure that it has the resources available and that those resources are not being denied to local needy folk. Comprende?

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good luck get official stats they will all be listed as NZ tax residents (especially if on a benefit) so under this government will be counted as locals, not foreign arrivals

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I would think that refugees are "needy" and not entering NZ at the same rate as in Europe. We have a quota of 750. Quote: Germany has received more asylum applicants than any other European Union nation, with more than 154,000 people seeking asylum from January to June 2015, up from 68,000 in the same period last year.
Adjusted for population, Hungary (129,203) and Sweden (228,601) are top recipients of EU countries.

https://www.amnesty.org.nz/sites/default/files/family_reunification_fac…

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Germany took in over 1.2 million refugees and asylum seekers and forced migrants last year.
http://www.bbc.com/news/world-europe-34442121
Thanks to Merkel, and now Germany is a country on edge.

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Shagger,
I think you have summed it up.
A workmate who has a Social Services qualification is now living in South Auckland with nine people.
She told me the children are going to school but they believe they will never have a job.
We didnt even clean the overcrowding mess up before we opened the immigration gates again.

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Sheep shagger... while I commend your empathy towards those less fortunate I would not rely on the media to base your opinion on.
If you have personal experience with items like those displayed regulary on tv ..that is one thing ..but don't rely on MSM to give a balanced report.
They are great at "pimping the poor"
They leave out pertinent facts to make out its all the systems fault.(read govt)
Then if the true facts come out the so called victims are shot down on social media/talkback..either way the MSM win ..its how they work now..no journalism required..they send out requests for stories then dress them up a bit and bingo..a story is born.
There was a classic case several years ago where Susan wood on Holmes had a story about an elderly Maori man who was bed ridden (injured) and the only caregiver was his 10 year old grandson(who couldn't go to school because he had to look after his grandad..Susan got stuck into ACC and the Health service..
Next night .all sheepish she had to reveal that the gentleman in question was an ex gang member who injured himself committing a crime..he had abused all his previous caregivers to the extent that no one would turn up at his house.He had no option but to get the kid to do it.
Its hard to legislate against stupidity..

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Don, I take your general point but you rest assured I was not taking my views solely from this one particular report. However on this occasion I think the reporter, Mike Wesley Smith, was genuinely moved by the plight of those affected and the scale of the problem. There was an estimate quoted that one in ten garages are occupied by desperate families in some south Auckland suburbs. I am sure that you can drill down and find among these people there are any number who have not fully helped themselves but the numbers now are so great its impossible to argue that many are not victims of a wider systematic failure.

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Nick Smith reminds me of capt Mannering fromdads army
a bumbling nincompoop whos thinks he knows what and how to run things but everything he does is a shambles and nonsensical

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Here he is in parliament defending the indefensible
http://www.parliament.nz/en-nz/pb/business/qoa/51HansQ_20160511_0000001…—overseas-ownership-of-new-zealand

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Thanks MortgageBelt.
This is an interesting quote from Dr Smith:

'Last year I tabled in the House a report from the Inland Revenue Department (IRD) based on tax returns. It showed that the level of overseas people declaring rent was about 2 to 2.5 percent of properties in New Zealand.'

Would be interesting to dig this up. If it's 2-2.5% across NZ it would be easy to imagine it more than 10% in Auckland. And growing.

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Things won't change until some of these fictitious foreign buyers start turning up in Omaha, Pauanui, Kelvin Heights, etc.

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Canada also considering taxes on foreign-related house buyers esp Vancouver.
http://www.vancouversun.com/business/time+foreign+property+owners+cibc+…

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Only 3% foreign buyers....yeah, I'm sure.

Student buys 31 million dollar Vancouver Mansion....

http://www.zerohedge.com/news/2016-05-13/canaccord-founder-sells-31-mil…

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How come 10-20% house price inflation doesn't stop buyers...and yet you think 10% stamp duty will? It's just another cost to be fixed by rising prices and won't hurt investors, overseas or local.
as for lvr ratios. House worth $1.2m mortgage $350k buy investment $800k total value $2m total loan $1.15m lvr 57.5%
OR...80% against home gives $800k, leaving only $350k against $800k investor house with lvr 44%. How low will you go!!??
Add 10% stamp duty, new borrowings $1.95m
Doesn't change anything material.
1. Take NZ land off the global market place. Nothing else will work if we don't do that.
2. At local level, if someone buys Auckland house on negative yield and says they're in business. It's clear, the stated, proven plan is to benefit from capital gain therefore is taxable under existing tax law.
3. If you really wanted to put cat among pigeons, treat housing as stock like many other businesses and revalue yearly to be treated as taxable income/loss.

One last thing. No-one's even talking about this article subject because the premise that only 3% buyers are overseas is such obvious crap

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As a communist, this would make sense because they don't thgink about the overall economic effect of continual increased taxes. However you cannot keep taxing without repercussions. It happened in the 70's when NZers left the country in droves because of draconian taxes and the economy tanked. One had better think about reducing drastically the GST rate if housing taxes are introduced, NZ GST being one of the disgustingly highest in the world which unproportinately hits the poor. A reduction of 75% of GST would benefit the less wealthy if one wants to introduce other taxes to hit wealthier people. Unless of course you just want to line the corrupt communist pockets.

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