House sales by Auckland's biggest real estate firm bounced back a little in May from very low figures in April, but were still down 13.6% on the same month in 2013.
Barfoot & Thompson sold 1109 properties in May, which was a whopping 37% rise from the 811 properties sold in April.
However, April this year was a strange month, containing all of Easter, plus an Anzac Day holiday on a Friday and in the same week as Easter Monday - which is sure to have encouraged many people to take a week's holiday.
A better comparison is with a year ago, when for May there were 1284 properties sold.
The latest figures show that the 'speed limits' on high loan-to-value lending introduced by the Reserve Bank in October appear to be continuing to dampen sales volumes - particularly in the lower price brackets.
In May 2014 B&T sold 473 properties for under $600,000. That compares with 684 sold for under $600,000 in the same month a year ago - a reduction of some 30.8%.
In stark contrast, the number of houses sold for over $1 million rose to 180 in May this year from 142 last year - a 26.8% rise.
The median price, which has jumped all over the place recently, rose to $645,000 from $619,550 in April 2014. It now sits slightly below the record $652,000 set in March. The median is up 13.2% on a year ago, which suggests that overall prices are not being hugely dampened by the LVRs.
The average sales price during May was $702,966, down from $708,603 in April this year and that was down from $725,728 in March. But the average has been jumping around a lot as well.
Auckland particularly has been very short of new listings and this appears to be continuing.
B&T managing director Peter Thompson said new listings at 1318 were the lowest in three months, and down 19% on those in April.
"At the end of May we had 3498 properties on our books, the second lowest number for more than 10 years."
Thompson said overall the market was "in line with season activity and we are likely to see a further cooling with average and median sales prices falling back slightly over the winter months".
In a research note that came out at the start of the week - before release of the B&T figures - BNZ senior economist Craig Ebert said that even if the B&T sales had remained low "bear in mind that this will be at least partly owing to New Zealand’s migration trends".
Net gains from migration are soaring - set to hit an annual rate of 40,000 this year. This is principally due to fewer Kiwis moving abroad.
Ebert said the fact that fewer NZers were moving would “naturally” stifle the rate of house listings – plausibly in order of many thousands – compared to what a “normal” rate of migration would supply for sale to the housing market.
"And, lets’ face it, a lack of new listings has been a common lament over the last 12 months or so – the period over which migrant departure rates have slumped most noticeably."
He said this "dynamic" might help explain why house price pressures haven’t disappeared as much as sales alone would normally have implied - and why any moderation in home sales could be "quite the wrong indicator to economic growth at the moment, given they at least partly reflect a whole lot of folk deciding not to leave the country, on the grounds that the local economy’s prospects are looking relatively strong".
Barfoot Auckland
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39 Comments
The underlying softening of volumes is more interesting and indicative of things to come than the headline increase in median price.
Most property bulls dismissed the downturn in March's figures (down 24%) as being completely due to the timing of the two long weekends. However in April volumes continued to decline by about 14%. Volumes lead the momentum in price by about 6 months so should be interesting to watch. Me thinks rapidly decreasing price appreciation to no growth by year end and price declines starting early next year.
To fix the housing crisis, why not prevent owners from claiming losses on rental income against their working income.
This current regime encourages owners to load up on property purely on the basis of capital gain whilst claiming a large rental income loss against working income which then allows them to leverage into more property. It also encourages artificially low rents, and a lack of maintenance on rental properties.
So say you acrue 100k in interest expenses over a 10 year period... and sell..
You can have the 100k claimed expenses 'clawed back', so effectively, your net profit over that 10 year period (as seen by the tax man) increases (retrospectively) by 100k, and you are liable to pay 33k tax (or whatever your tax rate is).
What if that same property made zero capital gains? Where would this money come from and would it be considered fair?
Finance costs for any business are ligitimate expenses, and when sold, no logic suggests that it should be clawed back.
Interesting concept. Let me know more details.
History isn't always a good guide to the future .. but
It's called getting rid of negative gearing, and
A Labour Government in Australia did exactly that in the 1980's
Investors started tipping their tennants out and selling their investment properties, prices fell a bit, but rental accommodation disappeared overnight
The Govt re-introduced negative gearing a year later
I didnt say anything about social good
you are attributing something into the comment that cant be sustained
Rental accommodation shrank dramatically. Renters complained loudly, Govt acted
They tried that - it didnt work - but being determined sorts - they THEN introduced Capital Gains Tax after re-introducing Negative Gearing
For the record
1984 - Negative Gearing cancelled
1985 - Negative Gearing re-introduced
1986 - Capital Gains Tax introduced
Oh you mean how if a property investor makes a loss on one income stream they can offset that against another?
But that's exactly what any company can do according to IRD:
"Transferring losses to other group companies
A company can transfer its loss to another company if:
- the companies meet the common ownership test;
- the loss company meets the shareholder continuity test for the loss that is being transferred;
-
the loss company meets the residence requirements ie it is either incorporated in New Zealand or carrying on business in New Zealand through a fixed establishment, and is not treated as non-resident by reason of a Double Tax Agreement;
- the loss transferred to the profit company is no greater than the profit company's net income; and
- the payment and notification requirements are met."
You are arguing the old line that property business get better tax treatment than other business but I still can't find where this misconception comes from?
...perhaps it's time we all got our mates together and formed a partnership or LTC. Sell our own homes into it, rent them back and claim all mortgage payments, gardening, lawnmowing, rates , R & M against our other income. Or to make it simpler, swap 'homes' with your mate and rent them back off each other.
It goes on.
Let us know how it goes.
The first one sounds like tax avoidance
http://www.ird.govt.nz/property/property-family-home/living-in-prop-own…
like any business where you claim private expenses as business expenses (which is the whole point - it's no different to any other business).
On the second it's called renting a house while owning a house somewhere else. Happens all the time. I know people that do that - working for a few years in another city, only needing a smaller house, or a bigger house etc.
I've been around the business scene for too long .. and I have never once come across a rational business explanation that justifies heavy negative gearing where it takes you 10 years to break-even on the rental income side, meanwhile you are willing to subsidise your tenants rent for 10 years .. yep we all came down in the last shower
It's nothing but an exercise in capital gains
Looking into the tax 'advantages' of pi business compared to other businesses:
other business can deduct expenses from profit before paying tax
pi business can deduct expenses from profit before paying tax
other business can offset losses against other income streams
pi business can offset losses against other income streams
other business pay no CGT when goal is capital gain
pi business DO pay CGT when goal is capital gain
other business tax evasion leads to prosecution by IRD
pi business tax evasion leads to prosecution by IRD
other business can carry tax losses forward to future years
I think pi business can carry tax losses forward to future years
please can someone explain what is this tax 'advantage' pi business have over other businesses - I can only find the opposite?
Because it's a stupid idea and won't fix anything. This is the old ringfencing idea - stopping small time PAYE earners claiming expenses against their incomes while allowing landlords with income through company structures to continue to do so. Why would you wnat to give companies financial advantages over people?
Don't even have to stop being a PAYE earner.
I do both, why can't others? Takes a little bit of work to keep the two properly and ethically separate, but it's worthwhile. One should -not- live as their job tasks anyway, that's for corporate and government drones, not people.
Interesting - while checking that out - noticed another article in the NZ Herald property section - A sale and transfer of Auckland property approved by the OIO - where the companies involved, buyer and seller, are both owned by the PRC - one of which incidentally owns the largest home builder in AKL - Universal Homes - the moral of that story is - AKL is now (largely) beholden to the PRC
Well Bob, pining for the fact checkers.
Its an interesting job.
A fact checker is the person who checks factual assertions in non-fictional text, usually intended for publication in a periodical, to determine their veracity and correctness. The job requires general knowledge and the ability to conduct quick and accurate research.
howsoever
The resources and time needed for fact-checking means that this work is not done at most newspapers, where reporters' timely ability to correct and verify their own data and information is chief among their qualifications. Publications issued on weekly, monthly, or infrequent bases are more likely to employ fact-checkers.
One we think that has resonance
Bright Lights, Big City is an American novel by Jay McInerney, published by Vintage Books on August 12, 1984. It is written about a character's time spent caught up in, and notably escaping from, the mid-1980s New York City fast lane. It is one of the few well-known English-language novels written in the second person, and its main character is unnamed.[1]
http://en.wikipedia.org/wiki/Fact_checker
http://en.wikipedia.org/wiki/Bright_Lights,_Big_City_%28novel%29
Kurt may be on to something
The telephone and the big board and the ticker were all fakes, of -course. They were
simply stimulants to make the Earthlings perform vividly for the crowds at the zoo- to
make them jump up and down and cheer, or gloat, or sulk, or tear their hair, to be scared
shitless or to feel as contented as babies in their mothers' arms.
People are willing to accept a 3% gross yield at the moment because in Central Auckland suburbs:
1. Annual Capital gains are currently over 10%
2. The lower the rental income the bigger the loss that can be claimed against income.
3. The banks best rate is just over 4% before tax - without leverage.
4. Owning property isn't hard earnt money (equity)- it is money for Jam. (Leveraged Jam).
LOL number 2 is a good one. Do you somehow think that the less taxable income you have the more money you've make or something? If I rent my house out for $1 a week and pay to repaint it 20 times for the heck of it I'll end up wealthier? The bigger the loss the more you have lost. That's why they call it a loss. Bankrupcy is not the ultimate goal.
No one would chose to be negativly geared over getting an income. They only do it to get into the market ASAP (fearful of entry costs getting out of reach) counting on future rent rises and inflation to turn it positive. It's a big risk where falling prices/rents or rising interest rates can wipe you out.
Correction:
1. Annual capital gains over the past year were 10%
2. Nonsense: If a property in a nice suburb likely to rise in value at 10% had a higher rental income also, the price paid would be even higher. Neg gearing is not deliberate, you still book a real cash flow loss of around 66% of the total loss, and eventually, as rates rise, this puts a limit on the number of neg. geared properties one can own.
3. 4% before tax is still a damn cite better than 3% before maintance, rates, insurance
4. Easy capital gains are EXTREMELY risky, esp if heavily borrowed to get them. There is no logic or rational reason or definate way of knowing how high prices go above fundamentals (rent, income ratios). If you get it wrong, its you that wears 100% of the decrease in property value, not the bank. Whole deposits can easily be wiped out. I'd NEVER buy in auckland at these prices, with these yields, locking in gauranteed losses each year in the hope that prices become even more irrational.
The other factor is that most Auckland Ithsmus property that's rented out was not purchased at 3% return (nor is 100% borrowed money). I may have bought at around 6% return which seemed like a reasonable investment at the time. The house has increased in value so return is now under 3% which looks bad - however it's also irrelevant. Compared to original purchase price rent increases now mean return is 8%. Seeing as it provides income why would one go through the hassle of selling for slightly better return in a riskier venture?
Ahh! ! Who said there's no money in property investment?
Canterbury rents set to hit Auckland levels
Canterbury continues to have the fastest-growing rental growth in the country, up nearly 15 per cent in the year to April.
Figures from MBIE show the region's post-earthquake housing shortage and rebuild activity continued to affect rents, which were likely to reach Auckland levels by the end of the year if the trend continued.
http://www.stuff.co.nz/business/industries/10124295/Canterbury-rents-set-to-hit-Auckland-levels
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