Faster gains for those who have?

Personal Finance

After three years of lackluster capital gains, there are signs that the country's housing stock is wanting to reprise its role of delivering tax-free gains falling from the sky

10th Jan 20, 4:40pm by David Chaston

The commitment of households to housing picked up in the September quarter of 2019.

According to the M10 data release by the RBNZ (based on CoreLogic sources), households saw the value of housing rise by +4.7% in the year. This is the fastest rate of increase in 2019, rising from a +3.7% rate in the June quarter.

This data allows us to derive the value of household rental housing investments, because we have the value of owner-occupied housing in the C22 series.

As at September, the value of the housing owners lived in was $857.0 bln. The value of household investment in rental housing was another $290.4 bln. Together, New Zealand households now have an asset in residential housing of $1.157 tln, a new record.

In the past year, the value of all housing stock has risen by $52 bln. But what is remarkable is that half of that rise came in the thirteen week to September 30, 2019.

While these rises may seem large, they are not record gains, and not by a long way. The largest annual gain occurred in the year to December 2016 when it rose by +$140.7 bln. The largest quarterly gain occurred in the 13 weeks to June 2016 when it rose by an eye-popping +$54.5 bln (or +$4.2 bln per week).

Separate Statistics NZ data released today shows there were 609,700 tenanted residences at the end of September. On that basis, the average value of rented dwellings is now $486,300. That is up +5.3% from the average value of $461,650 in September the year prior. Capital gains on renters are reappearing, although other data suggests that these gains are in regional urban centres, rather than in Auckland, Christchurch or Queenstown. On average, the gains amount to $475 per week. They are gains that are untaxed, unlike similar capital gains from holding many equities.

C5 RBNZ data shows that all mortgages for all housing at September 2019 involved a debt liability of $271.5 bln. By implication, New Zealand households have equity in their housing stock holdings of $825.9 bln. This grew +$21.7 bln in the September quarter, the fastest rise since 2016. The average quarterly rise over the previous three years was just +$8 bln. Many owners may dust off their ATM playbooks.

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82 Comments

by andreas_od | 10th Jan 20, 4:50pm 1578628209

Hmm, this article comes just the very next day after the other one tilted "Residential property is now a bad investment" a bit confusing , isn't it?

by David Chaston | 10th Jan 20, 4:55pm 1578628511

That other article is investment opinion. This one just reports what happened in the September quarter. It is not saying the trends represent a "good investment".

by richard1965 | 10th Jan 20, 4:54pm 1578628497

Did you not notice article... Not to trust the experts.....lol

by DIYman | 10th Jan 20, 5:55pm 1578632141

Yesterdays story was in my view, an advertorial,

by Gummy Bear Hero | 11th Jan 20, 9:12am 1578687137

.. there is a kernel of truth in what you say ...

by richard1965 | 10th Jan 20, 4:53pm 1578628403

Tax Free.... but is it not when government was planning to introduce CGT all ( who happpen to be rich, powerful and high places) with vested interest argued against it, as if government was doing a crime by taxing speculators (not family house).

Our very own PM who fought election on CGT took a U turn as greed of being in government (which was achieved on CGT) over powered all reasoning. So NZ has good politicans but NO leader.

Welcome to Tax Free Heaven - New Zealand.

by Narrabeen Boy | 10th Jan 20, 4:59pm 1578628777

Oh oh here we go again lady's and gentlemen!!!!!

by Audaxes | 10th Jan 20, 6:11pm 1578633075

C5 RBNZ data shows that all mortgages for all housing at September 2019 involved a debt liability of $271.5 bln. By implication, New Zealand households have equity in their housing stock holdings of $825.9 bln.

But only one third of households have mortgages. And those without houses, but subject to future periodic liability payments are wearing an equal and opposite present value percentage cost increase, without an automatic commensurate, compensatory wage increase or discounted present value capital gains. Casino economics at it's best, as practised by central banks.

by Audaxes | 10th Jan 20, 6:36pm 1578634580

Former Fed chair Yellen agrees with Prof Richard Werner's call for credit guidance (control of credit growth, restriction of non-GDP credit).

Has she read New Paradigm in Macroeconomics, Palgrave Macmillan, or Princes of the Yen http://quantumpublishers.com? Link

by BigDaddy | 10th Jan 20, 6:18pm 1578633498

We got rid of overseas investors and still prices are rising.
We got rid of flippers by bringing in a 5 year CGT and still prices are rising
We brought in depreciation curbs and still prices are rising.
We brought in harsher rental controls to discourage landlording and prices are still rising.
We brought in banking curbs on bank loans and prices are still rising.
Who then are profiteering?
Why, it's Mums and Dads making tax free capital gains by selling their own homes.
Are going to curb them as well?

by Due Diligence | 10th Jan 20, 6:23pm 1578633804

Just a reminder -

by BigDaddy | 17th Jan 19, 10:34am
These figures are a portend of things to come.
Frustrated sellers will start to slash prices as autumn and winter approaches.

by BigDaddy | 22nd May 19, 10:55am
First Home Buyers are about the only buyers in the market at all...Anything much over $750K cannot be considered. The Auckland residential market cannot survive on naive FHBs who will be the first to be dragged down as the market slips further.

by i am not a nimby | 10th Jan 20, 6:38pm 1578634684

lets swing in the tall poppy syndrome in action and lets ban res prop purchase.

by brisket | 10th Jan 20, 6:40pm 1578634823

"The market can stay irrational longer than you can stay solvent." - JM Keynes

by Shoreman | 10th Jan 20, 7:21pm 1578637307

DD - is BigDaddy RP in disguise ??

by Shoreman | 10th Jan 20, 7:22pm 1578637343

DD - is BigDaddy RP in disguise ??

by Due Diligence | 10th Jan 20, 7:35pm 1578638134

BigDaddy = Wolly Noland = Olly Newland

https://www.interest.co.nz/news/96835/bnz-unveils-two-year-395-home-loa…

by David Chaston | 12th Nov 18, 2:05pm
That is rubbish Ollie...

by Yvil | 10th Jan 20, 8:18pm 1578640697

Thanks DD for finding these earlier posts from Big Daddy... just one (actually 2) more wrong predictions. BD certainly seems to have changed his tune in today's post

by J.C. | 10th Jan 20, 6:39pm 1578634777

Who then are profiteering?

Everyone involved in the game. It's relentless. Trust me, if anything were to cause the magic to stop, who knows what the consequences would be.

by Foxglove. | 10th Jan 20, 7:04pm 1578636256

Well all the City Councils then. The higher the values, the higher the rate take, which the said parties, will neither confirm or deny of course.

by Pragmatist | 10th Jan 20, 7:11pm 1578636711

Yeah, you really don't get how rates work in NZ do you? They don't sit round and say we'll see what comes in depending on how values move. They say we need (want) $x this year, now divide that up over what the rating values of all the houses/properties, and that is how rates are set.

by Foxglove. | 10th Jan 20, 8:03pm 1578639807

Oh yes true enough if you are naive enough. Except the psyche is not what we need it is how much can we actually get, something akin to how much can we make people pay for a litre of milk, or screw out of the ratepayers this year without precipitating a revolt. And to justify that? Well just look at how much more value everyone now has in their property, thanks to us, in no small part. Risible.

by Pragmatist | 10th Jan 20, 9:07pm 1578643670

by Due Diligence | 11th Jan 20, 8:30am 1578684647

What's your point?

Since you seem to know a lot about rates tell me this, true or false: multiplying council rates by a factor of 5 will make houses cheaper. This is TOP’s logic, so you should answer true.

by Pragmatist | 11th Jan 20, 7:56am 1578682591

Still scared shitless I see. Sorry, not playing your game, toodles.

by Due Diligence | 11th Jan 20, 8:15am 1578683734

Toodles? You’re a special individual that’s for sure. The house thing didn’t work out, but I think I can help out in other ways. Step one - you need to drastically cut back on soy.

by Gummy Bear Hero | 11th Jan 20, 11:35am 1578695758

. . soy sucks !

... have a beer with Gummy , 'tis the weekend ... had a rigger of Hunter Hills pilsner last night . .. great little brew ... so hoppy that 100's of little breweries and brewpubs are popping up in our fair land , girt by fizz ...

by Foxglove. | 11th Jan 20, 11:59am 1578697190

After a ill advised Xmas present and many many years are obliged to make a batch of my own. Will in due course, if you like, send you a complimentary bottle, but best you buy your white walking stick beforehand.

by Gummy Bear Hero | 11th Jan 20, 12:11pm 1578697909

.. can't wait ! ... the Gummster has a cast iron stomach .... and a brain to match ...

by Averageman | 10th Jan 20, 7:11pm 1578636683

End of the day as long as money is cheap the debt everything bubble is protected. All down to global policy that protects makers of debt.

by meh | 11th Jan 20, 11:15am 1578694505

As long as credit is perceived to be cheap the debt everything bubble is protected.

Remember there is no "money".

Your rulers, the makers of credit, don't want it any other way.

Since the dawn of "civilisation", first by force and military might, then via religion, and now via credit and control of resources, minority groups with a lust for power and adulation attempt to rule the world.

by PocketAces | 10th Jan 20, 8:30pm 1578641409

No mention of high immigration rate there, I see

by Gummy Bear Hero | 11th Jan 20, 9:24am 1578687894

. . immigration is adding the equivalent of a New Plymouth to our population base every year ...

Another failure by Taxcinda and Winston . .. how many new New Plymouths must we endure ... the horror of it all ...

by Fritz | 11th Jan 20, 9:41am 1578688871

Slightly better than many Palmerston Norths.
At least NP is next to the sea.

by Henry_Tull | 12th Jan 20, 12:37pm 1578785826

Never seen such dirty sand.

by President of P… | 11th Jan 20, 8:56am 1578686211

by President of P… | 11th Jan 20, 8:58am 1578686306

Big Daddy - and you brought in your book in 2004 when the bubble bursts... perhaps Bernard read it. https://www.amazon.ca/Day-the-Bubble-Bursts-The/dp/0958230730?Subscript…
and prices are still rising....

by meh | 10th Jan 20, 6:51pm 1578635500

Abracadabra!!

by J.C. | 10th Jan 20, 6:56pm 1578635767

Not as good as the U.S. perhaps. Trump is referring to the best economy ever.

by Foxglove. | 10th Jan 20, 7:06pm 1578636378

And to top even that, the best President ever, to boot!

by Gummy Bear Hero | 11th Jan 20, 8:43am 1578685394

... and the hottest first lady ever ...

by Foxglove. | 11th Jan 20, 9:21am 1578687711

Oh dear GBH. Are you perhaps hoping Hef will rise from the grave and organise a pictorial?

by Gummy Bear Hero | 11th Jan 20, 9:28am 1578688088

... I heard they had the devil of a job to screw down the lid on his coffin ... he was a very stiff stiff ..

by Foxglove. | 11th Jan 20, 9:34am 1578688473

Is there then perchance, a passing acquaintance with the grand lady who needed to be buried in a Y shaped coffin?

by realist2 | 10th Jan 20, 8:08pm 1578640121

In my mind its a supply and demand issue. There is a shortage of housing (except in CHCH where prices have been stable for some time), therefore build more houses. But then, as has been pointed out by many, there is a shortage tradesmen. Solution: Train more tradesmen, they will identify the shortage and build the houses.

by PocketAces | 10th Jan 20, 8:31pm 1578641491

Unless immigration rate is severely curtailed we are on a tail chasing mission

by Hardly | 10th Jan 20, 8:09pm 1578640152

The words reversion to the mean spring to mind. Perpetual super normal capital gains are not the mean. As boomers are so happy to point out, over the last 30 years we have seen interest rates drop from like 20% to 3%. This is a one off change, it’s not going to repeat and might reverse. Therefore I’d suggest it’s not going to be an ‘up, up, and away’ type situation.

by Foxglove. | 10th Jan 20, 8:14pm 1578640464

Tks. Great comment. Best grasp of relevant recent history and voice of reason have read on this site for quite a while.

by Yvil | 10th Jan 20, 8:22pm 1578640942

For your own good, it's very unfortunate you believe such misplaced nonsense

by Foxglove. | 10th Jan 20, 8:37pm 1578641832

Post 1987 rates topping 20%. Post 2008 rates 3%. What happens next then?

by Yvil | 10th Jan 20, 9:13pm 1578644026

Same as what happened in the last 10 years
Same as what happened in the last 20 years
Same as what happened in the last 30 years
House prices keep going up

by Foxglove. | 10th Jan 20, 9:38pm 1578645513

The first great house price surge I experienced was during the Kirk Labour government. That government introduced the Property Speculation Tax. That stayed in situ into the second term of the succeeding Muldoon government. There have been subsequent surges sure enough, but at times, admittedly in the minority, there have been falls. For instance the great authority MP Brownlee, proclaimed that some Canterbury EQ red zone house settlements were in excess of the relative market value. All Hardly was suggesting is that prices are not looking likely to be strapped to a rocket and take off into the stratosphere.

by Hardly | 10th Jan 20, 10:27pm 1578648421

House prices will continue to climb over the long term. I’d bet on them going up next year.

But, surges in asset prices reduce the likelihood of a future surge. This isn’t just charts, look at the fundamentals - interest rates and incomes. We had what a 70%? jump in the 2000s and then a 40% jump last decade. The market doesn’t have another big jump in it. Most likely it will lift itself maybe 5-10% more based on these low rates and then stagnate for quite a long time with low of zero growth.

by J.C. | 11th Jan 20, 1:41am 1578660095

"It's all about the fundamentals"

Whatever you think they are and what they might be

by Fritz | 11th Jan 20, 9:44am 1578689044

Yeah along the lines of what I think

by Yvil | 11th Jan 20, 10:11am 1578690684

So we agree, house prices will keep rising

by J.C. | 11th Jan 20, 1:46am 1578660416

Like Coronation Street. So predictable.

by Fritz | 11th Jan 20, 9:42am 1578688935

I agree this reversion to mean stuff is bollocks

by Yvil | 11th Jan 20, 10:14am 1578690878

Hey Fritz, we agree on something, LOL. 2020 is a new year, the year we agree on everything (surely not but it's a good start)

by Fritz | 11th Jan 20, 4:24pm 1578713076

Bet you don't agree that prices won't get anywhere near doubling in the next decade!

by Yvil | 12th Jan 20, 11:07am 1578780475

Yep, I agree with that statement : )

by President of P… | 13th Jan 20, 7:35am 1578854137

well i wouldn't be surprised if the value of fiat is half what it is today in ten years, that would make prices double without them going up in value, plus chances are they will be in more demand - therefore increase in value/relative price too
President of Property
PS: MMT - modern monetary theory....worth a look at folks

by Gummy Bear Hero | 11th Jan 20, 9:35am 1578688500

... markets have a " mean " line ... but are usually somewhere above or below the actual line...

Whatever pricks the bubbles in stockmarkets and housing worldwide will send them tumbling below that " mean " line ...

.. butcha correct , reversion to mean is the forgotten metric when it's a lolly scramble for free capital gains.

by Cowpat | 11th Jan 20, 10:18am 1578691103

I am unsure if the value of housing stock at 3.77 times national GDP , nearing historical highs ,and likely to be passed in the December quarter , is really something to crow about. As for the headline increase , this should be offset against new residential investment, ( the increase in housing stock ) , and the inclusion of the underlying land value upon which those homes stand.

by Gummy Bear Hero | 11th Jan 20, 10:48am 1578692889

... far from something to crow about .. . The dysfunctionalities which have led to us having more expensive houses than the US , the UK , or much of Europe , are causing massive problems across society ...
Those off the property ladder truly are on " Struggle Street " .... the disconnect between the " haves " and the " have nots " has never been wider in NZ than it is now .... uncool , seriously uncool ...

by ngakonui gold | 11th Jan 20, 12:43pm 1578699821

Might be a supply and demand problem.
In theory if you build more thy should drop off in price but that will never happer because
a)we let too many people into NZ
b) we can't build houses for the people that are here which creates the problem

by Gummy Bear Hero | 11th Jan 20, 12:48pm 1578700089

.. I'd add that we're constrained in our housing styles , too ... adhering to a dominance of large 3 brm standalone homes in leafy green suburbs , constructed from standardized materials ....

Not enough innovation allowed or encouraged ...

by Halfway To Paradise | 11th Jan 20, 3:33pm 1578710035

Someone mentioned on here two or three weeks ago that if we get a continuing drought in Australia we will get people flooding her from Australia. With these fires continuing I see this being a possibility, how many Kiwis live in Australia? How many kiwis will think twice about going to Oz? This could be a major factor on immigration.

by Shoreman | 11th Jan 20, 4:27pm 1578713255

HTP - I mentioned re Aussy's moving over probably others as well. I have just been in South Australia for 2 weeks. I think the bushfires past/current/future and high temps are significant enough to make many people reconsider their longterm future. Melbourne/Adelade/Canberra were incredibly hot, some days ( some days temp would be halved ! ) really overcast/smokey so just being in those cities is impacting enough. Time will tell but possibly in the future our free border access will need to be reviewed. If just 1% of Aussies ( also Kiwi's returning ) decided to move to NZ over the next decade that would add 25,000 extra people a year or 250,000 over a decade it would be very significant for our Economy.

by Gummy Bear Hero | 11th Jan 20, 5:43pm 1578717834

... the hip pocket nerve rules ... Aussies earn considerably more than we do ... lower to middle earners pay less tax than we do , much less . .. groceries are cheaper ...

Job opportunities are greater ... theirs is a far broader economy than ours ....

... come to NZ to avoid a fire ? .... WTF !!!!

by Carlos67 | 12th Jan 20, 6:44am 1578764647

Its all good until the weather gets so hot and you run out of water at which point its all over rover. People are forgetting the basics of life you cannot eat drink or breathe cash to survive but you can use it to get on a plane and get the hell out of Australia to somewhere livable.

by Gummy Bear Hero | 12th Jan 20, 9:23am 1578774217

. . there's no shortage of water in Australia ... its just that most of it falls in areas like the top end , where few people live ... but , there's been talk for decades of collecting and piping it down and across to the major cities ... if anyone can do it , the Aussies can ..

A small island to the west of Darwin , Dum in Mirrie , copped 380 mm of rain in the past 24 hours .. .

by mikekirk29 | 12th Jan 20, 2:35pm 1578792906

Have a million Kiwis in Australia.
80,000 in Sydney

by kiwilover | 12th Jan 20, 10:03am 1578776605

Ministry of Business, Innovation and Employment (MBIE 2019) found no evidence that a higher share of new (international) immigrants in an area is associated with higher house prices.

by THE MAN 2 | 12th Jan 20, 10:43am 1578779027

Gummy Bear, you were wrong that the Ozzies have been paying less tax than what Kiwis have been!
Depended on what your income was!
If your income was say $48k in Oz you would’ve been paying more tax there than in NZ plus you had to pay Medicare as well.
The Super scheme was better with bigger contributions being made.
Yes some things are cheaper in Australia than NZ like petrol and electricity but there are a lot of extra taxes than what NZ has as well like CGT, and taxes when you buy property..
People always think that the grass is greener on the other side of the Tasman and that is clearly not the case!!
Both countries have issues that need addressing but what I do know is that these fires that are burning in Oz are going to have a massive effect on so many people in Australia, not only the farmers who are financially ruined but also the economy of so many small places.
NZ any day to live and Australia to holiday!

by Foxglove. | 12th Jan 20, 11:19am 1578781148

TM2 points made & taken. Just wish that both our countries as relative had invested in fire fighting planes to have ready on stand by. Yes the grass is always greener but have you taken a look at the high dry grass and tall noxious weeds such as fennel present in far too many areas of the port hills. Highly combustible, just takes a cigarette but and away it will go again.

by Gummy Bear Hero | 12th Jan 20, 11:41am 1578782500

Australia has a GST of just 10 % .... compared to our 15 % .... the first $A 18 000 of earnings is tax free .... here , you lose $ 2170 of that .....

The Kiwi way is to punish lower income earners ... to slug the middle ... an to go easy on the rich ... OZ hits over $A 90 000 earners with a 37 % tax ... we top out at 33 % for above $NZ 70 000

by THE MAN 2 | 12th Jan 20, 6:29pm 1578806996

Yes the GST rate is lower and many things are cheaper due to the economies of scale.
Different strokes for different folks as they say.
We lived in Oz for one year and I loved it but I wasn’t working over there and think it would’ve been not as good if I needed to work.
However have no regrets whatsoever in coming back as financially there is no way in hell we could’ve possible have made as much money as we have living in Oz and setting up the family forever with what we do!

by Gummy Bear Hero | 12th Jan 20, 4:53pm 1578801239

.. my contention is that despite 9 years of Helen Clark's Labour government .... and , 3 years of Taxcinda's . . we still have a taxation system which clobbers the lower income earners , compared to that of Australia ...

So , what the bloody hell is the point of Labour , then... they're absolutely useless at looking after the workers , the battlers on Struggle Street ...

by Fritz | 12th Jan 20, 5:15pm 1578802533

First 20k tax free! What are they waiting for???

by Just Some Advice | 12th Jan 20, 2:45pm 1578793557

THE MAN 2, you have firmly hit the nail on the head.

by mikekirk29 | 12th Jan 20, 2:34pm 1578792842

Has Stats NZ released figures for Auckland tenanted v owner occupied yet?
And by ethnicity
And with change since 2011?
Taking their time.
These National figures are worse than useless

by Andrew King | 13th Jan 20, 5:17pm 1578889063

Hi David. In your article you say that gains from selling a rental property "are untaxed, unlike similar capital gains from holding many equities". I thought that capital gains on rental property and equities were the same, with the only difference being that if you sell a rental property within 5 years you pay tax on any capital gain whereas this isn't the case with equities. Shouldn't it be equities are untaxed unlike similar capital gains on rental properties?