It's all (mostly) on the house again (is there any other way?)

Personal Finance

New Stats NZ figures show that in the 12 months to March, the country's household net worth increased by over $400 billion - about the same as the increase over the whole of the previous four years; But our savings rate is dropping again

22nd Jul 21, 11:40am by David Hargreaves

New figures from Statistics New Zealand show the net worth of Kiwi households shot up by over $400 billion in the 12 months to March 2021 - a rise that pretty much matched the increase over the whole of the four previous years.

But separate figures from Stats NZ also released on Thursday show that the strong savings rates by Kiwis seen last year have now fallen markedly.

Stats NZ's national accounts senior manager Paul Pascoe said the net worth of Kiwi households as at the end of March was $2.3 trillion, some $118 billion, or 5.5% more than just three months earlier in December 2020.

Net worth is the value of all assets owned by households less the value of all their liabilities.

The rising value of household owner-occupied property contributed $172 billion of the rise in household assets since March last year.

Financial assets, which include shares, businesses, equity in rental properties, bank deposits, and retirement savings owned by households, contributed $245 billion to the increase in household assets since March last year.

When combining rental properties (included in these figures as a financial asset) with owner-occupied property, the increases in the values of residential property accounted for about 54% the household asset increase for the March 2021 year, Pascoe said.

However, saving by Kiwis in the March quarter fell to the lowest level in two years after rising sharply in 2020 on the back of the Covid lockdown and massive economic stimulus.

"Household spending increased in the March 2021 quarter, after having been kept in check for much of 2020 by Covid-19 restrictions," Pascoe said.

The household saving ratio, which compares saving with net disposable income, was 0.4% in the March 2021 quarter, down from 3.2% in the December 2020 quarter.

Net disposable income represents the money that households have available to spend on goods and services after accounting for things like taxes.

In the March 2021 quarter, net disposable income rose 3.1%, but a 6.1% increase in household expenditure reduced household saving to just $0.2 billion in the quarter.

The increase in net disposable income was driven by a rise in compensation of employees, and income of self-employed business owners.

The increase in household spending was driven by increased spending on accommodation, restaurant and cultural services, and durable goods, Pascoe said.

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62 Comments

by alittle | 22nd Jul 21, 11:51am 1626911514

"It's all (mostly) on the house again (is there any other way?)"

Tell us something new and why be surprised.

NZ ECONOMY = HOUSING MARKET

Why = JACINDA ARDEN AND MR ORR ACTION/INACTION

FHB = SCREWED

THANKS = JACINDA ARDEN + ORR

by Justa comment | 22nd Jul 21, 12:22pm 1626913364

To be fair it was NZ First that stopped the capital gains tax, Labour were ready to go ahead with it.
Tax free capital gains remains a HUGE driver of the market.
NZ remains the only country in the OECD that does not have CGT.

by company of heroes | 22nd Jul 21, 2:52pm 1626922336

But Jacinda Arden shouldn't ruled out CGT while she is PM. That sent strong signal out to house speculators. She also said that most kiwi's wealth is tied to housing, she would like to see small increases in housing price every year which shows she only seeks after popularity and votes rather than doing right things for the country. I think the signals she sent to public really spiced house speculation up in these couple of years. She gives house owners or investors false hope that the government is behind them so they can just continue to build their fake wealth.

by Brock Landers | 22nd Jul 21, 1:38pm 1626917888

I never thought New Zealand could do much worse than John Key.

I was very wrong.

Aroha.

by frazz | 22nd Jul 21, 1:48pm 1626918520

Cough Cough..what? IF Smile and wave were in charge Covid would be rampant in NZ - but we might have a new flag and more women with pony tails.

by GV 27 | 23rd Jul 21, 6:36am 1626978997

And yet he did more for housing reform than the PM who got elected specifically attack his lack of housing reform and far more intense media scrutiny than she has ever had to face. But whatever, blue team bad etc

by Theoracle | 22nd Jul 21, 4:34pm 1626928476

Aw, that's not very kind (said with a frown).

by AJ123 | 22nd Jul 21, 1:40pm 1626918011

Write it in a upper case or lower case, it will not matter. But they are considering it as a achievement, they have made NZ household richer and they want to repeat it.

To hell with "human wellbeing", young kiwi's & lower and middle class, it's all about manipulation, lie, deceive, controlling media & ruling the country. Love the way Cindy & Orr playing with nation and remain untouchable. Good Job

by Andyg | 8th Aug 21, 6:27pm 1628404033

by Andyg | 8th Aug 21, 6:24pm 1628403895

Around last October 2020 Jacinda said quote
"we want house prices to increase it gives an indication of wealth for the country"
What a thing to say
Wasn't thinking about First Time Home Buyers.
Then in February or November last year this said this time around quote
said ' we want small increases"
She needs to get her script writer to rght it down before she speaks.
The averge pay in NZ is $70000 and to be happy is $80000 according to research.
It is the 6th most exspensive place of the develping countries in the world to live in.
The median price now is well over $820000 for a house or in uk money £410,000
It used to be the case that Uk was more exspensive to buy and live in

by Pietro | 22nd Jul 21, 12:03pm 1626912182

The problem is that the wealth is illusory. Sell your house and you have to buy another one, plus pay any associated agency and legal costs. Most people move up, so the gap has increased. And of course FHBs are screwed. The only winners are specuvestors and those moving to cheaper regions, or downsizing. But then of course there’s the opportunity cost of not holding as much property as you can afford. What a mess. Capital gain tax on any property apart from the family home is desperately needed.

by ShoreThing | 22nd Jul 21, 12:08pm 1626912509

I've never seen a good justification for excluding the family home, and a whole bunch of reasons to include it. So why should the "family home" be exempt?

by Spectators | 22nd Jul 21, 12:25pm 1626913545

Me too. I'm yet to get a good answer from anyone why the family home should be excluded. I know the real answer is the family home needs to be excluded in order to have any chance at the next election. The voting cohort in NZ (those who ACTUALLY vote) is still largely home owners so won't stand for it. We'll only get change if the non-home owners (generally young) actually rally together and vote in droves or when non-home owners make up more of the voting cohort than home owners naturally as home ownership dwindles. Until then expect no change. The house ATM to continue full speed ahead.

by Noncents | 22nd Jul 21, 1:32pm 1626917579

One reason is intent. The family home isn't intended as an "Investment" it is to provide secure shelter.

This would be inline with the current application of CGT for other investment classes. e.g. shares.

by ShoreThing | 22nd Jul 21, 1:36pm 1626917805

Counterpoint to this, by excluding the family home you will create a loophole big enough to drive truck through. You can guarantee that if it is excluded, there will be plenty of investment properties masquerading as "family homes".

by GV 27 | 22nd Jul 21, 1:38pm 1626917910

Counterpoint: We already have this distinction in our current tax law for the Brightline and anyone who is determined to just commit outright tax avoidance is going to do it regardless of what rules you set up.

by ShoreThing | 22nd Jul 21, 1:43pm 1626918190

That isn't a counterpoint, that is my point. There shouldn't be such a distinction, every single property transaction should have CGT applied.

by GV 27 | 22nd Jul 21, 1:53pm 1626918825

You're asserting a loophole would exist when that exact issue has already been contemplated for and legislated for. It's clearly not the stumbling block you are making out to be.

by ShoreThing | 22nd Jul 21, 2:24pm 1626920683

Would those people who contemplated this and legislated for it be the same people you are also calling incompetent and unable in your other comment? Which is it then?

by GV 27 | 22nd Jul 21, 2:39pm 1626921592

Ah, I see. So because I say various governments and their departments have stuffed up and got us into this mess, it means the tax loopholes you're trying to will into existence must therefore exist? You can do better than that.

by Noncents | 22nd Jul 21, 4:11pm 1626927063

Then apply that logic to everything...if you sell something for more than you paid, then it gets CGT. Shares, Property, Super schemes, art, cars, toys....

IMO, the tax disparity is not between individuals "investing", it is between business and individuals.

We should treat individuals and businesses the same. Either,
- tax an individual like a company i.e. tax on net profit (income from whatever source - Expenses) or
- Tax a company like an individual i.e. tax on revenue.

by GV 27 | 23rd Jul 21, 6:35am 1626978913

Or, we stick with the tried and true method of not hugely complication individual tax returns like they do in other countries and stick with the idea that you pay taxes on profit, which was fine until we spent 20 years not updating the tax system through a lack of political will and some added laziness.

by EarlyRiser | 22nd Jul 21, 12:41pm 1626914510

The family home should be exempt from a capital gains tax because if it was included it could make it much more difficult to merely move house. My parents paid $32,000 for a brand-new 3-bedroom house in 1979. They sold it for $900,000 in 2017. They used all that money to buy another house of a slightly smaller size on a smaller section for just a little under $900,000. If they had had to pay a capital gains tax, it would have been quite difficult for them to move. Would that be fair, I ask?

by ShoreThing | 22nd Jul 21, 12:53pm 1626915231

Why don't you start with your definition of fairness, which seems to include your lovely parents "earning" just shy of a million dollars, tax free.

by GV 27 | 22nd Jul 21, 1:36pm 1626917765

Why don't we start with the 'fairness' of taking that money from people to give to the same outfits who caused the giant mess we're in now, as if it will suddenly make them competent or able to fix the problems they've created?

by blobbles | 22nd Jul 21, 3:28pm 1626924527

You could apply that argument to any taxation. It's a classic argument from fringe libertarian groups what holds little weight upon more than cursory inspection.

by GV 27 | 23rd Jul 21, 7:01am 1626980472

I could, but I'm specifically applying it to this proposal. The government already taxes me on the inflation component of pay rises I have to earn to get back to where their PTA-mandated inflation figure shrinks my wages from - how much more money do they need before they'll suddenly be able to do the things we were supposedly paying taxes for this whole time? I, like many other Kiwis, are happy to pay for these things, but the problem is we've supposedly already been paying for them, as well as suffering huge blowouts in our own living costs - and guess who has been driving the decisions behind that.

Or is asking "Does anyone in Wellington know what the fuck they are doing?" considered fringe lunatic libertarianism now?

by Theoracle | 22nd Jul 21, 4:38pm 1626928684

Would've thought most of what they "earned" was just inflation.

Moot point based on example of 42 year time frame.

by fat pat | 25th Jul 21, 10:50pm 1627210213

A good portion of that capital gain is actually currency depreciation. Why should his parents be taxed becaused they happened to own an asset which maintained it's purchasing power?

by al123 | 22nd Jul 21, 1:11pm 1626916308

It wouldn't have been difficult for them to move, or at least no more difficult than it is for anyone to move. They could have sold and rented, for example. What you're really asking is whether it is fair that, with a capital gains tax, they would have had a bit less money available to buy exactly the kind of house they wanted in exactly the location they wanted. A lot of people are already in the position of having a lot less money available to buy not just the kind of house they want, but any kind of house at all, precisely because of the decades of policies that have lead to your parents house increasing by so much compared to wages. That's not fair either.

by GV 27 | 22nd Jul 21, 1:28pm 1626917294

That's a failure of the state and their institutions, and handing the bill to individual home owners for the crime of shifting from one house to the nexrt might seem rational and sensible to you, but I assure you it is quite insane.

by al123 | 22nd Jul 21, 3:10pm 1626923459

I didn't say shifting house was a crime. But what you're saying is that a certain group of people (asset owners) who make their money in a particular way (through capital gains) and want to spend it in a particular way (on buying a house) should not have to pay tax on that capital gain because it means they will have less money to buy the kind of house they want. Why shouldn't an income earner who doesn't own a house argue that because they want to spend the money they earn on buying a house they shouldn't have to pay tax on their income, because if they pay income tax they will have less money to buy a house?
There might be good arguments against a capital gains tax, but the argument that it means that current home owners who choose to move house will have less money to buy the kind of house they want doesn't seem to be a very good one. Every kind of tax means that people have less money to buy the things they want.

by GV 27 | 23rd Jul 21, 6:32am 1626978724

Where is this "house they want"crap coming from. People's housing needs change over time, so they have to move, be it growing families, school zones etc. I note plenty of renters seem to move for the same reason and their motivations are not portrayed as such.

Instead of questioning why gains are there on the scale that they have been (another one of those failures of the state, weeeee) to begin with, you're trying to tax every home owner's gains (that's another kettle of fish, am I capitalising the interest, painting and other general upkeep?) that are purely incidental as if they were a profit making exercise, and lumping them with a substantial compliance burden in the process. I'd also point out that in pretty much every other part of the world with a capital gains tax, there is some form of rollover relief for owner occupied housing in the event you move from one family home to another, for precisely this reason.

by al123 | 23rd Jul 21, 9:21am 1626988912

I think you're missing the point - you're exactly right that renters sometimes move for those reasons too. But a renter doesn't get to say 'I'm moving house, and if I didn't have to pay tax on the money I earn from working, I would be able to rent a better house, so its unfair to tax me.' But you think it's a knock-down argument against a capital gains tax if a homeowner says 'I'm moving house, and if I didn't have to pay tax on the money I earned from capital gains, I would be able to buy a better house, so its unfair to tax me.'
I'm not saying there should or shouldn't be a capital gains tax. I'm just saying that the argument that there shouldn't be because it's 'unfair' on a homeowner who moves isn't a very good one. The unfairness is actually that some people get taxed on the money they earn that they intend to spend on housing, and some people don't.

by GV 27 | 23rd Jul 21, 10:47am 1626994077

I'm not missing the point, I'm just tired of people thinking that because they think they can justify their argument on some point of principal that it trumps any other arguments that have the same level of grounding - which is 'I assert something is unfair, therefore anyone suggesting anything else can't possibly have as strong an argument as I do'.

I'd rather we proved our ability to administer our current system correctly before we go using subjective notions of what is and isn't fair to create additional massive complexity, when that energy could be used better using the current tax take we collect using our existing frameworks, which we don't seem that interested in doing.

by Justa comment | 22nd Jul 21, 1:16pm 1626916591

Yes the family home should not be included in a capital gains tax.
I dont think anyone has a problem with people buying a house to live in.

by the Joneses | 22nd Jul 21, 3:38pm 1626925089

I don't think anyone has a problem with people going to work and earning a wage, but that gets quite heavily taxed...

by imhenry | 23rd Jul 21, 7:48am 1626983294

Yes simply swings and round abouts

by Nzdan | 22nd Jul 21, 12:46pm 1626914805

Moving house. Sell for $500k. Assume CGT 3% = $15k. Buy house for $485k. Profit = $0, tax = $15k.

Now I can see a case if someone were to sell for $1.2 million in Auckland, and buy in Pahiatua for $200k.

by ShoreThing | 22nd Jul 21, 12:55pm 1626915352

You might have to expand your calculations there mate, it looks like you've assumed a 100% tax rate for the CGT if profit is zero?

by Nzdan | 22nd Jul 21, 6:55pm 1626936914

Yes complete brainfade.

by boreddad | 22nd Jul 21, 1:21pm 1626916905

You only pay cgt on the difference between the purchase price and the sale price of your existing home.

by StuckAtHome | 22nd Jul 21, 12:05pm 1626912331

Hardly surprising that nobody is saving - It's hard to think of any reason to store wealth in fiat. Savers always get screwed in a down-turn under the principal that they would be worse off (in absolute terms) if a correction was allowed to happen.

by fortunr | 22nd Jul 21, 1:45pm 1626918310

True. This dumb ultra-loose monetary policy has not created any wealth at all, but it has actually converted much potential available capital (savings) for investment in real productive activities into the fool's paradise delusion of ever-increasing nominal wealth based on the inflating housing Ponzi. An economy does not grow by selling existing houses to each other.

by xingmowang | 22nd Jul 21, 12:11pm 1626912695

before Labour got elected - J Arden and others "house price is unacceptable and National did nothing".

after Labour got elected - the same bunch "house price should increase each year. nothing to look at here".

NZ politicians are jokes.

by WellingtonInvestor | 23rd Jul 21, 12:59am 1626958746

Plus Labour had kiwi build, that then failed. I am amazed FHBs and yopunger people let them get away with that. Kiwibuild could have been the answer if done properly. But it would have taken a lot of FHBs out of the main property market, and allowed them to buy cheaper houses, making it a 2 tier market.

by MortgageBelt | 22nd Jul 21, 12:19pm 1626913188

Is it unfair that my house is getting a pay cut going forward with a lower rate of price increase into 2022?
Pretty soon I will be out-earning the house.

by ShoreThing | 22nd Jul 21, 12:48pm 1626914880

If it's any consolation, articles come out with these warnings all the time and they're always incorrect. Have you considered accumulating a few more houses before the market inevitably continues its upward trajectory? I'd hate to hear in a few years time that you were a member of the working class!

by Let me be Frank | 22nd Jul 21, 12:53pm 1626915189

"Net worth is the value of all assets owned by households less the value of all their liabilities."

And what happens to that equation when over valued assets revert to real value?

by chebbo | 22nd Jul 21, 1:04pm 1626915885

Hint: it rhymes with "schmegative schmequity".

by Carlos67 | 22nd Jul 21, 1:35pm 1626917733

There is no such thing as "Real Value" there is only current value based on what you can sell it for right now. You need to mentally evaluate the risk and just suck it up no matter which direction the price goes, property is a long game. The underlying issue is that most people are really risk adverse and just cannot commit to the numbers involved of a 30 year mortgage. Ask yourself are the prices more likely to keep rising or will they fall ? The odds are still in favor of continued rises at this point in time.

by Brock Landers | 22nd Jul 21, 1:41pm 1626918072

At what point would you say they would stop being in favour?

by GV 27 | 22nd Jul 21, 1:44pm 1626918284

Ah yes, the old "The problem is in your head, please ignore the fact that a 30 year mortgage used to be a 25 year mortgage as standard not too long ago and the extra five years is just to maintain a veneer of affordability, THAT'S ALL ON YOU BUDDY"

I think the underlying issue might be that house prices are cooked and they're less affordable than they used to be.

by WellingtonInvestor | 23rd Jul 21, 1:04am 1626959095

If they get the Super age raised up to 67 then up to 70, then they can easily add on another 5-10 years onto mortgages. This then allows house prices to go even higher. People don't seem to see that they are becoming wage slaves to these artificial high asset prices. They are instead buying into these inflated prices. Someone is making loads of money from this. I have also seen more and more leasehold new builds being sold. So those developers get to earn a passive income forever off these houses they sell, and lease the land out on.

by Let me be Frank | 22nd Jul 21, 3:48pm 1626925687

There is indeed real value...it is that value which can be supported.

by treadlightly | 22nd Jul 21, 1:11pm 1626916279

As economist Wynne Godley explained with his sectoral balance accounting identity (S-I)=(G-T)+(X-M) the private sector can only accumulate savings if the government runs deficits or NZ runs current account surpluses.
https://en.wikipedia.org/wiki/Sectoral_balances

by Rick.James | 22nd Jul 21, 2:00pm 1626919225

Maybe zoomers & millennials and those that come after will decide to denominate in Bitcoin rather than NZD...

Anyone who's done that over an extended period of time has experienced collapsing house prices...

Maybe not, time will tell.

by frazz | 22nd Jul 21, 2:05pm 1626919552

The fundamental scam of modernity is the idea that government needs to manage the money supply.

Saifedean Ammous, The Bitcoin Standard

by CWBW | 22nd Jul 21, 4:40pm 1626928832

Now I have much less doubt that anyone who tries to mess around with the interest rates by tilting it up will kick start another recession in this country.

by WellingtonInvestor | 23rd Jul 21, 12:56am 1626958594

But what actually makes a house rise in value 30% in a year? Are people paying that price, because these online estimation e-Value websites are saying that is what it is worth, and they can borrow all this cheap money from the bank? Those evalue figures are based on what people paid for similar houses previously in those areas. If people aren't willing to pay as much, then house prices can fall. Or will the government prevent that occurring?

by Carlos67 | 23rd Jul 21, 5:43am 1626975809

Not sure why people are having so much trouble figuring it out, the house I used to own was rented out a few months back for over $800 a week. Anyone as a couple earning decent money would buy a place instead instead of flushing $800 down the toilet every week. Nothing has changed, if you can make the mortgage repayments your better off buying a house. Near zero rates have caused prices to jump, its that simple.

by Carlos67 | 23rd Jul 21, 5:45am 1626975918

Dp.