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Government says next week's housing policy announcement will be part-stick, part-carrot to encourage investment beyond property; RBNZ calls for tax changes; Interest.co.nz considers some options

Government says next week's housing policy announcement will be part-stick, part-carrot to encourage investment beyond property; RBNZ calls for tax changes; Interest.co.nz considers some options
Image sourced from Flickr

By Jenée Tibshraeny

The Government plans to use a carrot to incentivise investment beyond housing, as well as a stick to deter speculation in the property market.

Finance Minister Grant Robertson on Tuesday said the package of housing policies the Government is due to unveil next week will include a “mixture of both incentives to go [invest] elsewhere and disincentives within the housing system”.

Prime Minister Jacinda Ardern framed the issue in a similar way on Monday.  

She said the Government was considering why there was an “extra psychological imperative” in the COVID-19 environment that's made housing feel like the safest investment.  

She said the Government had to do “multiple things” to ensure it was “encouraging people to build, and encouraging people to look at alternative investments that contribute to our productive economy”.

Neither Ardern nor Robertson shed any light on what these “incentives” would look like or whether they would involve the tax system.

Orr uses similar language and again mentions using the tax system

Reserve Bank (RBNZ) Governor Adrian Orr likewise mentioned using “incentives” on TVNZ’s Q+A programme over the weekend.

Speaking of the longer-term issues underpinning the housing crisis, Orr noted the need for people to look for “alternative places to invest”.

He acknowledged the RBNZ’s moves to lower interest rates were aimed at encouraging people to “go out there and use their money”.

But he cautioned: “We didn’t say, go out there and buy only homes.

“There is a full array of places where you can invest, but New Zealanders keep going to housing…

“It’s about access to the debt, it’s about the ability to take on so much leverage. For the investor, it’s about being able to fund yourself at the interest-only…

“It’s all advantaged towards housing, all of the time, as an investment. And so, we need to think hard about that and start making real change. Leverage, taxation, as well as the supply-side are the drivers.”

Potential incentives...

So what incentives could the Government introduce to complement, or possibly soften the blow of, the disincentives it’s about to unveil?

Interest.co.nz has no insight into what will be announced, but here are some options experts have recently recommended:

  • Reduce the amount of tax paid on KiwiSaver

The Tax Working Group, in its final report given to the Coalition Government in February 2019, recommended cutting the bottom two prescribed investor rates (PIR) for KiwiSaver funds by five basis points each to 5.5% and 12.5% (from 10.5% and 17.5%). The Group recommended leaving the top PIR at 28%. This is still below the top income tax rate.

It estimated the change would put an extra $630 million in low-income earners’ pockets over five years.  

  • Take a broader view to tax capital income less than labour income

Andrew Coleman - a former Otago University lecturer, who in January started working at the RBNZ as an economist - has long advocated for taxing income earned from capital (IE dividends and interest) less than income earned from labour.

He responded to the Tax Working Group report by saying lower tax rates on capital would encourage people to keep their wealth in the country and innovate. This would up productivity and wages/salaries.

Furthermore, taxing capital income less would see people benefit more from compound interest. The change would affect young people, with more time to grow their wealth, the most.

It would also reduce the relative attractiveness of residential property - from a tax perspective at least.

Coleman advocated for these changes to be included in broader reform, including introducing a more comprehensive capital gains tax, and taxing retirement savings when they’re withdrawn, rather than when money put into a retirement savings fund (like KiwiSaver) is earned.  

“This would bring New Zealand in line with standard OECD practice, and closer to the highly progressive tax systems adopted by most Scandinavian countries.” Coleman said.

While his ideas in full might be too much for the Government to undertake, reducing tax on capital income in some shape or form, like by reducing PIR rates, could encourage investment beyond housing.

As for potential policies to disincentivise property speculation…

  • Extend the bright-lines test

An extension of the bright-line test could be on the cards, based on the fact Robertson has repeatedly denied making this change would constitute a “new tax” and thus see Labour break its election promise to not introduce new taxes.

The tax, introduced under the former National-led Government at two years, has already been extended to five years. This means anyone who buys and sells an investment property within five years has to pay income tax on any gains made.

  • Restrict bank lending

Beyond this, Robertson has sought advice from the RBNZ on restricting the use of interest-only mortgages by property investors.

He has also asked the RBNZ about how debt-to-income (DTI) restrictions - a tool the RBNZ has long wanted - could be targeted to investors.  

He expects the RBNZ to report back within a matter of weeks.

The RBNZ clarified it currently has the power, legally, to impose restrictions on interest-only lending.

As at December, 39% of bank loans (by value) to residential property investors were interest-only, while only 13% of loans to owner-occupiers were interest-only.

  • Cap interest expense deductions

Another option could be restricting how much of their interest expenses property investors can use to reduce their tax bills.

Specifically, tax accountant Terry Baucher, of Baucher Consulting, in October said the thin capitalisation regime could be applied to investment properties.

He explained that under the current regime, “If a business such as Microsoft wanted to invest substantially in New Zealand, the interest deductions that it can claim on any debt funding provided are restricted if the debt to asset ratio exceeds 60%. Restrictions also apply to the interest rate that can be charged on the debt funding.  

“Applying the thin capitalisation regime would tackle the ability of investors to use debt to leverage up their investments which is another way first home buyers can be priced out of the market.”

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

283 Comments

Next week's policy announcement to include PR statements to hit news headlines and policy with no substance...

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This policy must be a joke. People expect the house price to rise at least 20% this year, and a 5% tax cut on Kiwi saver will make people put money on Kiwi Saver rather than buying investment properties. Seriously?

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Agree

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A good post here on their dilemma

https://surplusenergyeconomics.wordpress.com/2021/03/03/192-the-great-d…

In summary... ‘talk hard and act soft’

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Great link.

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I think the carrot should be the same as the stick. The target OCR (2%) should be subtracted from the tax you pay on savings (why should you pay tax on inflation) and also subtracted from the tax you can claim on debt (why should you be able to claim inflation as a cost). That alone swings things in favour of savings by 4% x

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Listened to Julie Anne Genter this morning outline their housing policy. Produced policy that was infinitely bolder than Labour and although I’m not a fan of all their policies if they bring their housing policies to the election they will get my vote for the first time.

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Don't you get it? Politicians say anything to get into power. Once there nothing happens. Were you born yesterday?

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Politicians say anything.....

Look no further as Best EXAMPLE Jacinda Arden.

She should get the award for conning the very people who voted her as she wanted to reach out to nationals support base but now is finished as she is neither here nor their.

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worse than that... They give token solutions to apparent symptoms. This way they can claim some kind of victory and then when the unintended consequences/higher order effects of their so called "solutions ", manifest down the track,..... its not their fault nor their problem.
Just listened to Julie Anne Genter interview.... and was pretty disappointed. Pretty weak stuff, in my view. She could not even be straight up and admit they want a Capital gains tax......
She could not answer if dealing to investors might have an impact on rents...
Investors seem to be the "enemy".. the ones to blame.....not just with politicians, but with many people ( going by comments on this site over time ).
Seems to be some kind of fantasy, that killing off ( figuratively speaking ) investors, will magically solve our housing problems, which include not just house prices ( affordability ) but also rental shortages in certain areas...

Tax and regulate seems to be the go to solutions that politicians use.... which , of course , they are not ( real solutions ). At best, they incentivize , but don't address the fundamental problems.. in my view.

I like the idea on building state houses, but question the need for a state agency that builds them. I think there are enuf ideas from looking back at our history of state houses. eg. Build during a downturn, uses Cheap reserve bank loans etc...
https://en.wikipedia.org/wiki/State_housing#:~:text=Almost%20all%20of%2….

The peak number of state houses were reached in the 1990s with 70, 000.
This has declined to 64000 by 2019.. https://kaingaora.govt.nz/assets/Publications/OIAs-Official-Information…

For me, our housing problems are a direct consequence of our immigration policy which allows high levels of immigration , without any regard for the impacts on infrastructure and housing...etc...etc AND.... u cant blame investors for that.

ALSO... Cant have your cake and eat it too... Govt/RBNZ are partners in what I call "financial repression". Transferring wealth from savers to borrowers. With ultra low interest rates it makes alot of sense to rotate out of term deposit type investments and buy hard assets ( like real estate) , with the use of leverage....
Who would u blame for this..?

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Blaming immigration is a canard. Compare NZ with Singapore. 50 years ago NZ population was 3 million vs 2.5 million for Singapore. Today it is 5 million in NZ vs 6 million in Singapore, due to much higher immigration there. But only 60% of NZ's population own their own homes vs 90% in Singapore. So it's not immigration per se that is to blame, it's poor governance in NZ!

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Great work by the Greens. Not that it's all likely to happen in the short term, but they have done their job of extending the debate and creating space for Labour to pick up some of the ideas and still seem like the 'moderates'.

Lets hope Labour don't drop the ball.

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When asked about prices dropping, JAG still only promised for prices to go back to the end of 2020 level, whereas that the 2020 election many Green MPs were saying prices had to drop from what they were even then.

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Don't think it was a promise. she just acknowledged that a $100k fall would only be to those levels. The implication is that she hopes for a much bigger drop but in a managed (soft) drop.

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It sounds like a good idea but the technicalities of trying to avoid obvious work-arounds would require years of work.

That said I think we're very unlikely to see meaningful reform from the Labour/National party because they are so intent on winning that middle class property owner vote.

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As I said on another article...

Are the Greens being used by Labour to test out policy, to gauge the public reaction to various policies before Labour announces the ones that don't cause the biggest push back?

It certainly seems so, now they have delayed their announcement. The Greens announcement comes out at exactly the same time GR said he was going to announce measures to cool the housing market. Testing the waters with your partners Labour? Certainly seems like it...

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As a test I doubt it will work. The greens could say the most sensible thing in the world and a big percentage of the population would hate it just because they hate the greens.
I think it more likely that Labour are using the Greens to dull down their changes to their new right wing fan base. "At least it is not as radical as the greens."

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It is one of the few sensible politicians that really understands the issues we are having and even the solutions they propose do not include a total ban on investment is not a bad start and at least they show they are not totally blocked by like Natbour due to the influence they get from investors and the banking sector.

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I voted Green. I'm not a big fan but I wanted them to force Labour to act on policy rather than re-election. National supporters voted Labour and defeated any meaningful change.

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You are joking right???

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Of course they have already removed the ability to claim interest deductions for Ma and Pa investors by only allowing deductions on a similar asset class, thus advantaging large investors and hurting those small investors.
Now they want to hurt the little guys even more, and control what they do with their money. This is an idea free, competence free government who keeps taking actions that have undesirable consequences without knowing what the hell they are doing - unless it is a very clever strategy to get their unpopular early policies implemented?
Am I missing a trick here?

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You don’t get it. Ma and Pa are not the heroes of this story. The collective greed and lack of imagination from Mas and Pas is throttling their own children. And from a renter’s point of view, having rental housing in the hands of large interests (or the state) is preferable to Ma and Pa, believe it or not. I’ve had to move house three times in five years despite being an excellent tenant, because Ma and Pa always dream of doing some Reno and juicing those capital gains, never mind that they’ve waited twenty years to fix the leaking roof...

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Well said.

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I'm not sure why people believe a "Ma and Pa" investor's rights to un-earned capital gains and to extract wealth from future generations by locking them out of the housing market, somehow trumps the rights of young working New Zealanders (who are just asking for a right to purchase a home if they work hard and save). You know, the same chances those "Ma and Pa" investors where given when they were young.

Not to mention the systemic risks now posed to the economy as a whole that the housing bubble has created - and who will pay for that? Future generations while those "Ma and Pa" investors escape with all the capital gains.

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Great comment. One of the best I have come across in this site for quite some time.

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And aren't they almost all Grandma and Grandpa anyway?

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Well said. Agree wholeheartedly.

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For that too happen NZ's population would need to have been a "Fixed" constant 2½ million people as it was back in the 1960's
Bit late for that now

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Oh please. The shortage of houses in NZ is estimated at between 60-80k properties. Labour oversaw a net migration of around 200k people over the last 4 years. Amazingly without those 200k additional people (at 2.6 people per property) suddenly we do not have a shortfall of houses - so we don't have ballooning rents, feeding the housing bubble.

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Make your mind up
You were advocating opportunity for todays generation identical to the previous 2 generations
Push an increase in population into Auckland and those opportunites disappeare straight away
You can't increase the population that much and hold the opportunities frozen in time
What your parents could buy a house in Auckland for then is impossible now, even at constant dollars
Can't have both.

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Why would the population need to be fixed to promote the same opportunities as previous generations? Are you saying there was no population growth the last 100 years in NZ.

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He's quite right. If I buy a 1/4 acre, nobody else can ever have that 1/4 acre; the remaining part of NZ up for grabs just got 1/4 acre smaller. The trend starts from the first boat ashore. Thus the inscription in the Statue of Liberty (think about that one!) says ' give me your poor, your tired and huddle masses - or something like that. The inference being ' we've lots of 1/4 acres over here in the US, and you are all crowded together (don't have enough).

Now, most of the land on the planet is owned, annexed, commandeered, but the number who would like a piece of the acreage, has gone from one to eight billion. In NZ, I've seen it go from 2 to 5 million in my lifetime. Spread evenly, that's a land-per-person reduction of 60%.

Not only that, but the wetland integrity, water quality, topsoil health, topsoil quantity and biodiversity have all gotten worse, while the best sites for everything - cities, dams, houses, roads - have already been occupied.

So of course they're worse off per head. And the first way to redress that (an essential but not whole requirement) is reducing population.

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Think we need to move away from the concept of everyone having the 1/4 acre. Its a dated idea. More high density housing, but older people for the most part are NIMBY's. You can't solve a problem when the people who set the rules don't want the problem to be solved.

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IO - they still need support acreage

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Maybe COVID is the cure not the disease?

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1/4 acre = 1,000 sq m. How long since urban areas had lots of 1,000 sq m sections?

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House prices, relative to income, stayed relatively steady for decades, even while population increased. It is not about the total population, its about ensuring balance between supply and demand and reigning in risky leveraged speculation.

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Wrong, Miguel - despite your fantastic comment prior.

What happened was an increased injection of energy into the system, from WW2 until say 1980. From there on, this has just been a classic exponential growth graph, upon which we're trending vertical.

As they do.

Until they don't.

And - as I pointed out upthread, there is no such thing as 'land supply'.

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I agree if you zoom out far enough, population certainly matters. New Zealand can't support 100m people. My argument is that we could have continued to provide housing at a relatively stable price with our natural population growth over the last 30-40 years given the resources we have extracted and used.

Would I prefer we readjusted our thinking to a more steady state economy? Of course. But the reality is we have continued our "growth" model, but have redistributed the benefits to existing asset holders and saddled the costs onto future generations.

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Miguel..we could have but we didn't so until we have built surplus houses the mass immigration tap needs to be turned off.

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And as I've pointed out down thread, your wrong. Miguel is on point.

The increase of energy into the system, if it is seen as a reason for land price doing anything, actually stabled land and house price in Texas at 3x median income.

But according to your 'theory', it should have gone up, especially in of all places, Texas. But it didn't. And that's because the injection of energy has nothing to do with why the price of housing in NZ is over twice what it is in Texas.

It's Govt. policy that has turned housing from being a house into a speculative commodity. That's all.

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Nope, it's Limits to Growth has forced us there.

And trying to conflate a high energy-income area with laissez-faire controls, is invalid.

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Wonderful law of nature, without any too much intervention (which is causing much of current distortion)..everything will end up dead, no more growth.

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You're the one that made the statement with NZ high house costs being due to energy costs, and yet in the Place, most people think of as freely available energy, Texas, land, and house prices are cheap. I'm just pointing out the contradiction.

I'm saying whatever mess you think we are in re house prices, I could do it for half the price, which doesn't mean I can guarantee people won't piss that saving away, if allowed.

What price do you think you should pay for your property or more importantly what's its real value on the market day?

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Dale...so please explain why you feel the basic law of supply and demand strangely does not apply to NZ rent and house prices? There are other factors, of course, but mass immigration is one of the biggest factors. Anyway we lose little by turning the immigration tap off so have little to lose. However, if you are not correct and mass immigration is having a huge and negative effect then the price we will pay it far too high ie the possible downside to cutting immigration is small (unless you are a greedy investor or business that relies on slave labour) but the upside is potentially massive. Why would we not just slash immigration if we even thought there was evn a small chance it might help the situation?

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I agree with the basic laws of supply and demand do operate in NZ, but they are not the optimum way demand and supply is meant to work. What everyone overlooks is this. It's all relative. Even if we halved immigration, then the restrictions in the system would just tighten up so whatever the demand was, it would always be, at least, just slightly greater than supply.

We have a presumptive right to not develop in NZ. This guarantees supply will always be short.

I agree that we should have a plan on what NZ looks like in numbers in say 10, 20, 30 years and put in place policy to live with that. This would mean more than just a reduction in immigration. Just look at what the Govt. and most people think they will do once we get 'vaccinated,' ie go back to the Status Quo.

Also what balanced supply/demand looks like is that supply can match the demand in real-time which also means supply can be reduced in real-time if demand is reduced. To either have too little or too much is what leads to boom or bust. Jurisdictions that have balanced supply, have long-term affordable housing, both in price and rent, and no boom or there is nothing to bust.

When there is a truly competitive market, there is always one more potential supplier (seller) than demand, so the demand (buyer) is the restriction in the market, and this forces suppliers into competition with each other, to offer a better price and quality than the other competitor. This is underwritten by the next best economic use of the land, so the prices will never fall below this figure. This is the opposite to NZ where the supplier is the restriction so there is always at least one more demand (buyer) than supply(seller) (this is how Auctions work best. The price is determined by what the underbidder stops at. No underbidder, nothing to bid up).

And when I do the figures on any NZ subdivision based on this true free market methodology (in NZ we swing between crony capitalism and crony socialism, ie no true free market), then it always comes out at about 3 to 4 times the median income. It's like a universal law of a stable housing market.

Places that have in effect no restrictions, like Texas, have almost historically continuous per annum immigration on the same rate per1,000 as NZ but housing has always stayed at approx 3x median income. This is because supply can always meet demand in almost developer real-time. As demand is turned on or off (there is always a cycle), they can turn the supply on or off just as quickly. No boom, no bust.

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Does an actual shortage exist at this level or is it a lower level, and the real problem is that some people have many houses and others have none. In a closed system where immigration has been curtailed, purchase demand can only come from locals who dont have a house, Citizens who are offshore and dont actually require a house because they dont live here, and investors..

Now if we have a hundred people who want a house and we build a hundred houses you would expect we would be fine. BUT IF ONE INVESTOR BUYS 50 HOUSES ,,, you have a mess. People are forced to become payslaves by the investor.... An investor who gets money for free from the people he has just screwed via low interest rates.. and pays no tax .. unlike the people he has just screwed.. Lots of people being screwed here, and they are all wanting to buy houses,, and lots of people incentivised and rewarded to stop them... Where are our leaders... why are they so asleep at the wheel.. could they perhaps be property investors.

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The moral question to all this is of course why a renter should be paying rent to a landlord that has bought a property with debt? The landlord hasn't risked anything or put any of their own money into it. May as well cut out the middleman and the renter pays rent directly to the bank. 'Investing' implies that you put capital into an asset and improve it.

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It also implies you are risking that capital. Yet we have politicians and the RBNZ who seem willing to go to any length to protect that capital, simply because the NZ housing market is "too big to fail". Privatise the gains, socialise the risk.

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Exactly, It's not a landlord vs renters per se, it's the rules.

If we have different rules, we would still have landlords and renters, but a different type of each. And prices would be far cheaper for everyone. Landlords would carry far less debt in real terms, and returns would be in yield rather than capital growth (because there would be none save for inflation and aby value-added improvements.

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The property investment we have is like a parasite that eats away at the healthy economy

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Very true. When I was renting they were the least professional. Far more likely to ignore their responsibilities, hiding serious issues at viewings and then ignoring requests to address them, try to add the most ridiculous unenforceable clauses to agreements, thank you for being a wonderful tenant and taking such great care of the place then upping the rent significantly and being shocked that you won't renew the lease, failure to give any or insufficient notice, regularly bringing the whole extended family around for a few hours to 'check over the trees' while having a picnic and allowing their kids to skateboard around the driveway and play with the hose wasting water that they bill you for. They are somehow always surprised to learn that they can't behave like they live there.

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It's 'people farming'. Its a dirty business (if you could even call it a business) so seems to attract certain personality types.

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IO you're always very quick to judge others, what do you do in life?

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As little damage to other people as I can, especially those more vulnerable than myself. And where I can, find ways to promote greater well being for ALL people. Not just one group at the expense of another.

Taking peoples wages in the form of rent, especially younger people who want to buy a house or those who are really struggling financially - and as a landlord you might have just outbid them at an auction using equity from another property is, in my opinion, as about as low as you can get in terms of good human qualities/characteristics. Its a form of oppression which will have very bad long term financial and social consequences for this country.

I'm not judging anyone personally - I'm saying as a group, property investors are going to have a lot to answer for in the future. You've made a lot of money the last few decades...but at what cost? Acting with ignorance and arrogance while causing suffering for others, while creating a great deal of financial/economic instability, is pretty poor form all round. If you feel judged, fine. But that might just be a sense of guilt?

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Could not agree more. Unfortunately this mindset and worldview is fairly uncommon.

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It's the arrogance that disgusts me the most. It's like an adult beating a child while constantly telling him to stop crying.
"Just stop being a victim" is very easy to say when you've never been in a vulnerable position.
Also, imagine a world where every teacher, nurse and policeman decides to become a landlord or REA instead. Who's going to do the actual work required to maintain our society? IMO it's the govt's responsibility to look after the people doing the essential work. Because without them the whole system would collapse overnight.

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Very noble IO, but life isn't fair. Are your kid's going to thank you for your altruism? I doubt it. Your demonizing of property investors says more about you than them - all they/we are doing is making logical financial decisions based on the regulatory and legal framework. You lack the maturity to admit that NZ has become a very desirable place to live and a valuable passport, similar to Canada. No one wants to see people living in cars or garages, but the solution is to build more housing.

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Life isn't fair but hasn't the whole focus - a very noble focus - of most western countries since WW2 been to make it a bit fairer?
That of course has been eroded by neo-liberalism.
But that doesn't mean we can't change course.
I think what we see with growing 'unfairness' and inequality is a whole lot of problems brewing, that undermine our collective quality of life.
That is, even if you are a very self interested person, you should be worried about rising homelessness, rising violent crime etc. Because you may be affected by it.

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Caring about society and investing in residential property are not mutually exclusive - not that many here will accept that.

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If we could use their equity to invest in new builds TK I'd certainly agree. Increase supply, reduce demand and competition with FHB's.

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Many of the above market sales in Auckland are for houses with large sections and recent zoning changes - these sales are literally investors who are using equity in other properties to build more townhouses. Auckland is in transition from quarter acre inner city houses to medium density. Most of these places will be bought by occupiers. In the absence of the State, we need investors to take some risk, acquire land and build.

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if kiwis cant become the occupiers, renters or owners, you have a problem with this model

and that is what is happening now

4000 children in motel rooms today,10000 in a year when the border is open again?, 20000 in five years......? children?

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'Very noble IO, but life isn't fair. Are your kid's going to thank you for your altruism?'

The opposite is also a true question for those who have decided heightened greed is the answer to today's issues. Will anyone's children thank the generations about them for their heightened greed (with respect to NZ and housing). From the discussions I have with young people, see the stress they are experience, and the lack of faith and hope they have about getting established in NZ and enjoying a decent adult life, the answer to that question is quite clear.

If yes, then you're probably very wealthy and your children might be the Max Key's of society - whether that is good for them and their personal growth, well each to their own.

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"No one wants to see people living in cars or garages" but you think purchasing existing housing is going to help the situation??

You're absolutely correct the regulatory and legal framework is to blame, it's just that the market has been massively distorted in favor of investors and speculators. We all scream blue murder when supermarkets or oil companies engage in anti competitive behavior but it's a different story if you own a rental property benefiting at someone else's expense, or a homeowner blocking development in your neighborhood.

And no, NZ has not suddenly become a desirable place to live, it's a western democracy so there are always millions of people who would move here for the chance of a better life. What will be telling will be the number of young kiwis packing their bags when the boarders open for the chance of a better life in Australia.

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TeK - it can't possibly be the solution. We are a species overshot by several billion (depending on desired per-head consumption-rate) yet you want to build 'more'?

And then what?

And then what?

Why not share what is already built, around? Oh no, can't do that, someone's whole persona is tied up in what they own...... Right?

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jeez... blaming Property investors the way u do... kinda reminds me of how the Jews were blamed for all the economic ills of pre WW2 Germany.

"Causing the suffering of others".... yeah right..
" creating financial/economic instability"... yeah right.
" acting with ignorance and arrogance".... yeah right.
" outbidding others is a form of oppression.." yeah right.

" Im not judging anyone"... yeah right.

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Godwin's law. You have officially lost the argument. I don't see landlords being made completely homeless with all their possessions except what they could carry on their backs taken or killed en masse as happened in pre WW2 Germany, they are not being forcibly sterilized or stripped for parts. Perhaps you can point to somewhere in NZ where that is happening because in pre WW2 Germany it certainly did and unfortunately the abuse to the Jewish people and families in NZ continued during WW2. Leading to family needing to hide their heritage and change their names when they came to NZ. Putting standards on housing against severe medical harm to the residents is not equivalent, and having investment policy is not the same as religious genocide and eugenics.

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Never understood Godwin's Law. I mean the longer the conversation the more likely it is that any other subject is raised.

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Indeed it arose more from online forums, (with usage varying around different forums) where one side or the other being compared with actions that lead to the holocaust, showed complete ignorance of the degree and levels of harm that had to be put in place. Unfortunately in today's era we actually do have very good comparisons of pre WW2 Germany with the actions of China's government and the confirmed abuse of those of certain faiths, advocates for political freedom etc. But Godwin's law was more optimistic; that nothing could be as bad as before because it was thought humans would learn to be better thus any mention of comparison (outside of actions towards genocide even seen today) would show the extreme ignorance of the speaker.

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pacifica..
i had to look up Gowins law.... I think u are using the term in the same way someone might use the term "white privilege".
ie.
"Godwin's law itself can be applied mistakenly or abused as a distraction, diversion or even as censorship, when fallaciously miscasting an opponent's argument as hyperbole when the comparison made by the argument is appropriate."

https://en.wikipedia.org/wiki/Godwin%27s_law

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Next time try reading the article. Very much so it is applied exactly in cases that comparing acts of genocide where an organized, systematic, industrialized mass killings of an entire race of human beings in unimaginable horror to minor annoyances betrays unimaginable ignorance and inept logic by those seeking to make the comparison. Much like you have saying landlords are being treated like the Jews. In no ways are you facing any of what the Jews experienced. Most investment and wealth gain in NZ is tied directly to rapid speculation in property equity and most idolized parties in our society are multi property owners idolized in part for their multi property ownership and not their business acumen (survivorship & halo effect assuming great moral courage towards newly created wealth).

"by conflating one of the most heinous crimes against humanity with any agenda found disagreeable, those who use the analogy are exploiting a tragedy. They are taking vile advantage of the victimization of others for political profit." Ilana Yurkiewicz "[It] constitutes the worst form of rhetorical exploitation. Acutely aware of the emotional reaction it will evoke, those who use it do so intentionally to get that reaction – to garner political gain and convince people to join their side. A Holocaust reference is brandished as the ultimate tool of persuasion, as an opponent cannot argue. " "But I would argue the problem runs even deeper. What those who exploit the Nazi analogy fail to appreciate is that their words shape public behavior and understanding. Speech influences how we think, how we react, and whether we judge something as acceptable or not. Language shapes norms.

As a result, by persistently misusing the Nazi analogy, the pundits are doing more than speaking in error. They are distorting history. Inaccurately invoking Nazism creates a moral and emotional distance from the Holocaust that has evolved into something more dangerous: a distance to the truth. For those who have not properly learned what the Holocaust was, this can be their introduction to it. Intentionally or not, the abusers of the Nazi analogy are paving the way for false understanding." In turn using the comparison as you did is an action to diminish the holocaust to a triviality or to compare with your situation suggesting that the Jews would have been benefactors out of such bias towards them as those investors recently have from the property market distortion by the reserve bank and speculative lending practices towards them. :/ Do you see why your comment was immediately and obviously unconscionably ethically wrong now.

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Yeah I don't really see the oppressed lot, say renters, deciding to put landlords into concentration camps....although stranger things have happened in history as you say.

Do jews remind you of landlords for any particular reason?

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IO... It was ur use of emotive language in ur attack against property investors that reminds me of the irrational way the German press, et al, blamed the Jews for Germanys economic problems.
Pacifica is the one bringing up the Nazi persecution of the jewish people.

Maybe i could of brought up the example of "reds under the bed" back in the 1950s'... another example of irrational blaming , but for some reason I thought of the Jews in germany. ( I like to read economic history )

I thought ur comments were somewhat irrational... emotive... maybe resentful..?? Over the Top .... If I got that wrong ..sorry.
Also... This is not me attacking u... I mostly read what u have to say, and often enuf, agree....

Oppressed renters .... yeah right...

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"Property investors are to be blamed for propagating inequality" - LITERALLY HITLER!!!!!!!!!!!!!!

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Yes thats why we call them 'INFESTERS'.... its much more appropriate

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CJ... and if they get worse we will call them Mao or Pol Pot and if they get even worse we will call them Kissinger. (The Trial of Henry Kissinger is a must read).

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What a horrendous analogy. Are you drunk?

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Its an uncomfortable truth but the "capital gains" investors have reaped from property have to come from somewhere. And in NZ those capital gains are largely being extracted by saddling a whole generation of FHB with unsustainable debts, or by extracting increasing portion of working people's wages. There is no "free lunch".

Property investors are NOT generating wealth by inventing new technologies or products, or by developing more efficient ways to produce products or services. They are not adding to the income of the country. All they are doing is extracting wealth from working people.

You may not want to acknowledge it, but its the truth.

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Government and central bank backed people farming.

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I call them "Battery Tenants". I'm not a landlord, just referring to the situation and the overcrowded conditions many suffer under.

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"All they are doing is extracting wealth from working people."

Exactly.

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I'd like to know more about the State House buying spree Labour has been on. Turns out they have been buying existing houses, so they have been making the supply situation worse, i.e. investors and FHB are competing for less available stock. New State Housing stock should be new builds only. Jenee, can you ask Ardern about this?

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You're right, but these 'Ma 'n Pa investors aren't to blame. They're behaving as they've been incentivised to. Likewise, in a behavioural economics sense, politicians aren't to blame either. They're incentivised to prioritise: (1) self, (2) party, (3) country. How we choose to organise ourselves matters and it needs to change. This site is great; but it's houses, houses, houses -- meanwhile an 85 year old mill closes costing 210 jobs in a small community affecting many families, tradies & local small businesses as well as adding to our, barely measured, crumbling societal 'health'. My opinion is we need stop worrying about minor levers like brightline tests and interest deductibility. We need to start from the ground up. Actually use this C-19 as an opportunity to change.

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Absolutely. Certain types and disorders, this is shown statistically. If you don't know what you're dealing with when attempting to reason with them, it feels like speaking another language. They aren't used to being confronted that often, as most of the people willing to do so understandably burn out. I'm typed as an INFP myself and thankfully very familiar with this.

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Your blind. or just plain Green eyed.

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I get it, but their changes haven't fixed the issue, it got worse. Your broad generalisations aren't correct.

I sold due to government policy changes, despite plans for long term investment, not speculation. We put money in to reduce debt and try to get cash positive. We went without, doing it to help our children, not 'throttle them'. The house was warm and dry, a good size, older but well maintained. Our tenancies usually lasted over 3 years, and between tenancies I lived in it and improved it.

We charged fair rent to a family with young children, but the Governments many policy changes made us pull out. You mentioned having to move, that happens with all investor types. Our young tenant family lost their tenancy because we could no longer afford to provide the home for them, they could not afford to buy so stuck with moving back home or pay much more for a lesser home from large investors. From their point of view as a renter, that's not an improvement.

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Of course they have already removed the ability to claim interest deductions for Ma and Pa investors by only allowing deductions on a similar asset class, thus advantaging large investors and hurting those small investors.

I assume you are talking about ring-fencing of losses, in which case you have mischaracterized it. You can still deduct interest cost from your income.

It's losses that must be ring-fenced to the same asset class. Losses comprise interest expenses, maintenance, rates, insurance, and any other actual things that cause you to make a loss on a property.

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Which is why it advantages large investors
Smaller investors are less liekly to have the ability to do this until they get their property to cash positive. Ring fencing make this less likely, hence the disadvantage.

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Get rid of all cost claims on investment property then to make it fair?
The biggest rort is that you can claim the ~2% inflation component of your interest cost as a cost even though your debt has also effectively gone down by that amount.

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The idea is to entrench the wealth of the wealthy. If we allowed ma and pa investors a foot in the door they next thing you know they’ll be growing their investments and building wealth.

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Haha, well said! Imagine someone trying get ahead in life lol, no no you bad, bad person, all the have-nots will jealously and angrily complain.
Oh wait... see the comments above.

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No one will begrudge the entrepreneur who comes up with new inventions, products or services or develops more efficient or effective ways of doing things. They add to the real wealth by producing "more" wealth that society can benefit from.

People have every right to complain about people who simply extracting wealth from the productive economy - which is what many property "investors" are doing. They aren't building new houses, or coming up with creative or more efficient ways to increase the supply of quality housing. They are simply capturing the existing supply, using borrowed money, and extracting increasing amount of wealth from the productive economy (via increased rents or extracting the capital gains).

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Many/most settlers who came to NZ post 1800 and especially post-1840 were coming to escape being tenants. It didn't take long for the worm to turn. Those who are ignorant of history are doomed to repeat it

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"ahead"

Fascinating throwaway. Please elaborate. Of whom, how far, with what, and demonstrated by?

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Bettering one's own material wealth with respect to the material wealth one had in the past.

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With respect to residential property investment I feel the term "getting ahead" is more about getting ahead of others in society. Transferring wealth rather than creating it.

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The issue is obviously stepping over other people in order to 'get ahead'. You know this from previous discussions here, but continue in your apathy regardless of the points raised.

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How about put your money into a productive enterprise like a new business rather than housing which has been treated like a commodity instead of shelter

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Don't you need creativity and intelligence to do that though?!

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AKLCrusader...actually you are missing a few tricks. You almost have a lay down misere.

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While I appreciate it's being looked at out of the Budget timeframe, lowering RWT on interest and dividends is something we should have been working on for some time before a property crisis ever came along. Why is it only happening now? Our tax rates haven't changed in years (save for the new top rate), inflation be damned - while the living costs you can pay with that same amount of taxed income have dramatically spiked. And our student loan repayment threshold is literally half what Australia's is, while their rate scales with income and ours is a flat 12% from $20K onwards. I'd have to be earning $130K AUD before their rate topped out, and even then it only hits 10%. And that's before you even get to capital gains taxes or stamp duties.

You can tinker around the edges with remedial bills all you like, but a wholesale re-examination of the tax system itself is massively overdue. Continuing to neglect it will mean we end up dipping into inheritances and taxing family homes to cover the social costs we're locking in by failing to act now.

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Yes. We should not be too aggressive in recouping student loans. Young people earn less, so it makes sense to not tax them so heavily. We already have 15% GST and a high income tax rate (in that it starts from 1 dollar upwards and scales up very quickly). Give a little breather to young people Reduce it to 6% for 20k to 80k% and then 10% to 80-120k and then 12% for anything more.

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Student loans are an already-theft from what is often the same cohort; well-paid university staff and rentiers.

In essence, in a depleting-planet scenario, the paid-now are buying bits of the planet, while leaving the future-indebted to pay back the debt. And the landlords are tapping into that forward-borrowing.

Done unwittingly, it is theft. Done wittingly; fraud.

How about an article investigating intergenerational theft, Jenee?

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Everything taught at Universities' is now free on-line. Give someone a laptop and free internet and if they have discipline they can get a free education.
If I had kids I would tell them flag Uni and spend the money on good tuition (1 on 1) and online courses.

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And when your kids can't get into any professional bodies because they haven't got the requisite degrees to qualify for the industry courses?

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Those days are fading fast ...and what exactly do "professional bodies" do these days except send a invoice to you and hold a expensive conference once a year?

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Lol, ain't that the truth!

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I only know about one professional body but you can become a chartered engineer if you prove equivalent knowledge.

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Medical professionals have more stringent and regulated professional registrations, they can also be prevented from practicing without the registration. Many can practice civil and other forms of critical engineering without professional body membership, e.g. CTV engineers recent work without professional body membership on apartment complex design. Non membership of engineers and an exceptionally weak professional regulation and repercussions has lead NZs engineering industry into many instances of disrepute.

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As long as you are happy to see a doctor who says I learnt it all looking at internet websites.

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Higher education is not exclusively about the skills learnt. But further refinement of a newly developed mind.

Critical thought, pressure, deadlines, learning how to deal with colleagues, politics. Building long term friendships and networking.

All of it voluntary (unlike school).

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Frazz - Saylor.Org offers free degrees.

Lets face it though, too many students simply go for the Uni experience. The degree is secondary.

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Agreed, Tax brackets are well over due for an overall. Why not just remove income tax on the first 20k all together? And then they start earning over 80k start taxing the first 20k at say half the total tax rate (eg if it is 33% tax it at 16.5%) the when your over 100k tax the first 20k at the full rate.

Also why do people pay tax on dole payments and other social support!?!? this is just a giant circle jerk, pay tax => to social welfare => social welfare taxed => tax money back to social welfare. Except at evert stage money is drained out of the system by all the middle men and accountants and pissing around.
Why do you need to pay tax on your dole "Income" when you are getting it in the first place because you don't have an income?

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Why not just remove income tax on the first 20k all together?

Because that's *very* expensive to do. That's why Labour's 2011 election policy was a tax free bracket up to $2,000, being extended to $5,000 over time as government finances allowed.

And then they start earning over 80k start taxing the first 20k at say half the total tax rate (eg if it is 33% tax it at 16.5%) the when your over 100k tax the first 20k at the full rate.

Beacuse the system you've proposed means that when you earn $79,999 PA you are paying something like $14,799 in tax, and then when you earn $80,000 you are now required to pay $18,099, ie you earned $1 extra and now your tax payable has increased by $3,300.

That's why income tax is not structured the way you have suggested.

Also why do people pay tax on dole payments and other social support!?!? this is just a giant circle jerk, pay tax => to social welfare => social welfare taxed => tax money back to social welfare.

Because it keeps things consistent and means when there is a tax cut beneficiaries also directly benefit from that tax cut. It also makes calculations simpler if someone earns an income on top of their benefit as you just treat all of it as taxable income, rather than trying to ring-fence some of it off a not taxable and some as taxable.

Except at evert stage money is drained out of the system by all the middle men and accountants and pissing around.

Money isn't being 'drained' from 'the system' by 'middle men' because most people who receive benefits don't use accountants. Your suggestion of having benefit payments not be taxable would actually make the system more complex and require more middlemen to manage than the current system does.

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Cheers for the knowledgeable response and insights :)

Expensive..yes. But they way things are going governments are likely to start printing money to give to the populace anyway in some sort of ubi or direct payments like in the states. So do you think that would be a good way to boost peoples income?

Yes I did think about that downside, so you would likely get a gap from 80k to what ever the wage would be to cover that increased tax. The other option was like you pay 0.5% per 1k over 80k that you earn, but that would be an absolute nightmare to try and calculate.
If they did remove it up to a certain income then put it back in, do you think there is a workable tax process that they could use for this?

But then it wouldnt matter if there was a tax cut, because they are already paying 0% tax. Im guessing this relates more to bribing voters than practically? Ie Labour cant come out and bride the lower class voters.

Ok im not picking on accountants (such as yourself im guessing?), but the tax system is inherently a drain right. Some one has to process all of that money and every time it goes around through the system there are inefficiencies. Just like the more regulations you make, the less efficiently things run as there are more middle men.
How would it make it more difficult. Wouldnt it be "this dude is getting his dole payment of 300 a week less tax da de da to gets $250 in the hand say" to "this dude is getting a lump sum payment of 300 a week with nothing removed" so when the ministry of social justice sends out its payment it is exempt?

Obviously a pretty top level view here.

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How would it make it more difficult. Wouldn't it be "this dude is getting his dole payment of 300 a week less tax da de da to gets $250 in the hand say" to "this dude is getting a lump sum payment of 300 a week with nothing removed" so when the ministry of social justice sends out its payment it is exempt?

Because it complicates the tax calculations if that same person also earns a little extra from part-time work or if they start/stop receiving a benefit part-way through the tax year. Also it's best if they're within the tax system because the aim of social security is for it to be temporary - not to have a class of permanent non-workers.

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Except through lack of accessibility and stripping human rights we do have a class of permanent non workers and they can be eligible for no support should they ever want to go on a date or go flatting. In many ways disabled people are treated far worse because they can be legally denied employment, denied any housing, denied financial support and denied basic medical support those non disabled have access to e.g. denied access ACC for work accidents unrelated to medical disability and denied treatment in public health system for basic survival needs.

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Absolutely. Note the only party who wants a wholesale change to the tax system to encourage productive investment is TOP, who have been banging on about it for 5 years or so now.

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Absolutely. It's as if we need a Tax Working Group.

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Why should you pay much less on your earnings than I do as a PAYE taxpayer?

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"...and taxing retirement savings when they’re withdrawn, rather than when money put into a retirement savings fund (like KiwiSaver) is earned"

Would have to be phased in surely if this was implemented? Otherwise there's a cohort about to get slammed on more than one front. Infrastructure catch up being another looming bill to be paid for.

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Presumably all existing kiwisaver balances at the time of the change would be exempted from being taxed upon withdrawal. It'd be the only way to be fair and avoid howls of outrage, the same howls of outrage you see whenever any sort of asset tax is suggested ("I used after-tax money to buy that asset, why am I being taxed again?").

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Or, (similar to USA) just have two classes of kiwisaver funds - pre-paid tax, and post-pay tax. Set a cap for the maximum amount that can be contributed to pre-paid tax funds, but allow unlimited contributions to the post-pay tax funds. Your kiwisaver statement should show the amount and growth of each fund that you've contributed to.

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I agree. I have had both an 401K (taxed when $ withdrawn) and an IRA Roth account (taxed when invested). They work. The Roth account works really well for share trading as you don't need an accountant to satisfy IRDs requirements.

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Yep phase it in for sure.
But anyone in it is going to benefit massively. Instead of having your tax taken out every year and losing the compound income on that money, you kiwisaver balance will grow a lot faster due, as Albert Einstein is reputed to have said, 'Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn't, pays it.

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If these clowns think that tinkering with some tax rates is going to solve anything they are even stupider than they look.

The one and only thing that is going to stop the property parasites is signalling that prices will be coming down and following through with concrete steps to make it so.

This sustained moderation garbage from the dopey tooth fairy aged like milk. No levelling off of prices matters anymore.

Go hard and go now.

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Yup only bold action is going to lower the house price to household income ratio from its current 8:1 to 4:1. Basically an overhaul of both the taxation & the monetary system. Tinkering would have worked well in 2010, but that boat has sailed.

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There was tinkering, but it was offset by massive levels of wage-suppressing migration. Ardern has been silent on what NZ's migration settings will be post-Covid. She needs to be asked this at every point she talks about house prices, and whether she will keep wages down by importing more white-collar workers that we cannot house.

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White-collar immigrants aren't really the problem, tbh.

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Depends. Graduate wages in many fields are still basically what they were 10 years ago. I think people would be surprised what's on the regional skilled shortage list; it's not all tourism workers, fruit pickers and chefs.

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So more of a problem of immigration into cities, regardless of collar, than white-collar or blue-collar as a whole?

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Depends how we're plugging the holes people leave behind when they move, and whether the skilled shortage list lets you avoid having to lift wages to attract talent. Rising tides etc.

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LH... there must be a specific list of immigrant approved jobs and it should certainly not include retail assistant, taxi driver or pizza delivery person. Almost all immigrant approved jobs such as fruit picker, machine operator, nurse etc should have strict phase out dates so we can train kiwis for the jobs and everybody is aware migrant labour is a temporary solution rather than a cheap and easy (and frankly lazy) permanent option.

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I've spoken to an orchard owner whose fruit pickers are earning $2k a week. That's because he was short and they're working overtime (and raking in the $, taxed at $10%)

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Whatwillhappen...fantastic news for struggling kiwis trying to get ahead. Hopefully the orchard owner will not have the choice to return to foreign slave labour again next season therefore limiting the chances of kiwis getting well paid work.

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So what is that fruit worth to the orchard owner which cost $2k in fruit picker labour cost?
And how many total hours to gross $2k for the fruit picker?

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This is a huge part of the problem. We don't have these questions being asked continually for the public to see. Ardern prefers having control of this herself on Facebook. It's worth wading through the muck just to see the kind of fawning she enjoys on there. We have Jenée thankfully, but this country is in dire need of more real journalism.

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Correct, the ideal income ratio should be 4:1 or 5:1. Bold action must be taken so to bring the income ratio down to these levels.

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It is interesting how effectively the government dealt with Covid by going "hard and early" and introducing decisive (but unpopular) measures - ignoring vested interests and instead listening to the experts. This had the aim of making the country as a whole better off. And boy did it pay off both in terms of a fast economic recovery and a much lower social cost.

Now compare that to their response to the housing crisis. If they had gone hard and early when they first came into office we could have reigned in the housing market before the economic hit from covid. They could have balanced out the playing field between investors and FHB, reduced immigration in the short term to reduce supply/demand pressures and short-circuited the insane belief that prices only ever go up - so when covid hit, we wouldn't have seen the bubble expand. But instead JA "couldn't find support" for a CGT ... couldn't build the promised houses ... just ignored the promises to address immigration.

I suspect the difference in approach was simply that the benefits to responding to covid could be reaped within an election cycle, while the costs were deferred into the future. Fixing the housing market may require some short term pain, but the benefits will be reaped for generations to come.

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JA did further serious damage simply by failing to say she believes prices need to fall. That simply further reinforces the belief many New Zealanders have that property prices can never fall.

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Absolutely correct.

Atleast John key had his priorites right that will support and was not a hypocrate like tooth fairy (loath so like the insult and this is just the begining as many are pissed by her)

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The devil will be in the detail. Lets hope its a case of better late than never rather than too little too late. The ultimate goal to reign in rampaging house price increases with particular emphasis on deterring the housing investor class.

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https://www.stuff.co.nz/national/politics/300253999/housing-crisis-gree…

At least the Greens know where their beliefs lie. I think this is Jacinda and Grant's one and only change for housing and tax reform. If they ever want to extend bright lines indefinately and do a barrage of other policy changes - it might be the best time to do it in history with the least votes lost.

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The Greens are the party of money-printing - which is the main cause of current burst of house price inflation. Hilarious anyone would take their "proposals" on face value.

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Rubbish, monetary policy is controlled by the RBNZ which makes its decisions independently of govt. Hilarious anyone that upvotes your comment.

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After the 2010 earthquakes and the EQC fund being drained, the Greens proposed simply printing money and re-capitalizing the EQC fund back to what it was pre-earthquake. John Key had a field day with that proposal.

There's nothing stopping the government printing money if they wanted to. Parliament is sovereign and can do literally anything (pending Royal Assent) in this country.

Don't forget that the government has explicitly given the RBNZ the power to buy bonds in the manner they are doing ('printing money') and without that permission the RBNZ couldn't do it.

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> which is the main cause of current burst of house price inflation

Just so I'm clear. The current burst of money printing is caused by the Greens. Not Labour(The current government)?

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Current burst of money printing is caused by Lab and Greens jointly . Including employment target and the other changes made to RBNZ charter have certainly contributed . The ideological push for those was provided mostly by the Greens , eagerly picked up by Labs.

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Current burst of money-printing is world-wide, and not ideologically aligned.

It is a sign that growth has stalled, and there aren't any 'tools' (so like economics, to try and associate with something real) left apart from debt issuance. It's a bit like a person dying from cirrhosis of the liver, drinking to dull the angst. Works until it doesn't.

The growth-stalling can be traced to 2005/8, the real inflection can be traced to 1970/73. Hence the extending debts all over, including the need for debt of the student kind. A system which was past its use-by date was papering over a widening gap, using - well - paper.

Blaming this or that cohort usually just exposes our pre-held prejudices; we're all to blame for this pickle, historically. .

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.

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Beyond this, Robertson has sought advice from the RBNZ on restricting the use of interest-only mortgages by property investors.

He has also asked the RBNZ about how debt-to-income (DTI) restrictions - a tool the RBNZ has long wanted - could be targeted to investors.

He expects the RBNZ to report back within a matter of weeks.

STILL EXPECTING TO NOT TAKE ACTION BUT TO RECEIVE ADVISE IN WEEKS/MONTHS THAN TO DEBATE FOR WEEKS/MONTHS AND THAN IF DECIDE TO HAVE ANOTHER DATE FOR ANNOUNCEMENT IN WEEKS/MONTHS........HOPEFULLY BY THAN SOME OTHER ISSUE WILL DIVERT ATTENTION OR MAY BE CORONA CAN BE USED AGAIN TO AVOID/DELAY.

Mr Robertson next week should be ready with advise as already had more than months for the same and whatever planing to impliment do it asap and not giving window of opportunity to speculators to create havoc as happened in february.

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Were you expecting any different? It's been over six months since they publically noticed the latest problem forming with housing.

Actions taken since then. Zero. Except finding teddy bears and replying to kids letters.

Grant Robertson said "we must not let inequality take hold in our recovery" then sat on his fat ass and did NOTHING while that happened in spades.

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"earned from capital (IE dividends and interest)"

Jenee uses 'earned' in its accepted definition, the problem being that it is incorrect. 'Earning from capital' is actually parasitic, upon someone else actually doing something. We have seen a rise and rise of parasitism as the BB generation used wealth to lever wealth. The problem is the physical limits to 'someone-elses doing something-elses. The gap between the real underwrite and the laid bets has inexorably widened (but you have to want to see it, to see it). This has resulted in both an ever-greater demand for 'investment opportunities' and an ever-lesser stock of real ones.

At that scale, houses, shares and idiot prices for collectibles and for virtual representations of everything from land to artwork) were the only homes for the bets. When the reset happens, where is the floor? Because some of the real incomes are dependent on the artificial bettors employing them (housing improvements ' paid' for by RE gains, for classic instance). What happens at real-underwrite level, post-bubble? Where are we? 30% of current house-prices? 20%?

Most people don't want to get their heads around lower prices (seeing it as being worth less themselves), some can't (because of blinkered thinking/training) but sooner or later, it's either that or rampant devaluation of dollars.

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Well, you are quite right there, but the biggest issue is that most so-called 'investors', BB or whatever label is attached, use debt to 'invest', not really that much of 'their capital'. That's where it starts, the monetary system is nearing its end as it structured right now and most people confuse debt with money, or confuse debt with capital! That is one big reasons why most people have no intellectual choice other than demanding unrealistic returns or unrealistic assurances of safety, i.e. property can do no wrong... It is at first a psychological, intellectual step we all need to take. And that is usually easily said, but hardly ever really done in real life, unless forced to from outside influences.

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"most people confuse debt with money, or confuse debt with capital"

The other way round
All money IS Debt IS Wealth.
Most believe the "pay off Debt" belony
When leverage is the way to maximise your share
Its all a game of getting your mouth around as many income streams as possible ... using Debt (in whatever form its described) to leverage the future

No. The real problem is physical output & leverage have limits

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Jacinda: “after much deliberation, we have decided to extend the first home grant up to $20,000”

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That will add fuel to fire.

They can plan for future but need immediation action to control speculative demand and to start can use DTI (defintely Mr Orr has given his advise by now) and interest only loan to be banned atleast for short time AND that too with immediate affect - minimum time to impliment.

Planing for future is good but if the government takes away the present of FHB, does future has any value.

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"We have decided to call this the Grant Robertson Housing Grant, if you take this up you will also get a Jacinda 'Be Kind' badge to wear at the many auctions you will attend"

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#progressive
#aroha

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Increase the government tax credit on Kiwisaver. Re-introduce kickstarter on kids' Kiwisavers. Would like that much more

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" . . . part-stick, part-carrot to encourage investment beyond property . . . "
Not confident at all that we will be seeing actions that will address the housing issues of affordability and supply in the short term/near future.
Sadly for FHB, KiwiBank forecast yesterday of a continuing rampant housing market for this year could well be a possibility.

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But I thought Westpac said prices are going to fall. So do Kiwibank have better economists (crystal ball gazers) than Westpac in your opinion for you to take that view?

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IO
You know my view. So not worth a response and you know it. Go fishing elsewhere.

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It was an honest question - two banks with two different forecasts. But you've decided you like kiwibanks forecast more because its bullish? Or will you say that westpac were right later this year if prices don't rise but fall an that you agreed with westpac all along?

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IO
I would not call it an honest question- rather an obtuse one. Certainly again what you assert I said is not honest - re-read my post again.
I posted a response to the same query from you two days ago: refer to that.
For one who hangs on Shiller and by your own admission calling a bubble burst for six years now I suggest that you do.
Have a better day.
Cheers

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Thought you agreed with westpac on that one where prices were likely to fall. But now you think they're likely to rise because kiwibank have said something else.

Anyway its just a bank forecast...they change their minds based upon which way the wind is forecast to blow that week.

Yes Shiller has a nobel prize for asset pricing - do you have a similar claim to fame? Or does association with a property institute give you higher intellectual powers than a nobel prize in that field (talking to property investors that would appear to be the case!)

Do you also disagree with Einstein on the theory of relativity? (because that is the equivalent argument).

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Hi Jenee, Good article for debate and it seems that FM and PM are still waiting for advise, are they serious as had months to get advise and now was the time to make decession, again trying to delay and avoid.

One thing is good

"The RBNZ clarified that it currently has the power, legally, to impose restrictions on interest-only lending."

RBNZ has already given advise that it can restrict interest only loan, so now on this issue ball is in Mr Robertson's court and what he does atleast with interest only will reflect his intention.

Similarly, Mr Orr too should declare what advise has already been provided to government so they cannot manipulate and put it on RBNZ or anyone else, specially this government who have fast learned the trick of lying and manipulation as both Jacinda Arden and Mr Robertson has taken a master degree in the same with PHD.

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What is important, first is to douse the fire of rising house price on a daily basis - which is possible, if have intent and should be a priority while keep on building new houses to add supply.

First have to douse the fire before planing for future. So important to announce policy like interest only loan and DTI while announcing the blueprint of future alternate investment.

It is you Mr Robertson and Jacinda who are responsible as have assured speculators come what may house price will never be allowed to fall as we are their to do everything to support along with rbnz (If I go to casino and the owner assures that come what may you will never lose and play to your hearts content - what do you expevt Jacinda, I or anyone will do)

John Key government had turned housing market into casino and you assured that anyone playing this casino will never lose as long as you the Great Jacinda Arden is PM (as if gods gift ti human race). Who is bigger culprit - one who started it or or the one who assured that will never lose.

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Whoops. Bumped report.

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Now I've heard EVERYTHING! - She said the Government was considering why there was an “extra psychological imperative” in the COVID-19 environment, which has made housing feel like the safest investment. *frown and headtilt* you are not fooling anyone Jacinda Ardern.. The only people buying a stupid sentence like that is you and people paid to agree

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PR speak here - what a spin. Covid increased housing prices! Nothing to do with the money printing or interest rates or tax system that dircts people to only invest in property.

Jacinda using her only skill that she possesses very well here - must have had good grades on that communication degree.

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Total spin. Next she'll be saying property specuvesting is a new weird symptom of covid and prioritise investors to be jabbed. She really is that nutso

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She sure does enjoy treating us all like we're stupid.

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Certainly the Suzy Cato of politics.

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Lol true. Would prefer Suzy actually

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LOL - agreed. Everytime I see her interviewed, watching her head go from side to side, I can't help singing, "one of these things is just like the other, one of these things does't belong..."

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Jacubda has tottally lost it and problem with power is that this people start to live in their own world and feel that rubbish thrown by them is being accepted by average people.

Jacinda Arden downfall has started, lost opporrunity but does it matter as she os secured for life - narrow thinking.

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Truly post-truth stuff. Parents beware.. Watch what your kids are being taught at school with this nutter at the helm

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Those potential incentives are tinkering around the edges. I mean, they certainly might help *a little*, but....

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Hah don't kid yourself. It barely even shifts the high growth in market values. To quote Ritalin kids now "are born in the gutter staring at the stars" (especially true in more rural areas). To help a little it would have to have a measurable effect and oh look the government is so concerned with removing all the statistical research around their actions and even when hastily made changes in a matter of days have a directly measurable negative effect it will take months to years to governments of deliberations to right the ship back to merely bad.

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This also has history: back a ways, people started to see housing as an 'asset' rather than as 'a house'.

They then set out to defend their 'assets'. They demanded rules that would see no leaks; the rules ended up monopolising the building of a house (you can no longer build your own, or even draw the plans) and creating ass-covering incentives at rule-making level.

Thus hoist with their own petard, except that those already on the train think they're going somewhere, they will always outnumber the folk waiting at the station, and the conductor counts the votes.... Don't blame the politicians, blame greed plus population increase. No other culprits in town.

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“It’s about access to the debt..."

Don't tell me Adrian Orr said that!
Hallelujah.....

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Just wow

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Orr acknowledged the RBNZ’s moves to lower interest rates were aimed at encouraging people to “go out there and use their money”.

But he cautioned: “We didn’t say, go out there and buy only homes.

Orr knew exactly what would happen when LVR restrictions were removed https://www.newsroom.co.nz/reserve-bank-to-remove-lvr-rules

So is Orr a moron or a liar?

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Everyone knows that the only investment game in NZ is property. NZ is a great country. which means it has high environmental standards, very expensive labor (third highest minimum wage in the whole world), very protective of people's safety, high taxes (or at least not low taxes to create business incentives). All good and desirable. However such conditions coupled with NZ other characteristics (its remoteness, its very small yet widely dispersed population, its lack of access to natural resources) makes NZ a very unattractive place for businesses that seek reasonable added values. (this would apply generally to all the western world). Finally, whatever NZ has any competative advantages (read primary industries) is so heavily invested in that additional investment is likely to reduce returns.
In this settings, it is absolutely no wonder that housing, fast foods, groceries and similar stuff are the only game in town. This setting should change, either due to NZ getting lucky and things happening on their own accord, or according to a comprehensive plan.

The one thing that can be done in a planned way is infrascture (in particular energy harvesting and distribution and transport). NZ does need a comprehensive, long term focused, integrated infrastructure plan that can create incentives for business. In absence of this, you can potentially ban any lending to the housing sector without any increase in lending to business.

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"high environmental standards"

Are you talking relative or absolute here?

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:) relative.

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He is a liar. If he only wanted to encourage people to spend he could have lowered interest rates while keeping the LVR restrictions in place. What else was the reason for removing the LVR restrictions other than to encourage people to buy more leveraged property?

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I can't tell at the moment if central bankers are hypocrites or if they collectively have some form of mental illness. They are fireman and arsonists. But then blame other people for getting burnt by the fire or hypothermia from their fire hoses. Which way is it?...

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Trying to fill a leaking boat with water.. Is never going to fix the leak Orr

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Exactly right Miguel, and the reason for putting them on was to dampen

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He is a liar or missing common sense.

On question of do you take responsibility, he start giving excuses like a kid who stole the candy and now telling stories after getting caught.

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Are you saying the reserve bank shouldn't be encouraging investment just because they know NZers will invest in the wrong things? I think he made a pretty good point: the reserve bank is just encouraging investment during a potential downturn, it is the government's fault that the best investment is housing.

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The way I interpret the situation is that the tax options are very marginal.

To me the main even will be whether or not they open up land to build new houses, if they can get into a supply side bias they will bring prices down rapidly (possibly down to half current levels, mirroring other developed countries with low population densities.) That's the move property investors need to fear, that has the ability to completely change the situation that has existed within New Zealand for over 30 years.

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"The way I interpret the situation is that the tax options are very marginal"

What is marginal about bringing in a CGT & using income from this to lower income taxes? This will increase affordability 2 ways for young people. The CGT will lower prices & after tax incomes will increase in effect giving young people more disposable income to pay a mortgage.

The value of NZ's housing stock is 1.28 trillion. If you had an owner occupier exemption on CGT & half of the property stock was held by owner occupiers, then 640 billion of the total stock would be taxable. With a 5% Increase in prices annually & a CGT of 20% this tax would in effect bring in 640 billion x .05 x .2 = 6.4 billion.

Source deductions (income tax) on the Treasury's balance sheet were 34.6 billion on the 2020 statements. If you implement an offset the 6.4 billion collected from a 20% CGT against income taxes you would be able to lower income tax's about 18.5% ((34.6 - 6.4)/34.6) = .815

A young couple earning 75k each, currently pays $15,670 income tax. If there income taxes are lowered by 18.5%, there new yearly income tax payments will be $15,670 x .815 = $12,771. So their after tax income will increase $5,800. (($15,670-$12,771)*2) = $5,798.

The net effect for this couple is housing affordability. House prices would drop about 30% immediately. So from about $780,000 to 550,000. The incomes for this young couple would increase $5,800. They are back in the game. They should be able to save for a deposit in 2 years (100k), pay off a good chunk of the mortgage in 3-4 years. Then when they drop an income to start a family, there mortgage will still be manageable with 1 income.

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Your calculations are wrong. Only a small percentage of the housing stock would sell in any given year, and with a CGT the percentage sold would be even lower than what it current is. So rather than 6.4 billion you would have maybe 10% of that, perhaps even less.

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How are my calculations wrong? 2+2=4. You are just a profiteer of housing ponzi arn't you?
Even if the amount of sales that get caught in the CGT net is 10% as you say. This is a good thing. It would imply that 90% of residential homes are
owner occupiers & that investors have moved out of the market. Not a bad thing if you ask me.

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Speaking of the longer-term issues underpinning the housing crisis, Orr noted the need for people to look for “alternative places to invest”.

The solution is obvious, but the bank capital leverage incentive is ubiquitous.

Hence suspend by regulation banks' practice of extending 60 % of their lending to one third of already wealthy households to speculate in the residential property market because the RBNZ offers them an RWA capital reduction incentive, to do so.

Our collective needs extend beyond the narrow pursuits of the giant Australian building society racket, currently infesting what is now our casino economy.

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I would like to know what those alternatives are. Shares? Bonds? Term Deposits? I now have weeks left on a TD and nothing looks enticing as an 'alternative'.

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The options for many will be "Start a business, or invest in a bunch of businesses, with the understanding some will fail, but the winners will more than make up for the failures.".

That is the only way we can get out of the productivity drought we are in, up incomes relative to asset prices and to escape the madness. But for it to happen, the tax system needs to significantly change to discourage investment into residential housing and encourage investments into businesses. Pretty quickly you would fine untapped potential in the country, a new generation of Tindalls/Brocks/Drurys, entrepreneurs who have been starved of capital to start new, inventive businesses (I know a bunch of these people). Yes there would be failures as well. It would be painful if it happens, but anyone with just a little wisdom knows that the hardest things to do are often the best things to do.

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If you've got a TD it suggests you either very risk averse or need the money in the short term. If you need the money in the short term there is little reason to chase returns for an extra 1 or 2%, if you're just risk averse you need to be aware that holding cash is one of the riskiest things you can do in the long term as it gets eaten up by inflation.

In terms of alternatives, bonds are practically uninvestable at current yields, all risk no return. Equities should be able to yield 4 or 5% but you need to take a long term view and ride out the ups and downs. However the real game is "alternative" investments, where it's quite reasonable to generate 8 to 10% without the big drawdowns from equites. They are not so easy to access for retail investors in NZ since the brokers want to keep you trading stocks. But there are plenty of Listed Investment Companies in Australia, or try googling "alternative investment strategies" site:nz

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Agree. Do some research or hook up with a Fund manager. We invest directly for the long term and weather the ups and downs. Plenty of ups and no tenants, no ovens to clean and no maintenance. And we carry the risk ourselves.

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Yes I am risk adverse - I'm old.. My TD was for a long term and was a great rate. In answer to comments about starting a business - I collect old tools and attend a lot of auctions. These days I find most of the auctions are for restaurant equipment and shop fittings from failed businesses - no thanks.

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I don't think its about being risk adverse at all. If you have a large amount of money in a TD, your simply in a position where you don't need any more money anyway. Risking it all for returns a few percent higher is just being greedy or plain stupid in my book.

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Maybe they need a working group to examine the tax system and provide proposals on the inequalities and distortions it currently promotes.

But this time, JA provides in advance her list of things that will not happen while she is prime minister. I have a feeling it is quite a long list, given how little has actually happened in the last 4 years.

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Jenee
IS THERE ANY CHANCE YOU CAN FOLLOW UP ON THE UNITEC HOUSING DEVELOPMENT???

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It was announced as a 10-15 year project for up to 4000 homes. It's unlikely to make even the slightest impact.

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I was pretty sure they had some decent short term delivery goals ie. Within 5 years (from when it was announced 3-4 years ago).
If I am right, the govt needs to be held to account as to why it isn't happening

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I work at a building on that site that is now owned by the crown. We are to be given 18months notice to vacate at some time in the future. They told us that over 18months ago and still no notice.

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So there you go.
I heard a rumour that there might be some treaty issues.

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So there you go.
I heard a rumour that there might be some treaty issues.

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The Tax Working Group, in its final report given to the Coalition Government in February 2019, recommended cutting the bottom two prescribed investor rates (PIR) for KiwiSaver funds by five basis points each to 5.5% and 12.5% (from 10.5% and 17.5%). The Group recommended leaving the top PIR at 28%. This is still below the top income tax rate.

It estimated the change would put an extra $630 million in low-income earners’ pockets over five years.

This would do almost nothing to stop investment in houses, as the final line in the statement makes clear - low-income earner's by and large aren't the ones who are buying up investment properties, yet they are the ones that would benefit from this change.

Since it's based on your annual earned income, reducing the tax rate for these lower levels would actually encourage more tax dodging by the wealthy, giving them even more reasons to manipulate their annual tax rate into the lower brackets, so they could gain advantage of this 5% PIR reduction too.

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Will we be the first to successfully deflate an asset bubble without a rush for the exits?....if so we may be able to bottle it and sell it but I suspect not.

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Doesn't matter what they do .....
The proposals will be aimed at hobbling individual and partnership investors

The smart-money will bring to market Augusta style syndicated residential property buying companies that will offer fractional style (sharesies) shares in their companies and they will buy outright with your cash, limited debt, and hold for the duration. They wont build new - takes too long

Be in to win with $1,000 down

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icon... have to be careful with syndicated property companies like Augusta as their management fees are very very high. (Augusta are commercial not residential BTW). Also using Augusta as an example your money almost always goes into one property which makes them (fairly) high risk. My parents have money with them and I often laugh and tell my Mum if she had an any idea of the risk she would not invest with them. She loves to talk about the return ON her money being much higher than a TD but will not consider the fact that the return OF all her money is far from guaranteed.
Here in New Plymouth Augusta has an almost cult-like following mainly due to slick front-men, elitist marketing and a general ignorance of risk. I think they even have rules or regulations where investors need to show they are in a reasonable financial position (due to the risk) before they are allowed to invest. And the minimum investment is usually 50K.

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Actually Augusta fees were not too bad. At one point they indicated that if they did no new syndications in the next year they would only break even - so they were not really creaming it.

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Just apply the foreign investment fund rules to property. You could say it's not a "new" tax, and obviously get rid of the bright line test at the same time

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We needed these settings in 2013 (ish) not 2021. Nearly 10 years late. In many respects, changing the rules now is pointless.

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First Principle. Any savings made in a system always are captured by the most restrictive, ie the most monopolized, part of that system.

So while these 'incentives' might create some savings, without removing the monopoly restriction that is land supply, then all that will happen is land prices will increase, and house prices will stay the same or continue to rise.

There is no mention of reducing restrictions on land supply. So, therefore.........

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There is no such thing as 'land supply'.

Not on a planet where human-kind has intruded, raped, pillaged and degraded the topography everywhere they could access. It requires real-time acreage to support us (and other biota) on a per-head basis:

"The minimum amount of agricultural land necessary for sustainable food security, with a diversified diet similar to those of North America and Western Europe (hence including meat), is 0.5 of a hectare per person. This does not allow for any land degradation such as soil erosion, and it assumes adequate water supplies. Very few populous countries have more than an average of 0.25 of a hectare. It is realistic to suppose that the absolute minimum of arable land to support one person is a mere 0.07 of a hectare–and this assumes a largely vegetarian diet, no land degradation or water shortages, virtually no post-harvest waste, and farmers who know precisely when and how to plant, fertilize, irrigate, etc." [FAO, 1993]

Your 'land supply' is 'life-supporting acreage, for those already dwelling in suburban - or denser - formats'. No use saying 'this is NZ', either, given the global nature of food and resource-acquisition. This is where Bernard Hickey and Giles Beckford fell flat on their faces (RNZ/2cent's worth), one saying "the environment's getting better" and the other not disagreeing.... our 'environment' includes overseas acreage.

We overshot due to resource stocks being full, but when they're depleted, there isn't enough sunlit acreage for us ALREADY, and by some orders of magnitude. Yes we still get this chanted mantra - not just here but right across the media - about 'land supply'. Bollocks. Mark Twain had it dead right.

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Great comment. Is this a game changer? Can we cram more people in using this tech? https://proteintech.events/finnish-startup-makes-alternative-protein-fr…

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Immediately the name reminded me of https://en.wikipedia.org/wiki/Soylent_Green

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There seems to be so many of these latest, greatest BAU saving technologies hitting the headlines. Do they disappear, or just become niche? To me it just seems like hopium that distracts from the simple answer to the human predicament. Degrowth.

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Nope. You have completely missed the point. Deliberately.

I'm saying the majority of the price you pay for land has nothing to do with its' physical availability. It's an artificial restriction first and foremost as to what you pay. That's why in Houston, a house costs 3x median income and in Auckland 10x.

These restrictions add non-value added costs which account for approx. 50% of the value of the land. If you take these costs out, THEN you are left with costs associated with bad resource use, population etc.

And given the land-use resource figures you are quoting, you might want to explain why you have the hectarage you do?

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Most likely there will also increase the First Home Grant for first home buyers. Because in their view that's "fixing the problem".
I'd bet my house on it!

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Agreed.

Rule #1 with Jacinda - Actions taken won't be the right ones, instead the ones that increase her own perceived virtue. She is a narcissist before anything else.

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Agree - anything from here has to be virtue signalling because if they actually implement policies that bring prices down, we're looking as if the entire economy will collapse with the housing market.

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At least that's the myth they peddle. I'd be willing to bet it would be far less bad than they make out.

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It will be interesting if they do because she has said in the past that she knows that will just increase demand.

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Also by increasing it, all it really means is a few more middle to upper middle income households have a slight chance of buying.
It does nothing for low to middle income households.

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If there's cuts to the PIR rates, then it ought to be at all tiers including cutting the 28% top rate to something like 26% at least. Otherwise the boost to capital investment + dis-incentivising housing investment will not be that significant

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Big Day for both Jacinda Arden and Mr Robertson as will prove, if they are genuinely in for FHB and trying to solve the crisis with hard meaningfully policies that were earlier not possible unde MMP or will they fail the majority and be scuumb to powerfully lobbyist with vested biased interest.

Will Jacinda Arden create history by taking bold step and emerge as a leader or will she be shrewed maniplative average politicians.

She did mention that does not want house price to fall but if today 10% fall equates to price as were in early February so will that fall impact anyone ex pet speculative flippers and benefit FHB -SO PRIORITY HAS TO BE TO CONTROL SPECULATIVE DEMAND ON PRIORITY - EVERYTHING ELSE IS SECONDARY.

Wait and watch

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Do you still think that Jacinda or Mr Robertson will have guts to act against speculators - so called investors.

Jenee for you also to ponder that this people are so shit scare that even if they are planing to control speculators are still trying to please them with different options to speculate. Like you do not gamble in sky city casino but we will build another for you to gamble.

Also they do not realize that For FHB, house is a home and not just I vestments to speculate. First they have to understand that FHB are looking for a home to share memories with their dear one and speculators are looking brick and cement house - a commodity to speculate.

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There's no point being sensible now after a few decades of being irresponsible.

Anything done from here is simply virtue signalling - because they know that if they do implement policies that bring house prices down, it will collapse the entire economy. Basically we've written the recipe for a shit sandwich. Cheap credit and loose lending, with ponzi sauce (investors using equity to buy even more property).

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Feed back on Dti just for investors, restrictions on interest only, and restrictions on interest deductions against income (cough cough tax avoidance). No worries, all investors have solid yields and are not buying for capital gain so what could go wrong...?

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Wot.. No Crypto!

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Wot.. No Crypto!

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Well I recon the problem would get sorted if you first start increasing home mortgage rates and second stop taxing people on their TD's. Many changes over the years have got us to this point and clearly most of them have been wrong. House prices have been in an upward spiral for years and its getting worse not better. I don't think there is anything that can be done now to bring prices down, the best that can be expected is just to stop them going up with near zero growth for years.

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Where have a heard that before?

There cannot be a functioning housing market when the government guarantees it to be risk free.

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RBNZ nearly doubles quantitative easing to $60 billion. It is not just houses, the NZ stock market climbs higher and higher as Covid 19 smokes the economy. The only thing holding it all up is money printing. If it stops - then it is tent city time for sure.

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As of November 2020, the average mortgage interest per annum per New Zealand dwelling is $3970 , the lowest in twenty years. In 2007,the average mortgage interest peaked at $8509. The RBNZ independently controls New Zealand's OCR, but it is totally subsumed by global players and their settings. If you can afford the interest you can play the game.

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Indeed.

And because the government and the authorities that are supposed to control financial stability failed to prevent runaway credit growth... what happens when global interest rates rise?

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Just seen this comment on another article. Worth repeating here.

by Pathos | 17th Mar 21, 8:56am
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New Zealand's mortgage market ballooned to about 95% of GDP according to the RBNZ in 2020, up from just 51.4% of GDP in 1998.
95% of GDP!!!!!

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There's a chart in this article:

https://www.globalpropertyguide.com/Pacific/New-Zealand/Price-History

We're now far more vulnerable than we were in 2008 - and are out of ammunition in terms of dropping interest rates.

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Surely those in the bottom 2 PIR brackets are not the ones buying houses. Lowering just the bottom 2 PIR brackets isn’t an incentive for those who would otherwise buy houses to shift to PIR funds at all... you would need to lower the top PIR rates for it to be an incentive.

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One of the iniquitous advantages of property and other fixed asset "investments" is that they benefit by "farming" inflation. I.E. over time inflation pays off the debt without any effort from the borrower. Savers are penalized and borrowers benefit unfairly. As I have suggested before, the inflation portion of interest should not be tax deductible to borrowers and tax deductible to savers. It is fiscally neutral and balances out the inequities, encourages saving and discourages the unproductive capital allocation into property and other forms of fixed asset speculation.

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"Savers are penalized and borrowers benefit unfairly" and the lack of tax on that is exactly the point.

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“ She said the Government was considering why there was an “extra psychological imperative” in the COVID-19 environment, which has made housing feel like the safest investment.”
Jeez, maybe it’s successive governments that bend over backwards to prop up the housing sector every time it looks like doing anything other than going up. Jacinda even commented to the effect that people expected house prices to rise and they would see to that.
How can the government even pretend not to know why??

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Let me think.
You drop the cost of debt to historical lows and access to it even easier,
You shovel stimulus cash out of the door to anyone who applies for it,
And you lock the population up with its borders and tell it property price will always rise
Nope. I can't figure it out......

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I think JA & GR will be very literal with their announcement next week:
1) Go invest anywhere else but in housing and you will get a bag of carrots
2) Invest in housing and we will throw a few sticks in your garden

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3) But none of our announcements about announcements will take effect until 2022. Aroha.

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Some promises like X thousand new homes to be fulfilled after 2023 election. Lets them off the hook for commitments they can be accountable for. Also allows JA to give hope to the faithful. Of course nothing will happen but then the govt can come up with new excuses and promises. I blame the greens and green lobbyists for the current lack of homes from underbuilding since 1990

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.

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JA and GR both does not have the guts to stop the housing ponzi pyramid as NZ = Housing Ponzi and now No One can not only derail it but cannot even think of derailing it.

Just that both are forced against the wall and as being forced to announce, will announce but will be toothless tiger - only for media byte and affects.

This will be real test of Jacinda Arden as has no excuse ( Winston Peter or Green party) to hide behind coalition politics and am sure that she does not have intent to ruin the pyramid so just and Watch how she manipulates and play dirty, where she excels as she too know that is the last term for her.

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After three months, have announcemnt next week and this announcement will be that waiting for more information and advise AND that next announcement will be next month or in May or .....

So chill as this government is run by politicians and are not the same in terms of value that they hold when won the first term and are now more dangerous than than other politicians by gaining full majority So nothing major but delaying tactics to avoid.

So Chill and just sing..... Ba Ba Black sheep, have you any Wolves...........Two.......can you guess the name ?

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"Too big to fail" springs to mind.

“If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem.”

Successive governments have relied on the "rock-star" economy (i.e. housing debt ponzi) for so long, they are too scared of the consequences of unwinding it. So they are basically ensuring that an external event, outside of their control, will trigger the house of cards to collapse - meaning they have no control over the scope and scale of the inevitable damage it will cause. Absolutely gutless short term thinking which the whole country will pay for.

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Is JA too nice or not nice enough?

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That gave me a good chuckle

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Is government trying to take some meaningfull action as last week Judith Collins panicked and today the mouth piece of real estate industry supporting the ponzi is panicking as in this article below is not trying to calm his support base of speculatirs but is actually trying to convince himself aloud :

https://www.oneroof.co.nz/news/39125

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I wonder what sort of self-serving, twisted garbage we can expect to see from One Roof (the Ashley and Tony show) in response to the coming announcements. If it was not doing so much damage to our society it might even be quite funny.

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I am not overly excited waiting for the so-called "Bold" plan to tackle the housing crisis. Maybe one loud burst of flatulence . All sound & fury. Plus stink. Nothing of substance.

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So. A typical day for Grant then

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When my feet hit the floor my wife hears me remark 'another day another ten grand'. Its bliss and long may it continue. PS sarcasm

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https://www.newshub.co.nz/home/politics/2021/03/greens-on-housing-crisi…

Greens Talking the same language as Jacinda Arden use to when in opposistion but see how Jacinda the Great has taken a U turn and is now talking, thinking, plaining to boostt and support housing ponzi, when in power.

When the opportunjty comes to act, no one will act even Green party.

What happened to Jacinda...... Well no one is born evil but may be it is situation and power that corrupts as otherwise all human beings are equal.

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The announcements could be pretty bad. Nobody seems to want to take the blame for the rocketing house prices, in fact what they are doing instead is effectively doubling down on the mistake by not making any changes because it shows they stuffed up. The stimulus overshot the target, who has prices going to the moon in the middle of a Pandemic ? its simply nuts. They simply should have never crashed the OCR to such lows and started throwing about free money.

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Sorry guys but you all will be buying crypto once the price goes up a bit more, same with silver in order to preserve your wealth and health.

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A govt that can no longer manipulate currency is one that the jig is up on. They will eat their own, wait for the corruption to show it's head.

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During Hyperinflation Tax becomes undoable.

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That’s like telling people to drink less alcohol and drink more water because it is healthier...

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Seems like we have a mule situation.

Love the pic!

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CONFIRMATION: Nothing will change, Govt will announce 500 new houses to be delivered in 2022 and extend the first home grant.

Nothing more than that, no CGT, no Bright line, no restriction on interest only loan & no increase in interest rate. That's what i can clearly see, tooth fairy & roly poly will not take any responsibility of house price increase of 40% from the time they come into power.

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Many places have gone up more than 100% since they took office. More like 40% since the middle of last year..

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I suspect that they will announce they there will postpone housing policy announcement to another, later announcement date because someone announced that there might (or might not) be a new covid case and they urgently need to announce this instead.

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For 9 years in opposition they said there was a crisis.
So virtually after 13 years it comes down to next weeks announcement.Hmmmmmmmmmmmmmmmm
Wouldn't expect the Nats to deliver anything either.

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Government says next week's housing policy announcement will be part-stick, part-carrot...

Part stick will be ....stuck.....up FHB....wait and see

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Ordinary Kiwis, normally operates with the IQ/EQ slightly in compromise position. They just don't realise the massive power of rolling strikes, work stoppages to force authority.. to do what is right. The renters for start can carefully time their strikes.. according to the permitted law. Surely, all those property moguls can also band together.. to do.. what exactly?.. or else.. what exactly? - The easiest? gradually change your Banks away from..

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- No body dare to ask JA or GR what is their ideal DTI number for Kiwis.
- No body dare to ask RBNZ, as to why NZ QE was the shock & awe outpacing the rest, UK, US, OZ even.
- Does anyone pondering with recent interest.co.nz graphs of housing cost.. where's NZ? & where's Japan?
NZ follows what Japan did in 90s, but at least they are still producing reliable Toyota which still run, NZ err..

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The question isn't if the NZ residential property bubble will burst. It's when.

Can governments and banks continue to prop it up for yet another decade? Maybe. Or perhaps the implosion is imminent. Hard to say.

But at some point a huge chunk of NZ's population is finally going to comprehend the fact they put themselves in debt well beyond their means simply to buy crap property that was in no universe worth it.

And the nation as a whole? Well, it's not as if you have much else going on, economically speaking. Some agriculture. A bit of tourism. Almost no manufacturing. New Zealand sells animals and trees on the side for some pocket money, but most of the nation's economy is the business of selling houses to each other at ever increasing prices. And when that's gone....

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It won't be gone, like the article implies.. the stick merely to put things at halt (not leveling or reduce), that is for sure. Then the carrot part? more stimulus to be administer by both RBNZ & govt, this is extra topping. Eg. clever hand out different 'investment' category/title.
NZ is good at splashing funds, just don't ask about accountability: 52mil covid grants to 'ehem', govt senior ministers pay cut 'ehem', motel/hotel owner can triple their charges for MSD funding/housing their client 'ehem'. The point being.. if overall Kiwis have addiction on gambling? alcohol? housing debt? drugs? Crypto? Ciggie? - it will be up to the govt to pick up the tab, after all like it or not those binge addicts were voters, they gave mandate. If in the near future JA kid decided with the rest of NZ crowds to bring back the fun of Aotearoa semi auto assault weapons, by means of voting? - it will be back on table, when it's being mandated by voters.
That is the nature of difficult parenting choice for JA, clearly she listened to voters for no CGT for example thus her 'firm frown promise' not to do so, it's easy to listen to the larger crowd but more difficult to be a 'just leader'.. silently, in background the Healthcare is bleeding hard, keep on asking forever of increasing funding.. if only more tax money can be given to them..oh eh uh.. wait.. Mr. Orr.. err QE for Healthcare?
First, OCR, second employment, third housing.. fourth... how about Healthcare cost for nation? team of 3.5m, be kind please to the displace 1.5m - because soon, when the trans-tasman bubble open.. it will be 3mil need to be kind to the displace 2m.. by end of 2021/mid 2022.

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One simple incentive to encourage investors off houses and into productive property investment is to stop treating commercial investing the same as housing. I have mortgages against some of my residential for the purpose of buying commercial. I do this because the banks traditionally give a lower interest rate on residential. At the moment the interest rate is similar but the percentage of leveraging of commercial is still much lower at around 50%. They have recently reintroduced depreciation for commercial but lots more could be done.

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"Tinkering" just delays the inevitable ... nothing much will change. A profit will still be made in the same areas of investment, but, maybe not as much as it is now?

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