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836 posts

Ultimate Geek


  # 1045972 16-May-2014 03:53
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k1wi: One point I'll raise is that due to human nature, being in the 'top 1%' increases your happiness very little above someone at the median (or even further 'down' than that).  Basically, above a relatively low threshold of 'comfort' or 'sustenance' more money has bugger all impact on how happy you are (because your expectations and aspirations increase in step with your means).

I'll let people put a bent on it either way, but its an interesting factor of human nature.


I agree with that. My wife and I don't earn massive money but we do ok and we have just started building a new house. It is nothing like I thought I would want when I was younger. We invested in more land and built a much smaller home.

Previously we had lived (rented) in everything from a 7 bedroom house to more recently a small 2 bedroom apartment. When I was growing up I literally lived in 3 rooms in my house, my bedroom, the kitchen and the family room. When we were planning our house we were like do we really need two lounges, 4 bedrooms etc and the simple answer was no.

When it really boiled down to what we needed we realised we would save money and have much more spare to do the things we wanted over the course of our mortgage. It also means our repayments will be less than what we paid in rent and should stay that way for some time.

Bit of an OT spiel but I feel so many houses these days are so big for what people really need. Of course this is all my opinion and my experiences. Everyone values are different... 

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  # 1046085 16-May-2014 09:33
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sdav:
k1wi: One point I'll raise is that due to human nature, being in the 'top 1%' increases your happiness very little above someone at the median (or even further 'down' than that).  Basically, above a relatively low threshold of 'comfort' or 'sustenance' more money has bugger all impact on how happy you are (because your expectations and aspirations increase in step with your means).

I'll let people put a bent on it either way, but its an interesting factor of human nature.


I agree with that. My wife and I don't earn massive money but we do ok and we have just started building a new house. It is nothing like I thought I would want when I was younger. We invested in more land and built a much smaller home.

Previously we had lived (rented) in everything from a 7 bedroom house to more recently a small 2 bedroom apartment. When I was growing up I literally lived in 3 rooms in my house, my bedroom, the kitchen and the family room. When we were planning our house we were like do we really need two lounges, 4 bedrooms etc and the simple answer was no.

When it really boiled down to what we needed we realised we would save money and have much more spare to do the things we wanted over the course of our mortgage. It also means our repayments will be less than what we paid in rent and should stay that way for some time.

Bit of an OT spiel but I feel so many houses these days are so big for what people really need. Of course this is all my opinion and my experiences. Everyone values are different... 


They very interesting thing about human nature is that thinking you are earning more than others is a better predictor of happiness than actual earnings.

BTW regarding the lorenz curve the full StatsNZ report (interesting reading) shows this and is discussed - they conclude it is a concave curve, typical of a developed country.  They also go into the personal wealth data by age, family status and ethnicity.  A big chunk of the people with zero or negative equity are in their 20's - maybe just graduated with a big student loan (me at 25), just started work with a car loan.

I would have been interested to see wealth against highest qualification.

For the CGT fans, are you happy to pay CGT every time the funds your kiwisaver is invested in sells property or shares?  Or are we just targeting residential rental properties?




Mike

 
 
 
 


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  # 1046100 16-May-2014 09:48
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ubergeeknz:
MikeAqua: The trouble with wealth tax is that wealth isn't always liquid. 

If someone owns substantial non-cash wealth but has low income how do they pay their tax?  They would have to borrow to pay it, or sell those assets.



Diddums


Diddiums you if you have kiwsaver/shares/savings.

Under a 'wealth tax' every year you would have to pay a % of their net value to the crown in cash.  If GV of any property you have exceeds your mortgage you would have to pay a % of that too.




Mike

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  # 1046149 16-May-2014 10:59
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KiwiNZ: With purchasing of home virtually out of the hands of first home buyers


Actually apart from in Christchurch a first home is obtainable, fro working people with realistic expectations.  There is only a real problem in Christchurch.

Even in Auckland there are houses that are affordable.  They aren't places I would want to live, but if I was in Auckland that is a trade-off I would have to make for the dubious benefits of living in a big city. 

Many people have unrealistic expectations, about the type and location of their first house.  Mum and Dad are in their 50's and have a nice house, because they have worked their way up the property ladder, and this influences their kids' expectations.  The kids probably never lived in, or don't remember their parents first house, but you can bet in almost every case that it wasn't as nice.

Classic example my cousin and her hubby:  For their first home with multiple kids under 5 and one (good) income 'had to have' a 3 bedroom house in the 'grammar zone'.  After living with their parents rent free for two years they bought a cold villa in Mt Eden, and have a horrifying mortgage.  They could have got a three bedroom home built this century in a less desirable suburb for just over half what they paid. 

While I'm making sweeping generalisations :) ...

People also forget/ignore why wealthier 'baby boomers' invest in rental houses. 

To start with owning one or two rental houses isn't what the 'rich' do.  It's what middle income people do late in their working lives.  They have paid of their mortgage and they need to invest in something.  They are more likely to be a builder or a mechanic than a CEO.  Put yourself in their shoes: -

 

  • Many of them got burned in the 1987 crash, or knew people who did.
  • Savings are static or devalue after tax and inflation, and are only partially guaranteed by the bank.
  • Commercial property is something most/many people don't understand. 
  • People understand residential property, it provides returns after inflation. It's tangible you can see it, and the building is insurable.






Mike

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  # 1046294 16-May-2014 14:29
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MikeAqua: For the CGT fans, are you happy to pay CGT every time the funds your kiwisaver is invested in sells property or shares?  Or are we just targeting residential rental properties?


All investments. I have both Kiwisaver and Australian Super, and I my fund pays CGT on the capital gains but by super still makes a good return.




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  # 1046351 16-May-2014 15:25
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ajobbins:
MikeAqua: For the CGT fans, are you happy to pay CGT every time the funds your kiwisaver is invested in sells property or shares?  Or are we just targeting residential rental properties?


All investments. I have both Kiwisaver and Australian Super, and I my fund pays CGT on the capital gains but by super still makes a good return.


OK so Aussie has CGT and house pricing in Sydney and Melbourne are even more crippling than in Auckland?  Why isn't it working?




Mike

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  # 1046375 16-May-2014 15:53
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MikeAqua:
ajobbins:
MikeAqua: For the CGT fans, are you happy to pay CGT every time the funds your kiwisaver is invested in sells property or shares?  Or are we just targeting residential rental properties?


All investments. I have both Kiwisaver and Australian Super, and I my fund pays CGT on the capital gains but by super still makes a good return.


OK so Aussie has CGT and house pricing in Sydney and Melbourne are even more crippling than in Auckland?  Why isn't it working?


For the same reason property prices are silly here.  Despite CGT, their tax system encourages investment in property, with cost of interest able to be offset against income.
This wasn't possible in Australia until the late '80s, when Keating (treasurer) simultaneously introduced a CGT (excluding the family home unless sold within one year) and introduced "negative gearing".
Despite historically high interest rates, Sydney house prices immediately took off.  One property we bought in Sydney at that time, we sold for 2.2x purchase price, only 13 months after buying it.  Zero CGT - as of course it was our home.  Keating got front page on Time Magazine named as "world's best treasurer" later to become PM, and instead of dealing with the fundamental cause, subsequent governments tried to make it easier for "new home buyers" by handing out counter-productive "free money" bribes (pretty dumb when prices are determined by supply demand - not "cost plus").

I also expect that there - as here - a good many politicians have their fingers deep in the pie as "investor landlords", and anyway, they all know that perceived wealth increases through property inflation makes people feel good (well - not perhaps for people who are looking to buy) and boost the economy.  Turkeys don't vote for Xmas.

 
 
 
 


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  # 1046376 16-May-2014 15:54
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MikeAqua: OK so Aussie has CGT and house pricing in Sydney and Melbourne are even more crippling than in Auckland?  Why isn't it working?


A few reasons:

- Interest rates in Australia are lower than NZ
- Population growth in Australia is higher than NZ
- More subsidies for first home buyers adds demand
- Very high usage of negative gearing to reduce tax (Australia has higher marginal tax rates than NZ)
- If you hold an asset more than 12 months, at the moment you only have to declare 50% of the capital gain for tax consideration




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  # 1046378 16-May-2014 16:04
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MikeAqua:
ajobbins:
MikeAqua: For the CGT fans, are you happy to pay CGT every time the funds your kiwisaver is invested in sells property or shares?  Or are we just targeting residential rental properties?


All investments. I have both Kiwisaver and Australian Super, and I my fund pays CGT on the capital gains but by super still makes a good return.


OK so Aussie has CGT and house pricing in Sydney and Melbourne are even more crippling than in Auckland?  Why isn't it working?


What makes you say the CGT isn't holding back prices in Sydney / Melbourne? 

How much would SYD/MEL prices be without a CGT?


I'd imagine prices would have increased even more without CGT. 

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  # 1046387 16-May-2014 16:08
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surfisup1000: I'd imagine prices would have increased even more without CGT. 


Absolutely. It's really only half a CGT anyway with the discounting. It's not very common you buy an investment property and sell it again inside 12 months. 




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Ultimate Geek


  # 1046394 16-May-2014 16:17
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I have to say, the winding journey of this thread is absolutely enthralling...

Where is it going to wander through next!?

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  # 1046397 16-May-2014 16:24
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k1wi: I have to say, the winding journey of this thread is absolutely enthralling...

Where is it going to wander through next!?


down the yellow brick road




Mike
Retired IT Manager. 
The views stated in my posts are my personal views and not that of any other organisation.

 

There is no planet B

 

 


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  # 1046410 16-May-2014 16:44
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surfisup1000:

What makes you say the CGT isn't holding back prices in Sydney / Melbourne? 

 


The fact the prices are completely ridiculous.  It's hard to imagine many people being able to afford any more than houses over there cost now.

If CGT is introduced here it will be on a similar basis as Oz - i.e. no CGT on the house you live in.





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  # 1046436 16-May-2014 17:55
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KiwiNZ:
k1wi: I have to say, the winding journey of this thread is absolutely enthralling...

Where is it going to wander through next!?


down the yellow brick road


And into the rabbit hole!




iPad Pro 11" + iPhone XS + 2degrees 4tw!

 

These comments are my own and do not represent the opinions of 2degrees.


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  # 1048478 19-May-2014 23:29
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SaltyNZ:
KiwiNZ:
k1wi: I have to say, the winding journey of this thread is absolutely enthralling...

Where is it going to wander through next!?


down the yellow brick road


And into the rabbit hole!


hmmm... now... "Drink Me" or "Eat Me" ???

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