Real estate, post level 4

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#2871749 20-Feb-2022 22:39

140,500 --- 812 --- Auckland median household income (more than one person in average household)

My little table is just a general rule of thumb, but it was yearly salary and weekly rent / mortgages.

If someone is trying to aggressively pay down their mortgage before higher interest rates kick in, 30% is not a bad idea.

If you're trying to save for a deposit, 20% of gross income for rent would be better obviously.

Sorted has a nice website

MikeAqua

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#2872622 22-Feb-2022 12:53

Handle9:

Do you turn down salary increases because “you are not really encouraged to do more?”

I've taken a salary decrease for an extra weeks leave. At a certain balance between income stage of life and costs of living, time is worth more than money.

I take the same attitude to my annual bonus now. I could work extra hard and smash all my stretch KPIs and get a 10% bonus every year. Then give the govt the lion's share. Or I can do a good job, deliver more than acceptable performance, and have a better lifestyle.

Mike

antonknee

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#2872783 22-Feb-2022 15:36

engedib:

It's household gross income, so it's even worse.

I think another bit issue is that the tax brackets have not been adjusted since 2010:

https://www.stuff.co.nz/business/money/300519291/minimum-wage-workers-pushed-near-middle-tax-bracket

So even at the minimal wage people are not really encouraged to do more because all of the extra income will be taxed at 30% + the new unemployment levy.

Do people really turn down payrises etc because they have to pay 30% tax on the increase? I doubt that very, very much or high income jobs wouldn't really exist, would they? Anecdotally, as someone who has previously earned minimum wage I can assure you any extra money was welcomed by my colleagues and I, even if that required extra work, and even if that extra money was taxed at a higher rate than other earnings - because it's still extra money.

In fact even now on a six figure income, I happily accept extra work knowing it's going to be taxed at 39% precisely because I still get more money at the end of the day. 61% is more than 39% after all. Obviously there's a tradeoff point somewhere thanks to diminishing returns, but it's almost certainly not at around $70k where that higher bracket kicks in.

Edited to add that I do think our tax brackets are really badly set up and need to be changed, I'm just not convinced it currently is a major disincentive to working.

mudguard

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#2872819 22-Feb-2022 16:18

antonknee:

Do people really turn down payrises etc because they have to pay 30% tax on the increase? I doubt that very, very much or high income jobs wouldn't really exist, would they?

I doubt it as well, I don't even use all my annual leave as it is. At this point of my life I'll take the extra money. I'm nowhere near the 39% threshold so I don't have to worry about that yet!

mudguard

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#2872820 22-Feb-2022 16:20

antonknee:

Edited to add that I do think our tax brackets are really badly set up and need to be changed, I'm just not convinced it currently is a major disincentive to working.

Yeah I agree that brackets should be adjusted annually with inflation.

MikeAqua

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#2873198 23-Feb-2022 11:44

antonknee:

In fact even now on a six figure income, I happily accept extra work knowing it's going to be taxed at 39% precisely because I still get more money at the end of the day. 61% is more than 39% after all. Obviously there's a tradeoff point somewhere thanks to diminishing returns, but it's almost certainly not at around $70k where that higher bracket kicks in.

After you pay $39 tax on that extra $100 if you spend your $61, you will give the govt another $8 in tax, leaving you $53 of actual spending power for your additional $100 income. So how much extra work do you want to do for $53 of goods?

A lot depends on your financial circumstance and life stage. I bought my first property at 25 and I'm now closer to 50 than 40. Three of the four kids have left home. The light at the end of the mortgage tunnel is visible. Time matters more than money. When psychologists research income vs happiness, there is an asymptote income above which happiness doesn't increase.

Mike

GV27

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#2873214 23-Feb-2022 12:08

antonknee:

Edited to add that I do think our tax brackets are really badly set up and need to be changed, I'm just not convinced it currently is a major disincentive to working.

Probably more at the bottom where the WFF abatements and minimum wage play silly buggers, but the $70K bracket is criminally low considering how much less $70K gets you compared to when the tax brackets were last adjusted.

There's also the cost of putting more than one kid into daycare; at that point you have to think about whether it's worth a second income when the daycare costs alone can be crippling. Sadly people have a lot less flexibility about that these days, so many will just end up taking the hit and missing out on time with family.

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Batman

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#2874103 24-Feb-2022 15:05

reserve bank single handedly tripled your house price in 2 years?

https://www.nzherald.co.nz/nz/politics/chloe-swarbrick-david-seymour-grill-adrian-orr-over-whether-the-bank-knew-it-was-igniting-a-housing-boom/7KRCQC3WO2VKWECEXLZN5TABUA/

insane

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#2874128 24-Feb-2022 15:46

Batman:

reserve bank single handedly tripled your house price in 2 years?

https://www.nzherald.co.nz/nz/politics/chloe-swarbrick-david-seymour-grill-adrian-orr-over-whether-the-bank-knew-it-was-igniting-a-housing-boom/7KRCQC3WO2VKWECEXLZN5TABUA/

It's paywalled - but yes of course the RB knew. Anyone who's in a position where a level of understanding of economics and human behaviour is required should have been able to see what was going to happen... History is good teacher on this topic too.

The retail banks though have held huge sway with successive governments - and we keep folding on their bluffs time and time again. Someone needs to stand firm and let them walk back across the ditch if they don't like our policies - none will.

quickymart

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#2876679 1-Mar-2022 09:50

https://www.stuff.co.nz/business/127913166/asking-prices-for-homes-fell-in-11-of-19-regions-in-february-as-market-cools

Not much, but I guess any drop is still a drop.

heavenlywild

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#2876681 1-Mar-2022 09:53

Just in time to save the market as cashed up overseas Kiwis arrive to buy up!

Buying a Tesla? Use my Tesla referral link and we both get discounts and credits.

Handle9

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#2877099 1-Mar-2022 17:32

heavenlywild:

Just in time to save the market as cashed up overseas Kiwis arrive to buy up!

Why would we want to? It's more likely to be net migration.

heavenlywild

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#2877104 1-Mar-2022 17:47

Why not?

I'm guessing we will lose Kiwis but gain more people with cash to spend on housing.

Buying a Tesla? Use my Tesla referral link and we both get discounts and credits.

Handle9

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#2877119 1-Mar-2022 18:26

heavenlywild: Why not?

I'm guessing we will lose Kiwis but gain more people with cash to spend on housing.

There won't be New Zealanders returning in any greater numbers than what has been the case in the last 12 months. The big exodus was at the start of the pandemic.

We'll come back for a visit rather than return permanently. Investment levels from overseas New Zealanders won't change a great deal.

heavenlywild

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#2877121 1-Mar-2022 18:39

Your guess is as good as mine so let's see who's right by year's end 😀

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