Real estate, post level 4

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#2762727 18-Aug-2021 19:53

antonknee:

(although the sharp jump since the first lockdown does feel like it was almost overnight), so we won’t be getting out of it overnight.

I feel that was very much the straw that broke the camels back

Here is my theory.

Lockdown caused spending to drop. Maybe some took that opportunity to reno their house. Every $ rented is hopefully $2 gained. Others saw that travel is an issue so lets settle down and buy, we can travel later when things get back to normal, kick that Kiwisaver into action and this forced savings. Maybe then housing activity was high, more demand. Super low interest compounded that, a perfect storm isn't probably an exaggeration. Now, down the track, demand is there but less, but sellers are way less, they have already done their deals, so demand may be lower but its in excess of seller supply, so pressure on house prices still exists.But it "appears" to be slowing.

Here we are, but thats just my feel.

tdgeek

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#2762971 19-Aug-2021 12:46

Interesting article on the birth of the housing crisis

https://www.newshub.co.nz/home/money/2021/08/human-right-to-financial-speculation-how-a-switch-in-ideology-led-to-the-current-housing-crisis.html

quickymart

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#2768473 29-Aug-2021 17:53

https://www.nzherald.co.nz/nz/opinion-government-has-caused-housing-crisis-to-become-a-catastrophe/KIC4UPEHUMTEJPP6NO22NO6SPI/

(paywalled) a look back at how the housing situation got to where it was, mostly since 2017 onwards.

mattwnz

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#2768480 29-Aug-2021 18:17

quickymart:

https://www.nzherald.co.nz/nz/opinion-government-has-caused-housing-crisis-to-become-a-catastrophe/KIC4UPEHUMTEJPP6NO22NO6SPI/

(paywalled) a look back at how the housing situation got to where it was, mostly since 2017 onwards.

Does it mention the emergency low interest rates being a significant factor in the steep price increases? Labour promised Kiwibuild, which should have done a lot of solve the problem for FHBs. Instead it has only gotten significantly worse

I have noticed that in some places house prices have essentially doubled in just 3 or so years. I know someone in the Hutt who purhcased a house for about $330,000 in 2012, today it is worth 1 million, so basically tripled in 9 years, most of it being in the last 18 months, and they didn't do anything to it.

What is interesting is that there doesn't seem to be anyone coming out and saying that sellers asking these crazy high prices are ripping off our younger generations. However today I got someone accused by a TM buyer, of ripping off kids, when trying to sell a limited edition collectable on trademe which is also a toy, even though my price was less than what others were selling it for, and was what the market is prepared to pay. I noticed that there are private house sellers on trademe where their listing have appeared over lockdown, asking some really crazy high prices for their house, often far more than any online estimate for pretty average houses. I know someone who has done this and already have someone who will likely buy it, and the price they are asking is crazy high. So the madness after lockdown will likely continue.

It is going to get more interesting as to what happens moving forward as much of NZ comes out of level 4, because NZs house prices rises are some of the highest in the world, and there are warnings that that is not sustainable. Here is a video today about the problem which is occurring all over the world, but NZ is singled out as the worst example https://www.youtube.com/watch?v=4AVwnnaOelo&t=675s&ab_channel=NeilMcCoy-Ward

Geektastic

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#2768538 29-Aug-2021 22:40

Houses are not unaffordable. If they were, they would be empty. Someone can afford all of them. It is as much a problem of average income as it is of house prices. Nobody ever seems terribly concerned with how to increase earnings or productivity in this scenario - all they want to do is attempt to get house prices down.

It's a complex equation of many parts, but the market sale price of the houses is only one bit. It would probably be helpful if the MSM tried considering some of the other parts rather than just fixating on price and also started asking why no other form of tax free saving is available in NZ other than buying houses.

If you have a spare $200,000 your choices are (a) invest in shares etc and pay tax or (b) buy a house and not pay tax (assuming you hold the property long enough). What is the most likely outcome? If there was a KiwiSaver-like product where you could save, say, $50,000 a year and it was tax free on what your saving earned, I imagine many people would channel funds there rather than buying houses. They do in other parts of the world where such things are available.

Lifting earnings by improving NZ's economic productivity (rather than merely by government diktat) would be a pretty helpful thing to do as well.

The low hanging fruit of "bring down prices" is both doomed to fail in the long run and too simplistic to be useful.

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#2768609 30-Aug-2021 08:36

Geektastic:

Houses are not unaffordable.

If you have a spare $200,000 your choices are (a) invest in shares etc and pay tax or (b) buy a house and not pay tax (assuming you hold the property long enough). What is the most likely outcome? If there was a KiwiSaver-like product where you could save, say, $50,000 a year and it was tax free on what your saving earned, I imagine many people would channel funds there rather than buying houses. They do in other parts of the world where such things are available.

Well it depends. This month your spare $200k might buy you something. Next month you need that $200,000 to be $210,000, the month after more.

I'd be intrigued to see what effect some sort of law change would in regards to using equity to purchase subsequent property could do. IE your mortgage was for a specific property only, and the equity stayed in that house, it couldn't be used as the 'deposit' for the next house and so on.

Or rather make the 20% deposit cash for first property, 40% for second, 60% for the third etc.

GV27

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#2768618 30-Aug-2021 08:58

mudguard:

Or rather make the 20% deposit cash for first property, 40% for second, 60% for the third etc.

I'd rather see we do this with stamp duties tbh. 0% for to swap one home for another, 10% second home, third home 20%, then 40%.

Sharesies

Trade NZ and US shares and funds with Sharesies (affiliate link).

mattwnz

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#2768830 30-Aug-2021 14:34

Geektastic:

Houses are not unaffordable. If they were, they would be empty. Someone can afford all of them. It is as much a problem of average income as it is of house prices. Nobody ever seems terribly concerned with how to increase earnings or productivity in this scenario - all they want to do is attempt to get house prices down.

It's a complex equation of many parts, but the market sale price of the houses is only one bit. It would probably be helpful if the MSM tried considering some of the other parts rather than just fixating on price and also started asking why no other form of tax free saving is available in NZ other than buying houses.

If you have a spare $200,000 your choices are (a) invest in shares etc and pay tax or (b) buy a house and not pay tax (assuming you hold the property long enough). What is the most likely outcome? If there was a KiwiSaver-like product where you could save, say, $50,000 a year and it was tax free on what your saving earned, I imagine many people would channel funds there rather than buying houses. They do in other parts of the world where such things are available.

Lifting earnings by improving NZ's economic productivity (rather than merely by government diktat) would be a pretty helpful thing to do as well.

The low hanging fruit of "bring down prices" is both doomed to fail in the long run and too simplistic to be useful.

Haven't you therefore highlighted the problem? That houses therefore should pay capital gains tax, to bring house investing inline with other investments. Currently houses have advantages over other forms of investments in nz. The house one lives in is not an investment, which is one reason why it has never been taxed, and excluded from CGT suggestions.

The government was advised to increase the brightline test to 20 years, but they increased it to just 10. Effectively what they have done is potentially made housing supply problems even worse, because now investors will hold onto their houses for longer, to avoid paying the tax. IMO they should just have said that there will be a CGT on any house that is not a family home, but they promised no new taxes.

If NZ could increase it's earnings, then we wouldn't need to worry about things like universal super or other funding shortfalls.

House prices are expected by the Reserve bank to fall , and increasing interest rates may help, as it means people can't afford to service as large a mortgage. The low rates have contributed significantly to the escalating prices. . It is a good thing if house prices fall, but probably slowly, as what has happened over the last 18 months is very damaging.

mattwnz

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#2768833 30-Aug-2021 14:38

mudguard:

Geektastic:

Houses are not unaffordable.

If you have a spare $200,000 your choices are (a) invest in shares etc and pay tax or (b) buy a house and not pay tax (assuming you hold the property long enough). What is the most likely outcome? If there was a KiwiSaver-like product where you could save, say, $50,000 a year and it was tax free on what your saving earned, I imagine many people would channel funds there rather than buying houses. They do in other parts of the world where such things are available.

Well it depends. This month your spare $200k might buy you something. Next month you need that $200,000 to be $210,000, the month after more.

I'd be intrigued to see what effect some sort of law change would in regards to using equity to purchase subsequent property could do. IE your mortgage was for a specific property only, and the equity stayed in that house, it couldn't be used as the 'deposit' for the next house and so on.

Or rather make the 20% deposit cash for first property, 40% for second, 60% for the third etc.

What I find interesting is that investors have been complaining about the tax changes over interest expense deductions being removed. However investors are running a business when they buy and rent out houses, but the loan they are getting is not at business rates, but at residential housing rates. So investors are getting a great deal on the ultra low interest rates, while other businesses may have to pay far more in interest when getting business loan.

Handle9

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#2768896 30-Aug-2021 16:44

mattwnz:

What I find interesting is that investors have been complaining about the tax changes over interest expense deductions being removed. However investors are running a business when they buy and rent out houses, but the loan they are getting is not at business rates, but at residential housing rates. So investors are getting a great deal on the ultra low interest rates, while other businesses may have to pay far more in interest when getting business loan.

There's a difference between a secured loan and an unsecured loan. Businesses can often access secured loans at better interest rates than a residential mortgage.

GV27

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#2768915 30-Aug-2021 17:33

Geektastic:

If you have a spare $200,000 your choices are (a) invest in shares etc and pay tax or (b) buy a house and not pay tax (assuming you hold the property long enough). What is the most likely outcome? If there was a KiwiSaver-like product where you could save, say, $50,000 a year and it was tax free on what your saving earned, I imagine many people would channel funds there rather than buying houses. They do in other parts of the world where such things are available.

That's the thing though - you don't have a god-given right to tax free investment income. The Kiwisaver comparison is apt, considering how much different things are in Australia, where super contributions are in the doubel-digits and, from memory, taxed upon realisation, not upon the original income being earned.

Here, because Kiwisaver has such a low bar, many Australian companies will actually get a saving from switching their employees gradually over to Kiwisaver schemes instead of offering them access to their super schemes at the same rates (12% or whatever it is these days). But then that's a double-edged sword because Kiwi incomes are so low, so mandating wages from people's take home pay go into a fund they can't access for decades when living costs are so high is kind of cruel.

So yes, it is a complex problem, but the reality is, given our low wages, houses do really cost too much and leave too little for people to actually live on once they pay their mortgage/rent/other housing costs. There's no getting away from that.

mattwnz

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#2769090 30-Aug-2021 23:37

GV27:

So yes, it is a complex problem, but the reality is, given our low wages, houses do really cost too much and leave too little for people to actually live on once they pay their mortgage/rent/other housing costs. There's no getting away from that.

When interest rates rise, and they bring in debt to income ratios etc. I really do wonder how prices can continue to rise, and must be why the RB expect a 5% drop. So many people seem to think these capital gains are locked in, and their houses estimate is like ratchet which never goes down. But anything can happen. At some point as supply catches up, getting someone to rent an investment home may become more difficult.