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gzt

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  Reply # 1639376 23-Sep-2016 13:01
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Gareth Morgan made a very similar proposal recently:

 

http://www.interest.co.nz/opinion/83523/gareth-morgan-looks-tax-again-and-concludes-we-can’t-get-rich-nation-selling-houses

 

 

(also in his blog and NBR)

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  Reply # 1639377 23-Sep-2016 13:02
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dickytim:

 

Infrastructure needs to be user pays either via increased fuel costs or toll roads.

 

The train set as you put it needs to be improved and some serious money spent on it, in fact a fast rail from Hamilton/ Out laying to the Auckland CBD? Yes please.

 

 

If you really want user pays, then the rail loop should be solely funded from ticket sales when it is open for business.  Last time I checked, you couldn't drive cars on the railway, so how is paying for railways by fuel costs or toll roads "user pays"?


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  Reply # 1639378 23-Sep-2016 13:03
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cynnicallemon:

 

I prefer openness and clarity but it seems a trait of all elected parties to not fully deliver on what they promise.

 

 

And yet, just above, you have a little sarcastic whinge about National delivering on their promise to hold referenda on the flag.


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  Reply # 1639382 23-Sep-2016 13:07
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Rather than increase rates, bring in a land tax for overseas buyers and investors. As half of aucklands houses are being purchased by investors, locking first home buyers out, this should have a big effect. It is better that the national government gets the revenue than local government, as it can have a wider use for other infrastructure and services that a higher population needs. Eg new hospitals and schools.

Rising interrst rates, which would reduce the amount people can spend on a house is a good idea in theory. But impossible because the global trend is down, and raising them will just strengthen the nz dollar, making more money flow into Nz.



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  Reply # 1639395 23-Sep-2016 13:38
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shk292:

 

There are two massive flaws in your argument:

 

1 - you haven't established causality between high running cost and low price.  The low price is due to the fact that you're buying an asset that has a limited life; when the lease expires, it's worth nothing

 

2 - Let's ignore above and assume that higher rates would cause a property price crash.  So, you're asking people to vote for a poilicy that would destroy their life savings, while at the same time vastly increase their outgoings.  Or are you suggesting that the banks or taxpayers should take the hit?

 

Once again, a suggestion that is a really good way of spending other people's money for dubious outcomes.  Margaret Thatcher had a good quote about that

 

 

Causality is easy to establish. Where land / property taxes are higher the price of the land is lower. Real-world examples are to be found everywhere. In the Canadian province of Ontario, property taxes are roughly 400% of what one pays in Auckland for a home of the same value. This ratio is observed in towns large and small. In Ottawa, two years ago, my sister's house was worth half as much as mine in Auckland (at the time)....but her property taxes were double. 

 

My father's house in Toronto and my other brother's house in Sarnia showed the same ratio operating. One large city. One medium sized city and one smaller city. Across the bridge in the US it falls apart because Michigan is depressed and in decay, but even the property taxes on a house in the beach in Port Huron were half what I paid in Auckland....for a house worth only US$33,000. In a depressed area, higher property taxes push the price of homes down much more than in areas in demand. 

 

You're making a few assumptions there about what I'm recommending. I'm more trying to highlight the effect itself and the choices about how one might place downward pressure on houses.....through taxes or interest rates. 

 

I own several houses in Auckland, so I have skin in the game. Lots of it. 





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  Reply # 1639396 23-Sep-2016 13:39
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MikeB4:

 

Local bodies are profoundly useless in New Zealand, giving them more money waste is wrong on many levels.

 

 

What do you base such a statement on? 





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  Reply # 1639397 23-Sep-2016 13:40
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joker97: For the sixth thread in a row over 10 years I'm going to say this: it ain't coming down....

 

I agree......provided nothing changes. 

 

I'm talking about what if something were to change. 





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  Reply # 1639398 23-Sep-2016 13:42
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tchart:

 

Linuxluver:

 

increase the rates.

 

 

I'll be sure to bring that up when you are retired and on limited income.

 

Fiddling with rates wont solve anything. In fact central government needs to reign in local government spending as rates need to come down - ie they cant just keep putting them up year after year especially when they are "pegged" against land and capital improvement values.

 

 

Council's have an established process for handling that situation. In Wellington it allowed people on superannuation to remain in multi-million dollar homes up on Mt Victoria they had owned for decades. These cases are easy enough to handle....and they are handled well unless the Council is run by a some very un-nice people. Voters tend to have some control over that. 





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  Reply # 1639401 23-Sep-2016 13:45
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gzt: Gareth Morgan made a very similar proposal recently: http://www.interest.co.nz/opinion/83523/gareth-morgan-looks-tax-again-and-concludes-we-can’t-get-rich-nation-selling-houses (also in his blog and NBR)

 

I'd forgotten that.....but yes, he is making much the same observation as myself. 

I've mentioned this a few times on Geekzone over the past 2-3 years when people moaned about high property rates. The reality is that property rates in NZ are generally very low - mainly because we fund education from income tax rather than property rates (the latter being the norm in most states and provinces in North America, which is why the property taxes tend to be so much higher there.....and note that income taxes aren't much, if any,  lower.) 





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  Reply # 1639413 23-Sep-2016 13:53
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Linuxluver:

joker97: For the sixth thread in a row over 10 years I'm going to say this: it ain't coming down....


I agree......provided nothing changes. 


I'm talking about what if something were to change. 



The only way is to purge.
Eg pass a law to determine who can and can't buy houses. Identify who owns houses. Force non eligible owners to sell within 5 years.
Start a political party to apply.




Swype on iOS is detrimental to accurate typing. Apologies in advance.


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  Reply # 1639414 23-Sep-2016 13:54
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Linuxluver:

 

Causality is easy to establish. Where land / property taxes are higher the price of the land is lower. Real-world examples are to be found everywhere. In the Canadian province of Ontario, property taxes are roughly 400% of what one pays in Auckland for a home of the same value. This ratio is observed in towns large and small. In Ottawa, two years ago, my sister's house was worth half as much as mine in Auckland (at the time)....but her property taxes were double. 

 

My father's house in Toronto and my other brother's house in Sarnia showed the same ratio operating. One large city. One medium sized city and one smaller city. Across the bridge in the US it falls apart because Michigan is depressed and in decay, but even the property taxes on a house in the beach in Port Huron were half what I paid in Auckland....for a house worth only US$33,000. In a depressed area, higher property taxes push the price of homes down much more than in areas in demand. 

 

You're making a few assumptions there about what I'm recommending. I'm more trying to highlight the effect itself and the choices about how one might place downward pressure on houses.....through taxes or interest rates. 

 

I own several houses in Auckland, so I have skin in the game. Lots of it. 

 

 

You've gone nowhere near establishing cauality, you've just provided a couple of example that correlate with your theory.  Correlation is not equivalent to causation.

 

Here's another example - property in Rarotonga has zero rates and is all leasehold unless you're a traditional family member because all land is owned by them.  Yet the buildings are owned by the leaseholder.  Property values gradually decline as the lease end approaches.

 

By your theory, the property would have extremely high value because rates are zero, but the inverse is true.




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  Reply # 1639417 23-Sep-2016 13:58
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dickytim:

 

darylblake:

 

Actually gutting the layers of nonsense thats going on in the council would start to make great in-roads. We have so many people moving to Auckland, and we cant build homes because there is so much red tape. Developers are walking away from projects because they council make it too hard. The council are MAKING developers add infrastructure at their expense and this is causing a lot of them to go an invest/develop somewhere else.

 

That statement about rates is arguable. Increasing rates to fund this infrastructure would help the situation, however we have too many muppet mayors who want to blow it on train sets. 

 

 

Infrastructure needs to be user pays either via increased fuel costs or toll roads.

 

The train set as you put it needs to be improved and some serious money spent on it, in fact a fast rail from Hamilton/ Out laying to the Auckland CBD? Yes please.

 

 

Most people already know that what you recommend doesn't work. User pays in NZ lacks the scale to fund infrastructure beyond the occasional footpath unless the government helps fund it. This has been demonstrated over and over and over.

NZ is capital poor. As soon as we create anything of value, we hock it off to a foreign buyer who then charges us more to use it to help pay for what they paid to buy it. It's a loser model....and it has dominated NZ private business from the earliest days.

 

When we DO finally create a lasting, local asset base like the co-operative dairy industry, our (mainly right-wing) politicians then do their very best to undermine by degrading the co=operative structure and supporting - actually supporting - foreign dominated competition that has helped reduced returns to everyone.

At the end of the day the ONLY organisation in NZ that can reliably get anything done is the government....because they have two critical powers: taxation and the ability to create money.

 

Anyone who hasn't got their head around this is inhabiting a neo-liberal religious cloud of economic mumbo-jumbo. This reality is why this government's economic policies are largely failing across the board......and why the previous government enjoyed considerable success in supporting regional economic growth and reducing our government's fiscal deficit.

The neo-liberals in this government blame us all for being lazy and not driving business like they think we should.....when the reality is that most of us lack the non-house capital to do it....and their policies only make that worse.   

 

  





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  Reply # 1639420 23-Sep-2016 14:03
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The trouble with increasing interest rates is that it hurts tenants (rental increases) and families that own a single house.  Increased interest rates tend to decrease consumer spending which decreases employment and government tax revenue.  People whose mortgage payments increase may save less when interests rates increase.

 

High rates tend to drive up the NZD - bad for tourism and exports (ie most of the economy), which has a negative effect on employment and government tax revenue. 

 

You also have to consider that we have already some of the highest interest rates in the OECD, but that still hasn't tempted people away from housing as an investment.

 

Increase interests rates and housing is still the best returning investment around.  I get capital growth and cash flow (rental).  Importantly I actually own a tangible asset I can see, understand and manage.  I don't know jack about shares, bonds, unit trusts, currency trading, CFDs.  But I do understand property.

 

Increase it to 12% and the rent will still just cover the outgoings.  And I've kept rent well under market because I have good tenants. 

 

Where else can you get deal like housing?  I have borrowed to acquire an asset. The tenant pays enough to cover the debt repayments and outgoings, yet I get the growth on the entire asset. 

 

If I sold up I would only get growth on the net proceeds of the sale. 

 

 





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  Reply # 1639426 23-Sep-2016 14:25
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shk292:

 

dickytim:

 

Infrastructure needs to be user pays either via increased fuel costs or toll roads.

 

The train set as you put it needs to be improved and some serious money spent on it, in fact a fast rail from Hamilton/ Out laying to the Auckland CBD? Yes please.

 

 

If you really want user pays, then the rail loop should be solely funded from ticket sales when it is open for business.  Last time I checked, you couldn't drive cars on the railway, so how is paying for railways by fuel costs or toll roads "user pays"?

 

 

Do you realise how ridiculous that statement is?

 

If we make the rail users pay for the tunnels etc, Rail will become so expensive no-one will use it.

 

Where will those 60,000 people a day go? That's right, the roads, one person per car for the most part. So, as you say, user pays, we build a sh*tload more motorways, and toll the heck out of them (because, user pays right??). It's a good way to reduce House prices though.


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  Reply # 1639442 23-Sep-2016 14:45
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gzt: Gareth Morgan made a very similar proposal recently: http://www.interest.co.nz/opinion/83523/gareth-morgan-looks-tax-again-and-concludes-we-can’t-get-rich-nation-selling-houses (also in his blog and NBR)

 

 

 

I can't agree more with this man. Kiwi's seem to be obsessed with owning property (and lots of it). It's almost as if eggs can only fit in one basket and others are completely out of scope.

 

It makes much more sense to spread finances across different assets, stocks, whatever floats your boat. If the property market were to crash this will cripple many Kiwi's as a consequence.

 

 

 

Saying the house prices will never come down is a joke too. History has proven that although house prices tend to increase in line with inflation they can most certainly dip in times of distress.

 

Yes there is currently an extreme demand for housing (particularly in Auckland). Demand is likely to remain strong however the amount of properties on the market can increase dramatically by changes in the economy. You could think of external factors such as an international armed conflict (war), shortage of minerals/fossil fuels, international exchange rates, stock exchange rates, anything that may impact the interest rate or the currency rates.

 

If the interest rate were to jump back up to 8% or more than that, all of a sudden you have hordes of people who have bought overpriced homes for $1M ++ and will be unable to continue to finance a mortgage that already put maximum pressure on their financial situation prior to the hike. You will see forced foreclosures and the sudden increase of stock due to bankruptcy will bring down the price levels. Similar things are happening in Canada currently where governments took action against foreign investors. It's also not impossible that similar measures may occur in NZ depending on what happens in the next elections.

 

As with most global events NZ follows several years later. My best bet is that the current situation remains unchanged for at least 2 more years, but something is bound to happen in the next decade.

 

 





Gigabit


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