Housing Announcement and Reforms 23/03/2021

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Master Geek
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#2682041 28-Mar-2021 16:32

Handle9:

I think you've been watching too many films. The IRD isn't opposed to the change and if they were it's irrelevant. They will pursue tax revenue and don't have tolerance for people who try and commit fraud. The Reserve Bank is similar.

You overestimate the power of policy makers. Policies can be undone just as fast as they get done. RBNZ has got nothing to do with taxation policies nor the IRD, why would they get involved?

Handle9

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#2682046 28-Mar-2021 16:51

703:

Handle9:

I think you've been watching too many films. The IRD isn't opposed to the change and if they were it's irrelevant. They will pursue tax revenue and don't have tolerance for people who try and commit fraud. The Reserve Bank is similar.

You overestimate the power of policy makers. Policies can be undone just as fast as they get done. RBNZ has got nothing to do with taxation policies nor the IRD, why would they get involved?

Why would the IRD get involved in tax fraud? Really?

tdgeek

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#2682080 28-Mar-2021 19:44

703:

Handle9:

I think you've been watching too many films. The IRD isn't opposed to the change and if they were it's irrelevant. They will pursue tax revenue and don't have tolerance for people who try and commit fraud. The Reserve Bank is similar.

You overestimate the power of policy makers. Policies can be undone just as fast as they get done. RBNZ has got nothing to do with taxation policies nor the IRD, why would they get involved?

The IRD perspective is quite clear. Allowing interest deductions is fair, so they oppose that new rule. But the new rule is not about fairness, its about removing speculators and investors from a neccesity, i.e. housing. Housing needs rentals but its not a risk free sharemarket. Which is what it currently is, hence the demand.

Batman

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#2682195 28-Mar-2021 21:26

https://www.stuff.co.nz/life-style/homed/housing-affordability/300264011/investor-tax-rule-changes-government-will-take-action-if-rents-spike-grant-robertson-says

sir1963

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#2682205 28-Mar-2021 21:46

Batman:

https://www.stuff.co.nz/life-style/homed/housing-affordability/300264011/investor-tax-rule-changes-government-will-take-action-if-rents-spike-grant-robertson-says

Yep Robertson is off the rails.

Makes Plan-B even more important.

GV27

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#2682236 29-Mar-2021 06:58

tdgeek:

The IRD perspective is quite clear. Allowing interest deductions is fair, so they oppose that new rule. But the new rule is not about fairness, its about removing speculators and investors from a neccesity, i.e. housing. Housing needs rentals but its not a risk free sharemarket. Which is what it currently is, hence the demand.

Correct; and landlords have suddenly gone from arguing they provide an essentially social good to the extent they should be considered philanthropists to threatening to jack rents on their tenants to prove a point against.... Grant Robertson? Maybe it's better these people aren't deciding who gets shelter and who doesn't.

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sir1963

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#2682243 29-Mar-2021 07:43

GV27:

tdgeek:

The IRD perspective is quite clear. Allowing interest deductions is fair, so they oppose that new rule. But the new rule is not about fairness, its about removing speculators and investors from a neccesity, i.e. housing. Housing needs rentals but its not a risk free sharemarket. Which is what it currently is, hence the demand.

Correct; and landlords have suddenly gone from arguing they provide an essentially social good to the extent they should be considered philanthropists to threatening to jack rents on their tenants to prove a point against.... Grant Robertson? Maybe it's better these people aren't deciding who gets shelter and who doesn't.

A Million dollar house, with 40% deposit sees a landlord with an $600,000 mortgage.

At 3%, that is 18,000 a year, or $346 a week.

Because the landlord can no longer deduct the interest, that is another $6,000 a year or $115 a week that has to come from somewhere.

Now According to Grant Robertson, the 12 months up to February, rents rose 3%, ie inflation + just enough to cover the additional compliance costs.

GV27

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#2682297 29-Mar-2021 08:19

sir1963:

A Million dollar house, with 40% deposit sees a landlord with an $600,000 mortgage.

At 3%, that is 18,000 a year, or $346 a week.

Because the landlord can no longer deduct the interest, that is another $6,000 a year or $115 a week that has to come from somewhere.

Now According to Grant Robertson, the 12 months up to February, rents rose 3%, ie inflation + just enough to cover the additional compliance costs.

Maybe the fact we're talking about million dollar houses as the go-to example is kind of the problem. A million-dollar house should be a sprawling family home on a decent bit of land, not the entry point for a terraced home with limited access to public transport and that requires a mega-commute in rush-hour traffic.

We seem quite happy to tell first home buyers to leave cities (and family and job opportunities) to give themselves a chance to buy a house of their own so they can have stable accommodation to start a family, but we should underwrite investors taking on massive amounts of debt to buy houses that others can't? I think there comes a point where that can't be justified, and in my opinion, we're long past it.

No one is hold a gun to property investors' heads and saying "you have no choice but cop this loss". If it's not tenable, then they sell up and put their money elsewhere. They'll still be getting pretty impressive gains if they bought more than six months ago. The good news for them is there's so much pent up FHB demand due to being priced out of the market that price retracing should be gradual instead of a sudden drop - although that will depend on how much investor activity drops off.

Ideally I would like to see owner-occupiers given a soft-landing through a state lending program and the OCR gradually return to around 5% to give people with cash some basic returns so they don't have to default to property investment. I'm hoping we'll see some signals around this at some point.

Fred99

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#2682306 29-Mar-2021 08:35

sir1963:

Because the landlord can no longer deduct the interest, that is another $6,000 a year or $115 a week that has to come from somewhere.

So when house prices have been rising at 25% PA, then FHBs have been facing increased costs of much more than $115/week and in finding that extra money, the "somewhere" has been their own pockets (or the bank of mum and dad).

About your loss of taxpayer-funded relief on the interest you pay, I'm not feeling sympathy.

Before you decide to move to Aus and buy a rental property in Surfers, if you've got an accountant over there, ask them what the main proposed policy of the ALP has been to address house price unaffordability, and how that might impact you if there's a change of government.

Paul1977

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#2682347 29-Mar-2021 10:04

Fred99:

sir1963:

Because the landlord can no longer deduct the interest, that is another $6,000 a year or $115 a week that has to come from somewhere.

So when house prices have been rising at 25% PA, then FHBs have been facing increased costs of much more than $115/week and in finding that extra money, the "somewhere" has been their own pockets (or the bank of mum and dad).

About your loss of taxpayer-funded relief on the interest you pay, I'm not feeling sympathy.

Before you decide to move to Aus and buy a rental property in Surfers, if you've got an accountant over there, ask them what the main proposed policy of the ALP has been to address house price unaffordability, and how that might impact you if there's a change of government.

@sir1963 isn't asking for sympathy, he's pointing out the inevitability that the increased cost of being a landlord will ultimately be passed onto the tenant. As the cost of business goes up, businesses charge more for their goods and services - the rental market is no different.

Even if these measures do slow the skyrocketing price of homes, it will make it a lot harder for FHBs to save for the required deposit if they are currently renting. That might balance out if the change results in less deposit required, but I wouldn't count on it. But renters who aren't looking to buy are stuffed no matter how you look at it.

Varkk

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#2682349 29-Mar-2021 10:05

sir1963:

Batman:

https://www.stuff.co.nz/life-style/homed/housing-affordability/300264011/investor-tax-rule-changes-government-will-take-action-if-rents-spike-grant-robertson-says

Yep Robertson is off the rails.

Makes Plan-B even more important.

I wouldn't say he is off the rails, but more that he is reminding people that the government does have the ability to regulate markets and will step in if there is seen to be a need to do so. This is using the implication of regulation to control a market rather than directly using regulation. Governments and market regulation bodies do this kind of thing all the time. How often does the Reserve Bank talk about adjusting rates without actually adjusting the rates.

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Fred99

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#2682366 29-Mar-2021 10:34

Paul1977:

@sir1963 isn't asking for sympathy, he's pointing out the inevitability that the increased cost of being a landlord will ultimately be passed onto the tenant. As the cost of business goes up, businesses charge more for their goods and services - the rental market is no different.

Nope, He's arguing that will be the case, there's nothing "inevitable" about it. It might happen, it might not, if it does then expect to be the target of further regulation.

Maybe if these so-called "business people" landlords actually had some real trading/market business experience (as opposed to "rent seeking" - in its most literally correct form) they'd be aware how fickle the real business world is, how hard it is to make a profit, and how you're often at the mercy of changes in the market outside your control (be that due to government or something else), in which case you need to suck it up and adapt to if you want to survive.

GV27

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#2682371 29-Mar-2021 10:36

Paul1977:

@sir1963 isn't asking for sympathy, he's pointing out the inevitability that the increased cost of being a landlord will ultimately be passed onto the tenant. As the cost of business goes up, businesses charge more for their goods and services - the rental market is no different.

Even if these measures do slow the skyrocketing price of homes, it will make it a lot harder for FHBs to save for the required deposit if they are currently renting. That might balance out if the change results in less deposit required, but I wouldn't count on it. But renters who aren't looking to buy are stuffed no matter how you look at it.

Things weren't exactly too rosy for renters and aspiring FHBs before this announcement, so I'm not sure I buy this. Rents and house prices are already massively unaffordable, am I meant to believe that this was supposed to endure to the benefit of investors forever without intervention? We're a low wage economy, are we suggesting rents would be any higher than they are now if interest rates were not lower? Or have we seen some big drop in rents as the interest rates dropped dramatically over the past two years that I'm not aware of?

Investments have risks, if the sharemarket crashes and my Kiwisaver is wiped out, then tough, noodles in retirement for me if I'm lucky to even live that long. I fail to see property investment deserves golden goose status when it comes at such a massive social cost. Untaxed gains, price floors through accomodation supplements, shortages of supply through nimbyism in central areas - how long was this party meant to last with more and more people standing on the sidelines?

SJB

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#2682451 29-Mar-2021 12:29

GV27:

Untaxed gains, price floors through accomodation supplements, shortages of supply through nimbyism in central areas - how long was this party meant to last with more and more people standing on the sidelines?

It seems to have lasted for the several decades that I have been lucky enough to own a house so why should it end any time soon?

GV27

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#2682455 29-Mar-2021 12:37

SJB:

It seems to have lasted for the several decades that I have been lucky enough to own a house so why should it end any time soon?

Eventually the consequences of some things became so garrish that they cannot be ignored. History has shown that things seem like they are forever going to be the way they are, until suddenly they are not.

I'm not saying we go down the route of dealing with things the same way the French chose to, but we might get a decent national anthem out of it.

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