Housing Announcement and Reforms 23/03/2021

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tdgeek

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#283972 23-Mar-2021 08:14

The other housing threads are closed, so a fresh one to discuss today's housing announcement. Will it make a difference?

Whats the expectations? https://www.stuff.co.nz/national/politics/300259265/dday-for-the-governments-plan-to-fix-housing-with-few-easy-options has a few ideas

Unless there are attempts to make me build than buy, not a lot will change

Be interesting to see how landlords are affected. If being a landlord became less palatable, that could cause a number to drop out of that market, turning them into homeowner properties. That would be quite a good option, IMO A minor exodus would not be a bad thing.

Bottom line is she doesn't want prices to fall, so unaffordability will remain

Interesting point in a Newshub article

"There isn't a lack of housing per se, what there is is too many people living in rental properties who seek to own," Prof Tookey said. The Government could incentivise rental property owners to "liberate" their properties, without punishing them, he said.

I'd always wondered about this oft stated 100,000 understocked number, there aren't 400,000 living in tents

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#2678930 23-Mar-2021 08:38

You can be sure it will either be

No real changes

Changes producing unintended negative consequences for the little guys and renters. Like every time.

For example, extending the brightline test to 30 years would just encourage hoarding for significantly longer, or cement in place multi generational wealth for the existing 'haves'.

Another suggestion in the article was removing income tax deduction of interest, this will just result in tenants picking up the full tax bill. I mean, ring fencing and record low interest rates already didn't do anything.

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#2678938 23-Mar-2021 08:48

I find it oddly reassuring watching a government struggle to come up with any useful solutions for the housing problem. It truly demonstrates the limitations of government.

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#2678940 23-Mar-2021 08:49

It was interesting on the telly this morning, Don Brash said a 400sqm section in Flatbush (South Auckland) cost approx $800k. To build on it would be at least another $200+, taking the "affordable" option in Auckland to over $1m

I wonder how accurate that is and whether there is a cheaper alternative to leaving Auckland for those looking for an affordable first home?

There was talk of removing some legislation or other that caused artificial boundaries within cities - basically opening up rural land to build on. Could this even work? Wouldn't the land just be as expensive as everything on either side of it?

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#2678946 23-Mar-2021 08:55

the problem is supply and demand and like all things , if demand outstrips supply then prices rise. We are building roughly 14,000 new homes a year and the population is growing by 60,000 a year. So the government can do what it likes but it wont make any difference untill we can build more houses to keep up with the demand.

Common sense is not as common as you think.

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#2678950 23-Mar-2021 09:00

[Housing Minister Megan] Woods said the Government might look at investment rules which encourage foreign capital into New Zealand to build large-scale rental developments.

This is the last thing we need. There is no shortage of capital, with historic low interest rates.

Foreign investment encouragement means

An unlevel playing field, with foreigners getting preferential treatment and making it more difficult for NZ companies to compete
Increased demand for land for large-scale developments, which will push new house prices & rents up further
Profits and/or rents going overseas, so a long-term drain on the economy.

What's really needed is an analysis of why Kiwi companies can't/won't do these developments, and then addressing those issues. Or why we need a few large-scale developments, instead of a bunch of small-scale developments.

tdgeek

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#2678951 23-Mar-2021 09:00

gbwelly:

You can be sure it will either be

No real changes

or

Changes producing unintended negative consequences for the little guys and renters. Like every time.

For example, extending the brightline test to 30 years would just encourage hoarding for significantly longer, or cement in place multi generational wealth for the existing 'haves'.

Another suggestion in the article was removing income tax deduction of interest, this will just result in tenants picking up the full tax bill. I mean, ring fencing and record low interest rates already didn't do anything.

Brightline may go to 10, not 30. Hoarders would keep hoarding so no effect there. Baby Boomer rental owners who intend to cash in, in the not that far off future and dont want to wait 10 years may cash in sooner, rather than have to hold on past the 10 years. If offsetting tax losses wasnt available, yes that may cause landlords to increase the rent, but how far can you push that? The only potential good thing is if some landlords start dumping their rentals onto the market

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#2678952 23-Mar-2021 09:02

Handsomedan:

It was interesting on the telly this morning, Don Brash said a 400sqm section in Flatbush (South Auckland) cost approx $800k. To build on it would be at least another $200+, taking the "affordable" option in Auckland to over $1m

I wonder how accurate that is and whether there is a cheaper alternative to leaving Auckland for those looking for an affordable first home?

There was talk of removing some legislation or other that caused artificial boundaries within cities - basically opening up rural land to build on. Could this even work? Wouldn't the land just be as expensive as everything on either side of it?

The thing is we don't want auckland to keep spilling out into the rural land when we have land much closer to the city at really low densities.

We have massive areas in central auckland which are single house zoned (600m2 min)

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tdgeek

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#2678959 23-Mar-2021 09:17

No FHB help

SaltyNZ

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#2679003 23-Mar-2021 09:18

Handsomedan:

It was interesting on the telly this morning, Don Brash said a 400sqm section in Flatbush (South Auckland) cost approx $800k. To build on it would be at least another $200+, taking the "affordable" option in Auckland to over $1m

I wonder how accurate that is and whether there is a cheaper alternative to leaving Auckland for those looking for an affordable first home?

There was talk of removing some legislation or other that caused artificial boundaries within cities - basically opening up rural land to build on. Could this even work? Wouldn't the land just be as expensive as everything on either side of it?

What kind of home are you getting for $200K? We just rebuilt our house, reusing the existing foundation and extending it by about 4.5m. It's a rectangle outside. It still cost over $500K. For $200K on a green fields site you might get a couple of brand new freight containers.

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gbwelly

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#2679004 23-Mar-2021 09:21

Haha, they outperformed my expectations on this one, brightline changes to 10 years but only applies to properties acquired after 27 March. Well played, more great ladder kicking.

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#2679007 23-Mar-2021 09:25

As I am sure I am not the only one to point out, anything that incurs a direct cost on a landlord is simply going to be passed directly onto the tenants so doing things like removing the tax break for interest is counterproductive in the short term. My suggestions:

Sinking lid cap on number of investment properties owned, to say just 1: no pressure to sell the ones you own (we do not need a price crash) but you can't buy any more
0% LVR on investment properties - i.e. you cannot borrow money to buy an investment (which includes taking equity from others you already own). It's 100% cash up front or nothing. Makes it much harder to buy the next one
Limit purchases on investment properties to new builds - helps to encourage the creation of more housing while greatly softening the market for existing houses because investors are now out of it
Do something about the materials cartel - neighbours across the road from my parents in NSW are building a bigger house than ours for less than half the price. Some of that difference is because the guy is a master carpenter, to be sure, but the builder's margin isn't 60%. The materials are just so much cheaper in Australia

I also support tougher regulations on building standards for landlords. Although some of those costs will be passed on to tenants, it will ultimately benefit them. And in the meantime if the hassle drives some of the crappier landlords out of the game then so much the better.

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#2679012 23-Mar-2021 09:37

and more proof that they have absolutely no fking clue -

"Todays announcement will make residential property less lucrative for speculators" - Speculators were taxed on profits previously just as they will in the future, when the main sourse of income is buying/selling properties for a profit, that is taxable income and not capital gains.

Investors however are typically in it for the long term. Unless they have specific data on the resale rate of properties in that 5-10 year gap that may apply, then its really just virtue signalling and looking like they are doing something when in reality, they will achieve fk all.

Extending the income and price gaps seems sensible.

tdgeek

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#2679015 23-Mar-2021 09:44

gbwelly:

Haha, they outperformed my expectations on this one, brightline changes to 10 years but only applies to properties acquired after 27 March. Well played, more great ladder kicking.

Agree, thats dumb. Make it retrospective, but give me space to sell so I avoid the 5 year Brightline, and let me sell then and avoid the extra 5 years, so I have a choice, and there you go, Ive reduced rental houses and converted them to owned houses. The minor benefit is that some investors will not join the market

tdgeek

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#2679019 23-Mar-2021 09:48

sen8or:

and more proof that they have absolutely no fking clue -

"Todays announcement will make residential property less lucrative for speculators" - Speculators were taxed on profits previously just as they will in the future, when the main sourse of income is buying/selling properties for a profit, that is taxable income and not capital gains.

Investors however are typically in it for the long term. Unless they have specific data on the resale rate of properties in that 5-10 year gap that may apply, then its really just virtue signalling and looking like they are doing something when in reality, they will achieve fk all.

Extending the income and price gaps seems sensible.

Speculators in that context is that you and me, salaried workers, that own a few rentals, who can skip Brightline (which is residential rule), will opt out of it as Brightline is too long and the tax changes affect us. Not the large scale investors who pay tax on capital gain income anyway.

wellygary

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#2679028 23-Mar-2021 10:07

tdgeek:

gbwelly:

Haha, they outperformed my expectations on this one, brightline changes to 10 years but only applies to properties acquired after 27 March. Well played, more great ladder kicking.

Agree, thats dumb. Make it retrospective, but give me space to sell so I avoid the 5 year Brightline, and let me sell then and avoid the extra 5 years, so I have a choice, and there you go, Ive reduced rental houses and converted them to owned houses. The minor benefit is that some investors will not join the market

The most interesting move is the removal of interest deductibility as an expense.... Now I can see this pushing a number of small investors out of business and making them sell up (probably the government's intention)..

But the unintended consequence is that it is a disincentive for large scale corporate investors to move into the "build-to-rent" sector. ( which the government does want)

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