RBNZ engineering our next recession

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Forums › Finance and wealth management › RBNZ engineering our next recession

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#3004977 3-Dec-2022 09:10

gzt: Problems with the equity related proposal. You will immediately hit a problem when people want to use equity to finance their grownup kids into a house. Other than that maybe you're right it could reduce the kind of activity that every make a million in property seminar recommends. Assuming you want to exempt the kids scenario, I'd guess reliably knowing the difference could be challenging.

I don't think there should be any kind of exemption. If you own a house that cost say $220,000 in 1999 (thinking of my parents here) and it's now worth perhaps $1M, by virtue of inflation and the effort of the community (keeping the area nice) it's had a 500 percent increase. Being able to use existing equity has probably driven a lot of this, that's not to ignore a general shortage through population growth etc.

I still wonder how many people would own baches etc if they'd had to come up with 20% (or more for non-owner occupied) deposit in cash?

tweake

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#3004980 3-Dec-2022 09:31

Honest Government Ad | the Rental Crisis

looks like aussies are going down the same path.

tdgeek

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#3005103 3-Dec-2022 13:36

tweake:

totally incorrect.

almost EVERY home owner is a property investor. anyone who has ever sold, or will sell, a house for more than they bought it for is a property investor. Thats the no1 problem.

Getting rid of that will improve NZ's economy massively.

Thats totally bizarre. Maybe we can stop people owning a house? Maybe we can regulate that if you bought a house in 1980 for $40000, you can only sell it on 2022 for $40000?

tdgeek

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#3005104 3-Dec-2022 13:38

tweake:

Honest Government Ad | the Rental Crisis

looks like aussies are going down the same path.

Perhaps if people built more houses and we had the exact number of houses that the population needed then there wont be a premium caused by normal demand not equalling the lower supply.

tweake

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#3005157 3-Dec-2022 14:30

tdgeek:

tweake:

totally incorrect.

almost EVERY home owner is a property investor. anyone who has ever sold, or will sell, a house for more than they bought it for is a property investor. Thats the no1 problem.

Getting rid of that will improve NZ's economy massively.

Thats totally bizarre. Maybe we can stop people owning a house? Maybe we can regulate that if you bought a house in 1980 for $40000, you can only sell it on 2022 for $40000?

not bizarre at all, thats exactly what happens. remember the saying "invest in your home". housing is kiwis 2nd income.

actually limiting sale price would actually work. i would not be so hard to limit it so much for so long. maybe allow a bit each year of ownership, say 4%. after 30 years no restrictions. that would allow for long term investors, which is just fine and normal in many countries. if people can't make quick money off housing then they will put money into better things, which makes the entire country better off. that would also slow down, if not stop, the boom and bust cycles of housing, building, supply and labor industries. more stable industries make for a better country.

there is a lot of wins if people stop trying to make money out of housing.

tweake

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#3005205 3-Dec-2022 14:38

tdgeek:

Perhaps if people built more houses and we had the exact number of houses that the population needed then there wont be a premium caused by normal demand not equalling the lower supply.

but there never is enough. kids leaving home can't afford houses and houses are slow to build.

plus why would people spend money building houses if not building them increases demand which increases profit. no debt and make money, its a win. thats exactly whats happened and now people are paying the price for that. only way to fix that is to have someone else (govt) build houses and give them away. but then you have to increase tax to pay for it.

wouldn't it be better if people made money from something else instead of housing and used that to pay for the new house?

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GV27

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#3005303 3-Dec-2022 14:52

mudguard:

I still wonder how many people would own baches etc if they'd had to come up with 20% (or more for non-owner occupied) deposit in cash?

The other issue is rolled-over equity is tax-free financing, whereas FHBs have to cover a deposit with after-tax wages from ordinary jobs.

Batches are a prime example of why housing got silly. Under the rules at one point, your house just had to available for use to claim 100% of the costs, less the portion you used it; e.g. 5 days at New Years meant you could still claim 360/365ths of costs, regardless of how often it was actually used for income-generating purposes.

At one point it was a not-too-ridiculous way to get a foothold in some sort of property, to the extent that I knew a couple of people who did it. The MUA rules put a stop to that though - there was a 20 year period where family batches went from being three bed portable homes with tin rooves to being essentially as big, if not bigger, than the ordinary family home you lived in for the rest of the year.

tweake

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#3005318 3-Dec-2022 16:45

GV27:

mudguard:

I still wonder how many people would own baches etc if they'd had to come up with 20% (or more for non-owner occupied) deposit in cash?

The other issue is rolled-over equity is tax-free financing, whereas FHBs have to cover a deposit with after-tax wages from ordinary jobs.

Batches are a prime example of why housing got silly. Under the rules at one point, your house just had to available for use to claim 100% of the costs, less the portion you used it; e.g. 5 days at New Years meant you could still claim 360/365ths of costs, regardless of how often it was actually used for income-generating purposes.

At one point it was a not-too-ridiculous way to get a foothold in some sort of property, to the extent that I knew a couple of people who did it. The MUA rules put a stop to that though - there was a 20 year period where family batches went from being three bed portable homes with tin rooves to being essentially as big, if not bigger, than the ordinary family home you lived in for the rest of the year.

likewise with hobby farms where you could write off your income tax to it and then sell it tax free.

tdgeek

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#3005325 3-Dec-2022 18:49

tweake:

not bizarre at all, thats exactly what happens. remember the saying "invest in your home". housing is kiwis 2nd income.

actually limiting sale price would actually work. i would not be so hard to limit it so much for so long. maybe allow a bit each year of ownership, say 4%. after 30 years no restrictions. that would allow for long term investors, which is just fine and normal in many countries. if people can't make quick money off housing then they will put money into better things, which makes the entire country better off. that would also slow down, if not stop, the boom and bust cycles of housing, building, supply and labor industries. more stable industries make for a better country.

there is a lot of wins if people stop trying to make money out of housing.

It is bizarre

if people can't make quick money off housing

MOST people dont do that as if you sell the house you bought for 40k thats now worth 1.4M what do you buy next? a 1.4M home in the next suburb

I am a home owner, first home at 19, it was a rental with a mate. Bought "first home" at 23. Moved here and there, where we are now, its 7 figures. Do I have 7 figures in my savings account? No. So, Ive made NO money off housing, not unless I sell up and we move to Gore (Sorry Gore)

You are too focussed on the numbers, you need tp be focussed on the supply and demand. Are you like this when shares go up?

I asked a while back what is your solution, you ignored that. Not interested in ideology, what can a Government do to fix this? Not ideas, but a hard action, please

tdgeek

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#3005326 3-Dec-2022 18:53

tweake:

but there never is enough. kids leaving home can't afford houses and houses are slow to build.

plus why would people spend money building houses if not building them increases demand which increases profit. no debt and make money, its a win. thats exactly whats happened and now people are paying the price for that. only way to fix that is to have someone else (govt) build houses and give them away. but then you have to increase tax to pay for it.

wouldn't it be better if people made money from something else instead of housing and used that to pay for the new house?

Sorry but OMG

If there is never enough, make it enough., then the supply/demand issue resolves itself

only way to fix that is to have someone else (govt) build houses and give them away Ok so you want Socialism or Communism thats out of the wheelhouse for this thread

wouldn't it be better if people made money from something else instead of housing and used that to pay for the new house?

Possibly, what do you suggest? Dont say buy a business

tweake

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#3005333 3-Dec-2022 19:34

tdgeek:

It is bizarre

if people can't make quick money off housing

MOST people dont do that as if you sell the house you bought for 40k thats now worth 1.4M what do you buy next? a 1.4M home in the next suburb

I am a home owner, first home at 19, it was a rental with a mate. Bought "first home" at 23. Moved here and there, where we are now, its 7 figures. Do I have 7 figures in my savings account? No. So, Ive made NO money off housing, not unless I sell up and we move to Gore (Sorry Gore)

You are too focussed on the numbers, you need tp be focussed on the supply and demand. Are you like this when shares go up?

I asked a while back what is your solution, you ignored that. Not interested in ideology, what can a Government do to fix this? Not ideas, but a hard action, please

thats complete nonsense.

EVERYONE does it. standard climb the ladder cash out at the top. i have plenty of retire neighbours who have sold up their big expensive houses and downside to a small house and are living a very nice retirement off the proceeds. ie you sell that 1.4m house and go buy a 300k house. pretty common.

the solution, get rid of profit from 2nd hand housing and yes people can buy/start a business or invest in shares, old cars, whatever. anything but housing. quite common overseas for people to run a 2nd business from home. whatever they do they are making money without taking it from future generations.

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tdgeek

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#3005338 3-Dec-2022 19:44

tweake:

thats complete nonsense.

EVERYONE does it. standard climb the ladder cash out at the top. i have plenty of retire neighbours who have sold up their big expensive houses and downside to a small house and are living a very nice retirement off the proceeds. ie you sell that 1.4m house and go buy a 300k house. pretty common.

the solution, get rid of profit from 2nd hand housing and yes people can buy/start a business or invest in shares, old cars, whatever. anything but housing. quite common overseas for people to run a 2nd business from home. whatever they do they are making money without taking it from future generations.

LOL

OK, so Mum and Dad who according you appear to be the problem. wouldn't it be better if people made money from something else instead of housing and used that to pay for the new house?

Im sure they can transition to yes people can buy/start a business or invest in shares, old cars, whatever.

If you can move me from my 1.4+ home to a 300k property, in my area, I'm keen on that...

Again, what is your solution. What does a Government need to enact to allow house prices to be fixed? That means no "profit" Profit in this context is arguable. If i bought a 40k home decades ago and its worth 1.4 now, I can sell it at a profit of 1.36M. Buy a place 4 doors down for 1.4

But before this continues for days and days, what can a Government do cause house prices to be fixed, presumably forever?

tweake

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#3005473 4-Dec-2022 11:25

tdgeek:

LOL

OK, so Mum and Dad who according you appear to be the problem. wouldn't it be better if people made money from something else instead of housing and used that to pay for the new house?

Im sure they can transition to yes people can buy/start a business or invest in shares, old cars, whatever.

If you can move me from my 1.4+ home to a 300k property, in my area, I'm keen on that...

Again, what is your solution. What does a Government need to enact to allow house prices to be fixed? That means no "profit" Profit in this context is arguable. If i bought a 40k home decades ago and its worth 1.4 now, I can sell it at a profit of 1.36M. Buy a place 4 doors down for 1.4

But before this continues for days and days, what can a Government do cause house prices to be fixed, presumably forever?

yes, every home owner is part of the problem. remember this is only part of the issue, there is other factors.

and no, not in your aera. they all move to a cheaper location. hence why i'm in a rural town with tons of retirees from auckland. many people sell the main house and retire to the bach.

fixes, there is many parts to be fixed. eg stopping councils using new housing as funding eg developer contributions which end up being pushed down the ladder. that would mean changes to the way councils are being funded.

stopping profit, we have a weak version of cgt but only on a small number of houses. first thing is to put that to ALL houses. i suggest taxing the profit from house sales based on age of ownership and starting with a huge amount. taxing some small percentage will make things worse as home owners will simply sit and wait until the price goes up to cover it, ie it will push the price up. whats needed is higher % like 100%. no one is going to pay asking price when they know how much goes to tax, so it makes raising short term prices pointless. if you then adjust % due to age, so say 15 years of ownership might be 50% tax, no tax at 30 years.

the point here is to provide a disincentive to profit quickly. this should lengthen the length of home ownership up to some thing decent. this way long term investors (home owner or not) are not affected. this pushes more long term rentals which has a lot of benefits. also its not going to absolutely kill profit, but it should dampen down the boom and bust.

the other advantage is if people do sell and pay the tax, that goes into a housing fund so govt builds new houses. so thats a bit of a feedback loop so if people start profiting again, the supply gets ramped up which pulls prices down. of course stopping govts raiding the piggy bank and spending it elsewhere is an issue.

people who have to sell and move quickly, they pay no tax if they make no money. ie buy at 300k, sell at 300k a year later and pay no tax.

downsides is people will have to work and invest elsewhere to buy a new house, not just pass the cost on to someone else. but on the other hand selling a new house is tax free.

there is other side effects, with little ROI people won't be renovating for sale so much, they will renovate to what they want as they will be living there for a lot longer. it will force culture changes.

so basically your 1980's $40k house will never hit $1.4m, but on the other hand your grandkids won't have to work 3 average wage jobs, have a half dozen flatmates and pay the bank stupid amounts for 30 years (not to mention how much interest they pay makes it even more expensive) just to have a first home.

cshwone

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#3005539 4-Dec-2022 13:08

tweake:

tdgeek:

Thats totally bizarre. Maybe we can stop people owning a house? Maybe we can regulate that if you bought a house in 1980 for $40000, you can only sell it on 2022 for $40000?

not bizarre at all, thats exactly what happens. remember the saying "invest in your home". housing is kiwis 2nd income.

actually limiting sale price would actually work. i would not be so hard to limit it so much for so long. maybe allow a bit each year of ownership, say 4%. after 30 years no restrictions. that would allow for long term investors, which is just fine and normal in many countries. if people can't make quick money off housing then they will put money into better things, which makes the entire country better off. that would also slow down, if not stop, the boom and bust cycles of housing, building, supply and labor industries. more stable industries make for a better country.

there is a lot of wins if people stop trying to make money out of housing.

And how do you account for renovations. I have invested in my home with new double glazing, 2 x woodburners, added 3 decks, added a heatpump, new kitchen, 2 new bathrooms, redecorated inside and out, added an office, added more insulation, landscaped, increased security etc etc.

Yes it is my home but I don't expect, at my age, to see out the 30 years you propose.

And in many countries the family home is CGT exempt. I personally have no issue on CGT on second etc properties.

tweake

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#3005596 4-Dec-2022 14:43

cshwone:

And how do you account for renovations. I have invested in my home with new double glazing, 2 x woodburners, added 3 decks, added a heatpump, new kitchen, 2 new bathrooms, redecorated inside and out, added an office, added more insulation, landscaped, increased security etc etc.

Yes it is my home but I don't expect, at my age, to see out the 30 years you propose.

And in many countries the family home is CGT exempt. I personally have no issue on CGT on second etc properties.

you simply don't. reno's to sell are part of the problem. do the house up to suit you, not for the ROI.

if you have to live in a house for a long time and ROI is no longer a factor, then reno it to suit you. instead of that fancy kitchen and bland "please everyone" paint job, make the house more comfortable, heathy and something that suits your tastes.

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