Housing crisis!

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685 posts

Ultimate Geek

#868611 30-Jul-2013 15:16

mattwnz:
ajobbins: New Zealand needs a Capital Gains Tax.

LVR will do nothing but make it harder for young people like me to get into the market. People upgrading their house or buying investment properties don't usually have a problem with LVR at all.

If you see what one bank is doing, they are getting mum and dads of child house buyers, to effectively take out the 20% deposit on their own home, and that is their maximum exposure. But this is just a sign that housing is affordable, without running to mum and dad for help.

There is a reason why CGT is so unpopular, and that is because so many people own homes, and want that capital gain. But other investments usually have to pay a capital gain, so I am not sure why property has been given special treatment. But that is beginning to change as more people are being locked out of home ownership.

I know this doesn't hugely sound related, but investing in property sounds to me more like the bubble with silver on paper rather than in 100% silver. I think capital gains is a bit silly because investing should be for cashflow (on-goign rent) not for a one off injection of extra cash. The problem with this, is people trying to make an income from not much work (cheap materials and least amount of labour on it) on properties in order to inflate their price. So we have less and less productivity for the money being made. Exactly the same as most investments, people trying to make money from no real added value. This just increases money supply but devalues the rest = recessions.

They way I see it, baby boomers are starting to retire. Soon they're gonna have to give up housing investments to pay for hips or medical treatment etc... if they don't want to be on a public waiting list. So there'll eventually be more homes back in the market to buy. Sure some have health insurance, but that will become expensive as a lot of the population age. The population is increasing, but a fair amount of it in 10-25 years is also going to disappear and a lot retiring.

Employment will be easier to find (especially in health and personal care) and housing will come down. Unless we open the flood-gates on immigration to pay for those retired we'll also have higher taxes. I don't care about owning my first home, I wrote that thought off years ago. What I'm worried about, is the cost and burden it will be putting on my daughter and her kids. Each generation and Government just pass the buck and financial mess on to the next generation to mop up, housing included.

My dream home is a few cheap sections, and a luxury 25 foot caravan or movable housing not open to bureaucratic resource consent crap. Less prone to EQC, less prone to large negative equity if the bum falls out of the financial system or housing market, andif there's an earthquake or big job lay-offs it's drive away.

But in 15 years I don't want to be in New Zealand. I don't want to be left with the mess of previous Government mismanagement.

ajobbins

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#868613 30-Jul-2013 15:16

mattwnz:

If you see what one bank is doing, they are getting mum and dads of child house buyers, to effectively take out the 20% deposit on their own home, and that is their maximum exposure. But this is just a sign that housing is affordable, without running to mum and dad for help.

Most banks are fine with this. They just want to cover themselves.

What I am suggesting is essentially get the government to play that guarantor role rather than a family member. Many family members are unable/unwilling to do this (The latter, in my case).

There are two issues for young first home buyers:

1) Affordability. Ie. the ability to service the mortgage. The average income:house price ration is the worst it's ever been and declining. People have to spend more of their wage to service the mortgage a house than ever before. But, as long as you can service the debt - at least that doesn't exclude you from the market.

2) Deposit. Linked to affordability, when you have to save a deposit which is also a high proportion of your income than ever before, this is the key thing that keeps you out of the market. When my parents were young, it was the norm to finish school, get a job and save money while still living at home. A year or two of saving and you have a decent deposit to buy a home. Nowadays, you just about need a degree to get a job stacking supermarket shelves - which means paying many thousnads of dollars to get it, and then being 3+ years later into the work force. By the time you're ready for the work force, you're probably in debt and living away from home where you have rent and bills to pay, as well as that student loan before you can even think about saving for a deposit. People like my parents were able to get in young, build up equity - and then leverage that equity to buy multiple properties with no money down. Properties now worth a multiple of what they paid for them, and all tax free (In fact, for years they made a 'paper' loss, and provided tax REFUNDS via LAQC depite being cash positive).

The government didn't want to be the nations landlord, so it provided incentives for citizens to take on the role. Now the pendulum has swung too far. The baby boomers are hoarding the property and the wealth, and sitting at the top of the workforce food chain for longer than any other generation.

There is a reason why CGT is so unpopular, and that is because so many people own homes, and want that capital gain. But other investments usually have to pay a capital gain, so I am not sure why property has been given special treatment. But that is beginning to change as more people are being locked out of home ownership.

Well, the reason why CGT is so unpopular is because so many people own MULTIPLE homes. Treat these like any other investment and pay CGT - but not on the family home.

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ajobbins

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#868621 30-Jul-2013 15:27

kiwirock: They way I see it, baby boomers are starting to retire. Soon they're gonna have to give up housing investments to pay for hips or medical treatment etc... if they don't want to be on a public waiting list. So there'll eventually be more homes back in the market to buy. Sure some have health insurance, but that will become expensive as a lot of the population age. The population is increasing, but a fair amount of it in 10-25 years is also going to disappear and a lot retiring.

The baby boomers are the biggest group (of voters). Therefore, any prospective governments tend to do well with policy targeted at the boomers. I expect to see even more tax dollars pumped into funding what they feel they are entitled to in order for government of the day to win and retain power. Not to mention half of the big two parties probably fall into the boomer generation themselves.

Many (most?) of the boomers:
- Got a 100% free education.
- Had government assistance getting into their first homes.
- In many respects enjoyed labour conditions far better than what are on offer today.
- Have been able to accumulate wealth through property essentially tax free.

Now, many expect to retire and be taken care of the government for decades to come. Modern medicine means they are living longer than ever, and the current tax payers are funding it. Most people retiring around now will cash out more from the tax system than they ever put into it during their working life.

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kiwirock

685 posts

Ultimate Geek

#868626 30-Jul-2013 15:31

ajobbins:

The baby boomers are the biggest group (of voters). Therefore, any prospective governments tend to do well with policy targeted at the boomers. I expect to see even more tax dollars pumped into funding what they feel they are entitled to in order for government of the day to win and retain power. Not to mention half of the big two parties probably fall into the boomer generation themselves.

Many (most?) of the boomers:
- Got a 100% free education.
- Had government assistance getting into their first homes.
- In many respects enjoyed labour conditions far better than what are on offer today.
- Have been able to accumulate wealth through property essentially tax free.

Now, many expect to retire and be taken care of the government for decades to come. Modern medicine means they are living longer than ever, and the current tax payers are funding it. Most people retiring around now will cash out more from the tax system than they ever put into it during their working life.

Exactly, well put sir.

MikeB4

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#868637 30-Jul-2013 15:44

The Government wants people to stop investing in housing, they are also making it more difficult for first home owners to buy homes. To extrapolate this, if the Government is successful in this plan then we will have fewer
people buying their own home, fewer people with investment properties for which they rent, the result is the rental stock drops, the demand for rental rises, prices of rentals rise thus making it even harder for first home buyers to purchase.

So we have now huge demand for rental, no available rental stock the result is either (A) overcrowding or (B) Homeless on the streets or (c) Shanty towns or all of these.

It is a very dangerous and serious problem that should not be dealt with along party political lines.

kiwitrc

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#868644 30-Jul-2013 15:56

ajobbins:
The baby boomers are hoarding the property and the wealth, and sitting at the top of the workforce food chain for longer than any other generation.

.

Yes and its pretty comfortable I can tell you.

ajobbins

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#868650 30-Jul-2013 16:03

CGT is absolutely required and only a matter of time.

People who legitimately are making profits off the housing market need to pay tax on it (Like every other profit).

Foreign ownership is an interesting one, as many of those people aren't NZ tax residents, so wouldn't pay a CGT even if there was one. If foreign ownership of property is genuinely an issue driving up pricing in New Zealand, then restricting supply to non-residents may be required.

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ajobbins

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#868653 30-Jul-2013 16:07

kiwirock:
ajobbins:

Many (most?) of the boomers:
- Got a 100% free education.
- Had government assistance getting into their first homes.
- In many respects enjoyed labour conditions far better than what are on offer today.
- Have been able to accumulate wealth through property essentially tax free.

Exactly, well put sir.

Oh I forgot one. They are also hiding all their assets in trusts, protecting them from means testing, pleading poverty and claiming handouts.

My grandparents are like this. Always moaning that they can barely live on their pension and that the government does nothing for them despite them working hard their whole lives, but at the same time they have regular overseas holidays, new cars, more gadgets than I can afford (flat screen tvs, computers, etc)

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graemeh

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#868654 30-Jul-2013 16:07

ajobbins:
There is a reason why CGT is so unpopular, and that is because so many people own homes, and want that capital gain. But other investments usually have to pay a capital gain, so I am not sure why property has been given special treatment. But that is beginning to change as more people are being locked out of home ownership.

Well, the reason why CGT is so unpopular is because so many people own MULTIPLE homes. Treat these like any other investment and pay CGT - but not on the family home.

This is not true. Other investments do not have to pay tax on a capital gain. Property is not getting special treatment.

While I don't like the idea of a capital gains tax if it is to be introduced it must include the family home with no exceptions. The family home buyers are the biggest contributors to high house prices.

Assuming that the idea of the CGT is to reduce house prices can you provide examples of countries with a CGT where this has worked?

Jeeves

301 posts

Ultimate Geek

#868658 30-Jul-2013 16:10

Using someone elses equity to cover the deposit is not a new thing at all. I did it 4 years ago when I bought my first house with effectivly a 100% mortgage.

And also lets just clarify that the LVR ratio restriction was bought about by the reserve bank, not National. National didn't want it. I suppose National could have muscled the bank to withdraw the idea, but I'm not familiar enough with the powers have over the reserve bank to be able to do that or not.

MikeB4

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#868660 30-Jul-2013 16:13

ajobbins:
kiwirock: They way I see it, baby boomers are starting to retire. Soon they're gonna have to give up housing investments to pay for hips or medical treatment etc... if they don't want to be on a public waiting list. So there'll eventually be more homes back in the market to buy. Sure some have health insurance, but that will become expensive as a lot of the population age. The population is increasing, but a fair amount of it in 10-25 years is also going to disappear and a lot retiring.

The baby boomers are the biggest group (of voters). Therefore, any prospective governments tend to do well with policy targeted at the boomers. I expect to see even more tax dollars pumped into funding what they feel they are entitled to in order for government of the day to win and retain power. Not to mention half of the big two parties probably fall into the boomer generation themselves.

Many (most?) of the boomers:
- Got a 100% free education.
- Had government assistance getting into their first homes.
- In many respects enjoyed labour conditions far better than what are on offer today.
- Have been able to accumulate wealth through property essentially tax free.

Now, many expect to retire and be taken care of the government for decades to come. Modern medicine means they are living longer than ever, and the current tax payers are funding it. Most people retiring around now will cash out more from the tax system than they ever put into it during their working life.

Would you prefer that now they have 'finished contributing' that they do the decent thing and die?
The baby boomers as you put have funded the retirement of previous generations by repaying debt via taxation and asset sales, funded the current pensions and have funded their own future pensions.

6FIEND

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#868663 30-Jul-2013 16:14

KiwiNZ: The Government wants people to stop investing in housing, they are also making it more difficult for first home owners to buy homes. To extrapolate this, if the Government is successful in this plan then we will have fewer
people buying their own home, fewer people with investment properties for which they rent, the result is the rental stock drops, the demand for rental rises, prices of rentals rise thus making it even harder for first home buyers to purchase.

So we have now huge demand for rental, no available rental stock the result is either (A) overcrowding or (B) Homeless on the streets or (c) Shanty towns or all of these.

It is a very dangerous and serious problem that should not be dealt with along party political lines.

I don't follow your logic...

If fewer people buy their own homes -> fewer people with investment properties for which they rent -> rental stock drops... Then that can only happen with a corresponding influx of 'rental properties' into the market. (Which would be a huge boon for first home buyers)

The rentals do not simply vanish when the property investors decide that they no longer want to own them!

The current problem is that there is no disincentive to dissuade home owners from accummulating and hoarding rental properties... thus locking out first home buyers and locking in their tennants.

Disrespective

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#868667 30-Jul-2013 16:17

I'm a fan of capital gains tax. I haven't read any of the major parties policies but if one has it i'll be leaning heavily that way.

MikeB4

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#868669 30-Jul-2013 16:19

6FIEND:
KiwiNZ: The Government wants people to stop investing in housing, they are also making it more difficult for first home owners to buy homes. To extrapolate this, if the Government is successful in this plan then we will have fewer
people buying their own home, fewer people with investment properties for which they rent, the result is the rental stock drops, the demand for rental rises, prices of rentals rise thus making it even harder for first home buyers to purchase.

So we have now huge demand for rental, no available rental stock the result is either (A) overcrowding or (B) Homeless on the streets or (c) Shanty towns or all of these.

It is a very dangerous and serious problem that should not be dealt with along party political lines.

I don't follow your logic...

If fewer people buy their own homes -> fewer people with investment properties for which they rent -> rental stock drops... Then that can only happen with a corresponding influx of 'rental properties' into the market. (Which would be a huge boon for first home buyers)

The rentals do not simply vanish when the property investors decide that they no longer want to own them!

The current problem is that there is no disincentive to dissuade home owners from accummulating and hoarding rental properties... thus locking out first home buyers and locking in their tennants.

I was referring to the aim of the government for people to stop buying investment properties, if the Govt succeeds in that the rental stock will drop.

ajobbins

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#868680 30-Jul-2013 16:28

graemeh:This is not true. Other investments do not have to pay tax on a capital gain. Property is not getting special treatment.

While I don't like the idea of a capital gains tax if it is to be introduced it must include the family home with no exceptions. The family home buyers are the biggest contributors to high house prices.

Assuming that the idea of the CGT is to reduce house prices can you provide examples of countries with a CGT where this has worked?

Any investments for profit should be subject to CGT.

It's hard to compare to other countries as I am not aware of any that have only recetly introducted a CGT (or in response to housing price inflation). Most countries that have had a CGT have had it for a long time.

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