Negative gearing question?

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#1218813 21-Jan-2015 08:57

nathan: some loon?

you want to negative gear against your salary because you don't want to pay tax? Tax that pays for hospitals, schools, police, dole bludgers and defence? who's going to protect you when the plebs with no money and houses need food and come raid you property? Build bigger gated walled communities to hide behind and pay for private police.

yeah its totally fair that people can get rich off capital gains off their land/house, paying minimal tax, while plebs are in indentured servitude for the rest of their lives.
It just cannot be good for society that young people will have a 40 year mortgage, paying twice the price for a house, paying it off just in time to retire then die.

Bit of a rant but people have every right to structure their tax affairs so they don't pay more tax than necessary under law.

In my opinion the main drivers of house prices are immigrants , councils, and building supplies companies. It is only an opinion and I could be completely wrong.

A new land tax with reduction of income tax would be great.

Geektastic

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#1218835 21-Jan-2015 09:23

nathan: some loon?

you want to negative gear against your salary because you don't want to pay tax? Tax that pays for hospitals, schools, police, dole bludgers and defence? who's going to protect you when the plebs with no money and houses need food and come raid you property? Build bigger gated walled communities to hide behind and pay for private police.

yeah its totally fair that people can get rich off capital gains off their land/house, paying minimal tax, while plebs are in indentured servitude for the rest of their lives.
It just cannot be good for society that young people will have a 40 year mortgage, paying twice the price for a house, paying it off just in time to retire then die.

Baby boomers, be happy that you are going to watch your grand kids be forced to move overseas to brighter countries, make sure you have good bandwidth so you can watch them grow up over Skype and Facebook.

This illusion of continual growth raping the earths resources on a continual quest to make more money is insanely short sighted. It must come to a grinding halt anytime soon....

the reality is that a lot of peoples kids are never going to be able to afford to buy a house because (some) people that own multiple houses are greedy, and NZers think they are amazingly smart and getting rich by selling overprices housing backwards and forwards between each other

Houses are a productive part of the NZ economy how?

No one will change this status quo because local government decision makers own multiple houses, central government decision makers are own multiple homes and yeeha they're all "getting rich" why would you even want to lower the 10-20% annual property price growth inflation.

I'll protect myself thanks and yes, I'd love to live in a gated community that kept outsiders out.

And there is no reason why anyone cannot do it - there's never been a requirement that you be rich first. It worked just as well on a $300k house as it did on a $3 million one.

Name one western economy where people do not make money from property? There just isn't one. The dystopia you yearn for will fortunately never exist.

Geektastic

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#1218839 21-Jan-2015 09:28

nathan:
logo:
nathan:
Jase2985: was that really needed?

me? happy to be corrected.

Do you own a home?

I own my home (and that's it - no rental properties - just my home). I don't like being called greedy just because I am a property owner.

no I don't, I wish I did, I'm single and I can't afford to own a house in Auckland.

I totally agree with you, owning 1 home is not being greedy. Everyone needs to live somewhere

No hassling to OP, he's looking after his retirement savings blah blah by owning a home to live in and renting out another.

I'm not hassling him. I'm hassling the system, a system that has:

a tax regime that encourages investment in unproductive assets such as houses
inquiry after inquiry after inquiry and nothing happens to enable a generation of young people to live or own their own homes
unitary plans and proposed Auckland Unitary Plan
building products cost monopoly inquiries
NIMBYs who want the status quo because they're already in on the action and screw everyone else
outrageous council building inspection fees
stupid regulations that require 6 star homestar ratings
force developers to have new builds with universally accessible homes for disabled
A Government (both National & Labour) that needs to treat the volume of immigrants seriously
swathes of rich migrants who get land in perpetuity and residency visas
pathetic leadership from local and central government
Baby boomers owning the houses, tax free capital gains pushing the load of paying for their retirement onto Generation X and the generations following.
Politicians promising to resign instead of engage on debate about retirement

Can anyone say VESTED INTERESTS

This is all fine while the money-go-round continues, but I cannot see how this is going to end well.

Your actual complaint is that your career has not made you enough money, and the system should be altered to suit your circumstances, then?

The list of complaints you have apply equally in (at least) the USA, UK, France, Germany, Italy, Spain, Portugal, Greece, Switzerland, Eire, Canada and so on. NZ is not some sort of unique place that exists in a vacuum apart from the world anymore.

nathan

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#1218849 21-Jan-2015 09:40

Yes it was a bit of a rant

I feel sorry for young new zealanders who are never going to.be able to live or own their own homes

Or others that will be paying off their house well into their 50s and 60s

The NZ obsession with property which isn't a productive part of the economy

Absolutely no problem with people structuring their tax affairs in a legal way

I wish council and government was just honest with people about house prices instead of paying it lip service

Also this widespread belief that house prices can only go one way, up. As we've seen overseas this is not true.

Paul1977

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#1218864 21-Jan-2015 09:45

Geektastic:Your actual complaint is that your career has not made you enough money, and the system should be altered to suit your circumstances, then?

A report just realised shows Auckland has a housing affordability rating of 8.2. This is calculated by median house price divided by median household income. Anything higher than 3 is considered unaffordable.

I think it's fair to say that very few peoples careers make them enough money to purchase a first home in Auckland.

heylinb4nz

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#1218939 21-Jan-2015 11:33

Rentals are overated in this market, just not worth it unless you have a large amount of equity on it that allows you to make a return.

eg. I have 95% equity on my house valued at $570,000 and it can return $460 a week as a rental. Less rates, insurance, remaining mortgage payments of $200 a week it would return about $200 a week, and that would be classed as income and taxed at 33%, so realistically $134 a week...im in a good position and its return would not really be life changing if I had to be paying a mortgage on a 2nd home with only 10% equity.

Short of sitting on it for many years and selling in a market where buyers don't have the $$$ you are far better off free holding your first home using the various methods available to you via your bank account structure, credit card, expense management and wages...plus time...your both in IT so its doable with good discipline.

Once done invest in other things other than property. Freeholding your home gives you so many options from career changes, investment in shares and/or precious metals.

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#1218941 21-Jan-2015 11:35

unless of course ... the house price triples in the next 10 years, then every hassle spent is worth every penny ... but nobody has a crystal ball ...

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heylinb4nz

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#1218946 21-Jan-2015 11:38

nathan: Yes it was a bit of a rant

I feel sorry for young new zealanders who are never going to.be able to live or own their own homes

Or others that will be paying off their house well into their 50s and 60s

The NZ obsession with property which isn't a productive part of the economy

Absolutely no problem with people structuring their tax affairs in a legal way

I wish council and government was just honest with people about house prices instead of paying it lip service

Also this widespread belief that house prices can only go one way, up. As we've seen overseas this is not true.

Building code, health & safety changes, local government regulations, developer greed, contribute substantially to home value before the house is even lived in.

My house was built for about $540,000 total 6 years ago.

Exact same house today approx $650,000.....thats $110k increase in 6 years purely due to land prices, double glazing costs, increased building costs, increased council costs.

Its a dismal outlook really.

heylinb4nz

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#1218950 21-Jan-2015 11:41

joker97: unless of course ... the house price triples in the next 10 years, then every hassle spent is worth every penny ... but nobody has a crystal ball ...

Assuming that wages increase in line with house prices....or interest rates drop into the negatives :)

My money is squarely on getting out of property market.

When US$$ and world economy turns to crap you don't want to owe money to the banks.

Batman

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#1218957 21-Jan-2015 11:48

i hope you're right (coz i don't own property in akl)

but people owning stuff will hope you're wrong ;p

wasabi2k

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#1218999 21-Jan-2015 12:26

Is it unreasonable to expect people to entertain the possibility of living somewhere other than Auckland?

Not possible in some industries due to job market - but there are other options?

ajobbins

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#1219068 21-Jan-2015 13:29

Geektastic: Name one western economy where people do not make money from property? There just isn't one. The dystopia you yearn for will fortunately never exist.

No one is saying you shouldn't make money from property. The problem is NZ's tax system is broken. If you buy an investment property, reduce your tax on it through negative gearing, then sell it for a 200k tax free profit, is that fair? No.

Kiwi 'investors' need to start paying tax on their capital gains like they do on other investments. Doing so will help to ease the price inflation on housing as well as encouraging investment in other, more productive things.

There are other factors in the high housing prices (especially in Auckland), but NZ's high rate of property investment is certainly one. We also need tougher restrictions on foreign non-residents buying property, changes to RMA and other red tape at a national level, and changes at the local council level to speed up consents and remove barriers to new builds and opening up land.

As a nation, we are also getting progressively more screwed over by a generation of retirees who are drawing significant public resources for pensions and healthcare (and for longer than ever) whist sitting on significant assets (like property) that they don't want to sell, even if they are not living in it. There is evidence to show that many in the boomer generation will actually cash significantly more out of the public purse in their lifetime than they ever put it, even accounting for inflation. Many in this generation seem to think that paying tax during their productive, working life was actually just a saving scheme for their retirement.

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mudguard

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#1219187 21-Jan-2015 15:01

I have wondered with the 20% deposit, (IE bank can have no more than 10% of it's book on low equity mortgages) why they couldn't extend it to subsequent purchases. So first home purchased 20% equity required
Second home purchased 60% equity required (figures are arbitrary) but make it less easy to purchase a second home using equity in an existing property. This of course boils down to whether taxpayers or voters think it's a problem or not. The previous post mentioned baby boomers, I'm 33, I hate to think what my personal tax rate will be in 20 years if we increase from 1 in 8 on super (vs taxpayers) to 1 in 4.

I must admit, we (my partner and I) are to start looking at houses this year, in Auckland. Her job is possibly available in other places, my job could actually be done anywhere really, I'm away from home 7/8 weeks and my colleague who does the same role is looking to buy in Cambridge, and has been ok'd by our bosses.
In short, I'm not looking forward to the process at all.

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#1219201 21-Jan-2015 15:16

the equity denominator is total worth.

if your first house is worth 500,000 and you want to buy a 1,000,000 house a 20% equity is calculated to be 300,000 across both property.

Paul1977

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#1219299 21-Jan-2015 16:25

wasabi2k: Is it unreasonable to expect people to entertain the possibility of living somewhere other than Auckland?

Not possible in some industries due to job market - but there are other options?

Not at all, but other cities are still pretty bad. Christchurch, for example, has housing affordability of 6.1; which is still considered "severely unaffordable".

Of course that these ratings are based on median house pricing against median income; first home buyers should be looking at the lower end of the market. On the flip-side of that I guess is that first home buyers are likely earlier in their careers and so may have lower income... and I'm beginning to waffle.

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