sxz:

 

tdgeek:

 

mattwnz:

 

jmh:

 

alasta:

 

richms:

 

The ones I do feel sorry for in the upcoming correction are those that have their cash together for a deposit and as a young couple/group are mortgaged to hell for a pretty average property that will become worth a lot less than they owe on it. And because of how things work in NZ, they are liable for the whole value of the loans, no walking away like in the USA.

 

 

Up until now politicians have been encouraging young people to get up to their eyeballs in debt to buy a house because it's never politically expedient to tell them that they can't or shouldn't buy houses. It was a relief a few days ago to finally near Nick Smith admitting on Morning Report that now is a bad time for young financially stretched people to buy houses. 

 

The real risk here is that housing investors are relying on capital gains for their income. When those capital gains eventually dry up then rents will have to increase substantially, hence creating a huge amount of inflationary pressure, which will then prompt the Reserve Bank to raise interest rates. When interest rates go up then highly leveraged homeowners could be in real trouble. 

 

 

With both Nick Smith and Bill English telling people to 'be patient' it makes me wonder whether they know a price crash or take-down is on the way.  

 

The other risk for investors/landlords is if unemployment rises suddenly and people can't afford to pay their rent.

 

 

 

 

If unemployment rises a lot, so over 12% the whole economy will suffer, as it has a big knock on effect. The problem with rising house prices, is that rents also need to increase for investors to get a reasonable return. Especially as they can't then rely on capital gain at the moment. But  investors do have the choice whether they should drop their rent to a more affordable level. People will also get government handouts if unemployed to cover rent.

 

 When rents decrease or can't go up any more, houses will be worth less for investors, and you will get more selling up, which will then give an opportunity for first home buyers. This will be a good thing, and these things all go in cycles. I always cringe when I hear investors say they are doing it for public good and they are providing a public service. Some maybe doing this, but I think  the majority are doing it to make money.

 

 

 

 

Investors dont do it for public good, they do it for number 1. Supply and demand. Rents are too high, no tenants, rents drop, house follow, as income is relative to investments.

 

Ive invested in property at age 18. Its a money making exercise, nothing else. Rent less expenses, can be lucrative if your well geared, then you have capital gain. Easy as. But, housing is for living in, owning, passing it on, wealth, and by that I mean family wealth from ending up with freehold for yourself and for the kids. More money to spend on the economy than interest for banks. 

 

So, eliminate the investment angle and you satisfy the real home ownership, i.e. the ones the live there. CGT helps that. I feel that there is a huge gain from real home ownership, self worth, security, and so on. 

 

 

Then aren't you part of the problem?

 

I don't believe so.

We bought a property. Spend time and money on it, and rented it to tenants who weren't able to or who wanted to, rent. Or we could have not bought and let someone else provide that need. Or demo it and build a block and sell, and deny renters. So, no.