Housing crisis!

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#869280 31-Jul-2013 13:30

kiwitrc:
mattwnz:
kiwitrc: Then maybe the solution is to tax companies more if they move to Auckland, or alternatively tax them less to set up in other centres.

This might help relieve the strain on the Auckland Housing Crisis (lets start calling it that) as well as the general Auckland infrastructure.

That would be a tax nightmare, and would be open to abuse. Eg. An auckland company may move their head office to dunedin for tax reasons, but it may just be a shell for offices in other areas.

IRD do audits now, they can easily audit a physical presence. It wouldn't be a nightmare at all. Simple matter of "you are based in Invercargill, you get a XX% rebate on your tax". I doubt any government would have the will to implement it to be honest as vested interest in Auckland would have it shot down in no time, but I haven't seen any other viable ideas so far so why not.

Just reminds me of these overseas companies trading in NZ, that have their head offices in foreign countries like Ireland where taxes are lower. Not sure the IRD have the resources either, there still seems to be quite a lot of tax leakage, especially around property.

There is actually a CGT already on property, if you intend to buy and sell for a profit. eg you buy a house to do up and then flick it off, but I suspect many people don't ever pay tax on it. I believe the IRD has had more money allocated to chase these up, but it would be a tough job to prove intention.

blackjack17

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#869281 31-Jul-2013 13:32

minimoke:
minimoke: What crisis?

As I'm in Christchurch I can't talk about the Auckland market but if I do a quick and dirty search on trade me there are oodles of properties in Auckalnd for less than $300k. For example, theres a 4 bedroom 2 bathroom in Saint Johns going for $179,000

OK, so I’ve tried to distil the general thoughts over the last few pages. And:
- People don’t want to buy leaseholds
- People don’t want to buy apartments
- People don’t want to buy long commutes in Auckland
- Varsity grads want to buy.
- No reported problems in places other than Auckland
I think we can take the housing crisis to be one of a crisis in Auckland. It is one based on unrealistic desires by the potential buyers.

So what are the remedies.

- People in general need to be told owning a house is not a right. It is an earnt privilege
- People need to be told if you want a freehold house in a big city within a 15 minute commute without a large income you are going to be tough out of luck.
- Stop investing in long term infrastructure (Motorways / Trains) in Auckland. Create an environment where the supply of labour dries up and forces employers to locate their work in other centers. Take the demand out of the equation.
- Remind people property is generally seen as a ladder – and to get to the top you have to handle the first rung.
- Renting is a perfectly respectful life style. Home is where you make it – be it a freehoild house, a rental, an apartment or a van in a trailor park. And somewhere else I might argue that it makes better financial sense.
- Let risk takers manage the risk. If people want to buy into an inflating market and if banks want to lend with small asset ratios let them do so. A few hard lessons will bring a sense of equilibrium to the chaos.
- Promote the limitation of pets – these creatures create problems in the apartment and rental markets.

Oh – and if I look at the median sale prices June 2010 compare with June 2013 Auckland has gone from $445k to $555k. Clearly the problem is an Auckland one.

Yes it is mainly an Auckland problem, the place where a third of NZ lives, the place where a lot of the jobs are. When your family lives and works their it can be difficult away.

I have highlighted a couple of your points.

Banks don't like lending on leaseholds or apartments.

Leaseholds can be exceptional risky, paying an excess of $30,000 a year in land rent and it can be much higher.
Apartments in my experience in NZ are terrible, I have lived and owned them overseas and would love to do the same here. Poor sound insulation, poor design/layout, average facilities and insane bodycorp fees

Long commutes are an issue, fuel price is going up, while manageable now what happens when it hits $3-$4 dollars? At present there aren't any viable alternatives.

Allowing Auckland to die/degrade is not a solution, a third of us live here and can't easily move,

Instead promote high quality apartments, public transport (trains).

Renting in NZ is difficult compared with Europe due to the lack of security esp with a family

out of time to finish reply

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kiwirock

685 posts

Ultimate Geek

#869285 31-Jul-2013 13:36

I disagree with pets, at least for non-apartment living. I have a dog where I rent, it doesn't chew, toilet or even drop fur on anything near the house and is well trained and exercised. It's owners that are the problems. If you are paying rent, you're paying to use the house as your own and there's a reason for bond and for tenants to have the fair right to make sure the property is how it was when you moved in regardless of how they occupy it to within legal boundaries. But what I'm saying is everyone shouldn't be penalised and generalised because of the idiots out there. Otherwise it just turns the outlook in to another haves dictating to the have nots view. People shouldn't have to give up other rights because they don't own a home. But I do agree about the apartment thing to a strong degree with certain pets, but again not all.

Renting is means to an ends but it's still a money sinkhole, it goes no where and you have the hassle of having to move or consider relocating when rents keep rising or when you get lazy landlords which I've struck far to common - whereas if it was my own property it would be looked after far better and I'm sure the same would be said if the landlord's lived in the property too. Not all, but there are some like that.

kiwitrc

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#869288 31-Jul-2013 13:39

ajobbins: While Auckland is the biggest problem for sure, the same applies to the rest of NZ, just to a lesser extent.

The income:house price ratio has been widening across the country and continues to do so.

Maybe people need to think outside the square a little. When I bought my first house there was no way I could get a loan, I was earning about 1/5 ratio of the price of the house so around $13,500 pa and the house was $68,000. I was flatting with a mate and our girlfriends, so we rocked up to various institutions as a pair wanting to buy. After convincing them we were not in fact gay (it was called homo back then) we managed to get 3 mortgages from different entities to buy the place. The cheapest interest rate of the three was 23%pa. The girlfriends paid rent as they had done in the flat and we had our foot in the property market. Even at 23% for a number of years we never looked back.

Fast forward to two years ago, my two daughters and one of their boyfriends wanted a place, guess what? They each chipped in a third, got a loan (well three loans) and bought a fantastic 4 bedroom house in a great location in Wellington. Two live there and they run it as a flat getting flatmates to help with the mortgage. Now they have a foot in the property market, a secure place to live and are paying a quarter of the interest we were in the early 80's.

kiwirock

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#869289 31-Jul-2013 13:41

What is hard for some though, is paying rent and petrol while trying to save for a mortgage. If you're saving for a mortgage then you have a different viewpoint of how expensive renting is. I think that's the largest obstacle with getting in to your own home. Perhaps instead of kiwi saver and investor restrictions, they should look at something based on what someone is paying in rent while trying to get in to their own home.

mattwnz

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#869295 31-Jul-2013 13:53

kiwirock: What is hard for some though, is paying rent and petrol while trying to save for a mortgage. If you're saving for a mortgage then you have a different viewpoint of how expensive renting is. I think that's the largest obstacle with getting in to your own home. Perhaps instead of kiwi saver and investor restrictions, they should look at something based on what someone is paying in rent while trying to get in to their own home.

People can also use their kiwisaver contributions, and go on a kiwisaver holiday, so they have more to pay for the mortgage. But they then miss out ont he tax credits. Some are also eligiable for a taxpayer paid first home subsidy, if they buy a qualifying house. But I think that has also helped push up house prices, especially at the lower end.

ajobbins

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#869296 31-Jul-2013 13:55

kiwirock: What is hard for some though, is paying rent and petrol while trying to save for a mortgage. If you're saving for a mortgage then you have a different viewpoint of how expensive renting is. I think that's the largest obstacle with getting in to your own home. Perhaps instead of kiwi saver and investor restrictions, they should look at something based on what someone is paying in rent while trying to get in to their own home.

Yes, as house prices go up, so do rents. The investors need to be able to (at least mostly) cover the mortgage with the rent, and therefore you end up with rents increasing faster than wages too. Even if you decide to live further away from work and buy a cheaper home, you're then probably running a car that needs more maintenance, and fuel at well over $2/L and climbing. Not to mention power prices that are higher than ever. By the time you pay your rent, fill your car with gas, pay the bills and fill the cupboards with food, there often isn't much left over to save.

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mattwnz

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#869299 31-Jul-2013 14:00

ajobbins:

Yes, as house prices go up, so do rents. The investors need to be able to (at least mostly) cover the mortgage with the rent, and therefore you end up with rents increasing faster than wages too. .

Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

networkn

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#869301 31-Jul-2013 14:02

mattwnz:
ajobbins:

Yes, as house prices go up, so do rents. The investors need to be able to (at least mostly) cover the mortgage with the rent, and therefore you end up with rents increasing faster than wages too. .

Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

I'll believe it when I see it.

mattwnz

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#869306 31-Jul-2013 14:11

networkn:
mattwnz:
ajobbins:

Yes, as house prices go up, so do rents. The investors need to be able to (at least mostly) cover the mortgage with the rent, and therefore you end up with rents increasing faster than wages too. .

Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

I'll believe it when I see it.

That is what a lot of people said when he said that house prices would continue to rise in Auckland about 5 years ago due to lack of supply, and he was right. Based on return, rent in many cases probably doesn't give much of a return, and people are replying more on mapital gain. But if there is no captial gain, people have to reply on rent. He also said that he saw house prices not increasing by much more.

networkn

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#869319 31-Jul-2013 14:35

mattwnz:
networkn:
mattwnz:
ajobbins:

Yes, as house prices go up, so do rents. The investors need to be able to (at least mostly) cover the mortgage with the rent, and therefore you end up with rents increasing faster than wages too. .

Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

I'll believe it when I see it.

That is what a lot of people said when he said that house prices would continue to rise in Auckland about 5 years ago due to lack of supply, and he was right. Based on return, rent in many cases probably doesn't give much of a return, and people are replying more on mapital gain. But if there is no captial gain, people have to reply on rent. He also said that he saw house prices not increasing by much more.

So 5 years ago they said the same thing? (Rents would double). 3 of my staff rent or did in the last 6 months, two of my sisters rent and my best friend rents. Just checking with them in the last 10 minutes, they say over the last 3 years rent has increased 10-12% across the board (total). In order for the law of averages to work out, that means that there are that many people who's rent have increased by considerably more than 50%.

minimoke

750 posts

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#869360 31-Jul-2013 15:35

The cheapest interest rate of the three was 23%pa. The girlfriends paid rent as they had done in the flat and we had our foot in the property market. Even at 23% for a number of years we never looked back.

Ah, yes those were the days when I bought my place as well. 25% interest, on a loan that the bank made me go through untold loops to get, was the one that nearly sent me over the brink. It was also a time I gave up drinking (well nearly), worked two jobs, and sold my most precious asset (a fantastic car) to rustle up a deposit for what was arguably the worst house in a very average street. And then brought flat mates in to help pay the debt. Its probably why I struggle to see where today’s crisis is.

kiwitrc

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#869364 31-Jul-2013 15:40

minimoke:
The cheapest interest rate of the three was 23%pa. The girlfriends paid rent as they had done in the flat and we had our foot in the property market. Even at 23% for a number of years we never looked back.

Ah, yes those were the days when I bought my place as well. 25% interest, on a loan that the bank made me go through untold loops to get, was the one that nearly sent me over the brink. It was also a time I gave up drinking (well nearly), worked two jobs, and sold my most precious asset (a fantastic car) to rustle up a deposit for what was arguably the worst house in a very average street. And then brought flat mates in to help pay the debt. Its probably why I struggle to see where today’s crisis is.

Oh yeah, I forgot about the night shift at the photo lab after real work and like you selling the good car and buying a poxy Vauxhall Victor with mushrooms growing in the back seat, which could have been a bonus except there was something living under the front seat which ate them.

alasta

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#869373 31-Jul-2013 16:00

mattwnz: Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

I personally prefer renting as it suits my circumstances better so it was a relief when I did the analysis a while ago and came to the conclusion that what I'm 'throwing away' on rent is about the same as what I would otherwise be 'throwing away' on rates, interest (both incurred and forgone), insurance, body corporate fees, maintenance, etc.

At least for the type of property that I would live in (a small one bedroom flat) there is no economic advantage to owning the property unless you're either getting capital gains, or tax deductability on the expenses. If either of those benefits dry up then rents and property prices would converge, but I damn well hope that rents don't double within five years because there is no way I could afford that.

networkn

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#869374 31-Jul-2013 16:01

alasta:
mattwnz: Rents are predicted to double within the next 5 years, according to Olly Newland, if you watch the video on interest.co.nz from yesterday. They are currently quite low, in proportion to the value of a house.

I personally prefer renting as it suits my circumstances better so it was a relief when I did the analysis a while ago and came to the conclusion that what I'm 'throwing away' on rent is about the same as what I would otherwise be 'throwing away' on rates, interest (both incurred and forgone), insurance, body corporate fees, maintenance, etc.

At least for the type of property that I would live in (a small one bedroom flat) there is no economic advantage to owning the property unless you're either getting capital gains, or tax deductability on the expenses. If either of those benefits dry up then rents and property prices would converge, but I damn well hope that rents don't double within five years because there is no way I could afford that.

They won't. Such claims are nonsense hysteria.

I just spoke to my previous landlord who we rented from 8 years ago, a brand new 3 bedroom terraced house (nicely fitted out executive standard). Back then we paid $600 a week to live there) and right now he is getting $675 for it, and says another he has in the same complex is only getting $635.

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