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14726 posts

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  #1543493 28-Apr-2016 16:15
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MikeAqua:

 

UHD:

 

I believe that all economic systems favour those with capital above those who labour. The wealthy have always made more money sitting in their houses than those who work all day. The phrase having money makes money is true even for someone who unambitiously dollar cost averages their entire lives.

 

 

That will always be the case.  A person earning only wages or salary is constrained by the hours they can work.

 

But capital investments can grow exponentially, they earn (or lose) money whatever you are doing.

 

The thing is people who work can get into the capital side of things by investing in Kiwisaver.  If nothing else you roughly double your money to the contribution level your employer matches.  The thing is to start early.

 

I started small funds for both my kids in time to get the $1,000 kick-start and I chip in a little money every now and then.

 

 

 

 

Unless of course you are self employed in which case you have to pay both parts...!






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  #1543496 28-Apr-2016 16:23
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MikeAqua:

 

There is leased residential housing in NZ.  For example a number of properties around Cornwall Park are on leased land. Leases are typically 10s of years rather than 100s of years (as I understand is often the case in Europe).

 

It can go pear shaped when 'rent review' comes around and market value has jumped significantly (as it did for Cornwall Park lessees), or when the lessor doesn't want to renew the lease (as happened with a number of lakeside batches on iwi land in Rotorua Lakes). 

 

If you have invested in a house built on land you no longer have a right or can afford rentals to occupy then what?

 

ockel:

 

Has the question of divorcing land and house ownership been discussed?  At breaking points in the past both her and in other cities the issue of using leasehold mechanisms to overcome housing affordability has been used.  And owning leasehold works well in other parts of the world - its less desirable than freehold but more desirable than not owning anything.  NZers just dont know how to value leases and pay over-the-top for the improvements during a leaseperiod.  

 

Or is the big sticking point not about owning your own home - but owning the land?

 

 

 

 

 

Usually, rent laws where countries have longer leases like that have two things: security of tenure (so in your example, the Iwi cannot decide not to renew except in very rare circumstances) and either controlled rents or rents where a review by an independent arbitrator (in the UK, this would be a highly qualified Chartered Surveyor who has passed additional qualifications, randomly appointed by the President of the Royal Institution of Chartered Surveyors - I do not know what would be done here) is instigated to determine the rent within the criteria of whichever legislation applies, with his answer being binding on both parties.

 

To give an example from the UK, the Agricultural Holdings Act 1986 tidied up legislation relating to leased farms. If the criteria within the Act were met, it was possible for 3 GENERATIONS of the family to be entitled to hold the lease one after another on death and the landlord had very limited circumstances in which he could prevent that.

 

It does not prevent the landlord selling the property but the new owner is bound by the same rules.






 
 
 
 


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  #1543516 28-Apr-2016 16:56
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ockel:

 

Has the question of divorcing land and house ownership been discussed?  At breaking points in the past both her and in other cities the issue of using leasehold mechanisms to overcome housing affordability has been used.  And owning leasehold works well in other parts of the world - its less desirable than freehold but more desirable than not owning anything.  NZers just dont know how to value leases and pay over-the-top for the improvements during a leaseperiod.  

 

Or is the big sticking point not about owning your own home - but owning the land?

 

MikeAqua:

 

There is leased residential housing in NZ.  For example a number of properties around Cornwall Park are on leased land. Leases are typically 10s of years rather than 100s of years (as I understand is often the case in Europe).

 

It can go pear shaped when 'rent review' comes around and market value has jumped significantly (as it did for Cornwall Park lessees), or when the lessor doesn't want to renew the lease (as happened with a number of lakeside batches on iwi land in Rotorua Lakes). 

 

If you have invested in a house built on land you no longer have a right or can afford rentals to occupy then what?

 

 

 

 

 

The "pear shaped" outcome only occurs when people dont understand the nature of the lease.  Lease terms can vary significantly but because the lessee doesnt understand what they are being doesnt mean its not a valid instrument.  The key is understanding the contractual obligations of the lease.  The high profile case of that Cornwall Park property is a case in point.  Person buys a leasehold property in 2005 with the ground rent set in 1988 at a land CV of $166,000.  The lease has 4 years to run and will reset to 5% of the new land value (any idiot can find the latest value from Auckland Council and have a reasonable idea what that will be).  Person has an expectation that the lessor will sell the property freehold (not that the Trust Board ever has sold any of its properties).  The lease instrument is not faulty - the lessee is an idiot.   Thats not pear shaped - thats stupid.  

 

I almost bought leasehold 5 years ago.  It was a great way to get access to a property I could only dream about.  Unfortunately the vendor wanted a freehold price for a leasehold property - clearly had paid too much previously.  If the lease had clauses like lessee's first right to purchase on sale of the property (as per the UK) or that the property can revert back to the lessor then that impacts on the value of the improvements and what the purchaser is willing to pay.

 

The UK and Wales are about 20% leasehold.  London is about 50% leasehold - a function of the 5 families that were granted the land rights.  There are issues around rent reviews, subletting and ownership transfers.  But it works just fine.  Probably better than the commonhold (read strata ownership as per NZ).  But the terms of those leases vary considerably.  

 

Is there a solution in giving the option of buying a property at the median Auckland of $950k or buying the improvements at $350k and a right to occupy for 21 years at $30k.  Thats 21 years of lease price set in stone.  Hell, you could even have a mechanism whereby the lessee could by the property freehold in 21 years at an agreed valuation method or the ground rent resets.  At least some equity in owning the improvements is better than having no equity at all (and griping about prices).

 

The real question I have is - are people actually concerned about "owning their own house" or using property (read: land) to generate wealth.  Cos leasehold would deliver the first but not as much of the second.


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  #1543529 28-Apr-2016 17:16
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Geektastic:

 

Usually, rent laws where countries have longer leases like that have two things: security of tenure (so in your example, the Iwi cannot decide not to renew except in very rare circumstances) and either controlled rents or rents where a review by an independent arbitrator (in the UK, this would be a highly qualified Chartered Surveyor who has passed additional qualifications, randomly appointed by the President of the Royal Institution of Chartered Surveyors - I do not know what would be done here) is instigated to determine the rent within the criteria of whichever legislation applies, with his answer being binding on both parties.

 

To give an example from the UK, the Agricultural Holdings Act 1986 tidied up legislation relating to leased farms. If the criteria within the Act were met, it was possible for 3 GENERATIONS of the family to be entitled to hold the lease one after another on death and the landlord had very limited circumstances in which he could prevent that.

 

It does not prevent the landlord selling the property but the new owner is bound by the same rules.

 

 

I think one of the big differences between NZ and other countries is that leasehold isn't viewed favourably in NZ, partly because its not as regulated. Pretty much anything goes with leases as long as the contract is fair and entered into freely by both parties. Without regulation there can be no certainty for lessees. 

 

 


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  #1543544 28-Apr-2016 17:48
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Elpie:

Geektastic:


Usually, rent laws where countries have longer leases like that have two things: security of tenure (so in your example, the Iwi cannot decide not to renew except in very rare circumstances) and either controlled rents or rents where a review by an independent arbitrator (in the UK, this would be a highly qualified Chartered Surveyor who has passed additional qualifications, randomly appointed by the President of the Royal Institution of Chartered Surveyors - I do not know what would be done here) is instigated to determine the rent within the criteria of whichever legislation applies, with his answer being binding on both parties.


To give an example from the UK, the Agricultural Holdings Act 1986 tidied up legislation relating to leased farms. If the criteria within the Act were met, it was possible for 3 GENERATIONS of the family to be entitled to hold the lease one after another on death and the landlord had very limited circumstances in which he could prevent that.


It does not prevent the landlord selling the property but the new owner is bound by the same rules.



I think one of the big differences between NZ and other countries is that leasehold isn't viewed favourably in NZ, partly because its not as regulated. Pretty much anything goes with leases as long as the contract is fair and entered into freely by both parties. Without regulation there can be no certainty for lessees. 


 



Indeed.







3724 posts

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  #1543607 28-Apr-2016 20:29
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Elpie:

 

I think one of the big differences between NZ and other countries is that leasehold isn't viewed favourably in NZ, partly because its not as regulated. Pretty much anything goes with leases as long as the contract is fair and entered into freely by both parties. Without regulation there can be no certainty for lessees. 

 

 

nail, head, hammer bang on. leasehold imo can be a good option for large property owners, especially in that semi rural fringe. just a thought.


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  #1544091 29-Apr-2016 16:18
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Geektastic:

 

MikeAqua:

 

The thing is people who work can get into the capital side of things by investing in Kiwisaver.  If nothing else you roughly double your money to the contribution level your employer matches.  The thing is to start early.

 

 

Unless of course you are self employed in which case you have to pay both parts...!

 

 

That's true but still worth getting into some sport of capital investment and KiwiSaver will let you gradually feed funds in while a lot of funds like larger deposits.





Mike

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