Is he a first home buyer? Did have a track record of being a good punctual borrower with the bank?
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Blackcap it is simply not true it is easy to get a mortgage currently . Sure the LVR's have gone but lending with a 10 % deposit is limited. Also the customer will not have access to the "special " rates or will be subject to a LEM or LEI on the loan .
I have put up an article on a reply to SBQ that has pointed out why the banks are tightening up . Here is another.
https://tmmonline.nz/article/9765171...high-lvr-loans
Which goes to show the confidence that the banks have on issuing mortgages.
I'll reiterate, there are SOME major banks that DO NOT deal with mortgage brokers. I know this 1st hand experience and had been confirmed at both ends (by the broker stating so and so bank and approaching said bank directly).
If i'm not mistaken, it was Kiwi Bank that does not deal with brokers and asks the client to deal direct with them.
Why pay a mortgage broker to go around when the customer can visit each bank to get the best rate?
It's Ok if you have the time to visit each bank but do they have a branch in your neighbourhood/ town ? Banks are closing branches down at a fast rate . Brokers/advisors apparently do circa 40 % of the loans for ANZ ( and climbing) so someone must be doing something right ...
How do you know it’s the best rate ? It might be a good rate but how do you know if it's absolutely the best rate .
If you dealt with a specialist that had access to most of the providers and was doing regular business I'm sure they would have a better idea than you.
SBQ , you said Some major banks , Kiwibank is arguably not major ( less than 5 % marketshare) so name another one .
By the way Kiwibank do deal with brokers ,in particular NZHL , apart from that group they have been limited as they couldn’t possibly process the volume . Started to roll out in a bigger way now.https://www.goodreturns.co.nz/articl...er-market.html
I stand by my comment lending conditions have tightened .
https://www.nzadviseronline.co.nz/ne...rs-271967.aspx
Further evidence lending conditions have tightened -https://croakingcassandra.com/
"For households, the only material changes were (tighter) serviceability requirements. That is interesting – if not too surprising – given (a) slightly lower interest rates, and (b) some temporary easing in the Bank’s LVR restrictions."
SBQ - still waiting to hear about the banks that don't deal with brokers ?????
I got an approval for 15% deposit, no hassle. Arguably my finances are okay and job is with emergency services. Using Mortgage broker because I couldn't spend time to go around asking each bank. Funnily enough he did tell me he doesn't deal with Kiwibank which is my main bank.
ANZ today becoming the first bank to change its deposit rules on apartments of less than 45 square metres from 50% to 20% equity.
Gee less than 45m2 dwelling? Just right for the Kiwi family with 2 children to live in. :laugh:
Bernard Hickey has something to say in his article here about the banks adverse lending behaviour on apartments, describing it as a market failure:
https://thespinoff.co.nz/business/18...cold-and-mould
Quote:
Banks love discrete parcels of land with simple structures that are already built, that already have a certificate of code compliance and a residential resource consent embedded in the value of this ever-appreciating asset. It is money for jam with a very, very low capital requirement and an even lower risk of default.
Most banks loathe medium density housing developments with a cold, hard passion that has turned into to the phrase “bank-friendly” in the real estate ads for the exceptional apartment or townhouse that has slipped through the cracks into the mortgage book.
Anything else we need Bernard Hickey's opinion on?
This is great change. There's more than ever single people due to progressive destruction of family in our current society. There was a need for singles to be able to buy property and studio apartment is ideal for just 1 person.
exactly not a property fix for all .. but helps those singles or couples , investors that what to buy entry level shelter ...would be good if Govt would back this up with laws around Quality and lease increase limiteds etc .... as I've come across a few in Auckland with stupidly high land lease rates...
If kiwis want to live in new shoe box apartments then they should at least have protection against these predator developers poor construction methods + lease rates that skyrocket after only a few years ..land lease rates shouldn't be allowed to increase higher than the CPI
No different than house price rises, and buyers know what they are getting in to in a general way at least. Plus they buy in more cheaply than a freehold property.
Leasehold places may be even more favoured for rentals now, with smaller borrowing and ground lease payments still deductible for tax. The latter has always been the case for rentals and tends to make the sums look pretty good. Until the next ground rent review anyway!
Doubled post
I remember some 5 years ago a baby boomer commentator saying that FHBs should not expect to buy the type of property their parents bought as a first home. They should settle for a small flat. The trouble is that these days FHBs are older and often with families. So yep they often do have to settle for a small flat while the grandparents remain in their house and garden….
I would be very cautious taking on a high proportion loan buying into a market in which interest rates are possibly at their lowest point.
Ground rent increases merely reflect the increase in residential land values. In a period of rocketing house prices, it is the land component that is inflating far faster than the improvements.
FHB absolutely in general think that the first home should be what our parents would have considered 2nd or 3rd homes. Image is everything and there’s no common sense. A lot of the FHB I’m selling to don’t have kids but still want 3-4 beds not two beds. It’s great news about the apartments now needing only 20% because now the sensible ones will atleast have more choice.
The market is still massively under supplied. Multi offers are still happening 80% of the time and auctions are still getting brought forward. The only change I’ve noticed is that we are getting asked the question now about the market slowing which was never happening but this is quickly rebutted when we have 10 groups looking at the house per day in the weekend and end up presenting multiple offers by the Tuesday.
Whether it is a good time to buy a flat with only a 20% deposit when interests are at their lowest point for years and after so much price growth, remains to be seen.
Is NZ a low wage, low productivity economy where housing is a commodity for investors?
https://www.stuff.co.nz/national/pol...is-a-commodity
Whether it is a good time to buy a flat with only a 20% deposit when interests are at their lowest point for years and after so much price growth, remains to be seen.
Is NZ a low wage, low productivity economy where housing is a commodity for investors?
https://www.stuff.co.nz/national/pol...is-a-commodity
Disagree whole heartedly fungus the best time to buy was yesterday.
yes when you look back and when the thread was first started 2008 and Crude was calling first home buyers screwed ...Quote:
Originally Posted by Bjauck
the NZ House price to income multiple was around 5. .... US research believes 3 and below is an good healthy affordable property market
At present we are around - 9 !!!... this is a BUBBLE of epic proportions .. being held up by FOMO + record low rates + HIGH rents + Media & RE Agents pumping the narrative +ongoing higher costs reg to build
Every month we have another major business failing...paper mills , NZ refinery .. we are gutting whats left of our secondary industries .. from a toxic business environment of higher energy running costs + reg costs ..... and to think Cindy was talking up downstream business growth ,,,
We have a Comrade Govt that doesn't have a clue around Business + running a country outside pandering to slogans ticking up billions to keep the lights on
, an opposition thats weak ...throw in Covid lockdowns and Tourism $$$ our Govts have relied on for many years to keep NZ looking rosy
Interest rates at 7-8% and multiple at 5 or Interest rates at 2% and multiple at 9, what's the difference? Low interest rates are here to stay. I doubt we will see 4% over next decade. It's been around 2% in Europe for almost 10 years now.
From today's flipboard
https://www.stuff.co.nz/business/mon...-from-november
Yes, dead right and many Nations GOVT -Central banks know this but you can only laden so much debt on the consumer before he can't consume anywhere as much>>> even at record low rates we already see Central banks must buy the same debt thats created as no one wants it the Monetary system is broken and being patched over but every increasing loans here in NZ to buy every increasing debt notes BONDs ...
If I lent my capital I would want a good return.... if it returned nothing then what value does that capital have ?? you better off spending it all and ticking up to the eyeballs and use all these cheap capital >>>> which is what we are doing at record levels
Yes but sadly many New and old investors think Property can only continue to rise ,,,
if the lowest lending rates went back to 7% and stayed there for next decade I can promise you NZ home prices would not double .. well not unless we have massive inflation in wage growth....now if rates went Negative and we got paid interest for having debt then yes we could keep the Bubble growth in play
I've seen many articles like this. It doesn't change my view. It's my opinion obviously based on the current situation. Common sense says there will not be significant raise in rates for years, because people woudn't be able to keep their home. No bank or government wants this. That's why I said I think the rates won't go up over 4%.
I can of course be completely wrong, I have no economic education and only go by my self study and observations.
It's been a sick journey for sure...I lost myself over the years but had a pretty good life... I still don't have a house! but In my attempt to skip the 30 loan term of a house I've faired up not too badly and having an unreal year.... I now have slightly more than a whole house freehold....
Pity though ... a few months back I had my investments past 1 million dollars... but here I am with a portfolio been slashed quite abit but still around 500k... I'm going all out here so pray for me that I can get that house freehold early next year and still be rolled 🙏 for life plus investments....
1 time for a freak pup 🐶 !!! Lol....
You probably mean unencumbered or mortgage free rather than freehold. Nearly all NZ houses are freehold, which refers to land tenure and simply means not leasehold. It's a common misnomer - but those who profess some financial prowess should know the difference.
I don't have a problem whatsoever for using the term... everyone understands what I mean even you...!
What is the meaning of freehold property?
: Freehold property can be defined as any estate which is "free from hold" of any entity besides the owner. Hence, the owner of such an estate enjoys free ownership for perpetuity and can use the land for any purposes however in accordance with the local regulations
That is plainly wrong. Almost all residential property in NZ is freehold, and over 60% of those freehold properties are mortgaged to a lender, which does not change their f/h status. The titles will describe them as leasehold or fee simple, (which is freehold). I just though with all your blah and blab promoting yourself as some sort of financial whizz-kid I'd be doing you a favour with a little basic education.
Obviously I am talking about freehold property and land...
Google definition "Buying freehold means buying both the building and the land. You own both outright, and are responsible them. There is no limit to the time on your ownership."...
.....
[QUOTE=Crypto Crude;894618]Google definition "Buying freehold means buying both the building and the land. You own both outright, and are responsible them. There is no limit to the time on your ownership."...[Quote]
Wrong again. Certainly buying land, not neccesarily the building, which could be a rented relocatable shed, and not necessarily owning outright.
To own outright means to have ownership of an assett using your own money, i.e. fully paid for, whereas a freehold property may br mortgaged to a lender.
You cannot own a property outright if you have borrowed againt it.
You can own a freehold property which is mortgaged or encumbered with any sort of loan.
Longman definition of own outright: to own something such as a house completely because you have paid the full price with your own money.
Pop along to your local university and sneak into a few law lectures. Chances are no-one will ask who you are.
Own outright 'to own something such as a house completely because you have paid the full price with your own money'
Ok thank you...
I will keep the wording to your liking 👍 😊
[QUOTE=fungus pudding;894621][QUOTE=Crypto Crude;894618]Google definition "Buying freehold means buying both the building and the land. You own both outright, and are responsible them. There is no limit to the time on your ownership."...Yes "FEE SIMPLE" freehold Title--- Certificate of Title is ones name with no lender is a great accomplishment 100% your home .... took me many years of different ownership with Banks to finally buy without a bank on the title >>> then you can use your properties full equity to drive further investmentsQuote:
Wrong again. Certainly buying land, not neccesarily the building, which could be a rented relocatable shed, and not necessarily owning outright.
To own outright means to have ownership of an assett using your own money, i.e. fully paid for, whereas a freehold property may br mortgaged to a lender.
You cannot own a property outright if you have borrowed againt it.
You can own a freehold property which is mortgaged or encumbered with any sort of loan.
Longman definition of own outright: to own something such as a house completely because you have paid the full price with your own money.
Pop along to your local university and sneak into a few law lectures. Chances are no-one will ask who you are.
Own outright 'to own something such as a house completely because you have paid the full price with your own money'
[QUOTE=JBmurc;894702][QUOTE=fungus pudding;894621]That's hard to follow. You can have a freehold property, (aka - fee simple) and still have a loan or mortgage registered on the title. Not sure of any advantage in buying without a mortgage or 'different ownership with banks' whatever you mean by that. You can always repay the mortgage and raise a new one with the same lender - and if you get your timing right your mortgage interest can be tax deductable if used to purchase income producing assetts, although Labour have changed the rules a bit on some residential investments.
[QUOTE=fungus pudding;894708][QUOTE=JBmurc;894702]LOL yah sorry about that >> what I Should have said was BUYing a Residential freehold property without having a morg reg on the title is a great achievement
Then you can use that great equity and fund other investments and be able to claim all costs of that lending ..Is how I have set it up >> we have debt but is 100% claimable just like many of our monthly costs ..
I don't get why people are happy to have debt over their home Car , private assets ..but at the same time have large amounts of their own capital in say the Sharemarket or term deposits,Bonds etc
[QUOTE=fungus pudding;894783][QUOTE=JBmurc;894772]Yes for sure .. we had a Morg over are last family home along with a company loan >> we decided to change tack sell the family home and move to a cheaper home area in turn being able to BUY Morg free .... then use new equity to purchase more spec property through company ... take profits ... buy commercial property=yield ...(all using RES rates)
Anyway you look at it RES Property is a great first stage of building equity and to put a roof over your head ... once the family home has good equity use elsewhere
[QUOTE=JBmurc;894793][QUOTE=fungus pudding;894783] Yep. For those who earn a sufficiently high salary and can raise the initial deposit these days, in NZ, under this government more than ever, owner-occupied home ownership is the foundation upon which a bigger nest egg can be built. Why?
1. Low interest rates on loans for residential real estate.
2. Untaxed annual return from the investment (imputed net rent)
3. Leveraged capital gain on equity.
It is also the tax efficient way of saving for retirement. Owner occupied homes (no matter what their value) are excluded from asset testing for some benefits/subsidies.
[QUOTE=Bjauck;894806][QUOTE=JBmurc;894793]That I did not know!!
and for those that gamble it all for their children to get 'better?' private school education, appears to be their only goal for their children to have high paying jobs at the end. So they can afford to buy the high priced homes without consideration of the rest of the population that are stuck in rental situations. Yeh!! Great job NZ! What a way to address inequality and child poverty. :t_down:
I'm probably self-detonating a grenade here, but what's to stop people looking to purchase real estate from buying somewhere cheap and working up from there? I have owned the first house I bought for 10 years and never lived in it. Instead I rented much cheaper accommodation and built up equity and reduced the loan.
Auckland is a first class city and its popularity will only increase as the rest of the world turns to crap. Waiting for prices to drop to any significant degree is futile as demand will always be more than enough.
Inflation running hot at 3.3%
All that money printing, profligate government spending, and what became basically a free money giveaway to borrowers at the expense of savers - it's all now coming home to roost.
Something has to be done about these idiots paying any old price for aging housing stock & then using said house as an ATM to fund their lifestyles - the behavior (mania) of these people is bringing the country to its knees and destroying the purchasing power of our dollar. The housing markets out-of-control irrational exuberance has lead the Reserve Bank to act in crazy and outrageous ways to defend it, slashing the OCR to the point where credit issuance was unleashing a tsunami of new money & people were viewing borrowings on the same footing as earnings.
Let's get some sanity restored and if some people suffer of the consequences of their own decisions, then they only have themselves to blame. If you are weak enough to join in a speculative mania and end up paying the piper, look in the mirror to see the culprit.
[QUOTE=SBQ;894924][QUOTE=Bjauck;894806]In some circumstances the home is exempt from asset testing for example..
https://www.seniorline.org.nz/rest-h...asset-testing/
I sense your anger however, NZ has long gone sold off houses as commodity for profiteering a LONG time ago. I had a strong sense this was going to happen when I first arrived in 1997. How could one not see this? A country with no capital gains tax on houses, no controls on how many could buy houses? New taxes to discourage investments in more productive assets (ie share ownership). The game is clearly rigged in advantage for those investing into house a LONG time ago.
Here's a fact I read the other day. In America, the top 10% own 85% of the wealth in their stock markets. In NZ, what % of wealth do the top 10% own houses in NZ? Then you will understand why NZ will always be a low productive economy.
Good guess. Your interpretation is probably right.
To answer your question we neeed to know what it takes to make the top 10%. According to this site,
https://www.newshub.co.nz/home/money...ealanders.html
in 2020 it was $860,000.
That seems ridiculously low. Surely you'd need several million to make that list? I know a fair number of people with a net worth of several million, and the vast majority own no residential property other than their own home. Most of them certainly 'cut their teeth' on flats and/or houses but progressed to commercial and industrial investments. I'm sure that's common throughout the country.
Thanks FP.
I found the item ambiguous. Did the figures relate to all NZers including minors or do they relate to NZers over the age of 18 or 21 or whatever? Rashbrooke also switches to referring to “families” too.
If the figures relate to all people including minors then $860K+ net assets per person to be part of the top decile sounds quite high, even these days. If there is a household of two adults then that could be $1620K. So that could be an above average house (in most parts of NZ) less a mortgage plus significant KiwiSaver and other assets.
With the increased disparity of wealth in NZ, coupled with the fact that wealth increases markedly with age, you would need considerably more than $860K to be in the top 10% of 55-65 year olds.
I would imagine that asset inflation over the past decade or so would have benefited the wealthiest 1% significantly more than the following 9% in that top decile.
I found some info:
NZ Median House value:
$637k in June 2020
$820k in June 2021
$401B current capitalisation of companies listed on the NZX (e.g. includes the total value of all shares of Australian companies which have a listing on the NZX.) SO perhaps about $250B when you strip out the big Aussies?
$1.4T Total NZ Housing Stock valuation (probably closer to your figure now!)
$280B mortgage debt in March 2020 (probably more now)
Thanks to our very expensive residential real estate, NZ is the fourth “wealthiest” country per capita in the World.
https://www.stuff.co.nz/business/300...t-in-the-world
SBQ, I'll put it to you again being rather loose & flippant with reality & your view of it. You are pulling some long bows, & once again showing that your epistemological framework needs some heavy maintenance work. So yes, perhaps you should rephrase your questions.
I respectfully suggest that you should do objective & non-superficial research and know the facts & correct answers to these rhetorical questions you ask; BEFORE you ask them. Do that, with some humility thrown in, and you might actually find that the answers politely challenge your entire view on macro-economics, including the inner workings & idiosyncrasies of the NZ residential housing market.
Some quick facts & factoids for you to ruminate over. Some of them do clearly contradict your glib "statements of fact".
- The TOTAL Cap' of the US equity markets is now over US$47 Trillion.
- Over 40% of the US equity markets are owned by FOREIGN interests. Meaning on a "good day" US interests (institutional, retail, etc) own "just" US$28 Trillion worth.
- Over the last 30 years US retail investors have owned between 15 - 35% of the US market.
- Counterintuitively, despite Covid created uncertainties, but primarily because of the subsequent & unprecedented expansion of the FED Balance Sheet, household savings in the US is now the highest it has been for over 40 years!
- Over the last 12 months total new funds entering into the US equity markets has exceeded that of the last 20 years COMBINED. Phenomenal huh.
- So, lets err in your favour and say US retail investors now own 35% of the US market.
- This would mean, that cohort currently has US$16.5 Trillion invested in US equities.
- Meanwhile, total housing stock in the USA is said to currently value up to over US$36 Trillion. Over 95% of that is owned by US Citizens, so say US$34 Trillion
So in summary, the average Yank has far more of their household wealth tied-up in housing than Equities. More than double!
interesting information in your post. I am sure most households in English speaking countries have more invested in housing than in listed company shares.
Taking into account overseas ownership of NZX listed companies, do you think The ave NZer has at least 14 times as much net equity invested in housing as in NZX listed equities?
I guess we should also consider pension assets? American households would invest indirectly in stocks and shares via pension and investment plans. Nz is still a minnow with respect to pension funds and managed funds. A greater proportion of NZ pension and managed fund assets would also be invested off-shore.
How do we treat trust assets? NZ has a large number of family trusts. Would you count shares and real estate owned by a trust as part of the settlor’s assets, or divide them up equally between all of the discretionary beneficiaries?
Read somewhere where NZX NZ % ownership has increased over last few years
https://www.nzherald.co.nz/business/...C6KN426NJOHJM/
https://milfordasset.com/insights/po...ign-investment
"Meanwhile, NZ strategic stakes have nudged up slightly in recent years, mainly because of the Government’s controlling stakes in the newly listed electricity generators, Mighty River Power, Meridian Energy and Genesis Energy.
Forsyth Barr has collected similar NZX data since 2004, mainly in terms of the involvement of overseas managed funds in this country.
These figures show that offshore managed funds now own 44 per cent of the NZX compared with Goldman Sachs’ 26 per cent figure. The difference between the two figures is because Goldman Sachs data is based on the total value of all listed companies whereas the Forsyth Barr figures are a percentage of the market’s free float.
The free float is the value of all listed companies after deducting large strategic stakes. Strategic stakes include the Crown’s holding in the electricity companies and the local regional council’s holding in Port of Tauranga.
The Goldman Sachs and Forsyth Barr overseas institutional ownership figures are essentially the same when their different methodologies are taken into account."
Great response. I won't directly respond to FTG's reply because he misses my point, though I will say some of his figures don't address my previous question at all.
Since this thread is about how screwed 1st time home buyers are in NZ, i'm trying to get some meaningful data on the reasons why, maybe some basic simple observations like what % people in NZ hold their wealth in other assets instead of houses? Where do the top 10% of the richest in NZ sit and where to the rest, 90% of the population sit in terms of how they can invest?
The way I see it in NZ, it's very clear the top wealthiest (and let's include all those investment housing trusts because there are so many people that have their $ invested in these schemes) say 10% - how much of this segment can influence the house price in NZ? Because the way I see it is they've turned the NZ residential market into a stock market hype. Over in the US house prices nationally rose 11.6% - here in NZ we're getting close to 30%. What those people in 'that camp of owing the houses as investments' fail to see is the bulk of the price increase occurred for most of NZ population (a fair guess 80% of the total population is affected by the rapid house price rise?). There are hot spots in the US but no way does 80% of their total population is affected from say a 30% rise in housing prices. Even at 20% ? are there some figures we can dig?
Oh and let's not forget about the market manipulation factor. There was a time few years ago that the Jacinda assumed the house price rise in NZ was caused by foreigners buying up houses in NZ. So she imposed a foreign buyer's ban. If it's not these foreign wealthy people buying houses in NZ, then who else? Jacinda has mentioned earlier in the year that a high % of the buyers of houses in NZ were those in the 'already own 4 or 5 houses camp'. Let me ask again, do the top 5 or 10% people in America have an active role in influencing their house price market or do they have a MORE active role in investing the majority of their wealth in the US stock market? What i'm looking at is this 30% rise in NZ houses affects far more of the total NZ population than the 11.6% rise of houses in America affecting their population.
Investing for retirement? NZ has been slow in adopting such 401K schemes like in America, and therefore the size of the Kiwi Saver invested is a lot smaller per capita. Well it will be less because NZ income per capita is a lot less than in America; so when you look at the minimum 3% employer contribution, it's almost a waste of time for a person on $100K/year income. Also as I mentioned before, NZ's tax structure is unfavorable for Kiwi Saver vs buying another house that sees tax free capital gains after 10 years.
Perhaps i'm biased the wrong way. NZ is a small country, we should not be priding ourselves being wealthy as our house prices rocket out of control. We're exposing ourselves a huge amount of risk being tied in 1 asset. There needs to be a CGT on houses or some land tax in NZ and or take away the taxation of Kiwi Saver / PIE funds or do what they do in N. America by 'tax deferring' the gains until retirement for those superannuation schemes.
BTW, it was John Key's party that stopped investment in the NZ Superfund for many years. The opportunity cost lost was massive when i'm seeing the DOW near 35K.
Ardern has a good newspeak way of turning failures into signs of success. Inflation at a rate exceeding guidelines becomes a sign of a booming economy; 30% house price rises a sign of having managed covid well. While there may be a little bit of truth in that, mostly they are a sign of failures (failure of housing supply, failure to provide affordable appropriate first homes, failure to improve labour productivity, etc.)
That is not to say that I think National would have done any better in our Covid era.
and I'm certainly not the only one SBQ. ;-)
Therein lies the problem with asking poorly constructed rhetorical questions as a primary way of espousing one's opinion/s.
So let's ask you a direct question. What is your actual number one key point?
In other words, when you distil it all down, (let's face it, you have written a LOT of the same stuff....you must feel like a broken record) what is the core, fundamental, foundational, belief/principle/opinion that you are wishing to propagate on this thread?
This is your opportunity SBQ! Openly present your thinking for all & sundry to view, inspect & challenge (or as it may be, support).
However, as a friendly challenge, there is just ONE condition....... your answer needs to be limited to one well-constructed sentence; succinct & concise. No waffling, no glibness, no doubts. Straight to the point.
Interesting discussion. But a very difficult one due to the fact it is hard to know what numbers are correct. I read an article by Brian Gaynor on Business Desk on 17 July, which discusses this issue amongst others. His numbers about where USA individuals have their investments is very different to what FTG has posted
Below is a summary from that article. NZD for NZ and equivalent USD in brackets for USA. It indicates Kiwis hold a far higher proportion of their wealth in property than Americans do.
It states NZ net wealth in real estate is NZ$ 1.42 trillion (USD 40.1t), financial assets NZ$ 1.19 (USD 105.6) liabilities NZ$ 0.31t (16.3t)& total net wealth NZ$ 2.30t (USD 129.5)
Interesting discussion. But a very difficult one due to the fact it is hard to know what numbers are correct. I read an article by Brian Gaynor on Business Desk on 17 July, which discusses this issue amongst others. His numbers about where USA individuals have their investments is very different to what FTG has posted
Below is a summary from that article. NZD for NZ and equivalent USD in brackets for USA. It indicates Kiwis hold a far higher proportion of their wealth in property than Americans do.
It states NZ net wealth in real estate is NZ$ 1.42 trillion (USD 40.1t), financial assets NZ$ 1.19 (USD 105.6) liabilities NZ$ 0.31t (16.3t)& total net wealth NZ$ 2.30t (USD 129.5)
I agree I don't think National would of done any better and Ardern or not - all these politicians are smooth talkers. How bad are things really here in NZ? My father left NZ at a time when uni education was free, income taxation was high, the gov't funded all sorts of developments, infrastructures, hydro, etc. Over the many decades living in Canada, he's kept an eye on what's going on in NZ and he was mindful to tell me to do the same thing as I chose to live in NZ. My relatives here constantly ask me when will my dad move back? I said yes there was a time he would consider moving back but FIF is what sealed his fate (and likewise with the many Kiwi's he knew living in Canada). I'm reminded in hearing how Canadian winters are very cold - but snowbirds typically spend a short trip to the southern US or a long vacation in Mexico; and can do so cheaply. If one has the $, they live near Vancouver where winter temperatures are comparable to Christchurch. Does one have to wonder why 20% Kiwis choose to stay living abroad?
The housing mess not only affects future generations but also affects migrants coming to NZ. As an example last week at my son's play date with his school friend, we visited their home. The father of my son's friend migrated from India in 2013 and had a struggled in finding a house as the earthquakes affected the housing stock. So in FOMO fashion they UNknowingly bought one of those leaky house syndrome (2 story, plaster cladded with no roof eaves). He was telling me how the real estate agent supplied all the details like a building report (whom the home owner supplied), EQC scope of works & damages, things that would easily satisfy the new migrant buyer (but not so easily to the local buyer). He told me after a year they noticed moisture creeping in through the walls and when they investigated, they discovered rotting of the timber framing. They had some coverage by insurance and EQC but he told me no builder would guarantee their work on the exterior re-cladding. Quote after quote, all the builders said the same thing and he had estimates around $400K which was about 80% of the value of the house. So his situation was, is it worth while to spend all that $ ? I told him even if you did, you would still end up with a house of the SAME design. The fault is not just only lack of maintenance but these types of houses offer little or no protection of water ingress into the building envelope. Would a greater supply of house in NZ fix this situation? Maybe.
Nevertheless, they are in the consent stages of building a new home but he's disgusted at how expensive building costs are. If the housing stock goes up in price, so will the building cost as those in trade won't leave free $ on the table.
Still no excuse for NZ to have a limited range of investments. The reason is clear - past NZ gov'ts have successfully turned houses into a commodity for maximum profit, while other investment choices like Kiwi Saver / PIE funds are taxed at RWT. If you look at America (like Canada), the tax approach there is entirely the opposite of NZ. Own more than 1 house and you will pay CGT. Want to invest in the stock market via an education / disability / TFSA RothIRA fund - then you get the tax free or tax deferred benefits. The wealthy realise the cards are stacked against them if they use houses a as commodity to profit (even with mortgage leveraging). If you're a non-resident wanting to buy a house in Canada, you pay a 20% 1 off tax! (that's $200K for every $1M on a luxury house, not small change here). Leave it empty like a vacation home, and you'll be dong with a Vacancy tax every year. The message is clear over there just like the message is clear in NZ that houses has made the top 10 or 20% of NZ rich.
Remember, 20+ years ago NZ treated all asset classes the same - foreign shares or not, they had no CGT or taxes applied to them. Then FIF came along to penalize foreign share investments (interestingly FIF does not apply to houses overseas) ; all while capital gains on houses were not touched. What kind of message is the NZ gov't telling? The UN is certainly not fooled about this kind of approach.
As an aside you raise an interesting side point Iceman. "The appeal of a particular argument can be strengthened simply by highlighting selected facts and omitting others".
You (and Brian G for that matter) have no argument from me that kiwis have a higher % of their wealth invested in housing than Americans.
I probably need to be clearer. With the small selection of facts I offered in Post 2068 you will note they were ALL USA centric. I was presenting these stats to highlight that, like Kiwis, the Americans still have more of their household wealth invested in residential property than Equities (more than double in their case). This was in response to SBQ's glib assertion that the American's have most of their wealth invested in equities, rather than housing. That is patently incorrect. He then partly uses this falsehood as grounds for why NZ should have a CGT, Land Tax, Wealth Tax or similar. As SBQ correctly states, Aussie has CGT AND Stamp Duty. There is a large inconvenient truth that he omits to refer however. Despite these taxes, each year Sydney & Melbourne battle it out with Auckland to have the most expensive housing in the world. ScReWing the 1st home buyer there just as much as in NZ.
Pulling back a little and looking at the bigger picture, over the last decade the % of investment in equities has been slowly climbing, and has accelerated post-Covid (part of the "everything bubble" phenomenon perhaps). However, the facts clearly show that in most OECD countries (certainly ones where home ownership rates are at 60%) the majority of citizen wealth is still in their respective country's housing assets.
This has been the case since Adam was a Caveman!
It appears FTG's figures are a bit different to yours.
The other countries (Aus/Can/US) in question all have some form of taxation on the demand side. FTG claims those taxes don't deter making houses affordable - what I would like to believe, those taxes do have an effect on the 'gaming ability' of turning houses into an asset class for financial gain. I mean how many places around the world are at 13 times average annual incomes? More importantly, what % of the population is affected by this high figure. Yes world class cities require high multiple figures but that does not speak for the rest of the country. In Canada, Vancouver and Toronto have hot housing markets but they do not account for the majority of the population. If you look at all over NZ the major regions, they ALL had significant rise in housing prices. Who actually pays for all this?
My close friend living in Vancouver has purchased real estate starting over 20 years ago. What he tells me is that the quick rise in house prices has brought too much attention by the gov't at all levels. As I mentioned before Trudeau sent a special task force to Vancouver to understand why and unlike past NZ gov'ts, they actually do make changes (all around taxation). He tells me hindsight, if chose to invest the same amount of $ into the stock market in a conservative ETF, he would be miles ahead on the basis that houses have become a hassle to own and the gains are not there because of taxation. Not surprisingly, my uncle that lives in the Gold Coast, Australia says the same thing. But you ask any person in NZ ; nope because there are no demand controls in buying houses.
I'll reiterate the following links as I find Bernard Hickey is far better at explaining NZ's housing crisis than I am: - there will be many that will disagree or simply don't care. If you're on 'that side of the fence owning all the houses', why would you?
https://thespinoff.co.nz/business/25...tion-was-lost/
https://thespinoff.co.nz/business/09...f-the-century/
You again show absolute ignorance. In all countries (AUS, US, CAN) you mentioned housing market is growing in unprecedented rate. I just discovered that Canada, which you mention in about 90% of your posts, seems to be even in worse situation than NZ despite having CGT. Problem seems to be generous subsidies and grants to buy a house... go figure, subsidies ruining free market.
BTW. kudos on yet another Bernard Hickey reference
It seems FTG again, is blinded at NZ's housing situation. 13 times incomes is a problem. Record # of families waiting for social housing. At least all my posts point to what other countries have done to address housing problems. The UN even knows NZ's housing problem is a unique situation that their rapporteur had to make bold comments again and again. The likes of FTG will never believe it.
So I ask a simple question - what is the NZ gov't going to do? If the whole country has voters like FTG, then nothing is going to happen and NZ will continue on to a path of oligarchy and feudalism.
"So I ask a simple question - what is the NZ gov't going to do?"
Buy more $8mil motels.
Sadly they will apply Elastoplast to fix a problem that requires major surgery.
As long as kiwis have many multiples more invested in housing than in pensions, managed funds or equities then they will not likely vote for a major overhaul. If those who benefit from the status quo, or think they may in the future, or think they may inherit from someone who benefits, then they may be less likely to vote for major change.
The US median house prices figures to June 30 were reported overnight. With the continued & massive pumping of the FED's Balance Sheet I'm disappointed to report that there are NO surprises. Just like NZ, the US residential housing market has been running away.
The trailing 12 month increase was 23.4% (NZ 28%). Across the border in Canada....26%!
The sobering fact is house prices in many big cities & countries across the globe are showing trailing 12 month increases of >20%. As much as some here would try & lead you to believe, "first home buyers being ScReWed" isn't a problem exclusive to NZ. It's an issue across the globe.
As in life generally, effective long-term problem solving requires one to first understand the real & fundamental CAUSE of the problem. As you correctly point out Bjauck, applying Band-Aids to something that requires surgery is short-sighted & unintelligent. That is only going to suppress the issue for a period, until inevitably the cancer will actually come back even harder. It's tinkering at best.
Imposing CGT, Wealth Taxes, Inheritance taxes, and on the other side of the ledger, strategies like FHB grants & subsidies are all just political Band-Aids & suppressant Drugs to the cancer of an artificially & unsustainably booming housing market. Some would go even further & say it's akin to "an Ambulance at the bottom of the hill". Yes, additional taxes and/or subsidies MAY have impact for a period, but the real CAUSE is not actually being properly addressed. A demonstration of this point is when looking at top 15 countries on the chart for Median House Price to Household Income Ratio. NZ is currently 14th highest on that chart (SBQ, FYI: Canada is 7th). Every....single....country, but 1, for the 13 countries on the list above NZ has a CGT. So the claim that having a CGT or similar regime implemented is a long lasting solution to the housing pricing problem is patently not the case. It could also be easily argued that doing so creates poor investment investment behaviours & further market distortions, hence creating unintended negative outcomes, e.g. moral, social & economic problems.
So, coming back to diagnosing the condition, the question is, "what is the real & fundamental CAUSE?" Some of the more learned contributors on this thread have reminded us of a basic principle re how pricing of ANY market is ultimately determined....
"The Law of Supply & Demand".
Posters here have then gone on to present & debate over the impacts of a multitude of supply & demand inputs for NZ. Examples noted include, high net positive migration numbers, foreign buyers, ghost houses, super slow RMA process, high building costs, skilled labour shortages, FHB grants, Taxpayer partly funded KS deposits, SHA's, no CGT etc etc etc. IMO each of those inputs do contribute to varying degrees to the crazy house pricing problem NZ has. However.....
The REAL underlying cause is a far bigger, uglier & hence harder one for us all to confront & tackle head-on. Plus, it too obediently abides to the Law of Supply & Demand.
So, have you some thoughts to what that Elephant in the room is that I'm referring to?
Not a single well-considered & reasoned thought?
My my, seems like some folk (SBQ, looking at you especially!) have run for the hills, run out of huff & puff, lost your tongue & slunk away.
Which then naturally asks the question; what was the real purpose/agenda of certain blame pointing perpetrators ranting & raving all about? ;-)
Yep changes to the RMA has often been mentioned. Even from an outside perspective, they imply changes to the planning & use of land which would add more supply to NZ's housing problem. But instead, our gov't is choosing the "lack of infrastructure" excuse of why there's no real supply. Have a look abroad, see how major cities are built and planned. Look how new residential sub-divisions are built and see how existing city corner blocks are knocked down (increase densification), to be replaced with multistory complexes everywhere. Then compare that to how NZ builds things. The conclusion is clear, NZ's RMA has stifled urban living and the NIMBY stance. Most of the new houses I see being built are nothing more than a 'dog box', VERY expensive single story boxes that offer little practicality. We are not improving NZ's standard of living by offering LESS of a house.
There was an an article in NBR earlier this week to the effect that Kainga Ora made an offer on a property $8 million above its eventual sale price. NBR got the information from an OIA request.
Some additional info on the wireless - KO withdrew offer, eventual sale price around $30 million.
Not a trivial overpayment offer, and have to wonder what else is KO keeping under the radar.
https://www.scoop.co.nz/stories/PO21...-reined-in.htm
From 2020: NZ is 7th (out of 39) most expensive per Square metre of housing per household income. (UK is 8th, Australia is 16th, Canada is 21st, USA is 38th) Other countries in the top are more densely populated than NZ.
https://www.oneroof.co.nz/news/kiwi-...he-world-38726
They have deployed an "interesting" way of measuring housing affordability. I would suggest that it is yet another example of how statistics can be influenced somewhat dependent on what info one uses as the measuring tool and how accurate & detailed that tool actually is. Additionally, in this case the party quoted in the Oneroof article as doing the measuring is "comparethemarket.com.au. Need I say more.
A universal principle of property investment that we should keep front of mind, is that the component that is actually appreciating in value is the LAND. The building on the land certainly won't appreciate as much, and in fact in most cases (both for resi & commercial) will actually depreciate over time. As is often said re land "they aren't making any more of this stuff".
So, when digging into the numbers a little further, we need to keenly keep in mind that NZ still has relatively large section sizes compared to the rest of the developed world. Additionally, market penetration of Apartments (which hardly have any land!) is certainly lagging well behind most other developed big cities/countries. So yes, the Per SqM price of the HOUSING for NZ, which has relatively more land under it, will understandably be artifically skewed to the higher end of the continuum.
Just to be clear again though. I'm not disputing the reality that by most forms of measurement NZ is in the top quartile for housing inaffordability.
Yes, it's certainly not a small one in its own right. Additionally, reasonably recent positive changes to the rules around what does or doesn't require consent for home renovations has also seen a further boom in home reno's (as has Covid impacts) and therefore house values.
However, RMA enforced costs are a tiny input compared to the BIG Elephant in the room that I'm referring to. When it comes to recognising the biggest single real driver of house price affordability in NZ and across the globe what do you think that is?
The appeal of residential housing as an investment I guess lies primarily with the land, its supply or lack thereof, the ability to leverage an investment in it and tax rules surrounding the return from it. The return from renting out a good building is taxed as income. The capital gains return from appreciating land values, which is as you say is what is appreciating in a rising market, is mostly untaxed.
However if you look at housing as providing shelter and appropriate comfortable accommodation for the population, then the cost per sq metre of actual residential building and the quality thereof becomes the most important aspect. And, that is the part of investor residential property on which the tax burden is placed.